Me Incorporated vs the statistics

I was unfortunate enough to be unemployed a few years back, though fortunate enough for this to be when the economy was still growing. Being unemployed was bloody awful, like I remember being that embarrassed I used to wait for my neighbours to leave before I went out to do the shopping or some DIY. But, dear Christ it does teach you some life lessons.

One was the transitory nature of work and all it entails. Going from complimentary booze and nibbles in an airport business lounge to queuing up in the broo within the space of a coupla months I learned all the associated status markers belong to someone else and as such should never have much value attached to them.

Another was just how bloody awful unemployment is and how it's so obvious the vast majority of those signing on really, REALLY don’t want to be there. I remember watching a guy come in just so he could thank everybody for helping him get a job. And while his obvious elation was catching, what struck me most was his new sense of freedom and self-worth.

Yet another thing was the realisation that there really is a something for nothing benefits culture. Every fortnight I sat there ducking some nutjob bouncing about on chairs txting the gaggle of neds and nedettes congregated outside in between coming up with bullshit excuses as to why he couldn't attend the recruitment fairs various employers where then organising at the broo head office i.e. back in the day companies were actively hunting people to employ and some people where saying "naw yer alright pal".

Then there was the broo i.e. public sector staff themselves; about 40% of those I directly encountered amounted to no more than different flavours of cock (the figure would probably have been higher except c. a fifth were always gassing by the printer the entire time I was ever in so I never encountered them).  The worst was one lassie who left me stuck in front of her for 20 minutes while she phoned her boyfriend to tell him about a job she’d just found for him. He obviously wasn’t that keen because she kept telling him to “stop it” before eventually putting the phone down. Finally, I thought, I could sign on and f’off. Or not because now it was my turn to “stop it” because, as she then informed me, she was off for a coffee break.

So yeah being unemployed was - and with all the skivers and strivers bollocks, still is - a humiliating and humbling experience tempered only by my being lower middle class. Now by this I don't mean my lip was any stiffer than the next man’s, rather I had an all important chunk of cash in the bank plus my (former) employer had paid for me to be outplaced.

Blessed with the "management" grade package no less, from memory this meant 2 one to one sessions with a consultant, some group sessions plus unlimited access to a room full of computers and printers. Apart from some half decent CV advice the rest was essentially bollocks, but it did mean I had the option of somewhere to be during the week plus psychologically important “meetings” to put in the diary. And I got to limit my contact with well the “unemployed” to help preserve my lower middle class sensibilities.

It’s the “bollocks” though that matters here. When I was unemployed this meant how to access the “hidden” jobs market that never appears in job adverts because it consists entirely of contacts and networking through which 80% of people, I was reliably informed, actually find jobs. This was what the consultants were being paid to alert me to and guide me through. Thankfully, in a time before linkedin and facebook, this didn’t entail any associated mince about social networking “strategies” (i.e. electronically pestering people you only vaguely know in a needy fashion).

More importantly I was also spared the latest thang of setting up my own company as a “vehicle” for my consultancy expertise. So yeah, I never got to be the director of my own, new business. Instead, I stayed unemployed until a slimey, but ultimately half decent recruitment consultant whored me out enough times for me to get a job. Lucky me.  

These days folks appear less lucky judging by the number of people I’ve worked with who’ve subsequently set themselves up as consultancy businesses after being made redundant. Oh, but in this new era we all have portfolio careers not organisational careers you might say and yeah, if you’re an IT consultant i.e. have obviously transferable skills, that may well be the case. For plenty of other folks though it just isn’t, rendering many of the Me Inc.s being set up for the most part little more than spare room based distractions. Like outplacement itself they provide a middle class means of managing the psychology of unemployment. And its in line with benefit rules where if you’ve much cash left after 6 months you don’t get any unemployment benefit so what the hey, sod signing on, lets set up a business.

