It is Obvious

Chris Rick has got altogether too much to say

Archive for October, 2009

What happens next – the answer

Posted by chrisrick13 on October 30, 2009

It is obvious: what happens next.

Every day I see conflicting news.  Some of it is bad some of it good.  When numbers are quoted you might think that there is no trick to any of it.  But that is not so.  A lot of the numbers are of unknown, or at least unclear, provenance.  A lot of the numbers are solid but interpretation seems to be variable.

My conclusion is that the ‘bad news bears’ have the best of it.  There is worse to come.  Maybe the world in general will return to where it was a couple of years ago but the UK won’t.

If I assume that the efforts of the government, and lets face this one, the efforts of us, will not recover the economy then what will happen?  How might I define a recovery?  Back to another housing bubble with little production in the economy is not a recovery.  How about everyone with lifestyles reduced by about 50%, down to neutral carbon emissions, self-sufficient on energy, food, and water?  No, I didn’t think you’d like that one.

If I can’t say what is a good result can I say what is a bad result as I’m assuming we’ll have one?  I don’t think there is a consensus about what will happen amongst the people who have the training and knowledge to have some chance better than a guess.

I talked about the house of cards earlier, but if I am one of those voting for Armageddon then I ought to put my thoughts on the record.  I just might be able to say “I told you so”.

Our economy will stubbornly refuse to come out of recession.  The revision on this quarter will at best be 0%.  The next will be negative.  This will signal that we cannot pay our debts.  Government debt will rollover at higher rates.  The only way out will be to allow hyperinflation to walk away from our debts.  The holders of that debt will not be happy.  That will be the task of the next government…a hung one and probably a Lib-Lab coalition.  What does it mean for the citizens of the UK?  Try Zimbabwe.

We will be in good company as Spain and Italy will be in the same situation.  However as they are in the euro-zone I have no idea how that will end.

It is obvious: what happens next is not good.

Posted in Uncategorized | Leave a Comment »

The EU

Posted by chrisrick13 on October 27, 2009

It is obvious: we should be in Europe

I have long bleated that I can’t get any information about being part of Europe or at least not from anyone who doesn’t have an agenda of their own.  There seems to be little reasoned independent comment it is all partisan.

One of my respected friends pointed out that the rules and regulations that exist in Europe are adopted throughout the world.  To trade in Europe we have to obey them.  So it makes little difference to us if we are out we still have to obey the rules from Brussels.

A good point, but what about the cost?  We are net contributors but the benefits that we get may be much more…or much less.  Not a clear argument.

If we are in the EU we can work from within to make it what we want, or at least better.  Also the EU ‘block’ is big and ugly.  It carries influence that the UK never can.  Against that I would say that where it matters we would be pushing or pulling in the same direction as the EU.  We may even get the EU courting us for support in some matters.

What of the future of the EU?  Can the EU exist with countries such as Germany and France in good economic shape and countries such as Italy, Spain, and Latvia that are essentially basket cases?  These questions will be answered in the near future.  It may simply be a curate’s egg of pain and at the end a good solution.  It might not.

However I am hearing a consensus that the EU is not a democracy.  We are giving up the charge of our own affairs to an unelected body with no accountability.  I would quote Tony Benn on people with power:

What power have you got?
Where did you get it from?
In whose interests do you use it?
To whom are you accountable?
How do we get rid of you?

It is obvious: we should not be in the EU.

Posted in Uncategorized | Leave a Comment »

The Recession

Posted by chrisrick13 on October 23, 2009

It is obvious: the recession continues

While I was stealing a few minutes to write my previous post the UK GDP figures were announced with a shock decrease rather than the expected small increase.

Interviews quickly followed on the BBC news programme.  All the interviewees said that these were only provisional figures and they are always revised with a clear implication that they would be revised up.  Indeed they are often revised – both up and down.  None of them were challenged.  How do they know which way any revision might go?

It still remains that the GDP movement was 0.6% lower than was expected…for provisional figures.  This is bad news.  For a programme that seems to thrive on reporting the bad rather than the good, why was so much effort put in place to make it seem like good news?

At least Vince Cable was interviewed and said it was bad.  Though even he said that, the figures indicated that the recession was bottoming out.  I’m not sure how he knows that.  He is a victim of the straight-line-prediction syndrome.  Projecting graphs on their geometric shape does not reflect the changing environment, and it is now a rapidly changing one.  This might be the up part of a ‘W’ recession.  It might be a short plateau of a very large ‘V’ recession that will resume its downwards tumble shortly.  It might indeed be a bottoming out.  Given the shock of the figure, that all experts expected to be positive, anything they say should be discounted as should their status of ‘expert’!

