29 April 2009

Swine flu - it may not be that bad, but idiot journos could make it a lot worse

The media is of course full of swine flu this week. Unlike the virus - so far - the coverage is inescapable. By today, we were facing a pandemic of predictions, an epidemic of articles. 

Most of the TV coverage I've seen has been pretty good - Channel 4 News had Liam Donaldson, the Chief Medical Officer, answering questions that had been emailed in by viewers, and it was quite in-depth and all very balanced and non-sensational. The printed and online media, by contrast, has been much more patchy. Most of the broadsheet reports have been OK but some of the columnists and bloggers have lost the plot completely. 

Simon Jenkins in the Guardian delivered an absolute pile of doo-doo today, arguing that panic over the virus is being 'stoked' by governments and the World Heath Organisation to justify increased budgets for disease management. There is a very strong argument for this view with regard to counter-terrorism budgets in the US and UK, but as regards a potential flu pandemic it's a completely ignorant distortion of the truth. Jenkins describes your average flu symptoms - "you feel ill for a few days then you get better." In which case why have 150 people died in Mexico City?

 So far, it is correct that the cases of the illness outside Mexico aren't fatal in the overwhelming majority of cases. But the early indications suggest that this new H1N1 strain of flu is substantially different from the normal seasonal flus which circulate every year. We simply have no idea how bad the impact might be outside Mexico. We might be seeing just the very small tip of a very large iceberg. When only a few people in the UK have been infected, there might well be no deaths at all. But if millions of people are infected, we may see a much higher death rate. As yet there is just no way of knowing. 

Jenkins says "professional expertise is now overwhelmed by professional log-rolling" but in fact the professional response as I have seen it in the media has been very measured and non-alarmist. It is certain sections of the media that are behaving unprofessionally by talking what they know is presumptious bollocks - suggesting that we know there is no risk whatsoever, or a very very minor risk  - whereas in fact we know nothing of the kind. It is sad that Jenkins, who is capable of much better journalism than this, should have dropped his standards so low on this occasion. 

I can't say the same thing about Telegraph blogger James Delingpole, because I have yet to read a single post he's made that isn't absolute crap. This guy wants to be Simon Heffer with a sense of humour. Sadly, he is a cheap punk impersonating an offensive moron. Or maybe he's just an offensive moron. Apparently no-one (except the very weak and infirm and people living in developing countries, for whom it was presumably a matter of social Darwinism anyway) is gonna die of swine flu. It's Simon Jenkins without the brains. One to avoid, methinks. 

And as for Michael O'Leary... this is a guy who shows such utter contempt for the human race that he is probably just a walking bag of nasty viruses disguised as a human being. Please, can someone infect this bastard, and put the rest of us out of our misery?

UPDATE: the day after writing this post I was lucky enough to find that rare thing - a balanced, sensible media article on swine flu by the excellent Ben Goldacre, author of the Bad Science blog. His view? We simply don't know enough to be able to make predictions on the severity of the outbreak or the potential body count yet - and anybody who says otherwise is a fool or a liar. Read this guy rather than the bunch of other duffers I've collected in this post and we might get somewhere...

Gurkhas - how many times can the govt shoot itself in the foot?

An embarrassing defeat for the government today over its plans to restrict the right of the majority of former Gurkhas to settle in the UK. The Lib Dems and Tories joined forces with rebel Labour MPs to back a Lib Dem amendment.

How did anyone in the government think that it was a good idea to try and pull a hard line on this? I have yet to find one person, of any political persuasion, who thinks that stopping the Gurkhas coming here is in any way fair. It seems pretty obvious to me that if you have served in the British armed forces then you should have the right to permanent residency in the UK. The government says it would cost £1.4 billion - fine, let's just put up taxes to raise the money. Could anybody seriously object? 

And well done to all Labour MPs who voted against the government on this - a full list here.

This makes an already unpopular government look ridiculous. And it's a huge PR coup for Dave Cameron and Nick Clegg. 

Government ministers need to try doing something popular for a change.

