It is Obvious

Chris Rick has got altogether too much to say

Archive for May, 2010

Tell me something useful

Posted by chrisrick13 on May 19, 2010

It is obvious: I love the media.

I am fed up of hearing reporters asking government ministers why they have changed policy to that of the coalition partner’s policy.  They seem determined to make the ministers publicly uncomfortable and expose the fact that there are differences between the parties.

We know that!!!!!  If they had the same policies then they would be the same party!!!!!!!

It is obvious: I love the media and I hate it as well.

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Spend it now

Posted by chrisrick13 on May 19, 2010

It is obvious: you can fool yourself for a long time.

I have been reading a lot about the economy – more than is good for me.  It seems that every move that might be made to fix our economic problems is counterbalanced by another effect.  For example cut government spending…but government revenue then reduces.  Not as much, but it does remove a lot of the effect.  Increase taxes…people spend less and government revenue reduces.  Not as much, but it does remove a lot of the effect.  Let inflation go up (or maybe stand helplessly by as it does).  Such export competitiveness as we might have does not go up, but drops as raw materials and energy cost more.  Increase interest rates to combat inflation…and our indebted nation has less to spend thereby reducing government revenue.

There is only one thing that really makes a difference.  We all reduce our standard of living below that of our competitors in global markets.  All the government’s efforts to maintain the standard of living just make the problem worse.  However any reduction in our standard of living resulting in more competitiveness in world markets takes a long time to come through.  Pain now results in gain…but in 10 years, not tomorrow and then only if society can hold together for that time.  Our reduced living standards means the government spends less but now on the good side of the equation.

Alas that is not enough on its own.  There still needs some appropriate management of the economy to take place and I think there is little chance of that.

I am amused that Liam Byrne wrote to his successor saying he had spent all the money.  It is amusing in itself, but it was so obvious that Labour had spent all the current money and all the future money I am surprised that he thought it necessary to write a letter.

It is also quite sinister that the senior people in the Labour party are running around with smiles on their faces.  There is no renting of clothes, no wailing in despair, no introspection of the disaster that they have presided over.  No, they see that a necessary 5 years of relaxation in opposition will take place while the current government tries to fix the problems they have left behind. They will fail and then Labour will have power for a generation.  For the moment they just have to sit out the honeymoon period and then they can set about making sure that the coalition gets the blame for the problems they left behind.

I am very pleased that my sons have chosen to live abroad.

My advice is to spend any money you have now.  In a short while you will be able to buy much less with it (inflation at over 5% and rising)  and the expenditure might help the economy a little.

It is obvious: you can fool yourself for a long time, but you can’t fool yourself all the time.

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Wait for it…

Posted by chrisrick13 on May 12, 2010

It is obvious: numbers never ever give up.

Every week the UK pays one thousand million pounds in interest on the money it owes.  I wrote that in words because I did not want it to slip quickly by.  Here it is in digits: £1bn.  Where does it come from?

Every household in the country has to find £35 a week to pay the government interest bill.  If you are a pensioner or not working, that will be very hard to find.  Even if you have a job the £1820 each year is not easy to find.  If, say, half the households simply cannot pay then the other half have to find £3640 each year.

Let me emphasise: that is just paying interest on the money owed.  It includes no element of paying-off debt, or of running the country

If the government adds £165bn to the debt this year, something close next year and the year after then you can double those interest payment numbers.

I have not mentioned PFI, pension liabilities or personal debt.  This is partly because I have mentioned it so often before and partly because the prospects are so frightening.

I draw some comfort that so many other countries have similar problems.  Perhaps we won’t notice the problems so much because our trading partners are also on a downward cycle.  But this is a zero-sum game.  There has to be a winner for every loser or a big winner for lots of losers: China, India, Brazil, Russia?

But why are we here?  It is not because of any credit-crunch or global recession.  It is simply because we have borrowed and spent, as a nation and individually, for a long time.  If you borrowed and spent twice as much as you earnt for 10 years then you will be paying off that debt with a standard of living reduction from where you are of 50% for a good many more than 10 years and then only if you can maintain your income.  This is a truly frightening prospect.

Now we sit and wait to see when it starts.

It is obvious: numbers never ever give up and they are stronger than politicians’ words.

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You win some, you lose some

Posted by chrisrick13 on May 12, 2010

It is obvious: there was a big winner in the election.

The ruling coalition has made the small political parties irrelevant.  Their only hope was a Labour/Liberal coalition.  They need not bother coming to London.  Perhaps in their constituencies they can do good work.  This includes the Welsh, NI, and Scottish MPs.  Alas, it also includes the Green lady.

On the news this morning every Labour politician was grinning from ear-to-ear.  They were talking about renewal.  They kept Gordon Brown in power to ensure they didn’t win and now he has gone.  The Argentinian effect will kick in.  They will be back in power for a very long time and they won’t have to wait 5 years.

It is obvious: there was a big winner in the election, and they are not in government.

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Don’t hold your breath

Posted by chrisrick13 on May 10, 2010

It is obvious: we haven’t had much in the way of government recently.

It is fascinating watching the progress of any negotiation.  Predictions on strategy are all very fine, but once a negotiation starts, suddenly, different possibilities open up.

I have not commented on the hung parliament as I assumed I could make some ‘I told you so’ type remarks today.  Very much, this is not the case.

To start with, the financial markets have given the negotiations time.  They are perhaps too busy with euro considerations to fully concentrate on the pound.  Also a sense of urgency is in place.  Therefore by giving a little time a ‘better’ solution will result.  I wonder if things are so uncertain that operators in the various markets think that taking a position would be too risky just yet.

