Thursday, January 31, 2008

Iain Dale Regrets The World He Has Created

I watched the 'Dale Confronts Heffer' or 'Heffer Confronted' latest on the Conway issue, and was far more interested in Iain Dale's position than Heffer's which was much as expected.

Dale said (I paraphrase) : I don't know if Derek Conway did anything wrong or not.

Heffer's reply (paraphrased) - which is odd because Derek Conway knows that he did, and has admitted it and apologised for having done so.

Dale: (paraphrased) If it had not been in the middle of a witch hunt about Labour sleaze, Conway would have slid through. It was unfortunate timing....the baying mob....etc etc

THE TRUTH: The public take a long time to get angry about things as basically they can't be bothered with politicians much anyway.

But when politicos act with such blatant lack of common sense as Conway and Hain, bloggers can whip up public anger, and it's a good thing that they do.

Funny how Dale the blogger doesn't like the results of his own work.

Blogs enforce common sense, and provide a forum which previously did not exist. The virtual world is starting to set the standards for the real world, just as Dale at one time said he hoped it would.

Iain Dale, you must realise that what goes around, comes around. You and Tim/Guido have created the new political environment. Your defence of Conway is as if from another era, which has now passed. You are like Oppenheimer regretting the creation of the nuclear bomb.

It's as if you're now saying 'Stop the world. I want to get off!'

It's too late, Iain. You've done it now. In the blogosphere, we are all subject to instant judgement against a yardstick of common sense. And in the UK, it came as much as anywhere from your very own Iain Dale's Diary.

It could fairly be said that it was you who hung your friend Conway.

Wednesday, January 30, 2008

Economist Reaches Comic Status

I don't buy the Economist that often. But today I was interested in what it had to say about the state of world markets and picked up a copy from a newsstand near the hotel where I swim most days. The economics was a sound summary of events with no new insights, but excellent detail. The politics was just laughable.

SERBIA (leader)

Take this one from the Leaders -on Serbia's Future. 'Serbia Should Recognise That It Has No Alternative To The European Union'. The article is openly patronising to Serbs, informing them that they have no future 'partnering' with Russia on a most unequal basis, and that Russians only want to secure Serbia's energy assets on the cheap. The author compares Serbia to Slovakia ten years ago, which was at that time, going down a highly corrupt nationalistic pro-Russian course, but finally yielded to EU overtures in 2004.

Slovakia and Serbia could not be more different - even though they both begin with an S, are in Central Europe (as they both call it) and have a Slavic language. Slovaks are Catholic. They are easy-going, hard-working and readily subservient to powerful foreigners. As they have been 'colonised' so many times before, they regard the latest coloniser as only temporary anyway, so why not the EU for now? There'll be another bus to catch later. The Economist author doesn't understand Slovakia. That is plain to see....

...or Serbia. Serbs are not subservient at all, and do not readily give away their sovereignty to anyone. Look at Jokovicz the tennis player, making a Serbian nationalistic speech after winning the Australian Open. And what about his family all dressed uniformly, and making effectively Nazi salutes of defiance when he needed a boost from the crowd. Let me tell the Economist one thing. You are not going to be able to tell people like that how to decide their future by patronising them.

Serbia (unlike Slovakia - a natural underdog) is used to being the dominant nation in the Balkans, and as the dominant nation of Yugoslavia, they maintained a remarkable amount of independence from Russia. I think the Serbs might well find the EU not to their tastes, and for that matter, the EU might feel the same way. Serbs are an especially determined people, who value their independence highly.

And anyway of course there are alternatives for Serbia. Serbia could negotiate its own arrangements with whoever she chooses. It is not good to patronise proud peoples. It only helps the Russians to appear the reasonable more palatable partners, who feel similarly humiliated by the arrogance of the EU encroaching on what was once their patch. If the Economist hopes to persuade Serbia to join the EU, patronising them is not the way to go, or hoping they will be the next Slovakia.

UPDATE - There is a far better article on Central Europe which makes good sense called Pipedreams on p51 in the same issue, covering Serbia's position. The Economist detailed articles are as good as ever they were. It's the Leaders which can be so politically naive and narrow-minded, along with Bagehot and Charlemagne.

BRANSON - Leader

Next up in this issue of the Economist is a big feature on Branson's Virgin Galactic. Branson's making the running at the moment getting so close to Gordon Brown that untold largesse and good fortune are landing in his lap since their little trip to China. If he lands the Northern Rock deal, he will be the beneficiary of the largest single subsidy ever made by a British government in history. Nice for starters. On top of that, he has just seen his arch-opponent for media businesses Rupert Murdoch being forced to sell his ITV shares by Gordon's Minister for Business, opening up the way for Virgin Media to launch into cable TV and other services. And if all that wasn't good enough, Branson now seems to be getting favourable coverage for his new space-travel-for-kicks business.

Branson has partly achieved political success with Gordon Brown and the EU, by being there to hurt Rupert Murdoch when they needed someone. But he also got into pole position by signing up with Al Gore's global warming campaign and offering a $25 million prize to anyone who invents the solution to carbon capture. Now you might have expected dedicated Global Warming campaigners to be concerned at the burning of unnecessary tonnages of fossil fuels projecting rich clients with nothing better to do into space.

But, no. The Economist carried Branson's propaganda department's justification for unnecessary space travel word for word...'when space becomes a democracy...the rich risk-takers who have seen the fragile Earth from above might form an influential cohort of environmental activists'. We all know Branson is a super-salesman, but does the Economist need to reproduce the flannel word for word as editorial with no counterbalancing comment such as 'is this business necessary - and isn't Branson being hypocritical trying to pretend it's somehow an environmentally friendly thing to be doing'?

Apparently not.

With Branson being in with the EU/Brown at the moment, I guess he can walk on water in the MSM for now. Let's hope he's not fated to become an Icarus, flying too close to The Sun, which loosens the wax of his wings, sending him crashing to earth.


Out of the whole issue this section is surely the stupidest. Again the tone is patronising, this time to Britons who think they can do better outside the EU. For example,

One Tory asked if the government thought the British public too thick to understand its (the EU's) benefits..Much of the Brussels establishment would answer 'yes'..They see British voters as exceptionally ignorant; or they see the British debate is poisoned by nationalism

The Economist takes no issue with the Brussels Establishment for holding these views. In fact the article later goes on to explain why it agrees with them, but not before letting loose a little bit more abuse of British euroscepticism, as follows...

At the right Brussels dinners, speakers tub-thumping applause by denouncing perfidious Albion

The article gets to the nub of the matter at the end, explaining why Britain must not leave the EU, and should sign up to Brussels power total.

If Britain left the EU, the 26 other countries would set terms for free access to their market (including a big contribution to their budget). They would have no interest in offering a sweet deal: as any member to a book club can attest, the free dictionary is offered on the way in not on the way out..

So what perks did we get on the way in, one might fairly ask? I don't remember any. Being made to sacrifice our fishing industry is what they are driving at I suppose. To leave we'll have to sacrifice our children too, no doubt. There's more..

As an Ambassador predicts, "Britain would have to pay a very high price."

OK. And here's the wrap-up paragraph...

In short Britain might enjoy less not more trade freedom if it pulled out of the EU, as protectionist governments flexed their muscles and allowed nationalism to tarnish the project What does that mean?. Anyone who dreams otherwise is lying not just to others, but also to themselves - the worst bad faith of all.

I feel apart from recommending that if such notions underpin our relationship with the EU, we should get out as soon as possible before these nutters dream up any more such blood-curdling nonsensical threats. I would ask the writer of Charlemagne who wishes to remain anonymous (are you surprised?) to read one of his own sentences...

such reveries ignore the fact that the EU is, first and foremost, an economic project

and he should recall that whatever Britain sells to the EU, the EU exports double that to Britain. I think it's time for these euro-babies uttering their pathetic threats to get real, and The Economist should be ashamed of itself for carrying yet more blatantly one-sided propaganda.

RUSSIA (Bagehot)

Then comes Bagehot. I always used to read Bagehot as one of my favourite weekly reads years ago. But now I cringe at what I read more often than not, and rarely find any insights that add anything to anyone's understanding. This week's run-down on Britain's current relationship with Russia is well put together as a description listing out the cultural background well, and giving the feeling of how things are in London at the 'From Russia' exhibition.

The trouble starts as in all the other articles I've mentioned when The Economist tries to do the politics. Again it's gobblydygook. Here it is.

the question is whether and how modern Britain can respond to the menace that also comes 'From Russia', and indeed to other big threats.

So an article that purported to be all about Britain and Russia in the round, ends up wanting to make a quite specific assessment of Britain's approach to all its relationships to any external threats.

And you guessed, it's another rehashed pro-European puff, although made in more coded language than Charlemagne's unguarded anti-British abuse. As follows...

The truth is that..Britain can do little to sway the Kremlin.

Can anybody sway the Kremlin?

Its (It being Britain) European partners have spoken up a bit;but the lesson for Gordon Brown especially must be that if Britain is to punch above its weight- and resist the punches that come back-it needs to show less cold shoulder and more collegial respect to the countries who really are its friends.'

In other words, if Brown cuddles up more to Europe, the EU'll call Putin's dogs off Brown. A likely tale that the EU can control Vladimir Putin so easily. The EU is unable to stand up to him for long as he controls their gas supply. All of Germany's gas comes from Russia.

