Technotastic

So are we moving from democracy to an era of technocracy? No not really, but it makes for better headlines than describing shit as simply the existing form of upper class rule is acquiring a slightly different public face in selected locales. So sure sure, the Webbs, those Fabian bods who founded the London School of Economics to produce better 'administrators, whether in commerce and industry, or in the national and municipal Civil Service' are probably doing cartwheels in their graves at what’s happening in Greece and Italy where terribly well qualified men (MEN!) well-versed in the ways of multinational bureaucracies are now in charge, its just on closer inspection so what?

The 2 good criticisms I've read of this swing to technocracy flow beautifully into each other. Oh hang on there’s a third that’s actually getting more attention about how it might challenge democratic institutions so lets deal with that one quickly; no it doesn’t. There will be elections in due course. The notion of DEMOCRATICALLY elected parties appointing technocrats being a threat to democracy is a fucking childish argument that distracts from far more serious critiques and anyone making it should shut the fuck up because they are a headline spewing, analytically incontinent fucktard.

Right back to the shit that actually matters.

Critique 1 is Professor Paul Krugman’s: The technocrats being given power to save the day are actually technically incompetent (“the trouble with the alleged technocrats we’re supposed to rely on isn’t just that they’re uninspiring — it is that they have been wrong about everything, again and again.”).

Critique 2 follows on from the above and was made in Private Eye issue 1301, which notes the new boss of the European Central Bank was previously a partner in Goldman Sachs while the new boss of the European Financial Stability Fund previously worked in hedge funds.

Putting both critiques together then the main qualifications the technocratic white knights now charged with saving the day appear to have is that they were the buggers who designed, tweaked and or worked within the fundamentally flawed system that is now fucking up on a monumental scale and when they weren’t doing that they were making themselves fortunes via the private financial products and financial institutions that fucked it up by exposing its fundamental flaws in the first place. Bonza!

A side note here is Professor John Kay’s neat wee note on how investment banker influence over the polity appears to have grown as the actual number of investment banks has declined, but that aside the wee interview with Sir Howard Davies, a former head of the Financial Services Authority and self-confessed technocrat, today on radio 4’s PM highlighted a range of interesting issues.

For Sir Howard, the good thing about technocrats is that they are people able to take the right or best, all things considered, decisions. Which is lovely I guess except it completely misses the point.

Sticking with Greece and Italy the actual point is not what decisions are taken, who takes them or even the decision-making process (as the third fucktard critique might fixate on), rather its whether decisions actually get implemented once taken.

Britain has an advantage here over Italy and Greece. As Daily Mail/Telegraph critiques of UK civil servants gold plating EU legislation makes clear, the British government tends or at least is more likely to be believed when it says that it will do something. By contrast, whereas the fiscally fucked Italian and Greek governments may be voting on however many austerity packages, a general view is simply aye right and we’ll believe it when tax dodging stops being a national past time.

Now, how appointing a technocrat will resolve that kinda ingrained, institutionalised, common-sense, mindset shit is beyond me given the nature of the political process. Like when a technocrat says raise taxes 20% who gives a fuck if the tax collectors choose to take a bribe instead regardless.

And resolving THAT kind of serious shit requires a clear, grown up view of politics which is that it’s not about technical competency, rather the art of the possible is about marshalling vested interests and interest groups, using patronage and bureaucratic power and authority. Now whereas a Vladimir Putin might say that, Sir Howard politely chose not to.

Alternatively, the approach being taken here is put in place some technocratic patsies who can in turn be blamed for taking nasty decisions no one likes so they can be voted out in due course (see, see, you threat to democracy fucktards?). Except, again that doesn’t matter if the implementation is a joke. But, if that is the case, then it fails to recognise that for patronage i.e. politics, to work you need to know the patron will still be there in a coupla years to hand out the patronage gravy, otherwise why do what he says?

Anyhoo, to summarise, the technocrats now being installed appear pretty shite on technical and moral grounds, we’re getting fed shite as to what them being appointed means, its not clear that the institutionalised issues underlying specific nation state problems are actually being addressed, appointing a technocrat has no impact whatsoever in itself on the fundamental role vested interests have in politics and how cool, being a blerk, must it have been to go to a Bunga Bunga party?

A wee P.S. here is provided by the Italian government’s latest debt sale. So there was me pointing out the difference between implied yields and reality in response to people going on about Italy having to pay more than 7%. Turns out they haven’t had to pay more than 7% after all. Boo, what a dull headline.

