Will lightning strike twice?

Pop quiz: The BBC has kindly handed the Barclays CEO a special platform to use to convince us all that banking has learned the lessons of the past and is committed to changing its ways. Is this a reference to:

a)      Bob Diamond (as was) giving the inaugural Today programme business lecture in 2011 about how banks needed to be good citizens and restore public trust?

b)      Antony Jenkins guest editing the Today programme today on R4 after giving a speech organised by Robert Peston on rebuilding trust in banks?

You decide. In the meantime, Robert Peston’s latest blog was interesting but only because of what it left out. It didn’t mention how so many banks were run into the ground by the sheer incompetence of executives handed mega pay packages for being competent right up until it turned out they weren’t. Saying that, it did quickly run thru the litany of crimes, institutionalised frauds, industrialised miss-selling scandals and so on that the bulk of the banking industry has perpetrated in recent years. But, it failed to mention how many people had actually gone to prison as a result. 

Oh hang on, no one has and as long as that's the case i.e. as long as bankers remain above the law regardless of what they do to customers, it's difficult to see, regardless of how lovely the BBC is towards it, how the industry can rebuild public trust (moreover the threat of going to prison AND having pay and bonuses stripped as a result of their being the proceeds of crime would also function as a pretty nifty deterrent).

A bit of "fun"

John Kerry's recent chat about the protests in Ukraine reminded me of how the US authorities responded to the Occupy protests: "The United States expresses its disgust with the decision of Ukrainian authorities to meet the peaceful protest in Kyiv’s Maidan Square with riot police, bulldozers, and batons, rather than with respect for democratic rights and human dignity. This response is neither acceptable nor does it befit a democracy"

HS2 is No.4

Paragraph 28 in the Commons Transport Committee new report on HS2 is well worth a read, it makes clear that never in the field of British history have so few people been so willing to waste so much of other people’s money on so little (re: Number 4 here).

The BBC, in its bestest Pravda voice, summarised the report as follows: “The MPs heard from bosses of consultants KPMG, who said in a report that by 2037 HS2 would boost the UK economy by £15bn a year. Some economists who gave evidence cast doubt on this figure”

Actually, this isn't quite right. Professor Dan Graham of Imperial College, London, said "I do not think the statistical work is reliable" while Professor Henry Overman of the London School of Economics described KPMG's approach as "essentially made up". And lets be clear, an academic calling something “essentially made up” is more than casting doubt, he is saying it's garbage to an extent where this isn't actually a debate.

So what did KPMG have to say in response to being told their expert assessment, their professional competency even was "essentially made up"? Not much. When questioned they emphasised that their results were provisional and conceded that their methodology "does not have a firm statistical foundation”.

This second bit is worth repeating; the people paid to produce an economic analysis of the benefits of HS2 used an approach even they think “does not have a firm statistical foundation” and according to independent experts is "essentially made up" i.e. KPMG think the benefits will be £15bn, they admit they've no solid evidence to support this let alone a credible methodology for making such forecasts, but they still think the benefits will be £15bn a year. Or more. Or much more. Or perhaps less. How much do you want them to be?

Except we already knew this if only because the whole notion of a £50bn project delivering a £15bn i.e. a 30% return per annum in an age when you do well to get 2% on your savings is inherently ridiculous. We also already know that if it does go ahead HS2, like the olympics, will cost far more than all the early estimates and deliver a lot less because that's just what big government projects do. Tarting this up by wasting money on consultants to construct makey-uppy numbers using a makey-uppy methodology to suit HS2's political supporters is simply an expensive charade gone thru not so much to give the process any credibility – it doesn’t - but to distractingly fill up air time until too many contracts have been signed for this train wreck of a waste to be stopped, which is a shame really given the opportunity cost here i.e. the other things the money could be spent on e.g. say 10 x £5bn projects more fairly dispersed across Britain that would also have spread the risk and start generating benefits within years rather than decades (as opposed to one big super-duper project) isn't even being considered.

As to why, well I guess making massively subsidising a marginally quicker London commute the lynchpin of Britain's transport and infrastructure policies for the next few decades will eventually confer some benefits, but ultimately its because politicians don’t like being seen to be wrong and that’s kind of it really, their egos being apparently worth tens of billions of our pounds.

Scottish independence vs food vs a fair corporation tax

Another day, another piece of garbage anti-Scottish indpendence chat, except this time one with broader ramifications; it turns out that besides causing the four horsemen of the apocalypse to rise up and grind the very earth into cinder, Scottish independence would also make your weekly supermarket shop more expensive. Crivens. The “argument” presented for this is as follows:

“in today's FT, which reports that bosses of three of the four biggest supermarket chains are warning that food prices in an independent Scotland might well be higher than in the rest of the UK. ….Scotland has a large dispersed population, so transport costs - logistics - tend to be higher in Scotland than in England.
Scottish people eat relatively less fresh food than the English, and fresh food is much more expensive to transport and store (the logistics of supplying fresh food are highest). So it is relatively more costly to provide fresh food in Scotland….

….. at the moment, the big four supermarket groups - Tesco, Sainsbury, Asda, Wm Morrison - absorb these differential costs in a pan-UK pricing policy. They take on the chin that the intrinsic profitability of doing business in Scotland is less than for England.”

So there. Or not. First off, I don’t know about you, but last time I went anywhere noticeably dispersed in Scotland I didn’t encounter a single major supermarket outlet whatsoever (check what Yell has to say about supermarkets on Arran fer instance). Rather, what I encountered were corner shops that already were charging plenty extra for basic goods.