In any case, Britain wasn't punching anybody as far as I can see, and nor do we wish to punch anyone. The Russian government instructed its agents to carry out the killing of Litvinenko in London using dangerous nuclear material, as he was being foolish enough to reveal that the FSB (KGB) had penetrated the EU hierarchy and that Romano Prodi, ex-commission president was one of its key agents.

The Economist wants Gordon to go to Brussels and be more pally with the EU as their solution. I guess we are meant to be pleased that the EU thinks it has so much clout in Moscow, but using the threat of violence as the way to get Britain to want closer ties with the EU, sorry folks. Not our style.

I wonder what the other threats the Economist mentions consist of. It's nice isn't it. 'You play more with our boys in Brussels, and they'll make sure you don't get beaten up or burned.' That stuff used to be known as a Protection Racket.


The Economist's reporting of American politics doesn't seem to be too bad. They have good writers and some good insights over the pond.

Conway Only Needed Common Sense

Conway is gone - 'for a long time' we are told, which leaves open the possibility of his return at some point, presumably after an election in 2010. Three years out is more like it, but in perpetuity is really the only option, as no one will want him back other than his 'friends'. A crook is a crook, and he should not return to any part of government or Opposition.

What is interesting to me about the reaction in the blogs, is how angry people are now about the corruption of public life. They don't even care what party the perpetrators come from any more. They just want them out, and a new lot in with better principles and morals, and a willingness to hold others to account for their corruption, not be trying to get their own snouts in the political trough.

I don't think those on the inside if the Westminster village understand the anger felt across the nation which has been generated by the years of spin, the collapse of the public services, of education, the police, hospitals, immigration control, lack of prisons and any number of other issues.

If the destruction of Britain and its way of life had been necessary as part of some application of high principle, people might be willing to go along with it, and adapt. But when they see the very people who have presided over the destruction of Westminster, the County Councils, the Common Law, the Bank of England, nearly everything about Britain that not all that long ago, worked so well - when they see these same people not explaining why Britain has had to be effectively destroyed, but instead trying to cadge a few more grand out of their expenses, the blood really boils.

And that anger now has a way to express itself powerfully and with immediacy - in the blogs.

It's not that new information necessarily is revealed by bloggers, although often that is the case. It's more that people have a chance at last to give instant and direct feedback to political leaders, which was not possible before.

When the feedback loop travelled via the MSM, public anger was discounted, and seen as not so relevant to the high level decisions being taken in the corridors of power. But when hundreds of thousands of people can instantly access opinion and see that everyone else is as angry as they are, something changes. You feel it in your gut. By writing opinions in blogs, you have impact on events, and can send a direct message to the people who are pissing you off. The logic of their decision making processes is affected, and you know it.

A million people went onto London's streets to demonstrate against the Iraq war. They halted nothing. But if the blogs had been running in 2003, I am sure that the daily drip drip of information about Blair's and Campbell's lies would have exposed them more forcefully and effectively than the MSM did. Peoples' anger at Blair would have found a way to build up and up until he could no longer ignore it.

The attack on the BBC and Andrew Gilligan for his 'sexing up intelligence' report would not have been so easy for Campbell and Blair to carry out. The murder of David Kelly would have been exposed more quickly, and the whitewash of the Hutton enquiry. In fact the Iraq War with blogging by people like Richard North and Guido would quite possibly never have happened.

Politicians and the media would like to ignore the blogs, of course. The Hain and the Conway affairs, however show that they cannot - all credit to Tim Montgomerie, Guido, and Dale. Brown hasn't got it yet, and he's still clinging on to the 'bureaucracy knows best' approach, and he still thinks that he'll control things from his bunker. Cameron on the other hand, by terminating Conway within 24 hours, has shown that he understands the new ways of the world.

In the Conservative Party at least democracy is fighting itself back to life. It feels like a rotten old box of clothes has just been opened and the fresh air is getting in there a little at last. If democracy in Britain started dying in 1992 at the time of Maastricht, then it is in 2008 via blogging, that it is starting to come back to life.

The lesson from the Conway episode for MPs, and for anyone else for that matter, is not to do anything that is indefensible - not necessarily as regards the law, or by the standards of the media or as could be defended according to ancient institutional practices. In the blogs you have to defend yourself in terms of common sense, in the ordinary terms of every day people. If Conway could have done that, or Hain, they would have survived. But they blustered and tried to slide around what were very simple questions.

Once the defences given by Hain and Conway were quite clearly of the farcical variety, they were easy meat for Guido. They were finished. The internet via blogs enables the instant and powerful application of common sense to any situation. And it isn't going away.

The good thing is that we will eventually end up with people who understand common sense running our country. Roll on the day.

Tuesday, January 29, 2008

Branson's Playing With Political Fire

Branson's moves to back Al Gore's Campaign to save the planet from Global Warming by offering a $25 million prize to anyone finding a breakthrough technology in carbon capture has proved to be a shrewder political move than maybe even he realised.

Never mind the evidence that world is moving towards an ice age in fifty years time, and that the last ten years have been noticeably cooler than the previous ten, the environment has big PR and political pay-offs, which Branson needs to further his business interests.

By playing to please Al Gore, he has thereby also pleased the EU which is calling the environment and the need to operate internationally against the threat of global warming, the primary justification for extending their growing powers. By winning favour in the right places, Branson is finding that the kind of deals which always eluded him under Tony Blair who was committed to a long-term arrangement with Murdoch, are now falling into his lap by the barrow-load.

He should net the Northern Rock at a bargain price winning the largest subsidy to a private business ever granted in British history, and as Huntsman reports HERE, he has also won the case (which he is not even a party to) whereby the Murdochs are being forced to sell off their shares in ITV which blocked Virgin Media from getting into cable TV and offering a whole raft of new media services. It seems eminently likely that Branson will get a double win by his being willing to sign up to the Climate Change PR game, and his desire to the erode Murdoch's empire.

Huntsman thinks that Murdoch will want to take his political revenge on Brown, and start openly backing Cameron but I'm not so sure Murdoch's that foolhardy.

The EU Competition Commissioner has far more unpleasant things h can do to Murdoch other than losing him his shareholding in ITV. He can call into question Murdoch's domination of Sporting TV rights in the UK, or any other of Murdoch's monopolistic media privileges. After one bloody loss on ITV shares, I can't imagine the Murdochs are hungry to take another caning in a hurry. The writers on Conservative Home blog have seen a definite swinging away from supporting David Cameron as much as he was pre-the ITV negotiations. This trend of offering Brown more favourable coverage, which has coincided with a Conservative decline in the polls, will surely continue.

Branson too, seeing the amazing results he has achieved so quickly by being EU-favourable will surely see the signs as to how he could cut more lucrative deals by offering Gordon Brown soft exposure, and being seen alongside him and bolstering his flagging image as a PM with economic savvy.

It will, though be a sad sight to see two of the country's most successful business operators competing to please the government and the EU, like two courtiers kissing the feet of an over-powerful monarch. Gordon Brown will be squirming with pleasure that he has at last found how to manipulate the levers of power so successfully, and enforce more favourable media coverage.

I wonder if the idea of ditching Murdoch was contained in that letter of advice from Tony Blair offering Gordon a few tips. I wouldn't be surprised. It will certainly be making David Cameron's task of winning power a whole lot harder than it would have been otherwise.

Branson should be careful, however. His bitter comments against Murdoch in 2007 claiming he has far too much influence on British politics, might soon well be applied to himself. By being the pivot on which Brown is able to lever Murdoch into position and put undue pressure on David Cameron, Branson is damaging Britain's long term interests. He might end up paying a price for that himself in time.

Conway Tries To Slither Out Of It

Conway's words of apology to the House included the following -

"I unreservedly apologise to the House for my administrative shortcomings and the misjudgements I made.

"I have let my family down very badly indeed and no judgement from any quarter could be more harsh than that which I apply to myself."

I would have thought that others could and should judge him far more harshly for milking his expenses to support his family than he has done himself. How could his son who attended Newcastle University have been able to do his studies and carry out a part time role for 18 hours a week in Westminster or at Conway's Constituency?

If he wants his words about being his own harshest judge to be believable, Conway should immediately resign.

Fear Signals The Coming Storm

The sub-prime crisis kicked off concerns of financial troubles in the USA in September. Banks were aware that the other banks they are lending to might not be as creditworthy as they thought. Money tightens. In the UK, the government fails to react. They then block the proposed takeover of the Norther Rock Building Society by Lloyds TSB, and paralysed like rabbits caught in headlights, they witness a thing that has not been seen for over 150 years - a run on a bank.

Then like in a movie, where calm is tipped into terror but only in little steps, the good guys arrive and guarantee that all will be fine. The UK government which could have solved the NR problem before it even happened, goes public with a guarantee that no deposit-holder will be allowed to suffer. All savings will be safe. Things get back to normal, and the horror of the storyline recedes once more. The bad things will not be allowed to happen, whatever the cost.

But the movie's not over yet.

Companies that insure bonds in the USA were last week becoming unable to pay the claims they were receiving. Another government, this time the US runs around frantically trying to find out what can be done to save the insurers. A $30 billion package is cobbled together by banks, and again the horror recedes. Don't worry. Bond-holders will not be allowed to lose their money either - for now or at least, and as long as the claims don't exceed $30 billion.

