It is Obvious

Chris Rick has got altogether too much to say

Archive for March, 2010

The numbers game

Posted by chrisrick13 on March 31, 2010

It is obvious: numbers are tricky things.

I think I have said that once or twice before.

The GDP growth for the last quarter has been revised up from 0.3% to 0.4%.  I had quite expected another round of excited shouting from Labour in general.  How clever we were to get such a good recovery.  Told you so.  Our growth predictions are correct.  I have heard nothing.

The reason for this is that the shrinkage for the previous quarter was revised down from 0.6% to 0.7%.  If you read Stephanomics then you will be familiar with the term “a steeper recession, but a faster climb out”.  I would be happier with “a deeper recession, but a faster climb out”.  I am disappointed at that her subtle change of words gives a very different picture to the reality.

Why?  If the movement is is 0.6% down and then 0.3% up the position is 99.6982% of where we were before then.  If the movement is 0.7% down and then 0.4% up we are 99.6972 of where we were.  The figures are showing a worse position in absolute terms.  Small numbers and at that level surely the error swamps the result, but it is £1.4bn of GDP that we didn’t have after all.

It is obvious: numbers are tricky things and we just don’t have the time to tie them all down.

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Mind you don’t cut yourself (2)

Posted by chrisrick13 on March 31, 2010

It is obvious: you can fool most of the people nearly all of the time.

Efficiency savings are an interesting concept.  I am surprised that the Labour party mentions them.  Their line should be that there is a continuing struggle to achieve efficiency but that there is little to be gained here as they have been so good at removing it.  The Conservative party can happily say that things are hideously inefficient due to Labour mismanagement and they are going to make big efficiency savings.  But neither are doing that.

I am constantly reminded of the big debates at PM’s Questions of as little as 6 months ago where Brown was taunting Cameron to mention cuts, which he never did, yet now they are all freely talking of the need for them.  Their inevitability was just as obvious then as now.  All that has changed is that a climate to talk about them has been created.  Is this a conspiracy?  Just prior to that Brown had been loudly trumpeting “boom and bust” and 60+ quarters of continuous growth (that included Conservative years).  Don’t hear much mention of that now either.

The problem with an economy is that cutting expenditure reduces income as that money is spent in the economy where it is taxed.  So cuts pose a danger to the economy recovering (sic) – what recovery?  However efficiency savings are a good thing as money is no longer being wasted.  It took me a while to get there, but one man’s waste is another’s profit.  Cutting involves sacking people and doing as much of the same work as possible with fewer of them, and also not buying so much stuff.  Efficiency savings means doing the same work with fewer people (sacking those not needed?) and buying less stuff.

What is the difference between a cut and an efficiency saving?  Not a great deal.  The only difference could be a policy of only buying British.  But how would we do that, as we don’t make anything anymore.

We can choose to do the reduction in spending (cut or saving) and try to manage the situation or continue feeding the illusion until someone else takes the decision out of our hands.  From the politicians point of view, bringing in the IMF would give the great escape: we are only doing these cuts because the IMF made us.

It is obvious: you can fool most of the people nearly all of the time, and you can often get away with it.

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Our debt

Posted by chrisrick13 on March 29, 2010

It is obvious: the numbers don’t add up.

We are spending more than we earn as a nation.  We owe about £750bn and will, if Labour have their way, nearly double that to £1.4Tn while getting to the state that we only spend a little more than we earn over the next 5 years.  This is in addition to over £1Tn in PFI debt, which is the next 20 years investment brought forward and spent, the underfunded pension provisions, and local council debts.

 Even those spending numbers are based on GDP increases that most commentators think unrealistically high.  Many of those commentators are ones who predicted this mess so could be believed.  The budget was dealing in savings of the order of £10bn, when the debt will soon enough reach £3,000bn.  There is a long way to go at 0.3% a time.