Whereas this would provide the French with the basis for a film detailing the existential angst of petite bourgeoisie life, here the consequences appear more statistical than cultural in ways that have obvious political ramifications. Like one of the noticeable things about the economy right now are the lower than expected levels of unemployment with this touted as evidence that the current government’s increasingly psychotic fixation with austerity isn’t as destructive as it actually is. Except, a contributory factor here is the number of redundant middle managers and latterly junior staff setting themselves up as consultancies to pass the time until they get an actual job. And besides unemployment, these new firms also boost business formation rates, again seemingly legitimising the current lot’s economic policies.

Me Inc. also goes some way to explaining the productivity puzzle where if so few people are unemployed, why is economic growth so pants? Because so many new company directors are spending all day tinkering with company letter heads waiting for some blerk they met at a conference three years ago to replay to an unwanted email is (part of the reason) why.

Blinkfeed in brown sauce

Jeez, must they? For a change I cycled to work listening to a world service business programme witter on about the various Samsung vs Apple lawsuits. Ooooh how much of what you pay for a phone is getting gobbled up by lawyers they said and so on til I switched off in response to the rank shiteness of business reporting in Britain especially when it concerns “technology”.

Here’s the deal; the Samsung vs Apple bollocks is just the pepsi challenge i.e. an exercise in marketing and product positioning, for phones. Apple, by taking Samsung to court for supposedly copying the minutiae of its product designs, gets to highlight how much importance they attach to design, which in turn leaves apple product buyers with a warm feeling inside after they’ve paid way over the odds for dem lovely rounded corners. More importantly, the exercise seeks to define the market as being about just those two companies – you’ve either a pepsi phone or a coca cola one with everything else relegated to supermarket own brand status.

The maturity of the product market means this focus on branding is increasingly important as manufacturers try to cope with how its changed; we’ve had the take-off stage where everyone got a dumb phone and the basic act of getting a phone for the first time saw sales grow exponentially. Then we saw the big switch over to smart phones, which again saw exponential sales. Now, with everyone in an advanced economy who wants one having pretty much already got a smart phone, we’ve gone from take-off to maturity with manufacturers focusing on trying to encourage as many people as possible upgrade their phones every 2 years with all that entails in terms of developing brands to preserve margin and engender product loyalty.

Except, unless you’re a tech nerd, there’s no “compelling” technological reason to upgrade, the inanity of subsequent developments being captured by the daily mash when they described the latest Samsung’s wolf attack mode i.e. once you’ve got a phone with a big screen that can surf the internet, play games and take pics as well as do phone stuff, everything else is pretty much irrelevant. So another obvious comparison now, besides coke, is baked beans where for apple read Heinz and for HTC’s blinkfeed read “in brown sauce” i.e. a minor variation on an established theme that's of limited if any significance.

 

And the business and technology writers? They actually take the legal bollocks at face value along with whether or not a Sony experia can save you from wolves. Worse, they appear to revel in it all, which is understandable given it means easy copy and a means of selling advertising space (Oh and its going to get worse, because for mature products product differentiation is typically driven by marketing). This in turn means rather than  trustedreviews (aye right) we get spoon fed PR releases, the only mediating factor being the amount of advertising the associated product entails. 

What makes this bad for consumers is obvious and obviously more material issues get ignored by men currently fixated on debating the importance of size. Like say if you can’t change the battery of a phone, then the battery effectively determines its usable lifespan meaning there’s additional expense, the environmental waste of binning an otherwise perfectly usable phone yadda yadda yadda,.

Or there’s the rip off prices charged for extra memory e.g. compare the £70 extra for a 32gb Nexus 10 versus a 16gb one with the £10 it costs to buy a 16gb SD card. 

More generally, when google ran out of Nexus 10s over winter to the point where apps were made to notify you when any where available, did the beeb's technology person Rory Cellan-Jones pick up on this story concerning one of the world’s most newsworthy companies? Like was there a fundamental break down in supply chains? Was it being withheld so as not to distract from the Nexus 7 in the run up to Christmas/avoid cannibalising Samsung's – who make the Nexus 10 – own brand tablet sales? And is there a broader business strategy at work here given after it bought Motorola google effectively sat on the Razr HD Maxx, the one phone to solve the problem of short battery life? Nope, because Rory Cellan-Jones is to journalism what prison rape is to badgers*.