Second, well lets go to some of Scotland’s more distant locales that aren’t so dispersed then, Inverness for example, the capital of the highlands or as it's also known “Tesco Town” i.e. a far north location with a ridiculous concentration of major supermarket outlets where logistical scale economies are already being achieved to the point where the notion that yer average Inverness punter’s weekly shop is being subsidised is a joke (alternatively and in the interests of fairness try Stonehaven instead give or take what you’d discover there are the joys of living somewhere where the only supermarket on offer is the Co-op what that means in terms of crap fruit and veg).

Dull facts mean I’m not too convinced by the “argument” being made allova sudden. But, what the hey, lets take them at their word regardless, except (a) if transport costs really are all that, then presumably this creates a greater incentive to source local produce i.e. taking away the supposed English food price subsidy could benefit Scottish food producers and/or (b) as supermarkets depend on price and convenience to out-compete smaller, local rivals, if price was less of an option, then Scottish independence could benefit local retailers. Oh and (c) so howcome a pint costs more in London, especially London City-bastard-Airport than anywhere in Scotland then eh? Eh?

Besides not being especially convinced by the anti-independence argument being made, what really struck me was the associated chat about the limited appeal of the SNP’s proposed competitive corporation tax rate; “the supermarket groups tell me that the Scottish government's promise to cut the headline rate of corporation tax by up to three percentage points would be of little benefit to them. The boss of one says the health increment on the rates currently costs them more than four times what that cut in corporation tax would shave off their tax bills….. The biggest Scottish supermarkets, those with a rateable value of more than £300,000, and which sell both cigarettes and alcohol, pay a 28% "health" increment on business rates - which costs them collectively around £30m a year.”

Now just chew on that for a second. And another. And then some more. Yup, that’s right, cutting corporation tax wouldn’t actually matter because these feckers already do so much to avoid it cutting it would be largely immaterial.

Now this strikes me as being what’s actually important here, which is as follows; Scotland already provides a practical example of how big, global PLCs can be more fairly taxed than is currently the case because it operates a tax that uses the rateable value of premises to exclusively target big retailers rather than whatever profits supermarket accountants claim they make in whatever country they happen to be operating in. And have any major supermarkets left Scotland as a result because they’re not subject to this tax in England? No, they haven’t and no they won’t either, because they, like KFC, amazon, google, Multinational-Tax-Dodging Incorporated etc.,  need boots on the ground to ensure they can actually reach consumers as this droog refers to here and here.

So really whether food would cost more in an independent Scotland is besides the point not least because the arguments presented as to why are pants and potentially favour independence. But, do existing Scottish tax arrangements – hit ‘em in their cost base regardless of the declared profits - provide a practical example of how to quickly and easily tax multinational PLCs more fairly without this having any adverse effects whatsoever let alone requiring any grand international agreements to be made that will never actually happen? You utterly betcha.

No wonder the article I’ve heavily quoted from referred to supermarkets being afraid of going on record about what they think, its just the reasons why appear a lot less to do with a supposed fear of Alex Salmond saying nasty things about them and a lot more to do with people actually having a  think about how they're currently taxed.

Hmmmm, flip flops. Nice.

For reasons I’ll spare you I found myself in Edinburgh’s Hollister shop recently. What struck me about the place was that the poor sods getting paid to fold stuff were wearing flip flops. In Edinburgh. In winter. Given company policy is to keep the place as dimly lit as possible I felt genuinely sorry for the shop assistants’ toes as all the shoppers crunched past in their winter footwear.

Then I discovered the CEO of the US parent company, the 69 year old plastic-fantastic freakzoid pictured above, has a 40 page plus manual detailing what the male models hired to attend to him (and his dogs) on his private jet have to wear, from  pants, to cologne to flip flops i.e. the poor sods with bruised toes folding jumpers down George Street are actually the embodiment of one pensioner’s sexualised fantasies.  

This is profoundly liberating I guess in that it relegates men to the same eye candy standards traditionally imposed on women so engenders an equality of a sort.  However, rather than gender issues, I reckon it provides a useful warning as to the future direction of British society and British culture. No seriously, it does.

This is because it’s an example of what the super-rich, the ruling class, the 1% even, does when it's free to dictate how others have to behave. Want a job? Getting hassled by the broo to do so? Then put on some flip flops. Why flip flops? Because a very rich old age pensioner thinks attractive young men look cute in flip flops that’s why. And no you’re not a shop assistant (yes you are, you're not even a visual merchandiser) you’re a brand ambassador. So how does that make you feel when you put on the company flip flops, eh?

In Hollister-land the super rich clearly have no sense of let alone concern for the personal dignity of anyone other than themselves and their own. In fact, they don't just lack empathy, they blithely shred the dignity of those they employ on low wages whenever it gets in the way of their personal whims and sexual proclivities. And if challenged, they will readily draw upon free market rhetoric about how making people wear flip flops in winter is good for shareholder value, creates jobs (that would be there regardless cos we all need jumpers, its simply whose jumpers we choose to buy) and confers a competitive advantage in a globalized economy, etc..

The reality of course is more complicated than this; the super rich dodge taxes the rest of us pay and benefit from government policies focused on boosting asset values i.e. wealth and subsidising the low pay that ensures the rich continue to get an even bigger slice of the cake. Except, this would be to imply the super rich aren't 100% wholly responsible for their great fortunes and we apparently can't have that.

This all matters because if there’s one country in the world that’s gallavanting as fast as it can towards the American model of super rich, super poor and fuck all those in between, its Britain. So bring on the flip flops and lets hope - as per Abercrombie & Fitch/Hollister company policy - our photos are judged pretty enough at their monthly review for us to keep our jobs.

