Archive for the ‘Britain’ Category

Black-eye Fridays all round

December 19, 2014


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Of all the great Cambridge traditions — wearing silly capes to dinner, jumping in the river, spying for the Soviets — Black-Eye Friday is surely the finest spectacle. On the last Friday before Christmas (today!) the good townspeople of the city remind us of their presence by getting as drunk as possible and fighting in St Andrew’s street, between Downing and Emmanuel colleges.

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So seriously is this tradition observed that a special medical team from the 254 Medical Regiment Army Reserves is called in to attend to the wounded. A legion of Black-Eye Friday ‘street pastors’ roams the city through the night, sweeping up broken glass, offering flip-flops to inebriated women in high heels, and ‘reasoning’ with those who just want to get on with a good fight. Police gobble up precious overtime and get to tell people to ‘spread ’em’ against the railings of Emmanuel college (through which those detained can conveniently vomit while awaiting their fate).

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So far the build-up to the most violent day of the year has been auspicious. Sub-editors at the Cambridge News were gifted the most prized headline in journalism before dawn on Monday when a man involved in a violent altercation allegedly bit a dog before dying of a heart attack.

In mid-week, the News sent its crime reporter to test the waters of St. Andrew’s street and he was pleased to report on a large-scale drunken brawl between a group of men dressed in Christmas jumpers. In a separate incident, a pastor offered a blanket to a young, insensible woman whose lower half was clad only in a pair of black lace knickers; she told him to go away, explaining that she had ‘come out like this’. Sadly, the News declined to publish photos of these interesting incidents.

Global link with Chinese food reference

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But it is not only in Cambridge that people are getting black eyes today. Over in Hong Kong, spooky-looking mega-billionaire Thomas Kwok, of Sun Hung Kai fame, has been found guilty of bribing the man who was about to become the second-most powerful politician in the territory (FT sub needed). Tommy might well be sent for a bit of prison congee when sentencing happens next week.

It is all rather shocking. The judge apparently failed to understand the Asian culture of gift giving, in which a consultancy retainer while holding public office, a couple of rent-free flats and an interest-free loan are simply ways of saying: ‘Hello, how are you?’ The sort of treatment that has been meted out to church-going born-again Christian Tommy suggests that almost any act of friendship can be called into question — as, for instance, when uber-billionaire Li Ka-shing gave retiring HSBC chief executive Michael Sandberg a metre-high, solid gold statue of the HSBC headquarters building. Thank god that black-eye Friday is only one day a year.

More from Hong Kong

Bloomberg details testimony from the trial about money, mistresses and paranoia. The ransom paid to Big Spender, who kidnapped elder brother Walter, was also stated in the trial, as HK$600 million. (Big Spender later kidnapped Li Ka-shing’s eldest son, Victor. It is all in Asian Godfathers…)

 

Farage’s forage

December 12, 2014

Having watched the UK Independence Party’s Nigel Farage deliver his brand of anti-immigration populism on the BBC’s Question Time last night, I keep coming back to these remarkable maps, below.

Voter support for UKIP appears to be almost perfectly correlated with parts of England that contain the lowest proportions of immigrants.

All those shops in UKIP areas of the country that sell flags of St. George should also sell life-size cardboard foreigners so that people have someone to hurl abuse at.

In fact, that is a very good idea for my next business…

 

UKIP support vs net immigration

Joined-up colonialism

December 3, 2014

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I recently mentioned a compelling new edition of Han Suyin’s beautiful novel And the Rain My Drink, about British conduct in the war against communist insurgency in Malaya after the Second World War.

As luck would have it, writing about British colonial perfidy seems to be the genre du jour, as one of my very favourite journalists, Ed Vulliamy (never met him), files a long investigative report about British conduct in Greece from late 1945 on. It is much the best thing I have read in The Observer for some time, and completely free.

Add a couple more case studies from South Africa, Kenya or Ireland, and we have the beginnings of a joined-up history of British colonialism.

