Monday, October 27, 2008

Will President Obama be a disaster or just a disappointment to his own supporters ?

With many commentators now predicting that the election of President Obama, is a foregone conclusion, it is probably worth noting a few points about the man who could effectively be "the most powerful man on the planet" from next week.

Nothing I have read, and I have read fairly widely, gives me a serious idea about what policies he is proposing other than some broad outlines. The broad outlines, I frankly find disturbing especially in the troubled times we live in.

My summary of the broad outlines Obama has revealed are as follows:

1) Raise taxes and increase spending. Hardly inspirational in times like these when the economies of the world are so fragile. The Wall Street Jounal summarised his tax plans like this:

2) Introduce trade protectionism- not a particularly positive plan at a time of world recession.

3) Withdraw US troops from Iraq. On examination this amounts to a little more than a discussion over timing so is hardly a radical proposal, whether right or wrong.

Obama's only clear message is "change" without any definition of what this change really is. Worse still, most of his supporters do not seem to have any clear idea what this change is about except that it must be something good. This is to imagine that change in itself is always good which seems very dangerous. Surely the leaders who have caused the most change were the most revolutionary or brutal. Hitler and Stalin certainly brought about a lot of change.

Obama's most obvious skill is his ability to speak. This seems unarguable to me. By extension this could be seen as an ability to inspire. However without clear plans or with some undesirable broad outlines, this seems no reason to elect him.

Perhaps most telling is a story being reported by today's Telegraph referring to a 2001 radio interview Obama gave when he spoke positively of the need for "redistributive change". That can mean many things but what he seemed to be saying was that it was not enough for the courts to do this but that legislation would be required.

Here are some extracts from the interview:

So one possibility is that Obama will be elected on the basis of some vague emotional notion of "change" to introduce redistributive based legislation and taxation at a time of global recession. That seems a recipe for disaster.

The other option is for him to be another Tony Blair and be elected to the cheering screams of his most extreme supporters only to be remarkably unradical and in the process alienate most the people who first supported him. This may also be possible and certainly has its precedent ! It is possible to imagine in that scenario that in 4 years he is viewed as little different from a black CEO of a major corporation and the most ardent critics will be the signifcant number of black voters who supported him but feel nothing has changed for them.

However the option to be most worried about is an increase in taxation and legislation to support redistribution of wealth (as described in his radio interview). At a time of global recession not even the Liberal Democrats are proposing that.

So unless there is a surprise next week I will not be joining the majority view in cheering the result. I will be quietly worried as to what Obama change really means. I will be watching with concerned interest.

Sunday, October 26, 2008

Hard Times ?

I am noticing a trend amongst colleagues, friends and the public in general to be not only talking down the state of the economy and emphasising the hard times in which we are entering but almost relishing the prospect too.

I find the relishing aspect a little short sighted as if the downturn does become really bad we could all be effected far more than we are expecting. However in London and the south of England despite the news, nothing (for most people at least) has really changed just yet.

People who seem to be relishing aspects of the downturn all believe it will actually have a positive effect on them or their outlook. Examples I can think of include:

- a colleague who predicted (or hoped) that harder times would mean the abolition of the Firm's "Diversity" department accompanied by the bundling out into the street of the "Head of Diversity". I am a little nervous about these sort of thoughts myself. While I would also question the value of such departments as "Diversity", to wish someone out of a job seems slightly unethical as well as tempting fate for one's own position.

- at least one person has mentioned the economic downturn as grounds for buying a reduced value of Christmas presents this year. This is irrespective of the fact of them personally being no worse off than last year !

- Another person mentions that the downturn may mothball or stop altogether a planned development of "luxury apartments" or similar on a school playing field. I guess every cloud does have a silver lining in this case.

In some ways a downturn can have positive effects. In a materialistic time and a materialistic city, anything that stops of the conveyor belt of consumption and consumerism (however briefly) and gives cause for thought about the wider purpose of life, may have unexpectedly positive outcomes.

That is not to forget the suffering of those who lose jobs and struggle to support their families. This is bad. It is just that good can also come out of bad sometimes.

At this stage however, I would question how far these really are "hard times".

A walk around our local town centre this weekend suggested we are still a long way from really hard times. Charles Dickens would not be impressed !

For example, while walking around I observed:

1) A nail salon staffed by a team of thai ladies seemed to be doing a roaring trade in synthetic nails.

2) Boots the Chemist, was promoting such essential items as digital picture frames at £54.99.

3) The same shops was selling bucket loads of aftershave and perfume in advance of Christmas.

4) The pavements were clogged with shoppers.

5) Our local Asdas had horrendous queues. I must have waited a good 10 minutes as a long line of trolleys groaning with produce shuffled sullenly to the checkout. The often obese bodies, sometimes complete with visible tatoos, of those pushing the trolleys suggested we are really far from the breadline just yet. Spare cash for tatoos is also not a sign of outright poverty. (Note to self- try and go to Sainsbury's next time. The shoppers are slightly less obese and have slightly fewer tatoos !)

