Ten ideas for a crapper Britain

Komment Macht Frei carries a 10-point plan to make the UK even worse than it already is, from the notorious Will Hutton. They are in fairness not all totally wrong, but some of them are truly idiotic.

1. Break up the banks
I can live with this actually, in principle, but it would help if there was an acknowledgement that the ridiculously complicated regulatory environment has forced banks to become larger and larger in order to cover these costs and keep up with it all. Reduce the regulatory bureaucracy and barriers to entry and you would indeed improve the banking sector. Not convinced these are his motives.

2. Build Great Companies.
This is a stinker, and worth quoting in full:

Too few British firms have good owners. Two more important companies – Smith and Nephew, and De La Rue – are fighting to retain their independence from foreign takeovers. Their shareholders do not care about innovation, their staff or customers; their priority, and thus that of the directors, is only next month's share price. Increasingly Britain is a hollowed out economy for hire rather than a centre of business decision-making and wealth generation in its own right. There has to be root-and-branch overhaul of the framework for owning, directing and launching takeovers of Britain's companies.

So basically foreign ownership is bad, Will has no solutions, so we should start with roots and branches. Really, this is 6th-form stuff, blindly blaming shareholders. Shareholders do care about "innovation, their staff or customers" because that is what drives the share price. Shareholders tend to want their companies to be successful and well-run. That is why you invest in a company.

3. Bust the Monopolies
Meh.

4 Abolish Redundancy Payments
Why do I sense in this some sort of increased state intervention coming up?

5 Livelihood Insurance
Whoooomph there it is! Surely this is a bit like National Insurance, except I guess everyone will still pay National Insurance, right?

6 A Citizen Grant of £50'000 for every 21-year-old
Oh no, sorry, whoooooooooooomph THERE it is. Now that is special. And where pray tell might this money come from? Oh, you planted some beans? Should be fine then.

7 Payback time for babyboomers
Some interesting thoughts here actually. Probably the least bad of his ideas.

8 An end to parents-pay education

Private schools should ... be compelled to admit, through competitive examination, children from households with less than £40,000 a year. Their fees would be paid by the government.

Ah yes, the problem is private schools, not the parlous state of the state school system. Why not just bring back grammar schools, if you want competitive examinations?

9 An Honest Media
I agree, but bwahahahahahahahahahahahahahahahahahaha good luck with that.

10 A written constitution along with proportional voting
I don't think this would make a blind bit of difference but there you are. This is instructive however:

In particular, there should be an entrenching of local government's power: it should have the constitutional right to raise up to half its revenue from local taxation.

That is the extent of Will's ability to imagine what local government power should look like - how much tax they can raise. Sad.

And to avoid accusations of being negative for the sake of it, here is my 3-point plan for a better Britain.

1. Get the fuck out of our lives, just stop bloody interfering and remember that you work for us.
2. Stop fighting pointless, never-ending wars to distract from what is going on at home.

Actually, that'll do for starters, there you go, a 2-point plan!

The Myth of Contagion

Another good article this morning from Ambrose Evans-Pritchard in the Telegraph. He actually seems to have a reasonably good grasp of what is going on in Europe at the moment, which makes a change from most of the commentary I read.

However, I want to specifically address the idea of "contagion", which anyone that has followed the Greek and Irish bailout stories will have heard as a key reason for the bailouts. Here is a good example, I have pulled out they key quote:

The problems of Ireland's banking system pose a risk of contagion to other Eurozone countries, European Central Bank Governing Council member Yves Mersch warned in a newspaper interview released Wednesday.

(...)

To banish this contagion risk, other governments must make the reforms needed "to gain market confidence," and appropriate structures must be set up for the Eurozone as whole, Mersch said.

This "contagion" is not something that can be averted with the application of more money. In reality, the bailouts are fuelling the crisis, because now the market knows that by exerting enough pressure on the bond market, credit spreads will widen to a point where the EU/IMF will intervene, pouring liquidity into that economy via the bond market.

This is not a malicious attack on a currency or economy, but rational behaviour. The fact is that the Greek, Irish, Portuguese and Spanish economies are all in serious trouble, and while Portugal might conceivably be saveable with a third bailout, you can forget it with Spain, it is FAR too big to bail. In fact, as Evans-Pritchard points out:

Saxo Bank said the EU's €440bn (£370bn) bail-out fund would lose its AAA credit rating if Spain needed serious help.

This would require Germany & France to put more money in, which for Merkel in particular would be very hard to explain to voters. She is already rowing hard in the other direction, with her insistence that Irish bondholders must pay for the Irish collapse. Morally she is right perhaps, but it is a very damaging thing to say and suggests to me that she has already given up on actually saving the Euro area as it stands, and is positioning Germany for the future.

The "contagion" is unavoidable, it is a consequence of a single currency and single monetary policy, neither suit any of the countries in the Euro. The bailouts, just like the whole Quantitative Easing debacle, are making everything much, much worse.