That said, there are marks on both sides of the ledger. As Brave Dave Cameron observed on his visit to India last year: ‘I think there is an enormous amount to be proud of in what the British empire did and was responsible for. But of course there were bad events as well as good events. The bad events we should learn from and the good events we should celebrate.’

He’s right. The Carry On movies were tremendous, a real boon to my childhood. And It Ain’t Half Hot, Mum, not bad either.

A little clear thinking

November 18, 2014

I am posting a number of documents by Adair Turner relating to the concept of ‘helicopter money’. The term was coined by Milton Friedman and refers to the idea of simply dropping money into an economy to expand the monetary base without any commitment by a government or central bank to ‘pay’ for the money. Indeed, the point is to increase money supply, possibly permanently, in order to pay for government expenditure.

Printing money to cover a government’s bills is never going to be an easy policy to sell. But Turner has bravely put this option on the table because the place to which the major economies of the world are heading under current policy may actually be worse.

How so? Turner’s point is that the policy of central banks expanding their balance sheets and flooding financial markets with cash to force down interest rates to zero is merely fuelling asset bubbles – in real estate, in stocks, and even now in things like fine art. What the world needs is a return to somewhat higher interest rates to head off another speculative bubble and bust (selling some Apple shares yesterday at 18 times earnings and more than four times what I paid for them reminds me we may already be in bubble territory). The problem, of course, is that higher interest rates cannot come at the expense of another collapse in the demand in the real economy and hence a spiral of 1930s-style deflation. Logically, as Turner argues, the only option may therefore be to expand the monetary base, create a bit of inflation to allow a meaningful rate of interest, and simultaneously use the printed cash pay off some government debt and fund expenditures that maintain real economic growth.

Such a policy would (probably) put the fiscal boot on the other foot compared with the past six years. Almost all UK and US policy since 2008 has favoured those with assets – real estate, stocks and bonds — as asset values have been restored by the near-zero interest rate policy. If rates rise, those who hold assets under leverage will pay more debt service and asset prices will come under pressure. On the other hand, a positive real interest rate gives those with only a bit of cash (the young, the poor) some return on their money in the bank, while money creation can pay for lower taxes on work and investment in things like infrastructure. In other words, such a policy tilts the table away from those with assets and towards those without assets but with a willingness to work for a living. You begin to see quite how outrageous this proposal is…

The proposition is indeed shocking. However it is a measure of the times in which we live that you really should read what Turner is saying. He is not a red, and nor are the economists (like Milton Friedman and Irving Fisher) whom he cites in support. Turner is pretty much an Establishment figure…

The lightest iteration of what Turner is saying is an FT opinion piece from last week. I have not done this before, but I am reproducing it in the hope the FT won’t pursue me for breach of copyright. (Having only been paid £250 for my recent opinion piece for them, perhaps they will decide they owe me a bonus; one notes that deflation is already haunting the Pink’Un.)

November 10, 2014

Printing money to fund deficit is the fastest way to raise rates

By Adair Turner

No technical reasons exist for rejecting this, only the fear of breaking a taboo, writes Adair Turner

What is the right course for monetary policy? The International Monetary Fund seems to answer with forked tongue. Its latest World Economic Outlook urges that monetary policy should stay loose to stimulate growth. Yet its Global Financial Stability Review warns that loose monetary policy risks creating financial instability, which could crimp growth. In fact the best policy is to print money and raise interest rates. That sounds contradictory, but it is not.

The global economy is suffering the hangover from many decades of excessive private sector credit growth. In 1950 private credit in advanced economies was 50 per cent of gross domestic product; by 2007 it was 170 per cent.

After the 2008 crisis, households and companies began trying to pay back what they owed. This depressed consumption and investment, generating large fiscal deficits as tax revenues fell and social expenditure rose. It then seemed essential to balance public sector accounts, which has depressed growth further and made deleveraging harder.

Debt owed by the public and private sectors has actually increased as a proportion of GDP, from 170 per cent five years ago to 200 per cent today. Weak demand has led to below-target inflation in all major economies.