24 April 2009

A funny sort of 'class war'

The favourite expression of right-wing commentators to describe the Budget this year was 'class war' - apparently because Alistair Darling introduced a 50% tax rate on incomes over £150,000. I know that people like Simon Heffer and the even more ludicrous Jeff Randall have a vested interest in knocking the Labour government (although to be fair to Heffer, he hates Cameron as well - I don't know if anyone in the current crop of Tory MPs is right-wing enough for him to actually support them. Maybe Frank Field on the Labour side might be... Enoch Powell is sadly deceased, although my wife's great-aunt believed he was still alive, but that was before she was dead too), but if we're drawing the dividing line between 'the great unwashed' and 'Middle England' at £150,000 then we ain't got many people in middle England.

Data from HMRC (the Survey of Personal Incomes statistics) shows that only about 1% of income tax payers earn more than £150,000 per year. And only about 70% of adults in the UK are income tax payers. So the class war is 99.3% of the adult population of Britain in the working class vs 0.7% in the middle class. With such a small middle class it's no wonder the economy is going down the tubes. 

Even the number of higher rate (40%) taxpayers is pretty small as a proportion of the population (although a lot bigger than it used to be, as average earnings have grown faster than the higher rate threshold.) I think it's about 15 to 20% of taxpayers in that bracket. So even a rise in the higher rate to 50% would be a pretty unbalanced 'class war'. 

Of course it's in the Daily Telegraph's interest to paint a picture of oppressed hordes of City workers - but there are actually a small handful of high earners at best. During the boom years their salaries grew far faster than anyone else and they cultivated a reputation as the saviours of the UK economy. In the wake of the credit crunch this reputation has largely collapsed - although in many cases their earnings remain high. In some cases we have found in retrospect that not only were they not worth these inflated salaries, their worth to the economy was actually severely negative (step forward, Fred Goodwin).

The government's strategy is - or should be - based on targeting a small number of people who have done very well - far too well - out of the complete imbalance of the global economy in the last three decades. The 50p top rate is only the start of that strategy; Capital Gains Tax needs to be reformed and a lot more needs to be done to reduce tax avoidance. But it's absolutely f*** all to do with class war, whatever Simon Heffer or Jeff Randall might tell you. 

Cutting too much

One thing that has only really emerged from the budget a day or two later, after people had a chance to look at the small print, is the sheer scale of the public spending cuts being planned. In a prime example of the cynical manipulation that makes the budget statement such a farce, Alistair Darling said that public spending would grow by 0.7% a year in real terms from 2010 to 2013. In fact, that figure was misleading, as it didn't include investment spending, which is being cut massively. Overall, public spending is actually going to shrink in real terms over those three years. In fact, most of the heavy lifting in the 10-year plan to balance the budget by 2019 is being done by spending cuts, not tax increases. 

This is, to put it mildly, absurd. Those of us who remember the 1997-2001 Labour government will remember the two years when spending growth was constrained to the Tory plans, which were for low growth. Coming on the back of years of underinvestment, this 2-year squeeze caused huge problems in health and education which the government then spent the next 10 years trying to sort out - with only partial success. Well, the cuts planned in 2010-13 are much worse than those 1997 Tory plans. It's going to be a complete disaster. If people think the health and education systems of the UK have serious deficiencies now, wait until they've been completely starved of cash for several years. 

The correct response of a Labour government to recession was summarised by Tony Benn in a diary entry for December 1974. I don't have the exact quote to hand, but it was something like, "we are going to have to reduce our living standards over the next 12 months. But if we just do that by everyone taking two steps down the ladder, then the guy at the bottom is going to fall off". With cuts in public spending of this magnitude, there are going to be a lot of very poor, very vulnerable people falling off that metaphorical ladder.

The 50% top rate was a nice starting point for a progressive response to the recession, but if the government had had real guts it would have pledged to maintain spending as a share of GDP once the recovery starts, putting up taxes as necessary. The huge hole in the public finances needs to be filled by tax rises rather than spending cuts. It's a real shame that the government is running too scared to protect its legacy of increased spending on public services compared with the Tory years. As Tom Clark in the Guardian shows, if the spending cuts are implemented they'll leave public spending as a share of GDP back at roughly 1997 levels. And then, one might ask, what was the point of New Labour? A ten year diversion in between business as usual? It's a disgrace. 

23 April 2009

Sad day for Ipswich Town

I don't think I've done a sports-related post on this blog for many a moon but I couldn't resist grabbing the sick bag when I heard that Roy Keane is the new Ipswich boss

I haven't supported Ipswich since they sacked George Burley about seven years ago. I switched to Colchester United instead... closer to me, easier to get a ticket, and (at the old Layer Road ground) within walking distance of a very good pub, the Odd One Out.) (It isn't any longer... the new stadium is out of town.)