There is the mantra from the Labour party that if spending is cut the economic recovery will fail, while the Conservatives will not talk of cuts.  I would suggest that the Conservatives would dearly like to miss out on a majority by a few votes and let Labour run things for another year or two.  The mess will be so big and so attributable to Labour that they will be unelectable for a generation.  Labour want to lose by a few votes and can then say that whatever course the Conservatives take that their, different, course would have avoided the pain, thus landing the Conservatives with the blame.  How does an election campaign work when both major contenders are trying to just lose?  I imagine the Liberals are terrified of being in the position of choosing which party to join with and thereby being held responsible for the mess as well.

What is the way out?  Squeeze spending (not cut), get a little more out of taxes and export to give GDP growth of 10% (sic).  All other routes involve lots of pain for UK citizens.  There is a maximum tax take (Laffer curve).  We cannot be far from it at the moment.  The public sector is so big that cuts are easy to achieve but because they are taxpayers also and will move on to benefits, the salary reduction is offset.  Can either have much effect?

Will either (or both) cause the recovery to halt?  I could say: what recovery?  However, increasing the debt means suffering is delayed a little while longer.  Then at some point the interest payments required on the debt are so large that cuts are forced because the income (taxes) is needed to pay the interest on the debt.

It really is cut now or cut bigger later.  Suffer now or suffer more, later.  One strategy wins an election one loses it.

It is obvious: the numbers always add up eventually.

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A hole in the ground (2)

Posted by chrisrick13 on March 19, 2010

It is obvious: society is changing.

I commented a while ago that with lots of school and university leavers not getting jobs, a whole generation of first time buyers were going to go missing.  They are living at home, putting off getting married and, if they can get a job, are saving for a deposit on a house.  There absence will be bad enough for the housing market.

Not only am I funding 3 generations of pensions (previous, my own, my children’s) I am also running a social services operation looking after unemployed children that I already paid taxes for to have covered by the state.

I heard today that the average age of a first-time buyer was 37.  I find that a little hard to believe, but I am happy to accept that it is a lot higher than it was just a few years ago.  This has a further implication I had not thought of before.  Many people are sponging off their parents and then getting married with money enough to move into a 3 bedroomed-semi and have a family.  Not so long ago they were doing everything they could as two individuals to get into a 1 bedroomed flat, ‘get their foot on the ladder’ as early as possible and then later sell both to move into a bigger place together.

Therefore there are a large number of small properties that now have no buyers – they are all living at home saving.  When they do come to the market they will be looking at bigger places.  Of course everything has a price if you are psychologically prepared to accept it, even if it still leaves you owing money.

It is obvious: society is changing but the housing stock can’t change fast enough to match it.

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More than my job’s worth

Posted by chrisrick13 on March 19, 2010

It is obvious: some jobs are harder than others.

I design and build software for a living.  There are times when it consumes my whole life.  A complete design might be buzzing around in my head.  I need to keep it there or the effort to put it all back is immense.  It is bad enough going to sleep at night.

 The stuff I produce is also expected to work and I have to set up a testing framework so that I can prove to external testers that it does work.  Along the way I have to say how long it will take and how much it will cost.  As time moves along my estimates are expected to get better and better.

I have to forsee problems, warn of them, propose solutions and keep the system I am building performing to an agreed set of measures.

I am not special.  We all do it.  Despite some big failures a lot of us do it well.

If you are running the Bank of England things seem a little different.  Keep inflation close to 2% is the only measure.  The BoE has failed.  Is the Governor to be sacked?  Is there going to be an enquiry into the failure?  Oh no, just drop a line to the Chancellor tell him you missed your only measure.

I also notice that Mervyn King said that he was going to fail in the other direction in the following months.  I looked hard for his plan to prevent that from happening.  I thought I might see what he had done to try and prevent this further failure.  I thought there might have been an analysis of what caused the failure and what they had learnt.  Nothing.

Either there was nothing they could do or it just doesn’t matter.

It is obvious: some jobs are very easy.

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