The week before, signs of stress had also been visible in major US banks. They quickly sold assets to sovereign investment funds from the Middle east and China, which eagerly scooped up what was on offer. Then the banks gave out reports saying that the sum total of their sub-prime losses had been capped, and absorbed. Let's hope they are right.

The US government then announces a drop in interest rates, and a recession-busting tax cut. The measures were meant to reassure tumbling share markets, but somehow the urgency with which they were taken, sent a different message. It was just a touch panicky.

Then the world's leaders all meet in Davos, and starting making reassuring noises, poo-pooing George Soros' prediction that the financial situation is about to trigger major panic. Talking from the comfort of five star hotels in Alpine paradise, the softly spoken reassurances of the world's leaders placed a blanket of comfort over all media networks. The orderliness of the world will be preserved, they opined, just like the snow, that paints the Christmas card scenery that greets them every year in Davos, all expenses paid.

But even as they spoke, a French rogue trader loses four Nick Leesons in Paris in a day, and another avalanche of worry ripples down the snowy financial peaks. At the weekend, the clouds lift a little, and some rays of sun promising a new spring not many months away light up the scene, but then the movie set world of Davos, where political actors charm their audiences, is over.

On Monday morning, another group of less powerful but more real players takes over the lead role in the story, as the politicians fly home. Traders located across the globe, who live with the unmentioned linch-pins of this brave new financial world, fear and greed, start to speak, and their language is the opposite to that heard on the Davos movie set. The reports coming out from those who use their guts to feel their way each day, could not be more different. Their language is unmistakeably now one of fear. See this from the Wall Street Journal -

Investors around the world have been jittery for weeks about a U.S. slump, which would likely weaken demand for exports and drag on global growth. There is also concern about a worldwide credit crunch triggered by rising defaults in risky U.S. mortgages, which has led to mountains of bad assets at major American and European banks.

"There's a lot of uncertainty out there: uncertainty over the U.S. economy, uncertainty over China's economy," said Rob Hart, an analyst with Morgan Stanley in Hong Kong.

"People are also worried about contagion in Europe. If the U.S slows down, will it trigger a slowdown in Europe?" he said.

These phrases are spoken straight from the gut. 'Jittery, slump, mountains of bad assets, uncertainty over the US economy, uncertainty over China's economy, contagion in Europe'.

You have not heard anything like that in my adult lifetime (aged 53). In the UK in 1974, a bad collapse of confidence happened, and the economy struggled to find its feet. It didn't do so until Thatcher brought in what economists call micro-economic supply-side reforms, or what you and I call, common sense. She has been demonised ever since, but if she hadn't done what she did, Britain would have been finished.

The world is now faced with the same situation. No one has been taking responsibility. All the controls of yesteryear, the necessity for which was learned through hard experience, have been taken away. People have been making stupid decisions in nearly all markets. Politicians too have been wasting money on an industrial scale. People trying to do the right thing have been driven to the sidelines while the fools have been allowed to make billions by assuming crazy risks, or building political position by wasting everyone else's money.

Once the situation hits home, it will be goodbye to the Clintons, the Bushes and all. And it will be Hello Obama. In the UK, goodbye New Labour, Blair and Brown, and Hello David Cameron. While the fools are removed from the stage, everyone else needs to get their tin hat on for the coming storm which their irresponsibility caused.

But once the storm has blown through, we can look forward to a healthier political landscape . It will clear the air, and remove much of the pollution that has built up in the atmosphere.

As for China, it's in a mighty boom that must eventually bust. But the country's been around for 4000 years. Things will change there too but it isn't going to disintegrate. It will no doubt be all the healthier for a growth pause too.

As for the EU, no one would be surprised if cracks appear in the eurozone. This storm might for me and my ilk, turn out to be the most beautiful one ever known if it started to crack open the corruption and stupidity of the Brussels bureaucracy. Britain might get her freedom back and experience a second common sense revolution, if the wind blows hard enough.

The movie of financial terror might yet have a happy ending.

It's an ill wind......

Monday, January 28, 2008

Proportional Representation Is Collapsing

The collapse of Prodi's 11 party coalition in the Italian Parliament and Senate has demonstrated once and for all what the effects of proportional representation are. Big parties fracture.

First into two, then four, then eight and so on until there is an infinite variety of tiny political entities competing for votes.

The electoral side of PR all seems terribly fair to voters as every shade of opinion known to man can find a seat in the Parliament. The trouble is that so many of these little groups and egos need to be in agreement to get a working majority (Prodi needed 11 separate parties to form his 2005 majority). If only one breaks ranks, nothing can be done and that is what happened to Prodi's coalition in Italy last week.

In a report from the International Herald Tribune today, you find these words decsribing the situation -

So far, most of Berlusconi's allies have backed his calls for early elections, seeking to take advantage of the center-left's sinking popularity.

Some small groups in the center-left party also favor a return to the polls.

But Prodi's main ally, the new Democratic Party, led by the mayor of Rome, Walter Veltroni, wants a new government charged with reforming the proportional representation system that critics blame for fostering political instability and division in Italy.

On Sunday, Veltroni said that a new executive would need about a year to pass reforms, including "an electoral law that will give the country a chance to choose between two recognizable and united lineups."

Any Briton fancying the idea of introducing the 'fairness' of PR to Britain should read the words of Walter Ventroni the Mayor of Rome very carefully indeed. Italy has fifty years experience of proportional representation, and has finally become to all intents and purposes ungovernable.

If the electoral reform process is gone through with a caretaker government as Veltroni desires, it will make Italy the second European country where proportional representation has effectively collapsed inside six months. Belgium still has no government after their elections failed to resolve the disputes between small political parties, making majority coalitions impossible to form.

Friday, January 25, 2008

Gordon Brown Is Quite Clearly Thick

I stumbled on this by Googling Brown + Davos, Gordon Brown's latest article published in the FT website yesterday.

Gordon begins with his usual ambitious-sounding title -

By Gordon Brown.

Most political and business leaders gathered at the World Economic Forum this week agree on one thing:

no marks for guessing what that was.

But we should also agree that turbulent conditions, throughout history, have been an opportunity for reform.

I'm sure it wasn't anything you did Gordon. No I thought not....

In their search for higher returns, investors underpriced the risks in a number of markets, particularly in the markets for complex derivative products...

I don't quite get it, Gordon. You say that people searched for higher returns, and yet they did that by underpricing the risks? It doesn't quite make sense. Maybe your diagnosis is, as yet incomplete?

He continues - Recent turbulence, where loan risks were transferred to those least able to understand them, has exposed four big questions and issues for policymakers around the globe.

So we get one sentence of at best an incomplete assessment as to what went wrong. And now a whole book coming up on how Gordon's going to put things right all round the globe. Amazing.

Ah no. Here's some more detail on the diagnosis....

If the manifestation of the problems was an underpricing of risk, the source of many of the problems was a deficit of transparency. That transparency deficit needs to be addressed – from within organisations, their auditors, the credit rating agencies and through regulatory requirements, leading to an increased understanding by firms, investors and regulators.

'transparency deficits' ? Well, Gordon knows a lot about those.

So one bunch of dealers conned another bunch by using 'transparency deficits'? The innocents were trying to make 'higher returns', but came unstuck from 'transparency deficits'. And regulation will do a lot to stop these 'transparency deficits' in future.

Thank God for regulation, say I. If it's so easy and effective, why didn't they use it before, one wonders?

Hang on. Didn't the Bank Of England carry out an overall supervising role over all banks in the UK and ensure all were operating sensibly and without undue risk, that is before Gordon ended this supervisory role in 1997. Or am I missing something?

And didn't banks start offloading debts from their balance sheets as encouraged by Basel 1? In fact isn't this crisis caused more by inappropriate regulation than anything else, much of it directly commanded personally by Gordon Brown?

But wait. Gordon's speech is moving on. He's got global ideas now. Mere national crises are obviously too small to warrant his attention.

Second, as financial markets become increasingly interlinked, countries must ensure they have robust and effective cross-border crisis management arrangements. Central banks have already taken co-ordinated action to deal with these short-term problems. We now need not only strengthened national regulatory frameworks, but also strengthened international co-operation.

.....The world has no effective early warning system....... Many of the problems were identified in advance but were not acted upon. We need a clearer, more authoritative watchdog.

I see.

So the trouble Gordon's having with the Northern Rock, for example was caused not by poor supervision by the British government, or inappropriate regulation of banks but by the lack of an international regulator, and co-operation between national regulators.

I particularly like the sentences - 'Many of the problems were identified in advance but were not acted upon. We need a clearer more authoritative watchdog.'

I wonder - does he have anyone particular in mind?

...and who knew about and 'had identified' the Northern Rock troubles in advance, and that British banks were getting involved in 'transparency deficits'? Well obviously not Gordon Brown, who was Chancellor of the Exchequer from 1997 to 2007.

And yet maybe it was Gordon that knew about Northern Rock in advance and failed to do anything about it, himself.

If the British government is clearly not required or expected to oversee its own banking system, then who pray will Gordon appoint to carry this unfortunate burden for him?

Here is his answer...

The International Monetary Fund should be at the heart of this reform. It was built for the era of national, not global, economics – for dealing with local balance of payments crises, not global flows of capital. To be effective for a new era, the IMF should act with the same independence as a central bank – responsible for the surveillance of the world economy, for informing and educating markets, and for enforcing transparency through the system. .............. We should also consider how the IMF’s responsibilities for financial stability could be made clearer.