Back to compelling technological reasons, well I guess there is one wee one and its Betamax shaped. Quick recap – with video players, VHS competed with Betamax. Betamax was the better technology in terms of video quality, but VHS had the most films to rent i.e. it had the software, so it won. Now phone operating systems are where its at and are getting ever larger and more sophisticated, which in turn means phones increasingly need to be upgraded to keep up with the latest software. Actually, there’s no need to make the video comparison, just think how much of a pain in the arse each new version of Windows is.

As for me having just changed the battery on my two year old phone, I've put off getting a replacement for at least a year - the research this entailed prompting the discovery of how profoundly wrong business tech journalism is. No my phone still won’t save me from wolves, yes keeping it has saved me over £200. And YEEEESSSSSSS , that's all the standard viruses on Plague Inc now done.

* i.e. not especially nice and a complete irrelevance

Decisions, decisions

Given the timing i.e. years after the event and following the publication of a damning report into his conduct, there are various readings of why James Crosby is giving up his knighthood. One would be:

1) That he’s realised the error of his ways and has decided to make a meaningful gesture as an act of contrition; he’s genuinely sorry for the consequences of his actions.

2) Another is he’s simply “guilty” of getting caught.

3) Or mebbe he’s only just realised the magnitude of what happened and its consequences

3) Yet another is he reckons giving up the knighthood and a bit of pension is worth it if he can avoid becoming another Fred Goodwin like pariah with all that entails in terms of journalists digging into his life/camping outside his front door.

Am sure there are other interpretations, but lets see what his written answers to the parliamentary commission’s initial round of questions say:

Q1 - “I resigned as CEO at the beginning of 2006. This had been planned for some time prior to 2006.”

Q2 (1) – “The FSA’s Final Notice was based on what I presume was a detailed review of the period 2006 to 2008, a period substantially after I’d left and in respect of which I have no first hand knowledge and cannot comment on specifically … the prolonged closure of funding markets through 2007 and 2008 was without precedent…. it brought about a much more significant deterioration in the performance of HBOS’s Corporate loans than anyone would have expected or indeed should have been the case”

Q2 (2) – “The merger of Halifax (“H”) and Bank of Scotland (“BoS”) was designed to create a stronger and better balanced business than either of its predecessors…By 2005 with the merger all but complete lending growth in Corporate (only slightly higher than Group deposit growth) had slowed considerably and for the second year running HBOS chose to cede mortgage market share to its rivals.”

Q2 (6) – “The Group’s strategy and its Plan for the following year were largely the creation of the specialist managers in each Division”

Q3 – “At all times the Main Board was conscious of the need to take an acceptable and consistent level of risk both within each Division and in aggregate. There are numerous examples of the Main Board approving strategies designed to temper risk, for example; the decision to raise fresh equity capital in 2002.”

5 – “Having left HBOS in 2006 I have no first-hand experience or knowledge of the detail of what actually transpired subsequently.”

Hmmm. What do you think; when there’s apparently no “pressure” being brought to bear do his responses convey a sense of contrition or was he focused more on distancing himself from a debacle that resulted from unforseen and unforseeable circumstances i.e. it wisnae me 'sides it was all sensible and lovely when I was in charge?

Gettin' rhetorical 'bout shit that's "historical"

Reading between the lines, Robert Peston’s take on the parliamentary report into the HBOS failure was this; move along now, nothing to see here. How else can you explain him writing stuff like:

 “(I)t is not the fact of censure that is odd. It is the timing, and that it's just these three rather than the great gang of bosses of failed British banks” and “(a)ll that said, there is a potential danger in this attempt by parliamentarians at ritual blood-letting so many years after the great crash of 2007-8” and finally “(h)ad the punishments been meted out in 2009 or so, there might have been a great national sense of justice having been done. And then morale in the banking industry - not unimportant to our prosperity - could have been rebuilt.”