The government has been working hard to end the recession.  It has paid for a lot of new cars to be bought.  It has reduced VAT to encourage spending.  It has printed money and handed it out (though not to me).  These efforts have surely pushed the GDP up, but they are ending now.  We don’t know how much the GDP might have shrunk without these measures.  We will soon.

I’m on the Armageddon side of the fence.

It is obvious: the recession continues.

Posted in Uncategorized | Leave a Comment »

Royal Mail

Posted by chrisrick13 on October 23, 2009

It is obvious:  the Royal Mail workers should strike.

I’m at home most of the time and my postie has his mid-walk bag of post put in our porch.  Consequently I often get to talk to him.  His shift finishes at 13:30 and he frequently talks to me after that time with half his round still to deliver.  He gets no extra money for that.  His management have told him that the driver is going to lose his job so he will have to do the driving soon as well.  He is just bewildered about what is expected of him and the way he is treated.  He was even criticised for not being fast enough over the summer.  I’ve seen him walking his round at speed with a bag I’ve had difficulty even lifting.  This is a man who puts in a genuine effort for his pay.  He said yesterday that he is better off than others who joined recently because he has a decent pension.  I hope he does because the pension fund is one of Royal Mail’s problems.

When I was a lot younger I watched Jack Dash, ‘Red Robbo’, and Arthur Scargill drive the London docks, the UK car industry, and the coal mines into oblivion.  I suspect that all three of those men had communist sabotage agendas but the workers who went on strike clearly thought it was worth it.  They thought that they had a right to the employment conditions they had always enjoyed and that the status-quo could be maintained if excess profits were diverted to their pockets.  It took a shorter or longer time but the demise of all three was inevitable.

Royal Mail has much the same problems however it is not making money, there are no profits to reduce to the benefit of the workers.  Also we are in a different world.  Many people are working for decreased benefits.  Some are taking pay cuts in their jobs, others are being made redundant and then taking jobs elsewhere at lower pay.  The Royal Mail workers might well have to accept that there are to be fewer of them and they are to be paid less.  The management may well see that as the only option but they do seem unable to do manage that in a sensitive way.

I remember when the power workers went on strike and we had no electricity for long periods each day.  They were in a strong position.  There was nobody else trained and available to do their jobs.  There was no private company available with a duplicate power infrastructure ready to take over.  Though you may remember when Reagan sacked all the air traffic controllers.  Not all the ‘safe’ jobs are actually safe.

The Royal Mail workers have no such protection.  A lot of their business is profitable and there are many private companies working hard to take that business off them.  This will exacerbate Royal Mail’s problems losing the profitable business.  The loss making parts will have no choice but to up their prices.  Soon the prices will be so high that private companies will be able to compete for even the most basic of services when there is no effective subsidy in place for Royal Mail.  What will happen is that rather than selling off parts of the company the business will be taken piece-meal at more profitable prices by competitors.  This is the worst possible result for Royal Mail workers and the UK public.  The Royal Mail workers are hastening the one thing they say they are trying to prevent: privatisation.

It is obvious:  the Royal Mail workers should not strike.

Posted in Uncategorized | Leave a Comment »

What is going to happen?

Posted by chrisrick13 on October 22, 2009

It is obvious:  I missed something.

The amount of defaulted mortgage debt in this country over the last two years has resulted in about £2bn in losses for the banks.  Total mortgage debt is about £208bn.  This does not seem like a problem.

The number of people declared bankrupt over the last two years has created debts of less than £2bn.  They didn’t owe all that money to banks but it probably came round to them in the end.

Why did we (the government, us) have to put 100 times that into the banking system?  Probably good and well documented reasons.  However the disaster could not have been of our making, us, the UK population.  Somebody else walked away from their debts, not us.

The government has run up £805bn of debt which is 65% of GDP.  This is perilously close to the level at which we can never repay.  I have seen an estimate that the PFI and unfunded pension commitments come to £1.35trn.  This is definitely a level of debt that cannot be paid.  Alas we owe it even though the government ran up the debt on our behalf.  At 5% interest we are paying £100bn a year in interest.  If we were able to pay off a small amount of the loan and treat it like a sinking fund it will take more than 30 years to pay it off.  This requires that we spend less than we earn (as a nation) and can afford the 10% of GDP needed to service the loan.

Very big numbers, yet the average household debt is made up of £2,000 of loans and £8,000 of mortgage.  Most of us can manage that.  Can’t be a problem.  Not many of us are going to default on it.