Decent and sustainable jobs vs amazon.com

Back in the day the various UK development agencies fixated on, fetishised even manufacturing when they went out chasing foreign direct investment. This reached its apogee with Chunghwa picture tubes, the central belt facility custom made to build cathode ray tubes just as the world discovered flat screen technology. Lessons were presumably learned until now it seems any new job is a job worth having. Except, is this really the case given the companies Britain now bends over backwards to attract?

The contrast between two things are prompting these questions. One was attending the Radical Independence conference on Saturday, the other is the BBC expose of working in an amazon.com fulfilment centre. Ignoring the actual proposals to sort things made at the conference, one of the key demands repeatedly made was for more decent sustainable jobs, a perfectly reasonable request when you consider amazon.com.

Now, the BBC thing is all very well, it will, I’m sure, highlight lots of nasty employment practices just in time for Christmas then be forgotten thereafter give or take some handwringing. Except the global chat about amazon.com has for years now made clear it's a ferociously shite employer.  Here, for instance, is an article about how Amazon set up a fulfilment centre in the US without air conditioning that got so hot emergency medical personnel were on standby to take workers suffering heat injuries to hospital (whether they get their pay docked after passing out from heat exhaustion isn't clear). Here you’ll get a flavour of how amazon.com’s aggressive employment policies are being contested in Germany where trade unions are actually listened to unlike as opposed to here where amazon.com’s anti-union stance is easier to impose. So even without the BBC it was already clear that as an employer amazon.com is bad for your health and your wealth.

Then there’s the wee thing you notice about where amazon.com locates its fulfilment centres. In the US this includes Baltimore - as in The Wire, as in post-industrial urban decay and high unemployment - which was so eager to get the centre it handed over $35m in enterprise zone tax credits, $5.5m in Maryland tax credits, a $1.25m loan on easy terms and discounts from the local utility company. Here, amazon.com has fulfilment centres in Gourock (I think they mean Greenock really) and Swansea i.e. our own hot spots of post-industrial urban decay.

So how much taxpayer funded aid did amazon.com get then to set up shop in Grerenock/Gourock and Swansea? And where else exactly would they have gone if they hadn’t set up shop there given its not as if their actual customers are moving anytime soon i.e. if amazon.com wants to sell to the West of Scotland and Wales, then amazon.com needs fulfilment centres in the West of Scotland and Wales (or bigger centres employing more people elsewhere i.e. no net gain in employment whatsoever). And hang on a mo, so is amazon.com getting millions of taxpayer moolah to do something it’d have to do anyway at the same time as it dodges paying British corporation tax, like how’d that work then?

Unfortunately, politicians aren’t much of a guide because they still sound like they’re lumbered with a Chungwa Picture Tubes mentality. Like when David Cameron responded to amazon.com opening 3 new fulfilment centres by saying “I am delighted that Amazon will create thousands of new jobs … this shows that the UK has the infrastructure and talent to continue to attract major investments from leading companies such as Amazon,” I think what he actually meant to say was that:

1)      amazon.com wants to maintain and improve its access to and ability to service tens of millions of profitable customers in one of the world’s richest online economies

2)      and to a lesser extent, by doing so it limits the scope for any potential (initially) UK focused rivals to emerge given by definition the amazon.com business model of selling online in itself doesn’t convey a sustainable competitive advantage whereas a logistics infrastructure does.

I think that was what he was meaning anyway, its hard to say other than amazon.com needs access to the British economy far more than Britain needs amazon.com.

So amazon.com, lovely. It dodges taxes, it treats the majority of its employees like shit and - am guessing - it gets big taxpayer handouts to set up warehouses it’d have to set up anyway. I think I;ll be doing my Crimbo online shopping a wee bitty different from now on until amazon.com starts providing “decent sustainable jobs” (with this presumably involving Jeff Bezos spending less on space ships and a wee bitty more on air conditioning and, heaven forfend, wages).

Paraphrasing the news

Despite the BBCs mendacious efforts to stay on message, a quick skek of what they’re currently reporting neatly conveys how things are. I’m paraphrasing here, but as I read it the following appear to be some of the big stories:

Today's headlines; the total cash paid to the rich people in charge of big companies is growing around ten times faster than the actual economy.

This is despite the notable example of the rich person in charge of a big company that may well have systematically defrauded taxpayers for years apologising for potentially systematically defrauding taxpayers for years. Sources report he is set to remain very rich regardless and retain what is likely to be a very big, most likely tacky holiday home somewhere sunny despite his having gotten rich running a company that may well have systematically defrauded taxpayers for years.

Elsewhere, very rich bankers, some of whom went to very expensive private schools, explained why they should be paid lots of money even when they do their jobs really badly. Sources confirm the small print in the contracts signed is such that the taxpayer clients involved don’t have no leg to stand on when it comes to getting any money back. Not a penny. 

When asked if this means the very rich bankers involved will ever be employed on behalf of taxpayers ever again, our sources advised that as the banks employing the very rich bankers are currently on the look out for retired government ministers and senior civil servants to employ as 2 day a week special advisors on what are currently understood to be 6 figure packages, then yes they would receive taxpayer funded gravy in future.

In breaking news the current Tory party fixation with drawing increasingly improbable links between the Labour party and an incompetent, drugged up party boy approved for a job he very obviously wasn't up to by people managed by someone the ConDem government subsequently knighted where judged to be highly successful at drawing attention away from the Tories letting a bloke who owns a chunk of Wonga and gives them money try and rewrite employment law in ways that would make him more money, but were for the most part dismissed as mental *.