So why now and not before? Lets try and find some answers. The first is that the HBoS failure has already been the subject of an investigation by the FSA. A long investigation, so long it wasn’t until September 2012 that the FSA was able to say it:

“(N)ow intends to start work on the HBOS Report and, subject to the legal processes that will need to underpin such a report, would aim to publish it during the remaining lifetime of the FSA, prior to ‘legal cutover’ to the future Financial Conduct Authority.

The purpose of the review will be to:

1. explain why HBOS failed and cover the FSA’s supervision of HBOS and explain the focus of the enforcement actions; and
2. inform a wider internal and public understanding of the causes of failure during the crisis (to the extent not already covered by the RBS report).

The terms of reference for the Report and details of its governance arrangements will be published shortly.”

So why now and not before? Because the failure was still being investigated in 2009. And 2010. And 2011 and 2012, meaning publishing anything before now would presumably have been sub judice or something similarly bad. What’s also notable is that whereas the parliamentary committee investigation only took from late last year to now to start and finish its report, the FSA still hasn’t published its report, which I'm guessing is costing millions and is currently being changed to ensure its in line with what the parliamentary commission found (more of which later).

Here, hang on a mo though, hasn’t Robert Peston already covered the FSA looking into HBoS? Yup back in 2011 when the FSA was setting out what in practice was its sequential approach to things which meant it was RBS first, then HBoS, which is handy cos that addresses Robert Peston’s other question about why the “great gangs” of bosses aren’t also being criticised right now; presumably it’s their turn next!

Am still confused though about Robert Peston’s profound memory lapse. Perhaps other factors were/are at work? Like watching the parliamentary enquiry into HBoS what came across very clearly during the initial sessions was how the background research conducted by the the members of the committee appeared to have been restricted to reading the final notice issued by the FSA to one HBoS executive last autumn and little else.

Now obviously these are very busy people so no wonder they weren’t properly prepared. Unfortunately, the FSA note was only able to conclude things like (section 4.15). “the Corporate Division was the highest risk part of HBOS’s business“, which is interesting but - as the new parliamentary report has now made very clear  - wrong; the international division was even worse i.e. the latter was actually the highest risk part of the HBOS business i.e. the FSA has wasted years generating an analysis fundamentally wrong at the most basic of levels that has in the process limited the scope for any other actions to be taken. 

Now to get a sense of how crap the FSA investigation has been the parliamentary lot end with various questions for them that include:

 “The reasons why the FSA did not undertake serious analysis of the quality of the HBOS loan book in the period from 2005 to 2007” and “The extent of losses in each division, which we have had to estimate” i.e. despite years of investigations the FSA still doesn’t know how much was lost at HBOS, where or who by.

The parliamentary boys, bless ‘em, did eventually realise how (self-servingly) cack the FSA was. But, only after they questioned the former international division CEO relatively. During this sessions much of their questioning took the form of a basic fact find, that flagged up their general ignorance, with the more serious stuff taking its cue from the FSA's focus on the corporate division. This meant the former international CEO could respond with stuff like “(w)hat I would say first is that my main day-to-day job was running the international division as part of the organisation” and “clearly, not being involved in the day to day of corporate division, as I have already said, I am describing what I suspect happened” i.e. corporate? Nothing to do with me pal.

Even better/worse, because the questions derived from the FSA’s piece of shit final notice focus on corporate, the former international CEO got away with things like stating how in Australia the business he ran was “principally a retail and SME bank with a small corporate business” and in Ireland “principally an SME business banking book, which is why it was in business banking. We then felt that there was an opportunity for us to grow in Ireland, across the retail, SME and a small amount of corporate business … We had-I haven’t got the detail-a small number of larger corporate loans in the Irish book, but it would be a very little number”. 

Really? When I look at the readily available, published portfolio data I see a completely different story, one where corporate, particularly commercial property lending accounted for whopping great loss making wodges of both portfolios.  So going back to Robert Peston’s question about why now and not before, clearly the willingness of bosses to impede investigations by misrepresenting the facts, when given a chance and you bet they were given a chance, also forms part of the explanation.