Roy Keane always has struck me as a dickhead... irrational, had a habit of deliberately crippling other players as a player, used to play for Man Utd. What's to like? 

The asinine headlines have started already: "Keane sets promotion goal". That's funny, I thought he was trying to get relegated. Like at Sunderland? 

So, balls to Ipswich. (I do quite like Chelmsford City and Braintree Town as well... I've seen good matches at both those grounds.) 

22 April 2009

Well, I got a bit of what I wanted, but only a bit

Today's Budget is, in one very particular way, the best New Labour has ever produced. The new 50% supertax on incomes over £150,000 is a welcome (if partial) reversal of the downward trend in top rates of the Thatcher years. The Institute of Directors are up in arms about it, which pretty much guarantees that it's the right thing to do. (Simon Heffer also doesn't like it - which doubly means it's the right thing to do. "Idiocy, bigotry, tribalism and sheer class hatred" - yep, I'll have some of that please.)

The supertax isn't perfect - the ever-astute Vince Cable (best Labour Chancellor we never had - yet?) has pointed out that it won't affect people who are able to pay themselves in capital gains rather than income (e.g. private equity bosses) as the rate on capital gains remains at 18%, and the government should definitely think about a 50% top rate of CGT to match. There are a lot of other tax avoidance issues to sort out as well, as Richard Murphy of Tax Justice Network points out. But the 50% top rate is at least the first step towards a sensible tax policy. And it's very unlikely it would ever have happened under Tony Blair.

Other than that, the good news is a bit thin on the ground. The government has largely rejected a further fiscal stimulus, mistakenly in my view. There is a tiny bit of extra money for the Child Tax Credit - £20 per child per year - but this is nowhere near enough to enable the government to meet its child poverty target for 2011. A bit of extra investment for green technologies, but again, very small beer - about £500 million according to Richard Murphy. Nowhere near the amount that the Green New Deal group has identified as necessary.

Of course the main reason the extra spending was so thin on the ground was because advocates of a further fisacl stimulus couldn't convince the Treasury in the face of the rapid - and continuing - deterioration of the public finances combined with the cost of bailing out the banks. Borrowing could be up to £200 billion this year - a post-war record. Bigger than 1976 when Labour went to the IMF, who were a similar wrecking crew then to what they are now. 

Given the speed and ferocity with which the public finances have unravelled, it's understandable that the Budget projects only 0.7% per year real growth in public spending over the period from 2010-11 onwards. Understandable... but wrong. 

For one thing, it's not a credible spending path. The economic growth projections that the govt published yesterday were less of a trip to fantasy island than the infamous PBR 2008 projections but they are still wildly optimistic about the pace of recovery. The truth is this: after 30 years of misplaced trust in market forces and bubble finance, the UK economy - perhaps more dependent on financial services than any other economy - has had the guts ripped out of it. Recovery, when it comes, will most likely be slow and halting. That's if it comes at all, and we don't slip into Japan-style depression. So, the 3.5% growth prediction in 2011 is cloud cuckoo land stuff.

It seems that the private sector is most unlikely to precipitate a strong recovery on its own - particularly after the Government's green industries package proved to be something of a damp squib. Instead, we need, if anything, to expand public sector investment during the recovery - focusing on building the transport, technological and skills infrastructure that will enable us to work our way out of recession. 

Taxes will need to rise by a quite substantial amount once the recovery starts, to pay for this. For sure, there is some public spending we can cut; any use of management consultants by the NHS or local councils, by example, should be banned. They're overpaid and ineffectual. The ID cards scheme and NHS IT scheme, also both completely ineffective, could be canned. We don't need to replace Trident. 

But this is small beer in the wider scheme of things. Let's not kid ourselves that it's easy to cut public spending without any adverse effects on services - there is no evidence whatsoever for that view. All the evidence in fact is that cutting 'back office' functions - the easiest target - impedes delivery effectiveness. HMRC is a good case in point; reduced to a point in which staff have to routinely cut callers off to meet government targets. 