And finally, ordinary people continue to be made redundant en masse because this is for the good of us all. Yer average punter didn't give a hoot either way because he or she continues to favour engaging in narcissistic, but ultimately apathetic pursuits instead.


* what's interesting here is that because party boy appears to have been so much of a party boy, the Co-op is now looking at his expenses claims. This, when you think of Al Capone,  has real potential in relation to justice and all the other boys that fucked the economy into a cocked hat. 

 

Mon the deflation!!!!!!!

That the total rewards paid to FTSE company directors grew 14% over the past year was as predictable as it was repugnant,so lets have some fun at the scrounging, subsidised bastards’ expense. Yeah, that’s right, according to the right’s own arguments all these FTSE boys are subsidised scroungers.

Here’s how; reading thru some of the details it turns out the bulk of the gains were from “share-based long-term incentives” i.e. if a company’s share price goes up, the execs get the mega moolah. This is terribly lovely until you realise that for years now monetary policy in Britain, in particular quantitative easing, has been geared to boosting asset values. And shares are an asset i.e. a big swodge of the gains executives creamed off this year are hee haw to do with them and plenty to do with a policy the British Chambers of Commerce says, according to CNBC, is debasing the pound!

As for the subsidies, well, lets get realistic for a minute and ignore all the annual report and account bollocks about how such and such a thought-leadership-best-in-class business strategy is delivering real gains; the bulk of the business costs being cut in Britain today are to do with labour be it via redundancies, shorter hours, pay freezes or the closure of pension schemes. Now, what happens when pay gets cut or people laid off? That’s right tax credits and unemployment benefits pick up the strain i.e. the government i.e. us, is subsidising all the supposedly best in class business models all these FTSE douchebags claim they’ve successfully implemented ahead of plan.

Then there’s the very, VERY obvious point, which is in an economy still miles away from trend growth of c. 2.5% a year, if the cash all these execs get goes up 14% a year, they’re getting an even bigger slice of the cake.  So yeah, sure, mebbe the UK GDP dead cat is bouncing for a change, but so what given all of the benefits are getting ripped off by the already very rich; as it stands things work for them, but no-one else or to quote the CBI on recent (below inflation i.e. waaaaay below 14% per annum) pay rises “It's clear that pay restraint is continuing to underpin employment growth. We expect wages to pick up next year, but sustained growth must come first to protect jobs” i.e. we’re all expected to endure yet another year of real terms pay cuts for the greater good whilst the subsidised, scroungers in charge get 14% increases for managing mediocre, subsidised growth.

This brings us to the spectre of deflation currently haunting the Eurozone. Now the mechanics of why deflation is typically regarded as a bad thing are clear enough; if prices fall, then consumers and businesses are wracked by uncertainty and likely to postpone spending e.g. why buy a widget making machine today, when (a) it might be cheaper tomorrow and (b) the widgets it makes will sell for less than you thought when you bought it.

But, speaking as an employee and as a consumer so what? In the current environment one thing I’m certain about is that my pay is set to fall further behind prices i.e. its real value is going to keep falling for the forseeable future so to me a dose of deflation, given it would boost the real value of my pay, is a good thing.

Besides, the arguments against deflation looking pretty weak from my perspective. Like, bearing in mind my marginal propensity to consume is much higher than a FTSE executive’s which is an important thing in the consumer driven UK economy, its not as if I can actually postpone the bulk of my spending given it involves things like food and monthly bills. And as for consumer durables, well, what characterised the NICE decade if it wasn’t ever cheaper, ever higher spec Chinese made goods that people kept buying in spades regardless? So actually, falling prices have a very obvious appeal; but ahhh, this would undermine business confidence and investment and ultimately economic growth – except, so what? Right now, as the 14% FTSE subsidy junkie increase makes abundantly clear, any gains, however teeny, will just be creamed off by a swathe of fat, fat fatty cats whilst me and pretty much everyone else in Britain gets less than hee haw, so feck it, lets have some deflation i.e. the hurtling extent of inequality is such, what is and isn't a good thing for the economy is increasingly a matter of where you sit in the class structure *.

* The bigger point here is the growth in economic inequality and all that entails is, besides being unjustifiable in its own terms, very obviously socially and politically corrosive and, increasingly, a threat to the economy. As for the CBI bod quoted above, every employer, the Tories etc., they really should think about Orwell’s chat about Lenin I think it was; “You can’t make an omelette without breaking eggs.”, “Yes, but where is the omelette?

Wonga vs the sovvie ring

Sovvie or soveriegn rings ain’t what they used to be. Growing up I remember them as being obvious markers of the rough-working class. They were flash, they were tacky and if you wore enough you had a ready made knuckle duster (men and women, boys and girls). They also performed the important economic function of being a readily pawnable asset, it being reasonable to assume the wearer was also the owner.

These days you don’t see so so many. Fashion is probably a factor along with the price of gold pushing them out of reach of some whilst encouraging others to cash theirs in for good. And when the only portable valuable an increasing number of people have is a contract mobile phone, pawnshops become less of an option.   

Online payday loans appear a ready alternative to pawnshops then in ways that stem from this and their sheer convenience to an extent those arguing for a credit union alternative appear unwilling to acknowledge.

Another “advantage” payday lenders have is their anonymity. Even though the pawnshop I used had confessional-like booths, the whole experience felt stigmatised and came complete with a readily imagined scope for public humiliation; I still remember how, after sliding my goods through the grill , I walked quickly away clutching my tenners like they were fresh pornography. I reckon the association remains today, only now it favours the online lender just as it does the online pornographer. Equipped with a laptop in the privacy of our own homes, we’re free to indulge our wants regardless of how exhorbitant or explicit they may be.