Finally, there’s the demise of the FSA itself and its replacement by the Financial Conduct Authority as from April the 1^st this year. Now lets be clear - any report that concludes with 9 questions “on which we expect the FSA to expand” was intended to be published before April 1st. So going back to the question of why now, it's also because it was deemed not politick to do so. I mean c’mon you’ve got the sensibilities of the former boss of the FSA when all this happened (the HBoS collapse, then the ongoing and deeply incompetent investigation into said collapse) to take into account here given he only just got his knighthood in the 2013 new year's honours list followed by a plumb job at Barclays.

As for Robert Peston’s shite about blood-letting and punishments, that is just bollocks noise – oh no all these people on (multi) 6 figure retirement packages might get called incompetent in public and have to give up an additional directorship or something. Oh no. How ghastly.

Like seriously, on the one hand you’ve now got the bedroom tax on the poor, on the other so far just one millionaire has been hit with a half a million pound fine for making decisions that cost a company an estimated £46 billion, which in turn led to a multi-billion taxpayer bailout. Here, let me say that again, these cunts got rich taking decisions that have cost taxpayers billions and billions of pounds i.e. they got rich and look set to stay rich doing things that have cost us all more than every benefit “cheat” in the land has for at least the last decade. These people are the real enemy.

Practically, one approach here is or at least was straightforward; if current law doesn’t allow you to bring these cunts to justice then HR policies should;if the records were still there travel and expenses claims could have been/could be examined along with examples of how they behaved towards staff etc., then they could have at least been dismissed for misconduct on hee haw rather than early retired off on sweet, sweet packages.

The reality of course is this didn’t and won’t happen because doing so would call too many vested interests into question. Much better, it appears, to let people with a vested interest (the FSA) fudge and delay for as long as possible until eventually cheerleaders for the rich and the status quo can start coming out with chat about how this is all very much in the past and that we should all move on now, this despite the very clear links between what they did then and current government policies. Like seriously, how much of a disingenuous with a selective memory cunt is Robert Peston? (My turn for a rhetorical question, the answer is very).

Reverse Robin Hood Reversal

Traditionally, banks mediate between borrowers and lenders, transferring surplus cash from flush A to want some cash B. In the process they transmogrify time, turning short term deposits like the balance on a current account, into longer term lends e.g.  mortgages. The credit crunch revealed banks operated as time-machines in a different way transferring money from millions of taxpayers after 2007 into the pockets of millionaire property and private equity investors in the run up to the credit-crunch.

Well when I say investors, I mean speculators. And clearly, some people benefitted from this redefinition of financial intermediation more than others. Well, a few rather than some and they were typically already doing very well thank you very much.

More generally, anyone who owned things, if they weren’t too greedy or dumb enough to attribute capital gains to their financial acumen as opposed to an unsustainable bubble, did well.

At this point we set sail across the azure seas to Cyprus where another massively overblown banking sector has imploded. And as usual the EU cocked things up with its early negotiations; all that was certain about the initial proposal to impose a tax on all savings was that it set neon signs up across Europe saying “bank runs now”. Now though the details of what appear to be the final arrangements look like the first, fair response to the credit crunch.

Obviously, yer average Cyprus punter can expect the full Greek treatment in due course; public spending cuts here, pay freezes there, mass unemployment, emigration and privatisations left, right and centre etc.,. But, limiting the savings tax to the rich, the starting point for all this is that the people who benefitted from and contributed the most to what went wrong are getting the shaft. So at least, unlike here, there’s that small crumb of consolation.

Did I say fair? I meant to say the imposition of a more realistic risk-reward structure will serve to disincentivise moral hazard, encouraging markets to work more efficiently and capital to be more effectively allocated. See? Its not just "common sense", "good economics" spouting Tories that can come out with the econ-chat to tart up their prejudices.

P.S. Its noticeable that this is essentially about the Russians i.e. "our" oligarchs still get saved, each and every, fecking time.