OK - so because national supervisors are failing to oversee their own banks and correctly regulate their financial organisations, and especially Gordon Brown himself must be about the best living example of that, the IMF should be appointed to carry out the task of overseeing those at mere national level.

Third, we need to ensure that fiscal policy can play its rightful role supporting monetary policy, keeping the economies on track while maintaining sound public finances.

So Gordon, do you mean you want the IMF to supervise your Chancellor for you as well? Your fiscal deficit is ballooning as you haven't got spending under control. It is not helping confidence in the UK, which is why the Pound is falling, and foreign money is moving out. Bloomberg recently referred to you as the 'sub-prime minister of a sub-prime economy'. You really could be doing more to help yourself. At least in the USA they've got some powder dry to address the problems they are facing. In the UK the cupboard is bare. You put nothing by for a rainy day.

Fourth and foremost, the downturn will be compounded if we lurch back into protectionism as more people see globalisation as a threat, not an opportunity.

Amid these uncertainties, we need to show that we can respond to the impact of globalisation, but also show how the global economy can benefit ordinary working families feeling insecure about their futures.

Gordon, now you're just getting silly. 'Fourth and foremost'!!!! Protectionism? But you've just signed up to Lisbon and are accepting that the EU is responsible for Britain's trade policies. The EU bars agricultural products from poor countries all over the world who don't have much else to sell, ensuring they remain in permanent poverty. But what's this got to do with the Financial crisis that you've engineered and supervised these last ten years?

You're trying to change the subject and go off into one of your grand finales, aren't you Gordon.

OK get on with it if you have to....zzzzzzzzzzzzzz.

Progressive business and government voices should come together to agree a manifesto for successful globalisation. That manifesto needs to stand behind free trade, open markets, flexible economies and investment in people as the only way forward for rich and poor alike. I will redouble my efforts with the US, the European Union, China, India, South Africa and Brazil to make possible a fair World Trade Organisation settlement on trade. Our prosperity, the credibility of the multilateral system and a chance for millions of poor people to break out of poverty are at stake.

The writer is the prime minister

I see. Create a worldwide financial government. Put Gordon Brown in charge of it. And he'll be one up on Tony Blair, who'll only be operating at European level.

When will we see the end of these New labour fantasists, none of whom can even run a whelk stall, let alone a national economy - and god help the world economy if they ever got their hands on that?

The only encouraging thing in this article is that Gordon's sniffing around for what will come once he's no longer Prime Minister. Maybe the IMF would be an excellent posting for him. Are there, by any interest any vacancies coming up soon? Please.

The credit crunch was not caused by 'transparency deficit'. There was not a 'transparency' but instead a 'responsibility deficit' where governments, risk-buyers and sellers all decided that someone else would carry the can if things went wrong. Brown himself is very much part of that story. I wrote about it recently HERE.

It seems to me that if this is the sum total of Gordon Brown's analytical skills, it's no surprise that Britain is in the mess that it is. And as to how the MSM kept writing year in, year out that Gordon Brown is a bookish genius who just cannot socialise, I have absolutely no idea. If this is the standard of his analysis of important events, Brown is quite clearly thick - not to mention a bullying egomaniac.

Thursday, January 24, 2008

What's Going On In Italy?

Romano Prodi, alleged to be the KGB's head agent in Italy by Alexander Litvinenko in 2007 months before he was poisoned and silenced, has now resigned as Prime Minister of Italy for the 2nd time. The coalition of the left has collapsed. (Mario Scaramella who assisted Litvinenko make his revelations, is in jail in Italy accused of bringing Prodi into disrepute).

Berlusconi is waiting in the wings to seize power by forcing another election.

NPR reports -Berlusconi said his conservative lawmakers would veto any push for a "technocrat" government, an idea supported by lawmakers who want Parliament to enact reforms of the electoral system.

"We need to go to the polls in the shortest time possible without delay," Berlusconi was quoted as saying by the Italian news agency ANSA.

But the leader of the largest party in the government, Rome Mayor Walter Veltroni, contended that early elections would only "push the country into a situation of dramatic crisis."

Crisis is inevitable. The economy is stalled. Industrial production is falling. The consumer economy is going backwards, as the population decreases with the lowest birthrate in Europe, and with no confidence to spend.

The country is weighed down by debts. Under Prodi the hoped for improvement in the fiscal position has not transpired. Italian government debt is now the most expensive in Europe, priced at 45 basis points higher than German government debt, giving the lie to the theory that the Euro is a single currency.

If Berlusconi wins power, one option he will need to consider would be whether to quit the Euro. It the Euro bonds were repriced in Lira, Italy's debts could be reduced by billions at a stroke. Italy could run its own economy again with lower interest rates, higher inflation, stimulate domestic demand and become competitive in world export markets all at once. Such a move must be a major temptation for Berlusconi.

The currency option was discussed at length in this paper explaining how quitting the Euro would work.

I guess this will all be talked about at California University Professor Barry Eichengreen's Seminar in Stanford University next week, called The Collapse Of The Euro Area.

Ice Shock For Mark Mardell

Mark Mardell, who knows almost everything there is to know about everything, finds it incomprehensible that anyone could not be in agreement with the theories about Global warming and Climate Change that have become fashionable in recent years. He wrote on his euroblog the following post today - link HERE -

President Barroso sees the European Union’s plans to deal with climate change as a route to popularity.

He told the European Parliament that it was a great argument for the European Union and shows that the world needs a strong EU.
I am not sure he won over quite everyone in the chamber.
Mr Barroso sat laughing and shaking his head as the UKIP MEP Graham Booth derided the plan. This is part of what he said:
“Climate change is precisely that! Climate changes - ALL THE TIME! So what if Earth's climate decides to cool down instead of warm up? Will the "experts" then suggest that we must produce much more carbon dioxide to try and offset the cooling?

"Of course not - they are so committed to their present "Global Warming" prediction that that would NOT be an option.
“But, sadly, it looks as if that is what IS happening. IF Global Warming has been just a temporary blip and we are now heading relentlessly for the next (inevitable) Ice Age, any reductions in CO2 emissions will have precisely the OPPOSITE effect to that which is intended.
“And all the fancy calculations of carbon trading, the "benefits" of which are highly doubtful anyway, will be completely pointless.”

Conservative MEP Roger Helmer, a fierce critic of the European Union, also doubts that global warming is caused by human activity.

So does Czech president Vaclav Klaus, and we had quite a discussion about it when we met last year. I was interviewing him, yes you guessed it, about his scepticism towards the European Union.
What is the connection between euroscepticsm and doubts about man-made climate change ?

Maybe Mark Mardell needs to broaden his sources a little, and he might find that it is not only eurosceptics that hold these views. If he spends all his days listening and talking to BBC folk, he will, of course have no doubt at all about the orthodoxy of the Climate Change/Global Warming theories, to the extent that he feels confident to belittle those who dare even to mention that they don't hold with them.

Eurosceptics not unreasonably don't like the way that the EU is propagating the climate change/warming scare and then awarding itself political powers sufficient to coerce 500 hundred million people to bankrupt their economies as the only way to solve the supposed Climate problem.

If only Mark and President Barroso spoke to a few others outside the Cult, they would hear that in fact we are faced not with global warming at all, but the imminent arrival of an Ice Age. The Eurosceptic Global Warming Sceptics could well be as right about the weather as they are about the EU.

Just two days before Mardell was blogging and Barroso was laughing at Graham Booth in the EU Parliament, Russian scientists in St Petersburg announced that they believe an Ice Age is imminent. They provide all their arguments and evidence HERE

Now Mark, I hope you're going to read this with an open mind. I know Barroso won't be capable of that, but as a BBC top journalist........

EXTRACT - ST. PETERSBURG, January 22 (RIA Novosti) - Temperatures on Earth have stabilized in the past decade, and the planet should brace itself for a new Ice Age rather than global warming, a Russian scientist said in an interview with RIA Novosti Tuesday.

"Russian and foreign research data confirm that global temperatures in 2007 were practically similar to those in 2006, and, in general, identical to 1998-2006 temperatures, which, basically, means that the Earth passed the peak of global warming in 1998-2005," said Khabibullo Abdusamatov, head of a space research lab at the Pulkovo observatory in St. Petersburg.

According to the scientist, the concentration of carbon dioxide in the Earth's atmosphere has risen more than 4% in the past decade, but global warming has practically stopped. It confirms the theory of "solar" impact on changes in the Earth's climate, because the amount of solar energy reaching the planet has drastically decreased during the same period, the scientist said.

Had global temperatures directly responded to concentrations of "greenhouse" gases in the atmosphere, they would have risen by at least 0.1 Celsius in the past ten years, however, it never happened, he said.

"A year ago, many meteorologists predicted that higher levels of carbon dioxide in the atmosphere would make the year 2007 the hottest in the last decade, but, fortunately, these predictions did not become reality," Abdusamatov said.

He also said that in 2008, global temperatures would drop slightly, rather than rise, due to unprecedentedly low solar radiation in the past 30 years, and would continue decreasing even if industrial emissions of carbon dioxide reach record levels.

By 2041, solar activity will reach its minimum according to a 200-year cycle, and a deep cooling period will hit the Earth approximately in 2055-2060. It will last for about 45-65 years, the scientist added............


Wednesday, January 23, 2008

Heffer Is Wrong

There are two lines of current eurosceptic thought, which are both wrong.