So in many ways payday lending appears no more than a new way of meeting a longstanding desire for instant access to cash, only now our ability to fulfil it has been reduced to little more than the speed of our internet connection. To be sure, economic factors underpin the growth of payday lending, most obviously the incessant, downward pressure on incomes that's set to continue for the forseeable future. However, I reckon cultural factors, in particular the changed interaction between what technology makes possible and what we're now free to feel comfortable doing also matters.

More leverage, being 2 tips, a story and some observations

Tip 1: You’re summoned to a meeting with HR. Not good. She’s already sitting behind a desk with a note pad and an intimidatingly fat folder when you arrive. During the meeting, the HR person taps the folder, at one point implying it concerns you and the reason for this meeting.

Or it might not. A bog standard HR tactic is to take a  folder into meetings like this to deliberately intimidate people. You're within your rights to ask to see it and if she refuses, inform her you'll be making a subject access request  -as per the data protection act - after the meeting to have a look at all these files she supposedly has on you. Now whose intimidated?

Tip 2: The meeting with HR is almost over or at least she’s said all she’s got to say. You, on the other hand, if you’ve just found out your being made redundant, might have a lot more to say, but are understandably distracted.

However, you're not so distracted you don’t hear the HR person pick up her pad and tap it on the desk, punctuating the meeting with a full stop you instinctively recognise and acknowledge. You look up, then at her as she starts easing out of her chair. Now the meeting is over or at least it is until you realise she is actively exploiting your civility so she can avoid having to contend with what you’re actually thinking or feeling.

A story*: What people leave on printers is great sometimes. The best I’ve heard about minuted the organised shafting of an executive who, for the purposes of this post,  we’ll call Mr Deputy Divisional-CEO. Mr Deputy had been recruited with the stated intention that after a few time he would take over from Mr Actual divisional CEO. Time passed, everyone agreed Mr Deputy was a very good deputy indeed, however, they also agreed he wasn’t quite divisional CEO material.

And so the shafting began; executives across the bank were contacted by HR who explained the situation and what they were going to do. Once all the executives agreed this was the right thing for the business, HR invited Mr Deputy to a meeting and told him his services were no longer required. Mr Deputy was taken aback at this, so much so he asked if he could speak to Executives A, B and C, especially B. HR said of course, but also advised (these were minutes remember) that executives A, B, C, D, E, F, G and H were all fully aware of and in agreement with the purpose of the meeting. To save face Mr Deputy made clear he would definitely be speaking to B, oh yes (unfortunately, the minutes of that meeting weren’t left on the printer).

Observation 1: From what I understand mass office redundancies are a horriible process. Individuals are queued at their desks, summoned into mass booked rooms to be informed of their fate, escorted back to their desk to collect their belongings, stripped of their security passes, then escorted out the building.

Observation 2: The above chat illustrates how decision-makers are institutionally insulated from the consequences of their actions, so much so this “insulation” has been professionalised, resourced and ritualised to the extent where I’m guessing there are flow charts somewhere detailing every step of the way.

So not having a sense of the consequences of your actions is a defining characteristic of both children and executives. This is very obviously a bad thing; if we don’t have the opportunity to learn what the consequences of our actions are, then what’s to stop us repeating what could well be mistakes in future?

Which brings us to the actual subject of this post, the Unite union’s “leverage” tactic, which can involve protesting outside the houses of executives. To the Tories this is a “thuggish” and intimidating tactic, except  its not. Its about people not playing by the decision-makers' rules and confronting them with the consequences of their actions. And if a decision affects a lot of people, then fine, let a lot of people do the confronting. Heck, HR is usually the first to claim work is about more than just pay, so why shouldn’t executives have to actually deal with the human costs their decisions impose?

Besides, from what I’ve personally witnessed (and read and documented above), executives are actively and strategically willing to exploit our politeness, our civility, essentially our passivity to achieve their own ends with as little fuss as possible. They’re also - are you listening ArthurScargill? -  vicious enough to cannibalise their own in the process. To my mind “leverage” is an honest, civil and legal (for now) means of challenging this rude exploitation.

No wonder the Tories are squealing about it, squealing like stuck, shite covered pigs

P.S. Nov 3rd - Andrew Neil's politics show had a wonderfully facile discussion of "leverage". Mr Neil huffed and puffed about it prompting, Diane Abbott to claim Unite hadn't protested outside an executive's house. Except, they very obviously had.

How dare Unite behave with such termerity! How dare people try and defend their not especially well paid jobs by protesting outside the however many hundred thousand pound house of the executive on a six figure salary, with a good pension, the kids at private school, a shiny German car in the garage for him and another for the wife. How dare they! Actually, they did him a favour, now his kids know what he did at work today without having to ask.

* this story is very obviously sheer fantasy. No civil person could ever contemplate being such a c&nt.

Pimp my professor

Professor Willem Buiter was a fantastic source of insight and analysis into the credit crunch, so much so Citigroup bought him in 2010. Since then he has undoubtedly earned lots of money and got to associate with powerful bankers who, I'm sure, regard him as a terribly nice ornament that does a really good turn at board meetings and away days.

But, compared to pre-2010, his more recent public output has been unfortunately limited and involved pish like “Global Growth Generators” wherein “Citi economists Willem Buiter and Ebrahim Rahbari investigate the likely future sources of global economic growth between 2010 and 2050. They come up with 11 global growth generators, i.e. 11 3Gs”.