The next few years is when we finally realise that we can't have continental European levels of public services unless we pay European levels of tax to go with them. Not an easy lesson to learn, but a necessary one. 

incompetent AND economically illiterate - a deadly combination

Apparently the IMF made a mistake when it claimed the UK faced a £200bn bill for bailing out the banks in its 'Global Stability Report' (a phrase to rival Orwell's 'Ministry of Truth', surely. The true figure is closer to £60bn - still a huge number but a long way short of £200bn. 

We've already seen that the IMF are good at wrecking economies - now it emerges that they have no quality control, either. 

Laugh? I nearly bankrupted a small country.

21 April 2009

What I'd like to see in the Budget

There's a long list of useful things that could be in the Budget this year. Unusually, the desperate circumstances the economy finds itself in means that some of them might actually get implemented. The main thing I want to make a case for is a big additional fiscal stimulus - a lot bigger than anything we've seen so far - otherwise the economy is going to flush down the toilet even quicker. Many, including Bank of England Governor Mervyn King, have said we can't afford it. Bollocks - we can't afford not to. It's true that UK government borrowing is ballooning to huge levels, and there is a possibility - down the line - that the cost of financing the debt may become so prohibitive that the UK government becomes insolvent. But an effective stimulus should actually reduce this likelihood because the worse the recession, the more likely it is that tax revenues will reduce further and land us deeper in the public finance hole. The alternative is to go the way of Ireland - slashing public spending and benefits, sticking with the same strategy that created the Great Depression in the 1930s while penalising the poorest and most vulnerable people in society.

The Child Poverty Action Group has calculated that a £7.5 billion package of increases in Child Benefit, Child Tax Credit and Jobseekers Allowance would enable the government to meet its 2011 target to reduce child poverty to half of its 1999 level - as well as creating around 200,000 extra jobs when multiplier effects are taken into consideration. That's a more than worthwhile investment.

There are other useful things that could be in the Budget - a supertax on high earners, new suport for green technologies, wealth taxes (especially on parasites like Fred Goodwin), a complete ban on the employment of management consultants in public services... but the fiscal stimulus is what we need above all else. Ex-MPC member Sushil Wadhwani has been making the case for further stimulus very effectively. Let's hope someone in the Treasury is listening.

20 April 2009

Calling Boris on his B.S.

One of my favourite pastimes when on a bit of a posting roll is to take issue with Telegraph columnists. Normally I pick the easiest target - the risible Simon Heffer - but today it's time to put Boris Johnson in the firing line.

Poor old Boris. He won the mayoral election last year on a wave of anti-Labour sentiment - since when he's achieved pretty much nothing of value whilst, in the media, his old nemesis Ken Livingstone stays one step ahead of him at every turn.

To compensate for the manifest failure of his day job, Boris ups the ante with his side-job as a Telegraph columnist. Some days this can be mildly amusing: today it resulted in the biggest slice of bullshit on education policy I've seen in years. It makes even the likes of Andrew Adonis (now thankfully moved to the transport brief where he can probably do less damage) look relatively sane.

Boris has noticed the minor bust-up in the Labour party over the possible selection of Georgia Gould, daughter of New Labour architect Philip Gould, for the (normally) safe Labour seat of Erith and Thamesmead, and used it as a stick to beat Labour supporters with over the party's education reforms. Or in fact, every education reform of the last 50 years (all of which were either introduced or supported by the Conservatives, but never mind). Apparently Labour education policy is responsible for nepotism in the selection procedure for Labour election candidates. A bit confused by the logic of the argument? So am I.

Johnson cites evidence that children who were born to middle-class parents in 1970 had a much bigger advantage over children of working class parents than equivalent children born in 1958. And yes, research using studies of children born in 1958 and 1970 shows that does seem to have been the case. But when were those kids born in 1970 growing up and entering the labour market? The 1980s and 1990s. A period in which the Thatcher and Major governments presided over the biggest increase in inequality in this country's history.

So, largely speaking, it's the Tories' fault, not Labour's fault. Now we'd all love to know what's been happening to inequalities and class advantages since New Labour took office in 1997 - and if Boris had had some evidence on that, then he might have had some kind of coherent article, rather than stitched-up rantings. But sadly there are no cohort studies of kids born in the UK in the 1980s or 1990s. Why? Because the Tories decided the study of kids born in 1982 (i.e. 12 years after the 1970 study) was too expensive, and scrapped it. Indeed there wasn't another study of this type until the 'Millennium Cohort study' of kids born in 2000... under New Labour.