So far the government response is that they are going to cut expenditure, most of which is spent in this country and increase taxes.  I don’t believe they can do it.  Any tax increase or spending cut is going to reverse any recovery.  Without action the loans we have will get very expensive as lenders start to doubt that we will repay.

I think that it is like a house of cards.  When you pull one out at the bottom you know it is going to crash but you can’t say where the cards will land or what bits will remain standing.

It is obvious: we’ve all missed something.

Posted in Uncategorized | Leave a Comment »

The UK recovery

Posted by chrisrick13 on October 19, 2009

It is obvious: the recovery is on the way.

Today new tougher rules on mortgage borrowing were announced by the FSA.  To come into affect I know not when.

There has been an outcry that these will prevent most people borrowing and cause a housing price crash!  People will not be able to trade-up and first time buyers will not be able to buy a house.

The clear implication is that unless we can get people to borrow at a level that is more than prudent to buy  houses then the housing market will collapse.  Or perhaps this is a subtle way of getting house prices to drop to a ‘reasonable’ level.

The response to questions and criticism will be to ask if it is right to allow people to take on debts they cannot pay back.  Can the return to what went wrong before be allowed?  Of course not.

The value of a house is exactly what someone is prepared to pay for it and able to pay.  If you remove most of the market by limiting access to money the market will operate and house prices will march downwards.

What puzzles me is why this measure is necessary.  There have not been many repossessions in this country.  When a repossession does take place the loss is only the difference between the loan and the value of the house.  These loans and their losses only account for a small fraction of the bad debts the UK banks have had.  The repossession levels for the last 2 years are less, a lot less, than the levels in all the years 1990 – 1996.  We didn’t we have a crisis then?  If the banks lost £100,000 on each repossession over the last 2 years, and they clearly didn’t, that means losses of £8bn.  Probably the losses are not even £1bn.  So why pay attention to this?

It is obvious: the recovery is on the way out.

Posted in Uncategorized | Leave a Comment »

Economic collapse of the UK

Posted by chrisrick13 on October 16, 2009

It is obvious: run for the hills.

I spend too much time surfing economic comment.  On the blogs I find a lively bunch of people commenting.  (See Stephaonomics on  Many of them are rabid extremists but there is also a lot of considered comment and research.

In the press I see a lot of comments and statistics about the economy.  The majority has now moved decisively to ‘much worse to come’ with simple discounting of any positive news.   Sir Howard Davies today issued a statement which said: “The next six months are going to be extremely delicate in the UK”, and then went on to say why none of it would work.

None of the remedies that the Bank of England or the government has will work as each carries the seed of it own downfall (tax increases, public spending cuts).  Exporting our way out of trouble would work if we had stuff to export and people out there to buy.  We have neither.

The solution so far seems to be to take money from the future that we do not know we will have and leave the problem to our children.  The problems with that are: it requires the people who might lend to us to believe that – which they clearly don’t, and for the time of accounting to be pushed a long way away – which it can’t.

There will come a time, not too far away, where there will be a lot of people prepared to take a job at just about any price just to survive.  At that point as we take the next step on the ‘race to the bottom’ there will be some respite.  Until then we are on a train heading towards the buffers pressing the accelerator rather than the brake.

The triggers where the inevitable is suddenly accepted by everyone are not easily predicted.  Silly small things often start the down-trend.  From my reading there are (at least) 3 hidden numbers: what will be needed to stabilise debt, the full extent of bank losses, the underfunding of public and private pensions.  The revealing of any of these could do it.  However there is an obvious trigger.  If it does not happen before, the downward trend on the big side of the lopsided ‘W’ of the recession will happen soon after the election.

It is obvious: run for the hills…somebody else’s hills.

Posted in Uncategorized | Leave a Comment »

The ‘Today’ programme

Posted by chrisrick13 on October 10, 2009

It is obvious: the Today programme on Radio 4 is the best thing on radio in the morning.

I love the way they deal with articles.  They have endless un-interesting interviews and news snippets.  Then when they get someone on who is knowledgeable on their topic and can talk in an absorbing way they always cut them short just when they are going to get really interesting and switch to something inane or boring.

They are always interviewing one side of a story and taking an opposite view.  Then they interview someone from the other side and take the opposite view again.  All done with no conviction.  They adopt a hectoring tone and never let the person fully answer a question interrupting with another question halfway through the answer.  Then when the person gives an answer that is not an answer to the question asked, instead of nailing them on that and really probing the evasion, they move to the next question on their script.  They are not listening to the answers or are not capable of recognising the evasion.  Such golden opportunities are routinely missed.

It is obvious: there is nothing on radio competing with Today or it would be second best.