Or not given, dumb buzzwords aside, a 40 year forecast (anyone feel capable of accurately predicting the rate and scope of technological change decades in advance? Thought not), can be safely ignored as one of those as stupid as its glossy “thought leadership” pieces companies hand out to executives who typically don’t know any better.

What’s also notable is that here and elsewhere Professor Buiter relegates himself to co-authorship status with a nobody business economist, a nice gesture that lets the latter ride on the coat-tails of the former’s reputation *.

With that in mind lets move on to a piece in praise of “Help-to-Buy” by Professor Charles A.E. Goodhart and Melanie Baker. Now Goodhart is such a big dog British economist he’s got a law named after him. Now? He’s a senior adviser to Morgan Stanley where Melanie (who?) works full-time as a UK economist. Hmmm, see the pattern emerging? Anyhoo, they make 4 big claims in support of Help to Buy, which are:

1)       It will help address to a gap in the market for affordable housing.

2)       Supply-side dynamics should respond from historically low levels to this stimulus if house builders have confidence in its duration.

3)       The private sector could take over some or all of this role after year 3 – by privatisation of the nascent mortgage indemnity insurer, by introducing private competition, or via re-insurance.

4)       It could be used as a powerful macro-prudential tool. Regardless of whether it remains a government vehicle, we think the FPC should retain control over the key parameters – and the Canadian experience shows a possible role for tweaking terms.

These are all for the most part pants. In response to 1), so would an increase in social housing, but without the risks inherent in help-to-buy's reintroduction of the 95% mortgage. Plus, I reckon building social housing assets that would generate income for government/put downward pressure on rents (a reduction in housing benefits costs anyone?) would provide all sorts of additional benefits.

Re: 2), note their use of the word “should”, also think about the timescales here because it takes time to build houses, let alone buy landbank, get planning permission, confirm designs, organise and schedule the various trades, then sell the final product. Then compare this with the actual duration of the scheme (a few years) i.e. government is boosting demand now, whereas actual supply “should” only start responding gradually over the next 18-24 months or so, which means house prices will rise sooner rather later (rendering housing less affordable in the process. Doh!).

Re: 3), “could” is nice, but why should/could the private sector take over this role given the government response is predicated on notions of “market failure”. Oh and the period up to 2007 practically illustrated the risks attached to high LTV mortgages and their consequent limited appeal.

Re: 4), this is simply wishful thinking/disingenuous. Yes it could be a macro-prudential tool I guess, but then so could flexing bank risk weighted asset ratios on mortgage lending, which has far more appeal because it would reduce risk rather than, as with Help to Buy, increase it and transfer it to the public sector. However, the real point here is that in practice all this scheme is being used for is to actively increase risk i.e. it’s a policy lever that only moves in one direction.

Pulling all this together, you’ve got Big Dog Goodhart actively pimping out himself and his reputation to a big bank for mucho cash to give us a pro-government puff piece as vacuous as its dumb. This is a bad thing because, as the Reinhart and Rogoff debacle made abundantly clear, we're in an environment where politicians make aggressively selective use of people like Big Dog to justify their policies, however nasty, dangerous or just plain wrong.

Now back to Buiter; when he took the Citgroup job he stopped writing his Maverecon blog stating  “As a consequence of this career move, Maverecon will be mothballed. That is the logical implication of brand integrity and credibility.  In Maverecon I wrote under the cover of ‘academic immunity’ . Academics have no duty other than to state the truth as they see it – to ‘speak truth to power’.  This gives them the ability to be undiplomatic, blunt, tactless and outspoken in ways that are unacceptable in the wider world – the world of grown-ups…..  Inevitably, during my years with the MPC and the EBRD, both the form and substance of my public statements were more constrained than during my academic episodes before and after.  The same will be true during the years to come with Citi.” .

I’m not as yet aware of any similar statement by the all grown up Big Dog Goodhart**.

* Alternatively, the nobodies actually write and research such dreck leaving the Big Dogs to read over the final version, then attach their name to it to lend it credibility/get it published/raise its profile.
** Americans call such people "shills". Britain doesn’t have such a straightforward equivalent to shill suggesting a cultural difference, but only so far as the relative willingness to acknowledge the practice exists.

P@trick Sway2e centaur tattoo

Just because.

Shameful

Simon-Wren Lewis recently asked on his blog whether the Conservative party will become like the US Republican party, well in two wee respects British politics certainly feels creepingly American.

One concerns the news, in particular how mainstream media reporting in the US is so bad, satirical shows – above all the Daily Show and the Colbert Report – are regarded as more credible sources that the actual news; cue April’s Daily Mash article about how “the government’s welfare cuts are targeted at the fictional character Frank Gallagher” and compare it with the reporting here of the new Work for the Dole scheme.

Another is the flat out disregard for the truth. Over there, this reached its apogee with Bill Clinton’s subsequent destruction of Paul Ryan’s speech during the presidential elections (recent events aren’t so much about truth as they are utter mental-ness). Here, we’ve just had George Osborne’s Conservative party conference speech.

Take him saying this: “You ask someone with a mortgage what happens to their living standards when mortgage rates go up. Just a 1 percent rise means an extra £1000 on the average mortgage bill.” Fair point, it probably does except he’s incorrectly using this to falsely claim his policies have maintained bond market confidence in current economic policy. Except, current interest rates are actually a sign of how fecked the economy is i.e. if the economy really was undergoing a strong and sustainable well interest rates would start rising back to more normal levels.