6) The roads are clogged with mainly new cars using our recently reduced price petrol.

True there are a few more Primark bagsvisible as shoppers economise. However let us not pretend that we are really suffering just yet as it is insulting to those in this world who really are.

As for those who relish aspects of downturn, I would caution in being careful what you wish for.
We could really end up in hard times. However from the looks of things this weekend, we are not there yet.

Saturday, October 25, 2008


It has been a busy few weeks since our return from Turkey and I had not planned to post as little as I have done.

However a busy time at work and a PC failure at home have taken their toll on my internet time. Thankfully the PC is sorted, even complete with an upgrade to a wireless router. As the weekend is here, I am posting a couple of photos from Turkey.

These are the ancient ruins of Heraklia on the shores of Lake Bafa. A wording of warning to anyone who ventures this way. The present day settlement at Heraklia is inhabited by some of the most pushy people in Turkey (and that's saying something !!).

On entering the village we were sold "tickets" by two men in what looked like a garden shed. The tickets were for "the site". As the remains are scattered amongst the contemporary settlement, these tickets were essentially to the modern village.

While tickets to the site were reasonable (if dubious in authenticity) it was unclear where to park. While deciding, a reddish haired fat boy emerged who could have easily passed for a German or north European. He turned out to be Turkish but in a high voice and broken English offered a "tour" of the ancient sites. A polite "maybe later" was definitely the wrong thing to say as we were quickly surrounded by a small group of children and a larger group of old women trying to sell linen, beads and even soap. One even tried to exchange Euros with me.

While a bit of enterprise is not to be denigrated, it was really too much as we were followed every step of the way by this group.

I was shown a "Roman Theatre" and then asked for money. With our son in a buggy, the smell of manure everywhere and harrassed by a group of locals at every turn we decided to beat a retreat. A French couple looked similarly fed up and also left. That was a pity as the Greek and Roman history of the site deserved more attention. If the locals were slightly less pushy I am sure they would do more business.

Lake Bafa is spectacular with a ruined monastery on an island in the lake. The rocks around the site make it almost look like another planet. I can recommend it but be careful if you drive into Heraklia !

Below are two photos that in order to take I needed to pay two liras to fob off a group of local children who were bugging me !

The locals in Heraklia were unusually pushy. It is not typical at all. Normally they politely leave you alone when it is clear you are not interested in buying anything.

Wednesday, October 22, 2008


Almost in the blink of an eye, life in the City of London seems transformed.

As little as six weeks ago it seemed a hub of the global free market, bristling with brave hope that all would be well.

Now there is a distinctly gloomy atmosphere and the City the centre of a quasi nationalised economy. The R word (recession) is out of the bag and there is real concern for personal prosperity as well as corporate survival.

All parts of the City seem effected and my own employers are no exception. Turnover is down and this year will be a tough year. I am working (or seem to be) harder than ever hence the lack of recent posts.

Hopefully back with something more cheerful and enlightening soon........

Saturday, October 11, 2008

Finance for Industry

A young Gordon Brown looks like a disciple of Michael Foot. Both Gordon Brown and Tony Blair were elected on the Foot Manifesto of 1983. (note the signs of the times- an ashtray was openly on display on the table)
The irony of this week is that 25 years after Foot's annihalation in the 1983 General Election, a key plank of his manifesto (described by Gerald Kauffman as "the longest suicide note in history") has been implemented.
One section of the manifesto included a section called "Finance for industry". This proposed creating a National Investment Bank, controlling the banks much more closely and if necessary nationalising one or more of the existing banks.
The 1983 manifesto was widely seen as a disaster leading to Labour's worst defeat since it became a governing party and Margaret Thatcher's greatest victory. Every Labour action up to and including the Blair Years has been aimed at learning from the mistakes of 1983 and adopting a more business friendly approach. With the arrival of Gordon Brown this clearly reached its limits but few could have thought we would be returning to the Foot Manifesto so soon.

More amazing still is that partial nationalisation of the banks is now on the global agenda. Who would have thought that the Foot manifesto could even be applied in America.

These are clearly difficult times and extraordinary measures are required. However I remain unconvinced that nationalisation of banks is a good move even in desperate times. The £500bn set aside for supporting the banks could be used in so many other ways to stimulate the economy. How about a suspension of corporation tax and income tax for a whole year ? The spending power that would give to ordinary people and businesses would be huge. What's more with Corporation tax bringing in £51 bn and income tax raising £155 bn (2007 figures) , the cost to the nation would be less.
I do not pretend to propose all the answers but if you are going to spend £500 bn on something there are probably a few more options to consider !
There would also seem to be cause for thought before the whole world "turns Foot" as Gordon Brown requested this week.
Below is an extract from the "longest suicide note in history" which is starting to be implemented after 25 years. For the record, Michael Foot is still with us at 95 years of age. He at least must have cause for a smile this week.....