Johnson then adds insult to injury by calling for a return to academic selection - but completely fails to explain how this would benefit working class kids. I went to a grammar school and it was completely dominated by middle-class kids - many of whom had been to private sector primary schools where they were very heavily coached for the 11-plus. Selection is an act of desperation - condemning the vast majority of kids to a second (or third) class education so that you can focus on a small elite in the grammar schools. What we need in education is the opposite of selection - a completely inclusive system, with no-one able to buy a better quality education place than anyone else, and no opt-outs. The private sector itself is a selective system (by income) - so,
let's abolish the damn thing. ONE high-quality system for all is the way foward.

Boris Johnson is a fucking idiot on education policy. And he's a clown of a mayor.

Green shoots look like so much hot air to me

Now that we're not seeing a banking collapse every couple of weeks as was happening last autumn, thoughts have began to turn to recovery. Business Minister Shriti Vadera was first to see the "green shoots" in January.

And now almost everyone seems to be in on the act: Barack Obama, his economic adviser Larry Summers, Gordon Brown and a whole welter of smaller-scale politicians and advisers.

But what the hell is this new-found confidence based on?

Some dodgy banking results, a share mini-rally which may have stopped in its tracks already and one month's figures on house prices.

The best we can probably say is that the economy is not contracting as fast as it was last year. And that's the best case scenario.

The worst case scenario? I'll leave that to Willem Buiter in the FT.

Meanwhile, we are coolly informed by the Treasury that the banking bailout may have cost the UK taxpayer £60 billion pounds.

If that's "green shoots" I'm the recently deceased JG Ballard.

19 April 2009

Tip of the iceberg?

The G20 police brutality story is really growing in coverage now... the Guardian is normally my first stop on civil liberties issues (notably Henry Porter's column), but the Telegraph also has good coverage. It now emerges from the Independent Police Complaints Commission (same acronym as the Intergovernmental Panel on Climate Change, oddly enough) that more than 185 complaints have been received relating to G20, of which 90 were from alleged victims of - or witnesses to - excessive police force.

Contrary to the initial (very spun) reports from G20, which suggested a moderate police approach, it is now becoming clear that many police officers saw the protest as an excuse to go out and give the protestors a damn good thrashing without fear of recrimination - or so they thought.

Fortunately, videobloggers and the more sympathetic elements of the TV camera crews caught them at it. We live in a surveillance society - but fortunately it's now a two-way surveillance society, at least at a public event like the G20 demo.

This is turning out to be an extraordinary 12 months of mythbusting in British politics. It's already seen the overturning of one myth (that unrestricted capitalism was the saviour of the UK economy - we now see that if anything, it's the gravedigger) - and we may now be seeing a second myth laid to rest - namely, that the police are servants of the public, rather than a force for the oppression of the public.

The nice thing is that the anti-capitalist, anti-authority voices which used to be pushed to the margins of UK politics are now in the mainstream. Which can only be a good thing in terms of overturning a lot of the b.s. that's been laid down over the last 30 years.

Which brings me to my only beef with Henry Porter's otherwise excellent Observer article on the G20 police intimidation. Henry says "this is the end-product of the disastrous legislative assault on Britain's rights and liberties inaugurated by Tony Blair." But it goes back way before that. Anyone who remembers the miners' strike, Greenham Common or Wapping will remember the way the police were used as a political tool in the eighties by the Thatcher government, who thought any protesters were a Communist front preceding a Soviet invasion force. Indeed, it was happening even before Thatcher - in 1974 the police brutally assaulted hippies at the Windsor Festival.

The basic problem with institutions like the police and the army - and this is an obvious point but it bears repetition - is that they are one of the few walks of life where you get to apply violence to other people as part of your job. This inevitably means there is a danger that the job will attract people who are deeply into the idea of causing harm to others for fun. Particularly if the victims are people who have traditionally tended to attract least sympathy from wider society - poor people, drug users, ethnic minorities, travellers, and political protestors. Certainly, the police assures us that they do all they can to stop these people being admitted to the police, and hopefully they succeed most of the time. But even if a few misanthropes get through, you've basically got "Magnum Force" for real. At the end of the day the police officers who are carrying out these despicable attacks - and the higher-ranking officers who are directing them to behave in this way - are like playground bullies - but with considerably more ammunition than your average bully. And no-one will be able to have any confidence in the police force until we have got rid of the nutters - not least the high proportion of decent and caring police officers who are undermined by this criminal activity.