That was flat out disingenuou whereas the following is a dirty great fib: He said “(u)ntil we’ve fixed the addiction to debt that got this country into this mess in the first place. It’s not over.” Uh huh? The Help to Buy scheme he announced has just been brought forward is about increasing personal borrowing i.e. debt. And it does so by increasing the risk involved because it single handedly reintroduces the 95% mortgages banks are no longer willing to sell.

So Osborne is trying to fix our addiction to debt by ......  aggressively encouraging an increase in higher risk borrowing by individuals. Immersion therapy economics perhaps given his stated aim? No, just rank hypocrisy.

The glass floor

Today I’m going to share what I reckon is a mucho nifty way of both conceptualising and summarising the place of the ruling class in capitalism today. It stems from conversations with a work mate who was moaning about what had happened to a team he’d previously built up from diddly into c. a dozen effective staff.

The mate moved on to be replaced by someone variously known, depending on who you spoke to, as “jingle-jangle” and “that useless bastard”. Looking on from the other side of the office, the mate asked why, given all the frustrated people leaving the team and its new found inability to do much of anything, jingle-jangle was still in place.

To us it looked like what we eventually called a glass floor was in place, one that protected as it held in place this uniquely incompetent fecker and stemmed from the self-interest of his boss; the sudden increase in staff turnover was cast as a broader problem to explain the change in output that could only be resolved by recruiting more i.e. growing the boss’s existing empire. Plus, to say jingle-jangle was useless would be to call the boss’s judgement into question given he'd chosen him for the job in the first place.

What I took away from this specific example was the broader notion of how within organisations power and self-interest combine to create a “glass floor”; an institutionalised and carefully designed means of protecting those at the top from the vagaries of capitalism. I reckon the term chimes because we all know about the glass ceiling, which, when you think about it, must look like a floor to those looking look down upon it.

It’s also, I reckon, more salient than the notion of a “glass ceiling”; the latter is all about gendered cultural processes, whereas the former is about concrete, documented arrangements. To give an example, people talking about the glass ceiling refer to amorphous things like off-puttingly all-male environments, whereas I can point you to the retirement packages male and female executives get and their removal, after they turned out to be profoundly shite, seen across banking following the credit crunch as evidence of the glass floor.

And the glass floor has broader implications when it comes to understanding how capitalism has worked in recent years. By getting in consultants to build them, executives, at least in banking, were insulated from the consequences of their actions. A bank does well? The execs win big. A bank does badly? They still win i.e. the glass floor removes one of the primary justifications for economic inequality in capitalist society; that it creates incentives to take risk and disproportionately rewards successful  risk takers  or as George Osborne (!) just put it "My parents planned carefully, took a risk, and set up a small manufacturing company more than forty years ago. The company grew. Employed more people. …. I will always be on the side of those who use their savings, take a risk, and put everything on the line to set up their own company."

With a glass floor in place, there are no risks for those in charge or to be more precise risk has been rendered asymmetric; they reap all the benefits whereas we’re subject to any of the negative consequence i.e. those in charge have all the incentives and no disincentives to take risk.

This aspect of the glass floor has had an obvious ideological influence; in banking and big organisations more generally, instead of risk different reasons are typically used to justify elite pay; executives need to be paid shed-loads of cash because we need their strategic leadership and vision while investment bankers deserve the big bucks because they make so much money for their employers i.e. the creation of the glass floor has pushed notions of risk and reward into the background because when you’ve a 7 figure pay off in your employment contract and however many million in an offshore savings account, share options or piled up in a personal pension pot (or all four), you simply aren’t taking any meaningful risks.

Yen and art of libor fixing

An older, wiser colleague once told me/said out loud; I’m not working bloody investment bank hours if I’m not getting investment bank bloody wages. The recent and tragic death of an investment bank intern last month reminded me of this; the subsequent comments and reportage less so.

According to the Guardian, “Banking interns need protection from the City's 'all-nighter' culture” i.e. this is a real problem and something should be done about the exploitation of ambitious young people. Except, picking thru some of the accounts of life as an intern kicking about, a recurring point made is how much face-time they contribute i.e. are they actually working into the wee small hours every night? Sometimes I guess. Alongside this though are they sitting at their desks making sure their managers see them regardless of having no work and no other reason to be there? Oh yes, which strikes me as more boring than exhausting. And definitely tit-like.

More seriously, the way the Guardian dumbly describes the long-hours “worked” in this “brutal”, “glamourous”, “financially rewarding”, “competitive”, “cocktail nights”, “superstar” culture , tacitly legitimises, at least in the eyes of the London media, the vast rewards paid to investment bankers and the consequent economic inequality that increasingly characterises British society.

Like, why does he get a £1m bonus? Because he works mad long hours in a brutal environment and competed hard to get their that’s why. Except, lots of people work long hours and don’t get paid that kind of money, heck a big reason many people work long hours is because their hourly wage is so low (or latterly because they’re shit scared of the chop).

Rather than this being a discrepancy, which it is, I reckon its more meaningfully regarded as being symptomatic of a broader, class mentality. “They” deserve the big bucks because they work long hours, whereas "we", certainly in Jamie Oliver land, deserve nothing but the long-hours. 

Similarly, “they” deserve the big bucks because that’s how you attract the best whereas “we” need to have realistic expectations come pay review time because times are hard don’t you know and anyhow, as Mervyn King used to obsess, widespread pay rises are a potential problem because they threaten to boost inflation (unlike the never ending double digit rise in CEO wages).

I guess if pushed, someone wanting to defend investment bank pay would refer to the money investment bankers make their employers. Except, as the growing number of US court cases make clear, a lot of this involved pretty basic fraud and market manipulation rather than genius-like financial acumen, as these emails about fiddling the Yen market make clear.