It is well known that PR is a major demand of the Liberals.  Indeed that seems to be a problem in the negotiations with the Conservatives.  But PR will more or less guarantee that this situation happens all the time.  The one big Liberal policy is shown to be causing a problem, though it could be that we are simply not used to it yet in this country.

A second problem I see for the Liberals is that they will always be a junior partner to the Labour party in their efforts to keep the Conservatives out of power.  They will suffer all the opprobrium of government failure and get none of the plaudits of success.

I mentioned the Argentinian effect before.  The economy is in a mess.  It may be that the Labour party did not cause it (I think they did) but their spending over the last 10 years has put the UK in a very weak position to withstand it and probably exacerbated it.  Hard times are ahead but Labour will not be blamed for that.  The next government will be blamed and be unelectable for a generation.  The Labour party have positioned themselves so that they won’t be in power otherwise Brown would have long gone.  The Liberal party have put themselves in the position where they almost certainly will be in power to pick up the blame.

However this far into the negotiation between Liberal and Conservative it is becoming increasingly likely that no deal will be made.  Here the Conservatives can be seen as honestly trying to come to a deal but failing.  They will stand and honestly oppose the Labour-Liberal coalition and watch the economy crash.  They will be able to say that 14 or 15 or 16 years of Labour caused the mess…and the Liberals.

I’ve just been for a run and come back to Brown’s statement.  This is an obvious step but one that creates an interesting situation.  We may be having another un-elected PM and be heading for PR, voted for by only about a quarter of the population.

I had a view that if we got a minority government then they would be forced to concentrate on the economy with few other laws that could be enacted.  There would be clear focus on the major problem for this and the next generation with no distractions.

Alas I see very little manoeuvring on behalf of the best interests of the country with lots of words saying the opposite.

It is obvious: we haven’t had much in the way of government recently, we don’t have any now and we are not going to have any in the future.

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The Argentinian Model

Posted by chrisrick13 on May 5, 2010

It is obvious: all the parties want to win the election.

Argentina defaulted on its debt.  It is a pariah in money markets and still suffers with an inability to borrow money.

The party that led them into the default was booted out by the electorate.  The party that tried to fix the mess has made progress but are now seen as the culprits.  Their support is almost non-existent and likely to stay that way for a very long time.  The party that caused the problems will be in power for that long time.

I wonder that the Labour party is quite content to run this election with Brown in charge.  They are sure not to win.  When they lose they can boot Brown out and in a couple of years look forward to a long time in government.  They are terrified of an alliance with the Liverals.  The Argentinian model will apply and with a shiny new leader they can bounce back to power on the back of a crisis they caused.

The Conservative party have not really pushed on issues that would sink the Labour party.  They have moved from a 20 point lead down to single figures.  I think that they have mis-judged it and will get a small majority.  This is not too bad as they can look at the books and reveal the full extent of problems before they do anything.  They can nail Labour and then go to the country for a mandate.  It might work.  If I am wrong they have to run the risk that a Lib/Lab pact will change the voting system, but even if that is the case the mess will be nailed to them and the Conservatives might even get a majority under any new voting system.  A golden scenario.

The Liberals are terrified.  On the point of casting off the ‘third party’ label they might get the blame for failing to fix the economic mess.  They are trying to make conditions too onerus for a pact, letting someone rule in minority for a few months to expose Labour and then moving back to a two party system with the Conservatives.  Just on the point of being a force in UK politics on their own they desperately need to avoid getting into power to be blamed for economic failure and having to implement PR thus denying them absolute power at the point where they can get it.

It is obvious: all the parties want to win the election…but not much.

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In the looking glass

Posted by chrisrick13 on May 5, 2010

It is obvious: numbers are still talking straight.

Apart from investigative journalism the media is only a reflection of us. A truism I know. It is also modified by reflecting only what we want to see which is defined as what sells is what is presented.

In economics focus has been on Greece of a late and by contagion the euro. Cuts have gone off the election agenda. We will be facing austerity of the same order as Greece if not more. At least we will be able to handle it with inflation and devaluation.

The numbers are so simple I have to run them through again. The national debt is £700bn. Labour and probably the other parties propose to run that out to £1.4tn before they get the rate of overspend under control provided that economic growth is 3%. This is clearly in Brothers Grimm territory.

The PFI is about £1tn. This is the nifty scheme where the government has brought forward infrastructure spending by a generation thus leaving no capital spending at the disposal of any government for many years to come. I note that Gordon Brown said that when a school is built is does not have to be built again. I go to a new building in a hospital in London. It is 5 years old. Already it is showing signs of wear.

Unfunded pensions are at about £1tn. Can’t say much more than that.

What has not been mentioned in the media for some time is the level of private debt. This is the elephant in the room. It stands at £1.4tn. Most of this is secured on houses. Rather it is secured on the housing bubble.

This comes out at over £3tn of debt that we have spent or had the benefit of. Don’t complain. Most of that has been over the last 13 years.

That stands at £130,000 per household. This is £6,500 of interest every year and a bill of say £1,000 a month to pay it off over 25 years.

Somehow the government has to suck £1,000 a month out of every household in the country for 30 years. There are not very many households can carry that extra burden. The ones that can will pay that debt in full by taxation or inflation. This is the traditional communist method of destroying the affluent middle-classes.

It is obvious: numbers are still talking straight and I don’t like what they have to say.

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