Posted in Uncategorized | Leave a Comment »

Solve the economic problems of the UK

Posted by chrisrick13 on October 9, 2009

It is obvious: there is a simple solution to the economic problems of the UK.

It is not my idea.  I have watched Croydon council do it.  The council spends more than it receives.  I’ll make no comment on how wisely it spends its money.  They certainly have a lot of expenses that they have little choice in spending.  I suspect that all the discretionary spending is very closely scrutinised by whoever the opposition party is and individual activists.

In order to fill the gap between expenditure and income they have been selling off assets.  For example they sold the city centre car parks.  They then rented them back and increased the parking fees to pay the rent.  This was under the guise of encouraging everyone to use public transport to get into Croydon.  Of course it is highly inconvenient to carry shopping on trams or buses particularly when there are plenty of shops the same distance away that you can drive to.  Consequently the city centre is slowly dying and car park revenues are down.

But I am distracted.  Clearly we have grave economic problems in the UK.  There are huge borrowings with little chance of paying them off.  Debt or is it credit?  The government is trying to keep the whole banking system from falling apart and generate enough economic activity to tax and pay off the debt (credit).  It is also trying to reduce spending without reducing economic activity.  I have written, and will write, long on that topic.

Is there an easy way out?  Suppose we were given, say, £1tn?  Would that solve our current problems?  Of course it would.  It would also leave enough money to get our energy infrastructure fixed.  It would leave enough to solve a lot of problems provided we trusted the party in power to do it right.  Not sure we could.

So how do we get £1tn?  Is there anyone out there got that much money?  Of course the Chinese have.  How can we persuade them to give us the money?  I have thought about this a lot and the answer… is obvious.  We’ll sell them Cornwall.  We might have to add in Devon as well to get the full amount.  Think about it.  There are not many people live there and it is really out the way.  With global warming it will be a prime holiday spot.  The politburo or whatever they are called can have their holiday villas there for some pollution free time away from Beijing.  But the tourist industry will be big and give a good return on the investment.  The Prince of Wales owns a big chunk already.  Get him on board and the ball will roll.  We might get into a bidding war if another country fancies a bit of the UK.  This is not without precedent as the UK owned the bit of France around Calais until relatively recently.  The US owns bits of Cuba.  There are many more examples.

Of course Cornwall is only the start as there are a lot of other bits that will not be much missed but with probably lower prices.  What about Cumberland?  It is a long way from anywhere.  Few people live there.  It is very wet.  We could probably get a good price for Norfolk if we are sharp about it.  In another few years it will be under water.  We can get some money before it goes.

It is obvious: selling off a county in one transaction is much more efficient than doing it piecemeal which is what we are doing now.

Posted in Uncategorized | Leave a Comment »

The Global economy

Posted by chrisrick13 on October 9, 2009

It is obvious: global markets work.

Now that there is cheap and fast transport global markets can work.  The progress, up of speed, and down of cost, enabled the expansion of markets.  It meant that strawberries from South Africa in December were no longer the preserve of the rich.  The farmers in South Africa make the same money selling a strawberry in South Africa whether it is eaten in the local market or 5,000 miles away in the UK.  Now they can grow a lot more and sell all they grow.

This is economics and I am not qualified to lecture on it.  What I do know is that oil is running out and oil is transport.  There is some debate as to whether we are at ‘peak-oil’, past it, or close to it but consensus is that it is close.  When oil goes to $400 a barrel then strawberries in December will once again become the preserve of the rich.  Oil will still be transport but there will be other uses that take priority.

Until then we have global markets but they are reducing as the price of oil goes up.  I have long thought that being a strong exporter like Germany or Japan was a very desirable state of affairs.  In a few years that will be a disastrous state to be in.  The UK has moved early to handle this problem by stopping producing anything that anyone wants to buy.  Self sufficiency as a nation will become important, but not in my lifetime, so I won’t dwell on that.

I’m interested in one particular market: that of jobs.  For any job that a person in the UK can do there are 20 people in India who can do it and for a good deal less.  We are in a ‘race to the bottom’.  We can be very competitive in world markets with anything that we produce if the average salary drops to a dollar a day.  I hear the argument that we should switch to a highly skilled population doing the skilled jobs that cannot be done in India.  Alas both our populations are normal curves and there are 20 people in India can do the highly skilled job that 1 person in the UK can do.  Moving to the top will not work.

So I would maintain that the booms and busts, credit crunches, depressions, recessions and other financial problems are all local disruptions of the global market in jobs and the inevitable process of bringing our wages, and standard of living, down to the global average in the global market.

It is obvious: global markets work, but do you want to go where they are heading?

Posted in Uncategorized | Leave a Comment »