Finance for industry

It is essential that industry has the finance it needs to support our plans for increased investment. Our proposals are set out in full in our Conference statement, The Financial Institutions. We will:

Establish a National Investment Bank to put new resources from private institutions and from the government - including North Sea oil revenues - on a large scale into our industrial priorities. The bank will attract and channel savings, by agreement, in a way that guarantees these savings and improves the quality of investment in the UK.

Exercise, through the Bank of England, much closer direct control over bank lending. Agreed development plans will be concluded with the banks and other financial institutions.

Create a public bank operating through post offices, by merging the National Girobank, National Savings Bank and the Paymaster General's Office.

Set up a Securities Commission to regulate the institutions and markets of the City, including Lloyds, within a clear statutory framework.

Introduce a new Pension Schemes Act to strengthen members' rights in occupational pension schemes, clarify the role of trustees, and give members a right to equal representation, through their trade unions, on controlling bodies of the schemes.

Set up a tripartite investment monitoring agency to advise trustees and encourage improvements in investment practices and strategies.

We expect the major clearing banks to co operate with us fully on these reforms, in the national interest. However, should they fail to do so, we shall stand ready to take one or more of them into public ownership. This will not in any way affect the integrity of customers' deposits.
It is interesting to note that the Foot manifesto also foresaw the arrival of broadband. I can't imagine they foresaw the internet. However all this was to be under "firm public control":


A national cable system will make possible a wide range of new telecommunications services, greater variety in the provision of television, and a major stimulus to British technology and industry. But it must be under firm public control. A publicly-owned British Telecommunications will thus be given the sole responsibility to create a national, broadband network (including Mercury, the new privately-owned telecommunications system for business), which integrates telecommunications and broadcasting.
The full Labour Party manifesto from 1983 can be found here.

Friday, October 10, 2008

Oil and Petrol

As the oil price continues to fall (today it virtually collapsed below $80 a barrel) the stubbornly high price of petrol seems ever less justifiable.

I know there is a time lag but funny how the time lag is very short when oil rises but very long when oil falls !

Oil is now little more than half the price of its peak (at $147 a barrel). In London at least you are doing well to find petrol that has fallen more than 10 % from its peak (currently around the £1.06/£1.07 a litre mark).

It's interesting to note that earlier this year the potential for $200 a barrel oil was discussed. This all seems quite a way off now.

At least one economic reason to be cheerful....

All form is impermanent

These is the the remains of the Library of Celsus in Ephesus (now part of modern Turkey). Around 100 AD, Ephesus was a major port, a Roman regional capital and with up to 500,000 people then one of the largest cities in the world.

As the sea gradually moved out and after waves of attacks from Barbarians and then Arabs, the city entered a terminal decline. It was finally abandoned altogether by the Turkish population in the 15th Century.

The ruins seen are as the result of restoration work.

It is a wonderful place steeped in history both religious and political.

This abandoned city now thronged with tourists from every continent of the world which we recently visited, is a sombre reminder that history shows no civilisation lasts forever.

While London is someway off collapse and abandonment (!), the same fate of Ephesus may one day touch London.

A global financial centre that until last year seemed ever growing and invincible, now feels slightly rocked by the waves of crisis running accross the globe. I still remain confident that this can be resolved in the way other troubles have (after all the fact we are all here shows life continued after 1929).

However the ruins of Ephesus remind us that even great cities, of which London is one, do not last forever and all physical form is impermanent.

Wednesday, October 08, 2008

The hour before dawn ?

It is stating the obvious to say these are extraordinary times in both in London and across the world.

It is far less obvious whether this current crisis is ending or just beginning.

Yesterday the Royal Bank of Scotland Group lost 40 % of its value. Today at one point it regained much of this while HBOS rose 60 % before falling back later. That banks with stable Scottish heritage should be fluctuating in price like fruit in a wholesale greengrocer underlines the depths of this crisis.

The solution from London at least is to "part nationalise" (in the words of the FT) all the major banks. While that may bring some relief to share holders and those seeking to borrow money it is doubtful that this is a real solution. Not least it represents a suspension of free market principles and as this crisis is now largely about confidence it does little to inspire that. It also increases the tax payer's exposure. While the banks seem more than happy to accept state support it seems more doubtful that they will accept the other aspects of state ownership. The tabloids are already rumbling with calls for cuts to bonuses, control over penalty charges and cuts to mortgage rate. Whether the banks will find the taste of a public bail out so sweet in the long term seems doubtful.

A temporary suspension of taxation would have cost less and would have been better for the real economy than throwing "good money after bad" in the banking system.

Like any crisis the hour before dawn is always the darkest of the night. What is unclear to me today is whether this is a dawn or just a flickering candle lit at enormous expense.

That the city which has one of the oldest stock markets in the world is today "celebrating" a partial nationalisation of its banks suggests the coming of dawn is uncertain. London is where Karl Marx is buried. I hope it does not prove to be the grave of contemporary free market capitalism which despite its many faults has brought prosperity and benefits to so many around the world.

A part of me remains optimistic. Even at its worst this is another 1929. Even 1929 passed and a dawn came. Let us at least hope the dawn to this crisis comes a little quicker than then.