Economists agree that this is how we got into the current mess, but they disagree about how to get out of it. Some, such as Paul Krugman and Lawrence Summers, argue for more relaxed fiscal policies. Cutting taxes or increasing public expenditure is the most certain way to stimulate demand. In Milton Friedman’s words it is an injection directly “into the income stream”. But this route out of recession would increase public debt even further. It seems blocked.

Instead, most countries have opted to combine fiscal tightening with ultra-loose monetary policy, setting short-term interest rates close to zero and using quantitative easing to reduce long-term rates and boost asset prices.

There are no technical reasons to reject such measures, only the fear of breaking a taboo.

But there are dangers. Sustained low interest rates create incentives for highly leveraged financial engineering. They make it easier for uncompetitive companies to survive, which could stymie productivity growth. And they work by restarting growth in private credit – which is what led to our current predicament. The Bank for International Settlements therefore argues that monetary policy should be tightened as well as fiscal, but that would depress demand yet further.

We should indeed seek a swift return to higher interest rates, to remove the dangerous subsidy to high leverage. But paradoxically, the best way to do that, particularly in Japan and the eurozone, would be to deploy a variant of Friedman’s idea of dropping money from a helicopter. Government deficits should temporarily increase, and they should be financed with new money created by the central bank and added permanently to the money supply.

Money-financed deficits would increase demand without creating debts that have to be serviced. This would lift either real output or inflation and allow interest rates to return to normal more quickly. True, banks might amplify the stimulus by creating additional private credit, but they can be restrained with higher reserve requirements.

There are no technical reasons to reject this option, only the fear that once we break the taboo, money-financed deficits will be used on too large a scale.

Despite that fear, de facto monetisation is inevitable in some countries, even if policy makers deny it.

Japan’s official policy involves using sales tax increases to make government debts sustainable, while massive monetary stimulus spurs inflation and growth. In fact there is no believable scenario in which Japan will generate fiscal surpluses sufficient to pay back its debts, nor one in which the Bank of Japan will sell all its holdings of government debt back to the market.

All the same, the pretence undermines the effectiveness of the policy. Japan should either delay the next sales tax increase, or announce a temporary fiscal stimulus financed with new money. It should make clear that the debt the government owes the central bank will never need to be repaid, dispelling fears of a massive future fiscal tightening.

Orthodox theory sees helicopter money as risky. But current quantitative easing policies are at least as risky, and have produced adverse side effects. In the UK the Bank of England has bought £375bn of government bonds to try to stimulate the economy through swollen asset prices and rock-bottom interest rates. It could instead have created new money to finance a smaller one-off increase in the fiscal deficit. If it had done so, a return to normal interest rate disciplines would now be nearer.

 

More. Turner for grown-ups:

Turner’s original CASS business school speech on this subject (2013)

And the slides that go with the CASS speech. (Lots of them, but many worth having if you live in the UK and are about to have people knocking on your door in the run-up to the May national elections asking you to vote for them. ‘Come in,’ you can say. ‘Have a seat and let’s look at the slides together!’)

A bit of Q&A with Turner and Michael Woodford from the Institute For New Economic Thinking blog.

Finally, on Thursday 20 November, the UK parliament will hold a backbench debate on the topic of ‘money creation and society’. It will be the first time that the issue has been addressed in a full debate in the House since the 19th century. You can watch here on Parliament TV and discover just how ill-equipped our politicians are to deal with the aftermath of the global financial crisis.

 

 

Dieting Fat Controller still loves a pork pie

November 8, 2014

 

 


osborne 2014 vs 2013

 

 

Britain’s Chancellor George Osborne has lost an impressive amount of weight in the past year. So much so that I was thinking I might have to stop calling him The Fat Controller.

Fat Controller in front of trains

It turns out, however, that George still loves a pork pie.

Witness the recent furore over Britain’s increased European Commission bill to reflect an upward revision to the estimated size of the British economy. The bill is linked to the size of the economy, then Britain gets a rebate (negotiated back in the 1980s) to reflect Britain’s relatively lower receipts of EU agricultural subsidies.