17 April 2009

Tomlinson: it's videobloggers vs "Magnum Force" on the streets of 2009

Despite the attempted cover-up, it's looking more and more like the police 'officer' who killed Ian Tomlinson may be brought to justice.

This particular fascist bootboy has miscalculated badly... both individual video bloggers and the news TV camera crews got him "bang to rights" literally. Showing him whacking Tomlinson from behind, well before the poor guy collapsed and died.

The initial coroner's report on the death was garbage... just plain garbage. As another Tomlinson (Ricky - good left winger) might have said: "heart attack - my arse". It took a second postmortem to get the proper cause of death - internal bleeding.

Well done to both the TV camera guys and the individual videophone jocks for getting the vital footage. In future, the more cameras there are recording these kinds of incidents, the better. (Provided of course that the cameras are in the hands of the public and not the authorities.

As for the police... it's quite clear that there is an element within the Met (to be precise, within the territorial support group, or TSG) which is trying to run a "Magnum Force" style vigilante force. These people are wearing police uniforms (though without identifying insignia so you can't tell who they are, and often with balaclavas on as well) but they are really operating like some kind of fascist junta. I'm not going to launch into some tirade here about how all police are fascists, as I simply don't believe that. But, there is an element who are, certainly. Hopefully the 'officer' who appears to have killed Mr Tomlinson will face prosecution for manslaughter. In terms of the wider future of the police force - and of democracy in the UK - the key questions are:

  • who (if anybody) authorised police officers to appear in public without identifying insignia, and to take this kind of action? 
  • the police top brass always denies that this sort of thing goes on. Are they just lying to us, or is there a rogue element within the police operating as a law unto itself? 
  • were Labour politicians involved in authorising these kinds of police tactics?
Getting the answer to these questions should be an absolute priority for the weeks ahead for all of us. Fail to get the answers and we move one step - at least - closer to a police state. 

16 April 2009


Hi folks
Just to say the Damian McBride affair has not gone unnoticed round these parts... but is competing with a ridiculous workload and irregular hours (brought on by Easter) at present. I can see now why people find Twitter so convenient: any fool can squeeze 140 characters into a spare 5 minutes. Should be called 'Witter'. Anyway, more on this at the weekend... promise.

09 April 2009

Some excellent critiques of the Geithner plan...

...from economists Joe Stiglitz, Peyton Young and Jeffrey Sachs.

By the 'Geithner plan' I mean the latest iteration of the plan to deal with 'toxic' banking assets in the US, drawn up by US Treasury Secretary Timothy Geithner. The Obama administration is suffering from a surfeit of lame economists in the upper ranks - Geithner and Larry Summers, to name but two. A bit of analysis shows that the plan is fatally flawed, but it seems to be going ahead anyway.

The two basic flaws can be summed up as follows (there's more detail in the articles by Young, Sachs and Stiglitz - they're all well written):

1. Incentives for the market to inflate the price of assets by competitive bidding wars, with the US taxpayer footing the bill

The US Treasury is promising to pick up most of the tab if the assets turn out to be worthless, which means that there is an incentive to buy them even if there's only a small chance they turn out to be worth anything. (In economist-speak the 'expected value' of the assets is inflated). This inflation in the expected value leads to an inflation in the actual value which the asset is being bought and sold at. This is due to a logical flaw in what the Treasury is trying to do. Geither believes that his plan will allow the 'real' value of toxic assets to emerge via market pricing, once the US Treasury provides the necessary confidence to underwrite investors' losses. But the Treasury intervention will itself the real value of assets. The plan is incoherent.

2. Incentives for insiders to manipulate the price of the assets without even bothering with a competitive process of buying and selling.

Sachs' article goes one stage further by pointing out that a big financial entity - like an investment bank - could sell a toxic asset back to itself (via an intermediary or subsidiary, for example) and collect a big sum from the US taxpayer by doing so. If the asset is worthless, the 'buying' part of the investment bank makes a large loss - but as it's sold the asset to itself (via the 'selling' part of the investment bank) there's no net loss on the transaction. And because the 'buyer' gets a large wodge of US Treasury compensation, there's a guaranteed profit. It's literally a licence to print money.