Paul De Grauwe remix

I reckon Paul De Grauwe's Vox article on austerity is already a classic, by which  I mean 50+ years from now economic historians will approach it the same way they do Keynes's "Can Lloyd George Do it?".

As with Keynes's pamphlet, De Grauwe is also seeking to influence government policy rather than articulate any grand, new theory. He does so by setting out clearly, concisely and in a deliberately populist fashion, how the rationale for fiscal austerity is utter bollocks. By doing so he renders fiscal austerity and all it entails an exercise in bigoted, unthinking, hurtful, dogma.

And if that wasn't enough, heck, he even appeals to the great and the good's self-interest when he says "As it becomes obvious that the austerity programs produce unnecessary sufferings especially for the millions of people who have been thrown into unemployment and poverty, resistance against these programs is likely to increase. A resistance that may lead millions of people to wish to be liberated from what they perceive to be shackles imposed by the euro."

So in honour of Professor Groo at a time when the Cyprus bank deposit mess sees the EU plumbing whole new depths of dumb,  the attached "remix" of some of his data strikes me as an appropriate tribute.

Ta da!

The original being >>>

Bank of England Tourettes

Watching Mervyn King set out his views on RBS to MPs today I thought what an ignorant fucker. Here’s why.

His suggestion that RBS should be split into a good bank (to be sold off and become much lovlier as a result and willing and able to lend loads more to businesses etc., presumably) and a bad bank is already built into RBS's structure except they call it core and non-core. And the latest accounts make clear they’ve been shrinking the non-core “bank” like billy-o, cutting it from £285bn plus £85bn of undrawn commitments at the end of 2008 to £57bn (plus £6bn undrawn) by the end of last year.

Now this means a couple of things re: Mervyn’s chat. One is well what bad bank is he on about exactly, the way more than £300bn one that's already been got rid of or the rump that’s left, which continues to account for a disproportionate amount of RBS losses (these being cross-subsidised by its core businesses rather than directly by the taxpayer as might the case if Mervyn's proposals were implemented)?

Another is does this chat - and the resultant uncertainty - help or hinder anyone, like is Mervyn undermining the value of a public sector asset? And what about to what extent is RBS and other banks getting all the shite lending off their books complicating the lending data being touted as evidence of banks being unwilling to lend? *

Unfortunately, Mervyn doesn’t say. Instead, he cite Japan as an example of what not to do, which is interesting in the sense of it being "interesting" someone noted for assuming he’s always the smartest person in the room chooses to spout such bollocks. Here, quick difference – Japanese banks just didn’t ‘fess up to their problems for years ... and years ... and years, which simply hasn’t been the case here. Spain? Fo’sho, but here? Nope.

Plus, there’s cheeky wee fundamental differences about Japan and the structure and common sense of its economy and how that facilitated banks supporting “zombie” companies, which clogged up their balance sheets to an extent you just don’t and won't see here. Then there’s also how generous the Japanese government was when it finally started sorting out its banks. So yes, UK banks have received lots of aid, but they've also paid for it or to quote that banker’s friend the Guardian ”The taxpayer has now made £5bn of profit from the APS and an additional £1.5bn from fees paid by RBS for other liquidity schemes” – and that’s just RBS! By contrast Japan's banks got aid on terms that would have even made Wall Street blush.

So yeah there’s some fascinating degrees of ignorance on show with Mervyn joining Paul Tucker in making random bollocks outbursts. Given Mervyn’s vocal support for the government’s austerity policies I reckon he should ram his ego back up his jacksie, shut up and f'off early.

* Council of Mortgage Lender data on mortgage LTVs make clear we’re actually still in a credit crunch. So rather than behaving like a spoilt wee girl, Mervyn could have more usefully come out with some chat on what he thinks the mortgage market should look like given the Bank of England is in the process of acquiring levers for influencing lending into it i.e. talk about what the Bank of England can and will do and why, not headline grabbing tosh that's as ignorant as its irrelevant as its unlikely to happen.