The first one is to be disappointed that David Cameron only makes eurosceptic noises in short bursts, and that his follow through on eurosceptic promises is not sufficient to convince potential eurosceptic supporters that he is serious. To these doubters, or even people who feel sure that Cameron has conned them with various unfulfilled eurosceptic promises, I would say the following -

Your fear and the fear of many others is that Cameron is only window-dressing as a eurosceptic, but in reality, his role is only to con eurosceptics, and neutralise opposition to the EU.

This is an expression of your concern. But you cannot be sure that it is true. He might equally be conning the other side. It is not possible to be certain either way.

From your viewpoint, though, it is for now better to play the chance that Cameron is not conning you, but is conning the other side.

If you don't do that, and it turns out that you are wrong, you will have thrown away your best opportunity to be free.

If, on the other hand, it turns out that you are right, then you can at that time of certainty, move on in the sure knowledge that your views are not being represented by Cameron, and do something about it. But right now eurosceptics should support Cameron.

A eurosceptic leader would of necessity be playing both sides, and play cryptic.

You will only really know where he really stands once he wins power (as with Gordon Brown who many believed prior to his taking over from Blair to be a eurosceptic including many intelligent commentators like Lord Rees Mogg). Prior to that all politicians play cryptic up to a point.

If Cameron like Brown also turns out to be a europhile once in power, there would be enough MPs who would feel the same as you and want a change of leader. Cameron in those circumstances could and should be replaced.

For now though we must focus only on winning power, and put doubts to the back of the mind. If you don't, you are only helping your real enemies to defeat you.

The second incorrect line of thought is as proposed most forcefully by Simon Heffer in The Telelegraph yesterday. His title says it all - David Cameron Must Take Us Out Of The EU Treaty.

The problem with taking this approach is that exiting the EU Treaty is necessary but not sufficient. David Cameron's responsibility will, in time be to go through the process of working out all the options available to Britain in 2010 when he wins power. These will not just be as simple as Heffer would like it to be - either 'in' or 'out' of the latest Treaty. The whole relationship will need to be placed into a new context.

There is a third option which is not addressed by exiting the Treaty alone, which needs exploring first, and that is, to explain what kind of relationship the Conservative Party would find acceptable with the EU. That might be as Cameron has already indicated, outside the Social Chapter, the CAP, the CFP and many other aspects of current EU membership. There would be a long list of options to work through.

Once the Conservatives have decided what their negotiating position is, then they will have to, win power at Westminster, go through the process of renegotiating with the EU, and finding out what is achievable.

Once that process is complete, and there are two stages to it - the specification process, followed by the renegotiating process , there will be the third stage, working out how the decision(s) is(are) to be taken.

The Conservatives could decide that it is too complex an issue to resolve by referendum, and use a majority in Parliament to force through the changes they believe are the best compromise achievable to the European relationship. Or they could equally decide that, the issues have to be dealt with by referendum.

There could not be simply two choices though, as Simon Heffer and many of us might prefer. There would be three at the least. Choice number 1 would be the easy one - whether to continue with the relationship as it is, inside the Lisbon Treaty (once ratified). That decision has been promised by all parties to be placed in a referendum, but the decision to quit Lisbon, which will soon be ratified by Parliament alone, could equally be taken by Parliament alone.

Once the decision has been taken to quit the Lisbon Treaty, then there would need to be a second decision taken subsequent to that, as to what kind of relationship would follow on from there. Cameron might feel obliged to hold a second referendum if he held a first one, then asking the public to decide between the position he renegotiates with the EU, or withdrawal to the position of a Norway or a Switzerland equivalent, or he might again use the power of Parliament to decide.

If Cameron starts to discuss all these options publicly, and make commitments now, that is bad strategy - both politically as he would draw endless fire from the media, especially the BBC which could jeopardise his pattern of gain in opinion polls, which is going well, and from the practical viewpoint. The final position of what he will, and will not be offering, cannot yet be knowable, as there needs to be much thought and discussion, and also much water to flow under the bridge between now and 2010.

In any battle and this is a battle, you are more likely to win if you keep your options open as long as you possibly can, while getting your enemy to commit themselves and their resources early.

Brown has obliged by committing himself totally to the EU, as have the Liberal Democrats. Nick Clegg's offer an In/Out referendum solves nothing, and is mere deception. Cameron now has both his opponents in a box, while he is still free to manoevre as needs be. Napoleon would be proud of him.

Emotionally there are many who would agree with the Simon Heffer position, but strategy and winning both the battle and the war require Cameron to carry on exactly as he is doing. Cameron is right to play it long, and keep all his options open. Meanwhile Heffer has to keep his readers fired up, and is doing an excellent job.

Tuesday, January 22, 2008

The Collapse Of The Euro Area

As shares gyrate across the globe, there is much talk of how will Asia and the emerging markets cope with a US recession or slow-down. Almost forgotten about is the economy of Europe. With EU officialdom prone to giving out fluffed up estimates of the Eurozone's economic strength, in particular its relative lack of consumer debt compared to the 'Anglo-Saxon' economies, one might be forgiven for believing that all was fine and dandy for the Euro's future.

Another picture entirely can be heard coming from no less a person than Barry Eichengreen Professor of Economics and Political Science at California University, Berkeley (pictured). On January 30th he is holding a seminar at Stanford with the title as in this post. See his seminar flyer for The Collapse Of The Euro Area HERE

What euro imperialists seem to be forgetting is that Europe has two key vulnerabilities.

The first is its puny consumer market, and its dependence on exports, for which a continually rising euro and falling dollar spells serious trouble.

From Money Week on 29th October 2007 As one Italian exporter comments to Ambrose Evans-Pritchard in The Telegraph: “The euro has risen 60% against the dollar since 2001. Until now companies have held share by squeezing margins but it’s no longer possible at this level. A strong currency is one thing. It is quite another when the exchange rate completely decouples from the real economy.”

But with German inflation hitting 2.7% in September, the chances of the European Central Bank relieving the pain with a rate cut any time soon is highly unlikely. This can only contribute to political instability in the eurozone.

That gives you the other vulnerability. There is no economic policy which suits all the countries in the eurozone. Germany wants nil inflation, while Italy desperately needs a falling currency to accommodate her indebtedness, and to keep her competitive in world markets.

Combine that with the property and construction boom that has kept Spain, Ireland and others on a growth pattern for over a decade, and see how the booms that have pulled those economies along for so long cannot go on forever, and there is a serious pattern of instability emerging.

I won't be able to attend Professor Eichengreen's seminar, but I'm sure we'd all love to hear his views in more detail. I'll email him and see what comes back!

The eurozone was said to be close to collapsing in 2005 after the French and Dutch rejected the Constitution. Unless there was greater political merging of the member states and cooperation, it was widely said, the Euro would disintegrate. That is no doubt why the EU has set itself on the politically highly risky course of imposing the EU Constitution on its member states without allowing any referenda (apart from Ireland). Faced with the imminent collapse of its currency the EU decided to take enormous political risks to ensure their newly created empire did not founder.

Let's see what more Professor Eichengreen can add to our knowledge? I cannot imagine anyone in a european University daring to organise a seminar with such a title. Click on the flyer and enjoy the sight. It will help you get over the depressing non-debate going on in the House Of Commons on the EU Constitution (although some of it is encouraging such as William Hague's excellent speech).

Italy is obliging Eichengreen by showing a potential collapse of Prodi's pro-Euro regime this week, also covered by Helen on eureferendum. Berlusconi is waiting in the wings of course. He'd be far more likely to pull the plug on the Euro and set the ball of collapse rolling.

By the way, if any of you can get to Barry's Seminar at Stanford, lunch will be provided.

Do you think any British journalist or official would dare attend Barry's seminar? I'd be amazed. There's a collapse of courage going on in the British media at the moment, as Gordon's pulling out all the stops to keep them in a state of threat. See post below on Branson and Murdoch.

Monday, January 21, 2008

Branson Moves Centre Stage

Many MSM commentators and some bloggers are asking the question ' "what exactly was Richard Branson doing on Gordon Brown's China trip?" Man In A Shed, for example, taking the lead from Brown's denials that he is going to offer Branson a 'sweeter-than-he-should' deal to take over Northern Rock, strongly suspects that the opposite might be true. He offered his thoughts, fisking the Press Association report as follows -

Virgin boss Sir Richard Branson said he believed he had a "winnable package" to see his bid for the ailing Northern Rock bank succeed.

Sir Richard, speaking in Shanghai where he is accompanying Prime Minister Gordon Brown as part of Britain's delegation, said some Chinese money could be involved in his package -

right there's a surprise-

but stressed it was essentially "British-backed"

like British Jobs for British workers perhaps ?

and under his deal the bank would be "very much a British bank".

You can just feel the New Labourness oozing out of that statement

Asked if he had had any talks with Mr Brown about a possible deal, Sir Richard said: "We haven't had any detailed discussions with the Prime Minister.

detailed! - the old Blair trick of redefining the question before you answer it - aka to everyone else known as not answering the question.

If Branson's taking part in the trip is only about Northern Rock, then Brown could and should be criticised for playing on the Branson-favouratistic side. Surely Brown should be holding at least three bidders at bay, making them all compete in offering the British taxpayer the cheapest and best option for getting them off the Norther Rock hook.

I'm not convinced, though that there is enough justification in the Norther Rock situation alone, for this unlikely growing alliance between Brown and Branson. There might be more to this than yet meets the eye.