Anyhow, first Brave Dave Cameroon said he wasn’t going to pay the £1.7 billion extra charge. Then people slightly less dim than Cameron realised that Britain has to pay the bill, because there is nothing unusual or exceptional about it. It is just the regular bill, amended on the basis of statistical revisions that occur periodically in all statistical systems.

So now the Fat Controller is claiming in the press to have ‘halved’ the £1.7 billion bill. What he means is that because there is an automatic rebate, the bill is really only about £850 million. But George wants to pretend this represents him having ‘negotiated a deal’ with the EU on a trip to Brussels this week.

He has done no such thing. George’s trip secured some very marginal fiddling around with payment due dates, doubtless because EU officials just wanted to get him out of the building as fast as possible. But he hasn’t ‘negotiated’ anything of any substance. Whatsoever.

Instead, George is just telling bare-faced Porky Pies. Like some fantasist kid in a school playground.

And that is why I am going to continue to call him the Fat Controller. No matter how much weight he loses.

 

More:

The Guardian explains pretty clearly.

Menaced in a Cambridge pub

November 7, 2014

They say there is no crime in this town, but there could be.

I return from a drink with a Japanologist, and decide that one for my road is in order at the pub at the end of our road, the Red Bull in Newnham, Cambridge.

Inside is frequent bar-propper Rory McGrath, of television fame. I don’t know him, but various people I do do. Since he does a comedy telly programme about Three Men on a Boat (I have watched perhaps 10 mins, have no view on it), puttering around the UK on narrow barges talking about who knows what, I show him a couple of pics that I took of a narrow barge that was granted permission to come up among the colleges recently. I blogged about it.

All good so far. Then, I say: ‘Listen, I don’t know you, but I was very surprised about the idea that Griff Rhys Jones might be a closet Nazi.’ This seems to me like standard pub banter. If you haven’t followed the story, RJ gave a long interview to the Telegraph in which he said that if the next government introduces a ‘mansion tax’ he might emigrate. The point is that RJ is quite funny, and yet, confronted in middle age with a modest tax on the huge capital gain he has made on London property, he suggests he might move to somewhere where I suspect he does not even speak the language.

Well, this set Mr McGrath off on the kind of frighteningly aggressive one-on-one verbal assault that I have not seen since I complained about being short-changed, as a student, on a marijuana purchase in Ladbroke Grove in circa 1985. That earlier incident did involve a knife, but the bile from McGrath was very much the same. It made me wonder if even comedians fall into the stylised description of John Carey’s classic work in which the British intelligentsia is shown to be drearily self-interested, drunk, and small C conservative.

I walked home thinking that McGrath must have some sort of point. But I can’t see it. Even if Rhys Jones spent 100% of purchase price fixing up his principal London home, he still made 4 million quid tax free. The mansion tax would be frivolous by comparison. Indeed it would be a much less rational tax, and a much lower tax, than one linked to capital appreciation. Andy Wightman sets out the numbers clearly on his blog.

These people — RJ — used to be our heroes. So what happened? I cannot even begin to imagine. To paraphrase, perhaps we are looking at: ‘All money corrupts, and lots of money corrupts a lot.’

Meanwhile Rory McGrath, was essentially trying to pick a physical fight with words of crushing violence. It appears he has form in this area. What do I say? I say: Fat. Drunk. And this evening ignorant. Sober up, my friend. I hope we will kiss and make up.

Damn and blast

November 5, 2014

A new study from the Centre for Research and Analysis of Migration at University College London shows that migrants from the European Union make a net contribution to the UK fiscal system — it looks to me, very roughly, like a cumulative 1 percent of GDP over the past 10 years.

I tell this to Camilla the Polish cleaner as she starts folding washing in the kitchen. She looks suspicious. I ask why. She says that the UK benefits system is outrageously generous and that fake ‘single mothers’ with husbands or fiancees ‘living’ at second addresses of convenience are driving around Cambridge in Audis while claiming benefits.