And its worth emphasising these are US court cases, because the UK’s financial regulators and criminal system really doesn’t want to know to an embarressing extent given the example of the actions being taken following the“London Whale” arer almost entirely US led. And again, I reckon this is something best understood in terms of class with any chat about investment banking's long-hours only serving to distract from an entire industry's apparently untouchable bent-ness.

The poor deserve what they get. Always

The bedroom tax is an increasingly bad move for the Tories, you know this when the government sends out no-marks like Sajid Javid (who?) to respond to Labour i.e. none of their big dogs wants to be seen to be standing up for it.

Yet, judging by "any questions" at the weekend, the notions of fairness presented in support of it still appear to carry some weight, this being people renting privately don’t get a spare room (am sure lots actually do), so why should those in social housing? Eh? Except, this is by definition yet another example of the mealy-mouthed, shit on thy neighbour cos someone bigger shat on thee mentality that politicians are playing up to as hard as they can right now.

By contrast, the facts of the bedroom tax are straightforward:

If you live in social housing, then by definition, you have a social need i.e. you are poor.

If you crank up the cost of social housing, then you are taking money off the poor.

There are not enough smaller properties for people judged to have a “ spare room” to move/"downsize" into.

So, again by definition, the bedroom tax simply takes money off the poor and the vulnerable who are effectively trapped. And because they are poor i.e. don’t have much if any spare money, the end result is a jump in rent arrears, an increase in suicides and all sorts of good fun.

And, because the bedroom tax is hitting people councils have an obligation to house - because they are poor and have a social need - it's creating all sorts of unanticipated costs, due to the explosion in rent arrears, of having to re-house people and move them into new housing, said people being mad skivers who reckon cerebal palsy justifies them getting state aid.

But, we’re talking “fairness” here, so lets be fair. Alongside the bedroom tax that’s supposed to save £505m in 2013-14, then £540m the year after, the Tories have also introduced the help to buy scheme, which has already set aside a £3.5 billion honey pot of taxpayer money to be used to give completely free loans (for five years) to people wanting to buy a house.

Now just chew on that for a few seconds. On the one hand, poor, disabled people are being evicted to save what was intended to be £0.5 billion a year, but will actually save less due to the costs involved at the same time as £3.5 billion is being pissed away to boost house prices and house builder profits so people with good jobs and good wages can get a completely free i.e taxpayer subsidised loan of potentially hundreds of thousands of pounds for up to five years.

You really couldn’t make it up. Like, I don’t know about you, but that doesn’t strike me as fair. Or moral. Or civilised. Or decent.  Or good economics. Or moral.

But, it does make clear what the values of the modern Tory party are; they are disgusting, nasty, piss on the poor because they've the temerity to be poor cunts. And if the bedroom tax was put in its actual context, which is the broader Tory housing strategy, then the notions of “fairness” being presented in support of it simply melt away.

Yet more anti-independence bollocks masquerading as journalism

In honour of James Naughtie badgering Nicola Sturgeon on the Today programme this morning re: something Alex Salmond said in 1999 (!) about the pound and Scottish  independence, lets pick out yet another tiresome example of anti-independence bias and show it up for the utter bollocks it actually is.

This time it’s the (Glasgow) Herald with its recent article headlined “Lloyds could move HQ post-independence”. !!!!!!! Oh no, disaster, loads of jobs might be lost if Scotland voted yes!!!!!

Except, Lloyds Banking Group isn’t headquartered in Scotland. Its company website clearly states its head office is on Gresham Street in the City of London. Its registered office is in Scotland right enough, which is what the CEO was specifically referring to in the interview the Herald derived its completely makey-uppy bollocks from, but – as any accountant will happily explain – where a company is based and where its registered are two very different things. 

So the (Glasgow) Herald article set out a threat, engaged in fear-mongering even, on the basis of a potential something that was just flat-out bullshite.

There’s  two ways of explaining this, 1) the (Glasgow) Herald business journalists know jackshit and/or 2) they or the editor is that rank rotten biased against independence, they’re willing to trot out any made up shite to support the party line. Either way they clearly aren't credible.

But, who didn’t know that already? Besides, the bulk of today’s independence chat was flannel and noise, which served only to distract from the National Institute of Economic and Social Research’s finding that if you divvied out the UK national debt post-independence, it would equal 86% of national income in Scotland vs 101% for the rest of the UK. 

And to be clear the blerk who reached this conclusion is not pro-Scottish independence given an earlier article wot he wrote  started off with post-communist Russia (I shit you not) as a wholly inappropriate and fear-mongering reference point for what an independent Scotland might be/have to contend with.

And this debt number is very, VERY important. Up until now, the national debt has been used as yet another scare tactic by terribly serious anti-independence people. The argument here has been as follows - yes well, independence doesn't just mean keeping the oil to ourselves don't you know, we'd have to take on our fair share of UK liabilities as well, oh yes. 

Except, now, when you deliberately stop quoting totals and start looking at percentages, it turns out that would be a good thing, a very good thing. Really, there are two stories here. One, it turns out Scottish independence does more to reduce public debt than any amount of taxes on the disabled, impliying independence would generate mucho financial benefits for all concerned north of Carlisle. And two, the Scottish broadsheets and London meja are shit scared of basic facts getting out.

Actually there’s a third. Personally, I was mad impressed with Alastair Darling during the more intense stages of the credit crunch. Now, with his anti-independence chat he comes across as being about as credible and insightful as Johann lamont’s left bollock with all the dignity of a badger that's just shat itself. What happened to him?