Plus, what does that say about the efficacy of markets given the above questions that can be raised about the technocrats who are otherwise being used to justify the reduction in borrowing costs? (here's a clue - that the people pricing this shit are stupid cunts for the most part who should be held at a remove from important decisions or anything that can impact government policies)

Not rocket science pt 2: Losing interest

Having spent the last wee while going thru another one of they “your job will not exist from this date onwards, but there’s these other lovely jobs you can apply for” reorganisation thingies, I've been too distracted to write anything vaguely coherent. Now I know the mortgage payments will be met for however long it is until the next reorganisation, I reckon its time to do another not rocket science thing, this time on bond yields and the Eurozone crisis.

First off the big thing here is the sheer volume of disinformation that’s going on. Like up until well the other morning really when Evan Davies on the Today show finally admitted he was confusing things, nearly all the mainstream media headlines about Italy and its cost of borrowing were a simplification of reality as distorting as they were out of context. Like seriously.

Not being a corporate financier I’ll also explain why in simplistic hypothetical terms, but hopefully ones less bollocks than those most people are using. Here goes;

Italy wants to borrow £100. It does so by issuing a five year bond for £100 that will pay whoever buys it i.e. whoever lends Italy £100, £5 or 5% a year for 5 years at the end of which the original £100 is fully repaid.

Oh oh, the original buyer of the bond sells it to someone else after a year because there’s a sovereign debt crisis going on and all of a sudden it’s not looking as likely as it once was that Italy will repay the original £100. Plus there’s only 4 more years worth of 5% payments to get as well.

So now I buy the £100 bond for less, a big chunk less, say £50. But hang on a mo this £50 has bought me an asset that yields an annual payment £5 i.e. the implied yield is 10%. Bonza! Just try getting that off a cash ISA these days.

In the meantime what do Italy care – it got the original £100 it was after, still has it for another 4 years and is still only paying 5% per annum. It was the original buyer who sold the bond for less that took the loss and felt the pain. And it’s the implied yields NOT Italy’s actual borrowing costs, that've just reached “crisis” levels.

The implied implication is that if Italy was to try and borrow more today, then it would have to pay current yield rates i.e. the 10%, except that cheeky wee word “if” highlights what’s actually going on here – the yield on existing debt doesn’t reflect Italy’s ACTUAL borrowing costs. What follows on from this is a number of things:

- The tenor of Italy’s debt is the crucial thing to be concerned about i.e. how much is maturing over the next 12 to 18 months and will need to be replaced with fresh bonds.

- The reporting of this has for the most part concentrated on generating distorted headlines, op-eds and articles that favour current English government economic policy (cut spending to save Britain’s AAA rating and so on) and the interests of bondholders.

- A fuck of a lot can happen in a week let alone 12 to 18 months.

One other wee sneaky bit that also warrants much, much more attention is the interest being taken in PIIGS government debt by speculators, hedge funds, vulture funds etc., This lot are already buying up cheap government debt because they’re taking a punt on being able to get high yields now and the thing completely repaid later (i.e. for more than they paid for it). Double whammy!

A couple of things follow on from this given the Greek example wherein billions of Eurozone taxpayer funds from other countries are already being handed over to Greece so it can repay holders of Greek government debt (i.e. its bondholders). One is that the speculators doing so are immoral cunts. The other is a nice neat straightforward demand – can a publically available record please be maintained that details:

1) Who buys any piece of government debt
2) How much they paid for it
3) When they bought it

Doing so would perform a VERY important risk management function cos it would enable anyone at any time to know who exactly was on the hook and for how much to whatever economy is in potential crisis.

Making that kind of info available would also do other sorts of mad stuff like make perfectly clear how rational (or not) markets were behaving and consequently whether crazy things like some government buying up its debt on the cheap to effectively cancel it out is an option e.g. the European Central Bank lends Italy £100 at 5%, Italy then uses this to buy 2 tranches of £100 5 year bonds currently trading at £50 each and hey presto its debt is halved.

It would also let us all know who the cunts were that were taking punts on national economies so we could pitch our tents up outside there head office. They will, in their defence refer to the “liquidity” they provide i.e. those wanting to offload Italian bonds can do so. Except so fucking what, like seriously, so fucking what. Head teachers here are about to go on strike for the first time ever because of the sacrifices they are being expected to make and some multi-millionaire cunt considers the ”liquidity” him taking a punt in the hope of making millions provides to be sufficient justification for taxpayer rape? Fuck off.

P.S. My understanding is Italian debt levels aren't really the issue here, rather its that the country is bent from the top down, which is scarey bsicuits because institutionalised bent-ness is awfy hard to remove due to all the vested interests it involves.