I ask her to unpack these assertions. First, she says, when she had cancer last year there were bleeding-heart liberals from the council coming round to her flat encouraging her to claim housing benefit because she was too ill to work. Naturally, she refused and sent them packing. ‘I have my savings,’ she says, and she never intended to let cancer keep her out of the labour market for more than a year. It did not.

Fair enough. But does she actually know any fake single mothers whose partners are living at separate addresses so that they can claim benefits? It costs at least £80 a week in Cambridge to rent a room. Would the benefits you could get by this ruse be substantially more than the £80 cost? She doesn’t know because she doesn’t claim benefits. And, no, she doesn’t have any actual cases of fake single mothers with Audis to present. But there are definitely Polish people who drive Audis.

Camilla goes back to earning her £10-an-hour, telling me how much she likes our house and her job. ‘People ask me why I do cleaning,’ she says, ‘but just now I am happy to have less pressure and spend more time with my kids.’ She used to be the Operations Manager of a chain of hotels in and around Cambridge. The last cleaner, a Hungarian, was a Research Chemist and left last year after being offered a too-good-to-refuse job in a research laboratory. She apologised that we poor English people would have to do our own cleaning for a couple of weeks, until Camilla showed up.

So this is all rather bad news for UKIP and Theresa May. How to loathe those who pay in more than they take out? The Brits, of course, are substantial net drainers of the welfare system at present. But self-loathing is hardly a viable election strategy.

Britain’s Essex-born Tory Immigration Minister was quick, when the report was published, to suggest that the Tories have never claimed EU migrants are net benefit scroungers (ho, ho, ho — this chump trained as a lawyer). Instead the problem is all about putting too much pressure on public infrastructure [which the Tories have failed to invest in for several decades]. If you have a sub to the FT, you can read his weaselly drivel here.

The serious point about the study is that it highlights the brain drain from continental Europe to the UK, as over-regulated labour markets in southern Europe, and eastern European countries with a dearth of professional jobs, force hard-working young people onto planes to the UK, with its highly deregulated labour market. Once there, all they have to do is to compete with poorly educated, monolingual Brits who drink during the day…

 

Farage with beer

 

 

 

 

 

 

 

The point is well made by David Green of centre-right think-tank Civitas in The Guardian.

Anyhow, all this leads us to the blog post I need to write about Italy.

Oh, Clegg

October 8, 2014

 

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Just watched Nick Clegg’s conference speech. It isn’t bad or anything. The list of things achieved is longer than you might think. The policy prescriptions are sensible, though limited.

But where is his anger? Why not just say: ‘It isn’t easy to go to work with a smile on your face when you know that David Cameron, George Osborne and Theresa May will be there.’ Or: ‘People say that we have been lucky to get into government. Is it really lucky to be stuck in an office with those people?’

Well, with seven months to go to a national election, it is getting to Blue door, Yellow door, Red door time.

I sent them £50 and a rant about fiscal unfairness when returns on capital are taxed less heavily than work. 18% and 28% for capital gains, versus 20% and 40% for work. Why don’t more people think this is absurd?

Not anarchists, but liberalism

October 6, 2014

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A curious morning.

I was editing an FT opinion piece about Hong Kong that will go live soon when suddenly I spied a narrow-boat steaming towards the college.

As you will know the University allows only punts on its manor, so my immediate thought was that it must be hippies, hopefully anarchists, storming our citadel.

I walked down to the river bank.

‘Are you anarchists?’

Blank stares.

‘Trotsyists?’

More blank stares.

It turned out to be nothing of the sort. Instead, the university had given these people PERMISSION to bring a motorised craft upriver.

What the hell is going on? Much more of this and they will stop giving unearned MAs to undergraduates. You will be allowed to leave a formal dinner at the wife’s college to go for a piss before dessert. You won’t need a beard and a Nobel prize to walk on the grass. They’ll start calling bedders ‘cleaners’ and pay them a living wage.