Brown would not want to be criticised again over the Northern Rock for favouratism, so what other advantages might there be for him in favouring Richard Branson, and allowing him such significant and public access at this moment in Brown's relatively troubled time as Prime Minister?

You could be forgiven for wondering if this had anything to do with meeting another of Brown's current objectives - that is keeping Rupert Murdoch pinned down, and, for example, preventing him from carrying on with The Sun's campaign against the EU Constitution.

Brown was shocked in September when Cameron was given top billing in The Sun, declaring his cast iron guarantee on September 26th that even if the Constitution was ratified, a Conservative government would be holding a retrospective referendum on Britain's relationship with Europe. The Sun placed itself as a campaign to stop The Constitution, and ensure the promised referendum was held.

Brown obviously wanted Murdoch's open rebellion, and his (shocking) campaign in The Sun to stop the EU Constitution brought to an end.

Coincidentally, shortly after this, Rupert Murdoch was informed by the Regulator that his shareholdings in ITV were no longer considered legal - the same shareholdings which the same regulator had in 2005 declared as legal.

The shock was now being felt in the Murdoch camp.

As expected, since the Regulator dropped this bombshell on Murdoch, there has been a noticeable change in his coverage of the EU Constitution and Gordon Brown's Prime Ministership, with more favourable interpetation being put out. The new pro-Brown biassed slant was immediately noticed by ' senior Conservatives' according to Conservativehome HERE, and they have expressed their disapproval accordingly.

See my post recording the change in Murdoch's stance on 1.12.2007 titled Murdoch Tries The Soft Soap.

Murdoch faces the possibility of being made to sell his ITV shares into a suppressed market losing around GBP 200 million, and even more crucially losing the voting rights, which he used to block Virgin Media's attempt to break into his near monopoly of British digital broadcasting. The final decision as to what happens to Murdoch's shares will be taken by the John Hutton, The Business Secretary, (without of course any influence being exerted by Gordon Brown).

The threat of losing his ITV shareholding position is clearly worrying Murdoch. One can only imagine therefore, how much more worried Murdoch must now be feeling, to see Branson, the theatened competitor to his TV empire, now sitting in pole position, publicly cuddling up to Gordon Brown. Gordon Brown and Richard Branson for that matter would clearly be mindful of this, even though they apparently are only talking about the Northern Rock.

Murdoch and Blair were so strongly aligned that Murdoch never once strayed from a position of loyalty to Blair throughout the ten long years of his Prime Ministership. He not only kept all his media privileges as a result of this relationship, despite having a monopoly for broadcasting Premier League football worldwide (Murdoch's Crown Jewels which could also be threatened by new interpretation of the rules). He accumulated yet more of them, landing Test Cricket TV broadcasting rights as one of his final Blair pay-offs. Blair was, interestingly offered a job as a Director of News International even while still Prime Minister.

With Murdoch and Blair held each other in such a tight embrace, Branson never got a look-in, despite several attempts to get privileged contracts as with the Lottery, Broadcasting and other areas. He only picked up the crumbs.

But now with Murdoch having made the tactical error of openly standing up against the EU and Gordon Brown, Branson must surely see his chance to at last sweep in as favoured media Prince, and start to engineer himself into some lucrative deals, shoring up Gordon Brown's weakened position in the process. At the very least, Brown knows that being seen around town with Branson will be putting enormous pressure on Murdoch, as Branson is his long-running arch enemy. He will no doubt, in these circumstances be even more likely to continue putting out news and comment favourable to Gordon and the EU.

It seems eminently likely that if Brown and Branson are getting 'closer', based on his past form and interest in breaking into TV, Branson will, if he hasn't already done so, propose that he has a second attempt at launching digital TV and media services via cable, if perchance Murdoch would happen to lose his blocking shares in ITV - or any other TV scheme that might come along.

From the consumers point of view, the cable idea must surely be a good thing, and would be a popular move. The plan Branson had was not to broadcast via satellite but to use the Cable network built around Britain at enormous cost by NTL (now called Virgin Media) to carry a whole plethora of new media services, like video on demand, internet telephony and many others, a well as TV, and some newer services no doubt not yet fully conceived of.

This must surely still be Branson's dream. He is unlikely to have forgotten his ideas of only a year or two ago.

But if this is to happen, what kind of deal will Branson be making with Brown on a more 'political' front?

Brown would hardly be willing to countenance Branson as a powerful figure in broadcast media without some kind of guarantees as to the material he would be putting out. Brown would not be wanting a Channel favourable to David Cameron and EU-scepticism. Maybe there is some kind of tie-up being discussed whereby Branson's news content would be controlled from elsewhere and not by Richard Branson directly, where Brown is offered a right of censorship...a bit like the deal Murdoch had with Blair, which BRanson so bitterly criticised.

That said Brown's image is always in need of a little boost here and there. He is such a dull speaker. As a personality. Branson could offer Brown a little muscularity, a chance to absorb some starlight by association with Britain's greatest individual entrepreneur.

It is possible that Blair found Branson an irritant, a competitor for limelight while Brown on the other hand, feels the need to borrow some. Branson could make few things happen for Brown, and Brown could line himself up to try to take much of the credit, as he is wont to do.

Branson is unlikely to get a better moment to advance his cause than now, while Brown feels vulnerable. Murdoch's loss could well ending up being his gain.

UPDATE - How wrong I was!. See Anatole Kaletsky's fury at Brown's pathetic handling of Northern Rock, and handing GBP 55 billion to Ricahrd Branson and his backers. To my mind this makes it even more likely that we will be seeing a Richard Branson/Gordon Brown media deal designed to hurt Rupert Murdoch, and that Branson will be timid in criticising Gordon Brown with any media he acquires.

Brown Bores World

From Boulton & Co's Sky Blog comes this on Brown's recent trips to India and China -

As befits a veteran finance minister Gordon Brown takes a financial approach to every issue - what it costs, what it could earn, and how it is organised. He undoubtedly has strong sympathy with the world's suffering but he doesn't seem to think In the UK he is keen on setting up policy reviews.

In international politics he is keen on establishing political working parties and fine tuning the workings of institutions such as the United Nations.

Interesting that the British Prime Minister has no interest in managing the UK. Not international enough for him, I suppose. Too local and parochial, it's beneath him. As for 'institutions such as the United Nations', I can think of one that he might be thinking of - the unmentionable EU.

If he has no interest in setting up policy review bodies in the UK, then why does he bother becoming the country's Prime Minister? Boulton continues...

By his own admission this often seems rather dry but Gordon Brown says its important. He genuinely believes that if political leaders organize themselves better, better policy making will make a better world.

The trouble is according to Boulton is that those on the receiving end of Brown's visits don't see him as a significant, important or interesting figure. That contrasts with Blair, who was seen as an important visitor. Also you can imagine these international organisations just itching to have Gordon Brown take them over as Chief Excutive, President or whatever and start to boss them all around, and bore them with his long pompous speeches. Gordon, it ain't gonna happen, baby.

As he puts it himself in his keynote speech in Delhi: "by working together and advancing a plan to reform our international institutions - we can ensure that globablization brings prosperity, justice and opportunity not just for some people but for all."

Interesting that Brown sees no role for entrepreneurs who create jobs, or mentions any admiration for the ordinary people whose culture and energy drives up their living standards. He sees only large institutional organisations as having a role - the kind that can regulate and interfere - and the kind that can offer him a job at GBP 1 million plus a year to rival Tony Blair once he graduates from junior school in the British House of Commons.

You can fly Gordon Brown around the world, but the leopard doesn't change its arrogant, self-obsessed, dull and narrow-minded spots. Apparently Gordon tripped on the carpet after he was interviewed. I guess that that won't survive the cutting room floor. At least Boulton mentions it on his blog.

Good report, Adam. Thanks.

Sunday, January 20, 2008

The Silence Of The Sheep

The McCanns released the drawings today of someone they suspect of abducting Madeleine.
Whatever happened to the help promised to them by Gordon Brown? Or is he preferring to keep quiet on the matter now?

Is this what Brown means by European cooperation? Making sure that victims of crime are first ignored, and then accused of abducting their own children, when they refuse to go away and suffer in silence.

The message for those who abduct children for paedophiles is that the governments of Europe fully support you. The McCanns are living proof. They have had to organise their own investigation, in the absence of a Police investigation, and without the political support they were promised by Gordon Brown.

There should be a term in the new EU Constitution guaranteeing that the EU will protect paedophiles from investigation, encoding into law the European practice of ensuring paedophile abducton is not investigated, so that the people of Britain can be quite certain they understand what the EU is all about.

No wonder Brown won't allow a referendum. Silence and subterfuge is his strategy, just as it is that of the paedophiles. The last thing any of them want is public awareness as to what they are up to.

From earlier post - in which the tendency of European countries to ignore paedophiles and allow them to get with it was looked at.

The current head of the EU Commission, EU President Barroso was previously the Portuguese PM. It was he that ordered an enquiry into the paedophilia that had come to light amongst Portugal's elite. However Portuguese child abuse experts say that he must have known all about the paedophilia going on before as they had told him often enough.....

From a report 'After the paedophile allegations were first published, Prime Minister Jose Manuel Durao Barroso ordered an investigation. Jorge Sampaio, the President and a Socialist Party leader, proclaimed, “The impunity which for decades on end has made this case a shame for us all will finally end ... Faced with the horror that so many children, who were entrusted to us to be educated and cared for, were victimised it is necessary to declare here that the guilty will be severely punished.”