Why the cuts won't be enough

This is a superb article from Simon Heffer, on why today's cuts simply won't be sufficient. He picks up on two major problems, namely:

1. Certain budgets are ring-fenced. The NHS and Education, two of the most wasteful black holes, are too sensitive to be touched, showing that the Coalition are indeed pussies. Furthermore, the ludicrous decision to ring-fence overseas aid is truly without merit at a time when the UK debt mountain is piling up by the day.

2. There is no room whatsoever for tax cuts at any stage. If the Chancellor is serious about stimulating the economy, he needs to get people spending, not take money out of the economy in order to reduce its impact with bad decisions by taxing the "wealthy". Angry Teen has posted on this element many time so I direct you to his house for further musings.

However, Mr. Heffer misses the Belgian mammoth in the room. His Grace has eloquently posted on this topic today, borrowing some words from Dan Hannan in the process. Hannan sums it up, so I shall do the same:

Britain’s net contribution to the EU is rising from £6.4 billion this year to £8.3 billion in 2011-12 and £10.3 billion in 2015. But, of course, the net figure is misleading: the EU may spend some of this money in the UK, but rarely does so on things we would have chosen for ourselves. Much of the moolah goes to a privileged class of EU contractors and consultants; some goes on straightforward propaganda. Our gross contribution is rising from £14 billion to £19 billion – enough to cut council tax by half, take fourpence off income tax or pay of our Olympic debt in a single year. Here are some vivid ways of visualising the sum.

The Coalition do not give a shit about you, anymore than Labour did. Until this torrent of money flowing from the UK to the EU stops, you can count on that. This is what happens when Cast-Iron Dave makes a promise.

Bank of England's Arrogance

Here is a particularly outrageous piece of arrogant, "let them eat cake" style bullshit from the inept Bank of England, headlined "Savers told to stop moaning and start spending".

The whole thing is worth reading, but to pick out the most offensive parts of the Deputy Governor's views (emphasis mine):

"Older households could afford to suffer because they had benefited from previous property price rises, Charles Bean, the deputy governor, suggested. They should "not expect" to live off interest, he added, admitting that low returns were part of a strategy."

That's right, the Bank of England's strategy includes keeping returns on savings low, so the responsible ones get screwed and the profligate mongs are rewarded.

Mr Bean said he "fully sympathised".

No you don't, you couldn't give a shit as you've already made clear.

But he continued: "Savers shouldn't necessarily expect to be able to live just off their income in times when interest rates are low. It may make sense for them to eat into their capital a bit." He added: "Very often older households have actually benefited from the fact that they've seen capital gains on their houses."

So they must be punished for benefiting from a housing bubble created in no small part by, oh that's right, the Government and its lapdog Central Bank.

Mr Bean said that encouraging Britons to spend was one reason why the Bank had cut interest rates. They have been held at 0.5 per cent for 18 months, hitting rates offered on savings accounts. The strategy had led to Mervyn King, the governor, receiving many letters of complaint. But it was designed to return the economy to a reasonable level of activity as quickly as possible, he said. "The faster we can achieve that, the sooner interest rates will get back to more normal levels."

Ah-hah, I believe this is what Al-Jahom would call cognitive dissonance.

So, Mr. Bean, what you are saying is, if everyone spends instead of saving, that will enable the Bank to raise interest rates, making saving more attractive, reducing how much people spend. What about the older people who have spent all their money? Now they can benefit from the higher rates they have helped generate.

Fail, Mr. Bean. Fail.

Cable's Idiocy - Part errr...I've lost count

Vince Cable is an idiot. This is not the first time, nor will it be the last time, that I write these words. Once again he shows himself to be a grandstanding nutter with virtually no understanding of business, banking, economics or indeed anything.

Here he is, ranting like a good 'un.

This quote is worth showing in full, emphasis mine:

"The Government's agenda, is not one of laissez-faire. Markets are often irrational or rigged," he will say. "So I am shining a harsh light into the murky world of corporate behaviour. Why should good companies be destroyed by short-term investors looking for a speculative killing, while their accomplices in the City make fat fees? Why do directors forget their duties when a fat cheque is waved before them? Capitalism takes no prisoners and kills competition where it can."

Ah-hah. Capitalism kills competition. So, what do you suggest then Vince? Oh, nothing. Just ranting then.

"Mr. Cable will tell the conference that he believes bankers pose more of a threat than trade unions."

This is the Business Secretary speaking. Words fail me.

As an aside, this whole episode also proves beyond doubt that no tax is ever repealed. EVER. This bonus tax will stay forever, and the Coalition will show themselves to be every bit as anti-business as their predecessors. Any politician that says a tax is temporary is a liar, and should be called out as such.

The Fairtrade Delusion

The Adam Smith Institute have an absolutely brilliant report on the failings of Fairtrade on their website. It's a couple of years old, but seems to be doing the Twitter rounds today, and I'd not seen it before.