Historians of the future please note: it all started with that boat. And it clipped one of our punts.


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Actually Dave, you are still rubbish

October 1, 2014

This feels cruel. But I have read Cameron’s ‘greatest ever’ speech to today’s party conference, and it is not very good.

Here is a late-night attempt to parse it and to translate it into plain English (pace Boris, who I don’t much like either).

 

Cameron puffycameron on housing estatecameron hague osborne

 

 

The full text is here.

1. ‘William Hague…greatest living Yorkshireman.’ Obviously not true. I plump lazily for David Hockney. Does he vote Tory?

2. ‘I am not a complicated man.’ This is the problem, Dave.

3. ‘I believe in some simple things.’ You mean simplistic things. File under ‘Farage’.

4. ‘It’s pretty simple really.’ No it is not. See above.

5. ‘The highest employment rate of any major economy.’ Try: the lowest productivity gains of any major economy.

6. ‘£25 billion is actually just 3% of what government spends each year.’ He is talking about proposed new welfare savings. The truth: yes, but you have already backloaded the cuts you promised in this parliament into the next parliament so you would need cut at least double what you are saying. It is undoable short of civil war.

7. We have a new new policy called ‘Starter Homes’. Dave, you are already providing this subsidy. It is growth by asset inflation. It is not sustainable in the absence of productivity gains. Ask George, at least he took a 101 economics course.

8. Some stuff about ‘My 3 young kids go to prole school, we are all in it together.’ Yes, Dave, but not for long. You will move them out of the National Education System at 13 and do your bit in undermining the Big Society you claim to represent.

9. The £41,900 tax-free plus lower-rate threshold will rise to £50,000. Already dealt with in today’s earlier blog post. As I said in the update it is somewhat devious/sloppy accounting. But the main point is that it is undeliverable in combination with a rise in the tax-free rate to £12,500 and all the other stuff that you and George have promised/are promising. George has already reneged on his deficit cutting plan so many times I cannot count and is now running the original Alastair Darling plan. It begins to seem as if all you care about is power, Dave, not honesty.

10. Ed Balls is… ‘a mistake’. This is in fact true.

11. Tristram Hunt, the shadow education secretary, went to a private school but does not agree with the existence of private schools in an optimal education system. That makes him — here is the key term — a ‘hypocrite’. No it doesn’t, Dave. It makes you either a retard or a liar. At least George has the dignity to send his kids to private school the whole way through and publicly not give a fuck.

12. ‘I’ll tell you who we represent.’ No, I will. The ignorant, the angry, the greedy, and people who are having a nice time and don’t notice the world around them.

13. ‘From the country that unravelled DNA…’ DNA was unravelled in Cambridge, not Oxford, Dave, and nobody here votes Tory.

14. ‘It’s about getting people fit to work.’ Exercise for poor, fat cleaners, Dave. Exercise for poor, fat cleaners.

15. ‘Our crime-busting Home Secretary, Theresa May.’ Imagine any Tory Home Secretary as your next-door neighbour. I fucking dare you.

16. ‘I know you want this sorted out so I will go to Brussels.’ Why not just say it: ‘I can’t speak a foreign language — bit like Farage — and I don’t understand history. Even if I like holidays in Italy, they are still wogs.’

17. ‘Our parliament… the British parliament.’ It was created to curtail the antics of inbreds like you. Best not mentioned.

18. ‘If you want those things, vote for me.’ You are going to lose, Dave. You will then spend the next 10 years wishing you had had bigger balls, and ideally a bigger brain too. George will visit you.

19. ‘Our exports to China are doubling.’ Dave, I am losing the will to live. Look at the baseline.

20. ‘I don’t claim to be a perfect leader.’ Ok, all is forgiven. Emigrate.

 

Amazing that it should be 20 things.

I am going to bed and not reading this through, so apologies for typos.

 

Later:

A pretty funny video of Brave Dave following his speech has been posted to Youtube. Here it is. 1.2 million hits already. It contains profanity.


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