He implored Portuguese citizens to trust the justice system saying, “We have to hope that our institutions work.”

However, a spokeswoman from Portugal’s Innocence in Danger charity said the organisation had been warning about child abuse for years in Portugal but there had been a virtual “media blackout”.

“It is no good President Sampaio and Parliament sounding off about the problem now and appearing to be knights in shining armour,” the spokeswoman continued. “They, like the police, must have known about the widespread abuse of children in Portuguese institutions for years. They have been warned often enough by charities such as ours but for reasons best known to themselves have remained silent.'"

And now Gordon Brown's joining the silence. The silence of the lambs comes from the abducted, abused and murdered children. From Brown and Barroso, we hear the silence of the sheep.

Topsy Turvy Times At Westminster

In the Telegraph, Mathew D'Ancona writes that the Second Reading of the Bill to ratify the EU Constitution (Lisbon Treaty) in The Commons is going to be a tough debate for both Brown and Cameron.

He sees the main problem as being for David Cameron though, keeping the Conservative side from appearing divided and overly hostile, and ensuring that Brown is not able to get away with sounding reasonable after abandoning his manifesto promise to have a national referendum. If the Conservatives sound overly anti-EU in the Commons, Brown would then easily portray the Conservative position as being the extreme one, and accuse Cameron of simply wanting to exit the EU.

As this danger is already being written about far and wide by many commentators, it is not likely that Conservative MPs will undermine their leader and oblige Gordon Brown in this way, just at the moment Cameron is at last in a commanding position in the polls. Events rarely comply with the prognostications of commentators especially when they are nearly all in agreement as to the likely outcome of events. Conservative MPs will surely behave themselves.

The more interesting part, to my mind will be whether Labour MPs will decide that this issue threatens their seats, and rebel. Labour survival instincts are more likely to take over, leading to a rebellion to force a referendum, than Conservative MPs are to jeopardise the strength of their current position. I think that Labour MPs breaking out against Gordon Brown's gameplan is a more likely scenario.

Just imagine the position if Labour MPs did rebel in sufficient numbers to force a referendum.

If the subsequent referendum were to reject the Treaty, the problem for Conservative sceptics would be that Gordon Brown or at least a Labour PM would be handling the renegotiation and not David Cameron. A renegotiation would be dressed up and sold back to Britain and repolled a while later. If Brown/Labour lost the first referendum, he might win a subsequent one, but whatever the outcome, Labour would be perceived as having traded fairly with the electorate.

Conservative eurosceptics would clearly do better to let Brown succeed in ratifying the Constitution through the Commons breaking his referendum manifesto pledge, and focus purely on winning power in 2010. They could then open up on the EU once in power, bringing all the issues to a head then while in a position of strength. Then it would be Cameron handling any renegotiation.

If Brown/Labour had already had a renegotiation, and succeeded in winning a second-time-around referendum, it would be far harder if not impossible for Cameron to open up on the core issues that he and Conservatives wish to address, as the Constitution would have been ratified openly and democratically.

It would be in Conservative eurosceptic interests to let Brown win for now, but pay a high price politically for doing so. It would, however without doubt be in Labour's best interests to ensure that he fails to ratify the Constitution in this way, that the promised referendum is held, and that they are seen not to have ratted on their referendum manifesto promise.

But will labour MPs act in their own best interests by blocking Brown and rebelling?

And will Conservatives act in their best interests by letting Brown win?

It's not often that both sides to a contest would do better by losing it.

Only Gordon Brown wants to see the Constitution ratified without a popular vote, breaking all his promises. It is because he is the supremely arrogant non-democrat that he is so unpopular. His unpopularity can only grow, the more arrogant and unwilling he is to face electors on any issue, whether it be his leadership, a general election or on this ratification procedure.

Meanwhile Cameron is remembering Napoleon's dictum - 'Never disturb your enemy when he's making a mistake.' Cameron must be patient, and wait while Brown weakens himself and his Party yet further. Conservative eurosceptics will have to be tied up and gagged for one month. Sorry, chaps.

A little debate might expose weak points in the government's and the EU's position, and those cards should be played. But unless the amendment backing the Referendum has a clear chance of passing with a big enough Labour revolt, Conservatives must not oblige Brown by venting their anger and frustration. If Conservatives win in 2010, they will finally get to sink their teeth.

Saturday, January 19, 2008

Labour MPs are Cannon Fodder

Imagine that Cameron decides to fight the EU Constitution in Parliament. He lets loose his MPs to vote and campaign openly against it. The Labour rebellion, currently projected to be 30 MPs might grow to 60 or even 100, and the Bill could fall. Hurrah! Eurosceptic cheers would even be heard across the Channel.

As the cheering and hollering died away, though people would gradually become aware of two facts. Gordon Brown would still be Prime Minister, and Britain would still be lodged inside the EU. For Cameron, it would be a classic Pyrrhic victory. He'd win the battle but would end up in a worse position than if he'd avoided one altogether.

If Cameron tripped up the EU Constitution, the BBC would never forgive him. All of Europe's leaders would become vocal in unison accusing the Conservative Party of being a wrecking force, and voters would feel concerned in case this was true. It could pass the initiative to Gordon Brown, just when Cameron's succeeded in getting Labour into the back foot for the first time in 14 years. Brown would make the issue into one of 'Britain -In or Out?', which would not be the preferred battleground for Cameron pre-election. Winning in Parliament against the Constitution would backfire.

The debate about Britain's future with Europe will happen one day. There is no doubt. At some point Cameron will decide that the right moment has arrived for the Conservative Party to define its position on the subject and set about negotiating and building a totally new approach. But trying to do that after orchestrating the collapse of the EU Constitution, while still vulnerable in Opposition, would not be the best moment to bring about a calm considered and constructive debate.

Cameron is said by Fraser Nelson in The Spectator not to have a Plan B, and just to be hoping that all European issues just go away. I'm not sure he's right he's right about that.

You can see one thing clearly enough. The Conservatives believe they can win the next election, and are putting that objective at Number 1. Win power first. Start tinkering with the status quo, or revolutionising it, second. Cameron will do well to bide his time, concentrate not on risky attack strategies, but focus on keeping the ship stable.

With Cameron's not being drawn out into open conflict, Brown is being deprived of the open Conservative splits on Europe he hoped the Constitution debate would bring. Instead of facing a situation where he can ramp up attacks on Cameron, Brown will find, instead that the drift into Europe through Lisbon will become harder and harder to present in a positive light, once the follow-on effects start to become clear.

Not to mention that the economy is at last moving against Brown after years of healthy growth. Britain's economy is heavily indebted and out of kilter, and the inevitable re-balancing will be intensely painful for many. Brown himself is hard-up for cash, let alone the electorate. His government finances are getting to the embarrassing stage after the Northern Rock has sucked in GBP 25 billion of his funds. He has no room for manoevre, and he is having to crawl to the Chinese, hoping they will move a key part of their investment operations to London, and lend him out of trouble. Brown's famous 'contingency' fund from his 'Prudence' days is well gone, as are half of the gold reserves which he sold off inadvisedly in 2002. The cupboard is bare as the economic clouds are darkening.

Looking a little further ahead, Blair as EU President could also start to impact on the political situation. Blair (in Dan Hannan's opinion) has done enough to win the EU Presidency for himself by yielding Britain's GBP 3 billion a year rebate. Britain could be faced with the sickening sight of the Blairs back in power, earning millions and glorifying in the limelight, while we are left with high tax bills, low growth, and mounting debts as we have to pay over the GBP 3 billion a year he gave away. I cannot see how a Blair Presidency will be popular in Britain, or helpful in any way to Brown and Labour's chances of winning the next election.

With these considerations, Cameron would do well to do exactly as he is doing, bide his time, and stick ruthlessly to completing the only task that actually matters - that is winning the next election.

If Labour MPs could see the dangers of Cameron gaining politically from their party's errors in its dealings with Europe, they would move fast and hard and launch a successful rebellion against the Constitution now, and bring an end to the great Labour Party betrayal of Britain. If they made the running in resisting the EU Constitution in Parliament, and managed to cause its collapse, Cameron's gameplan would be dented. It seems though that Labour MPs are not bright enough to realise the subtleties of the Cameron strategy, and they will go ahead and sign their own political death warrants by pushing the Constitution through, puzzled no doubt that Conservative euroscepticism appears to be sleeping.

It's not asleep of course, only waiting for the right moment to sink its teeth. That moment will come in 2010 after a hundred or more Labour MPs have lost their seats.

Thursday, January 17, 2008

The Technology Recession

The consensus that there will be or already is a downturn going on in the US and other major economies is near universal, and the overall make-up of this 'recession' is being explained in traditional terms of negative growth for two quarters. But this recession is not of a kind that has been witnessed before.

This is not a typical inflation recession of the kind we saw in the 1960's through the 1980's, where governments brought in higher interest rates to cap price rises, slamming the brakes on investment and consumption. Nor is this a sudden jolt recession as in 1973 when oil prices quadrupled overnight, shocking the world into a rapid slowdown. It is not even a growth surge recession where critical resources or people are in short supply, causing a fallback in activity.