Since this is a massive bugbear of mine, I direct you to the report and encourage you to read it in full.

Report is here.

Vince Cable is wrong and dangerous

A lot of people have gone from seeing Vince Cable as the messiah to seeing him as a charlatan that predicted 14 of the last 3 recessions. However, I think people see him as mostly harmless. This is wrong, he is a dangerous idiot who simply does not understand anything about finance or economics.

This latest piece of lunacy proves it.

To summarise what this madman believes:
1. Banks are not lending enough, or as he puts it, "acting in the national interest".
2. Banks must lend more.
3. In order for them to lend more, bonuses should be linked to lending levels.

Now, there is little doubt that one of the many reasons for the economic crisis we are in was utterly irresponsible lending by the banks. There were more egregious sins, mostly committed by the Government, but the banks got themselves into an awful hole by lending carelessly to people that could not pay it back. Much of this was also forced upon them by the Government, much like in the US.

As a direct result, banks are now being ordered to shore up their Tier 1 capital ratios, which has the knock-on effect of reducing the available pot for lending.

Yet Vince Cable wants banks to lend more, and to be paid according to how much money they pump into the system. This is the same Vince Cable that railed against bankers' bonuses - "I think the bonus culture which continues is unacceptable. The coalition agreement makes it very clear that unacceptable bonuses are continuing and that is something we want to try to stop and that reflects the lack of moral compass."

Can anyone see a wee contradiction here? Bankers' will lend to unsuitable people again, in order to boost their lending levels. This lending means they will get bigger bonuses. These loans will default, fucking up the banks' balance sheets and probably leading to more Government intervention, given the wobbly nature of these banks' finances anyway.

And which incompetent Lib Dem cretin will be the first to shout at the banks for paying bonuses for irresponsible lending? I wonder...

Fairtrade - The Problem

Yesterday, sweet-toothed trader Anthony Ward bought pretty much the entire European market in Cocoa beans, in the largest Cocoa trade for 14 years.

How boring, you may think. But there is a comment from a FairTrade representative at the end of the first article, which is I think sums up the problem inherent in the FairTrade concept. Here it is in full (emphasis mine).

Barbara Crowther, a spokesman at the Fairtrade Foundation, said that no farmers in West Africa would benefit from the higher prices. She said: "This speculation only serves to increase volatility and uncertainty. Part of the problems in rent years have been the lack of investment in improving cocoa farms. But the farmers have already been paid a set price – none of this money will filter down to them."

All that she says is true. However, in theory, the purchase of these cocoa beans should ultimately benefit these farmers. They wouldn't benefit this year of course, but next year they should be able to command a higher premium for their beans, or produce more, as evidently there is a mild supply shortage. This additional money would then provide the investment required.

The problem is, of course, the FairTrade intermediary will prevent any of this happening. Ironically, FairTrade has no real desire to help farmers invest and grow, as they have this romantic idea of subsistence farming that bears no relation to the reality of hours of back-breaking toil actually required.

Perhaps allowing a free market to set a fair price might allow these farmers to speak for themselves rather than being ripped off by an organisation answerable to no-one except themselves.

A Few Facts About Gordon Brown - from Subrosa

This is an absolute superlative article from Subrosa, everyone should read it, and BevaniteEllie and all the other drones should have a copy stapled to their foreheads so they can read it in the mirror every day until it sinks in.

The Death of Politics

That debate was an absolute disgrace. If this is the intellectual capacity of the three men who will be charged, either jointly or individually, with leading the UK out of economic crisis, then you may as well tow it out to the middle of the Atlantic and sink it.

I turned it off after half an hour, because not one of them has a grasp of even basic Economics, and not one of them can suppress the populism coursing through his veins like fire. Brown YET AGAIN gets away with this ludicrous statement about the Tories taking 6bn out of the economy. Why? Because CMD doesn't understand how to counter the argument. I have gone through this before and won't waste time repeating myself.

Not one of them can answer a question properly. Not one of them can debate properly. Nick Clegg's pathetic re-use of his "I didn't hear your name. is it? Well , you're absolutely right" goes unpunished. Brown just appears to have no idea what he is being asked, so utterly indoctrinated in his own nonsense is he. CMD is just so utterly weak and feeble when faced with frankly terrible opposition, that he is actually going to balls this election up, and if he does win it will be despite his myriad failings not because of his leadership.

So what next? I have no idea, but it's pretty bleak. They can talk all they like about restarting the manufacturing industry, but this isn't a planned economy and they don't work anyway. They can talk about getting the Banks to lend again, but if you tax them AND regulate them at the same time that won't work. Cutting benefits is a step in the right direction I suppose, but it won't be enough as long as there is this obsession with frontline services and a refusal to consider reducing foreign aid.

Thursday 6th May will be remembered as a terrible day for the UK, no matter what happens. It will be the day politics finally came off life support, and couldn't breathe on its own.