Of course, it may be that the US financial regulatory authorities can somehow police the insider option which Sachs points out - although it's sure as hell gonna be fiddly to do that given how adept financial companies are at setting up artificial entities (e.g. to minimise tax bills). But even if they can, there is still ample scope for price inflation through competitive bidding.

The Geither plan is a time-bomb ticking under the Obama adminstration's reputation for economic credibility. Partly of course that's because it's a slight modification of the Paulson plan from the Bush administration, which was complete pants, but somehow can't get off the table. Obama needs to sort this out quickly - what about sacking his entire tranche of senior economic advisers and getting people in who know what they're doing? Otherwise the consequences for his presidency and for the US economy could be disastrous.

08 April 2009

Hal on Twitter

For no very good reason, I have now set up on Twitter.

As for the poor sods who already receive text messages from me, expect the brain-bendingly moronic and irrelevant. DO NOT expect major league insights (but then you never did, did you?)

This is strictly for fun.

05 April 2009

Catching up after the G20 - how the IMF kills vulnerable economies (at least so far...)

Right then... after a week off on holiday in sunny Wales (and it was sunny, surprisingly), I find I've missed all the excitement of the G20 conference. As usual the media seemed preoccupied with wardrobe's (Michelle Obama's in this case) and failing to report any incidences of police heavy-handedness - like this one (thanks, Kevvy K, for the link).

So, we know the negative side - vacuous reporting and an entrenchment of the police state. But did anything good come of the talking? It's hard to get too enthusiastic. There has been extra bail-out money pledged to the IMF for economies that are on the verge of collapse - but bear in mind that when the IMF lends to countries it tends to impose conditions that collapse their economies still further (e.g. huge wage cuts, which depress demand) as it is an ideological slave to a Thatcherite/Reaganite economic agenda which has now been totally discredited. Having said that, it is possible that the IMF could change its policy stance somewhere down the line, although it's hard to see exactly how that would happen. The increase in Special Drawing Rights (essentially a low cost lender-of-last resort facility where the IMF plays the role of central banker) is useful to an extent, as it will hopefully come with less strings attached than a normal IMF bailout.

For a clear idea of what the IMF is doing to economies it's bailed out in Eastern Europe, it's worth looking at Paul Mason's wittingly titled "Euro-Crash" series on the Newsnight website. Latvia and Ukraine are absolutely buggered, Slovakia is doing somewhat better. What the f*** was the IMF thinking in Latvia? Who the hell thinks that wage cuts of 35% are the way to fight recession? You'd have to be an economic ignoramus to think that. It's almost as if a crisis was being deliberately engineered - perhaps the IMF is a Trotskyist front (ha ha). Meanwhile, in Ukraine, huge swathes of the banking system are bust and people can't get their money out. The government can't meet the conditions attached to the $16.5bn IMF loan which would at least sure the situation up. The conditions were ludicrous: cutting public expenditure and wages, which would deepen the slump even further (if that were possible). So, rather than changing the IMF's goddamn conditions so that the government can survive, the IMF is withholding the loan - which means that government collapse and revolution in Ukraine is looking a real possibility.

Paul Mason's reports are brilliant - but the only missing link is an interview with some of these IMF wankers, touring them round the streets of Ukraine to show the impact that their economic illiteracy is having on the country. Bearing in mind that many of the people who support the IMF's economic views are precisely the same people who were encouraging the reckless deregulation and expansion of credit - which is the main thing that got Ukraine and Latvia in trouble in the first place. We really do need to ensure that the IMF becomes a support system for the global economy rather than a wrecking crew. And that is what the G20 singularly failed to discuss - even if a bit of progress was made on important issues (such as tax havens).

(In the interests of balance I should point out that the latest column from Ambrose Evans-Pritchard, probably the best economics correspondent on the Telegraph, has a much more upbeat assessment of the IMF than me. He says:

Euphoria swept emerging markets yesterday as the first reports of the IMF boost circulated. Investors now know that countries like Mexico can arrange a credit facility able to cope with major shocks – and do so on supportive terms, rather than the hair-shirt deflation policies of the old IMF. Fear is receding again

Which puts a very different spin on things - but I will need to dig more into what is going on in Mexico before commenting further on whether this new "supportive" IMF is for real or whether it's just the old neo-liberal IMF with a new haircut. More on that later in the week.)