This recession will no doubt take a while to explain itself, and become labelled for its chief characteristics. Already it seems to be a recession caused in a new way to any others which have gone before it. In this post, I will try to give my interpretation as to why the world, in the middle of a period of the fastest growth ever known throughout history, seems to be slipping backwards into one almighty mess.

As I write the two biggest bond insurers in the world have just lost their Moody's Triple A status, and are losing market value fast. They cover exposure on $2,400 billion of bonds. If they go into liquidation, the effects on the world's banks will be terrible. In the words of Jamie Dimon, chief executive of JPMorgan, said this week when asked about bond insurers: “What [worries me] is if one of these entities doesn’t make it . . . the secondary effect . . . I think could be pretty terrible.”

Where did it all go so wrong?

Computers and IT are so much a part of our world now that it is easy to forget how recently these came into existence as everyday items in our lives, and assumed a pivotal role. I am 54 now, but I had not even seen a computer until I was 30. It was a privilege to see how tasks which before had been so time consuming as to be almost impossible, became easily achievable. For example doing the month end processing of accounts in my business used to take a whole month manually. With my first computer the whole thing was finished in less than one day. It was absolutely staggering to experience the change, and have so much time given back. Computers ended drudgery for millions.

Then came the arrival of information. On the back of all the data that began to be stored in PCs and mainframes, gradually the light of detailed information could be shone on business decision taking. When making a business decision prior to say 1984, you were mostly in the dark. It was hard to find out, for example who was a good risk and who was bad risk. You had to practically start your own detective agency, and build contacts to get good information about people in your industry.

Then one day, suddenly, and especially with the arrival of the internet, you could start paying at a reasonable price to find out in seconds if you wished to take a risk on a business proposal or not. What had once been a risk, requiring instinctive judgement, where an error would cause painful loss, could be tackled with a ready supply of online information at reasonable cost. Yet more pain was eliminated.

Businesses benefiting from these changes all over the world were able to grow much faster than before.

And then economic information about other countries began to improve so that people planning international investments could feel safe about exchange rate and other commercial risks, while at the same time being able to use email and internet telephony and other technologies to be 'with' people around the globe, all connected into a neat network that worked as a cohesive unit. None of this was possible prior to the 1990's.

Business and investment simply spread all over the globe, sending the world on a growth path of unprecedented proportions pulling hundreds of millions of people previously beyond the reach of the international economy, and joining them into the game. International finance in particular was revolutionised and empowered by technology to move money from where it was cheap to where it was expensive, and make enormous profits.

People borrowed money in Tokyo at 2%, converted currency and lent it in Britain in Sterling at 5%, or in New Zealand in local dollars at 6%, making gains on these currencies that swung up as their assets rose in price before a wall of money, and as their interest rates rose. This became known as 'The Carry Trade'.

Sovereign Funds such as China's trillions of dollars became available to swing around the globe riding short-term trends, or being used to shore up the dollar ensuring the USA provided a healthy market for Chinese manufactured goods. Hedge Funds found they could drive share prices down or up by concentrating their enormous financial resources, increasing investment returns as they went. Private Equity investors found that they could make money faster by buying businesses and selling them again, after a quick burst of energy to boost their earnings then by building them, or growing them long term. They could browse their targets online, and move in from a distance.

And yet while people were turning on their screens and looking at apparently rock-solid information, and feel sure that that they were buying a sure bet, and committing their organisations to placing billions into new and different risks, an air of unreality had somewhere crept in. In the beginning computers were speeding up tasks that had previously taken too long to be practicable. Then they provided information so quickly and efficiently, that what had previously been highly risky decisions, became well-informed low risk decisions. But then people decided to keep the party going, and use computer technology to repackage risks, and create new kinds of risk never before tradeable, buyable or sellable.

To do this, they had to make assumptions about the risks they were undertaking. But as they had all become used to the computers efficiently organising the complex details of their businesses, and calculating complex risks, many people had lost the risk-negotiating skills that were second nature to anyone in business pre-computers, to use their own minds to provide simple straight-forward notions, to refer to common sense. Lost in the machines and the complex systems they had created, people have forgotten how to be responsible for, or even to see the overall picture.

With the sub-prime securitisation, for example, buyers assumed that only a certain proportion of the debts they were buying would be problematic. They never imagined that nearly all of them would turn bad, although maybe even just one day spent checking around would have told any sensible person not to get involved.

In the Norther Rock Building Society in the UK, the Directors never imagined a situation would occur where other banks would not be willing to lend to them at all, and yet banking crises have happened every so often throughout history. The Directors there too had abandoned a sense of ordinary responsibility about the risks they were incurring.

All of these actors probably believed or assumed in the back of their minds that as a whole industry was getting involved in taking on unacceptable risks in the same way that they were, either the risks were really quite minimal, or they all assumed that in fact the government or some higher agency was keeping a watch over them from on high.

George Soros expressed his view of how risks are being wrongly managed as follows - The super-boom got out of hand when the new products became so complicated that the authorities could no longer calculate the risks and started relying on the risk management methods of the banks themselves. Similarly, the rating agencies relied on the information provided by the originators of synthetic products. It was a shocking abdication of responsibility.

And yet governments too have become overwhelmed by another effect of technology - the immediacy of communications. This has stopped most governments from getting involved in any detailed risk management and planning, merely concentrating on the news battles of every day. If things looked good enough in the media, then that was a good day's work done. The reality of the risks being undertaken by bankers was not even on the radar.

In the UK, fr example Gordon Brown dismantled the control previously exercised by the Bank of England, splitting up its responsibilities between three separate agencies, leaving none of them able to do much to prevent a crisis like the Northern Rock from coming into existence. Why he did it, is not exactly known, but he had claimed for himself ten years of favourable media comment for having done so, before the pigeons have finally come home to roost. And now the mess is obvious, he is showing more concern with news managing the crisis than dealing effectively with its underlying cause, the mistakes he made by stripping away the controls.

News organisations might in earlier simpler times have started asking questions, for example if it was sensible for so much sub-prime securitisation to be going on, or for Building Societies in the UK to be financing themselves predominantly with 24 hour interbank money at variable rates, and lending it for years ahead at fixed rates. But the media has got itself involved in trading with governments for favors, typically offering favorable comment to government in exchange for the right to expand their businesses, or win advertising revenues etc.

In fact there has resulted from the detachment created by technology a total abandonment of anyone acting in the role of responsibility-taker. Governments are pinned down by the need for short term approval. Media will say or write whatever it takes to please the government or whoever they are canvassing for favours. The ordinary common sense input of everyday people has been overridden and lost completely.

In Britain you used to contact your MP if there was some problem and hazardous situation building up. He would write to the Minister concerned, and mistakes by government were often rectified before they became generally destructive. MPs have so little power now, with the power handed over to Brussels by Treaty, that most people don't bother trying to communicate back to government any more. They simply give up running their businesses, emigrate or find a way to get out of the way of the bureaucratic behemoth that government has become.

This is another critical change brought about by the same technology. In the hands of government, computer technology has enabled agencies to be created to manage industries such as farming or fishing, health, health & safety, families, money, education - in fact anything that moves, severely restricting the choices an individual person or company is permitted to take. In such an environment, most decide that it's not worth fighting the system to do any good, as they might have done in a past kinder slower pre-technology world. All people see left is the opportunity to look after themselves. Caring about others or consequences is nigh impossible anyway, and a totally frustrating pointless pastime, with government intruding into every aspect of life.

With regulation so powerful a force, and self-responsibility so heavily curtailed, people just concentrate on playing the system, and abandoning the natural tendency to seek a moral or right basis for doing things.

Technology has been allowed to dehumanise work, and hamper humanity until people no longer care. The economic advantages of technology are so great that this 'technology' recession need not even be happening. It is though because people have not learned how to limit the negative and destructive elements of technology's advance that the world is being cast into a period of extreme uncertainty.

There is a need for a totally new form of thinking, where it is remembered that technology is only a tool, and that humans are always at the centre of events. If those humans are made not to care, and only to seek easy pay-offs, then failure and catastrophy will be the result. It is time for the human side of life to become the focus, for common sense, simple truths to be rediscovered, for bureaucracy to be curtailed and for crazy irresponsible risk-taking to be ended.

Right now, we are being destroyed by the inability of people to find fulfilment and contentment, as bureaucracy and big business eats up their lives.

The solution is there, but it will take creativity and strength combined to ensure it is found in time. The power of technology must be harnessed, at the same time as the tendency for technology to detach people from reality, must be suppressed. It will be a moral crusade, a reconnection of people with themselves and each other, with the instinctive good sense that silently resides within a person, that needs no electronic data or support.

Sometimes in the words of Barack Obama or David Cameron, you can hear the beginnings of an understanding that the world is dangerously out of balance, and that they sense the need for an end to an emphasis on mechanistic process, on state bureaucracy and a refocus on people, their common sense and their well-being. This is the fight for the next generation, to put mankind ahead of, in control of and correctly served by technology. The technology recession is saying that the time for the rediscovery of old-fashioned human qualities has come. It will soon deliver the shocks that the world needs to end the universal arrogance that the computer age has created.

UPDATE 2010 January - how the 'quants' brought Wall Street to the brink
It describes a system a bit like I described, where technology took over from responsibility.

UPDATE - IHT report on how US Regulators are desperately trying to find where the risks are located and shore up the defences.

UPDATE - John Redwood writes that this is a crisis in the UK of messing with the regulatory system by Gordon Brown, and worldwide of bad management of banks.