Michael Meacher: mendacious git

We welcome another member of the illustrious club of sociopaths: horny-handed son-of-a-son-of-the-soil Michael Meacher. In today's Grauniad he's arguing that you could kick-start the economy simply by taxing the snot out of the 1%.

An interesting proposition, Mr. Meacher, so how do you argue it?

The richest 10% control wealth of about £4tn. To put these figures in perspective, Britain's total GDP is £1.45tn.
Oh look, I think he's comparing wealth (a stock) with GDP (a flow). Perhaps he didn't learn any economics at the LSE. Never mind, surely the rest of his case holds up better?
Britain's thousand richest [...] In 1997 they held assets of £99bn, but they took full advantage of New Labour's being "intensely relaxed about people becoming filthy rich" to nearly quadruple this to £336bn by 2010.
13 years in which the RPI climbed from 160 to 228, so you can discount that second sum by 1.425 to give £235bn; more than a doubling, but certainly nowhere near a quadrupling. It's also worth nothing that house prices (a significant fraction of assets) climbed to 290% of their 1997 value by 2010 according to the Nationwide HPI calculator.

And, having failed to make his case that the rich have received an undeserved rise in wealth, what's his solution? Tax the wealth:

In the short term, the most feasible approach is to impose a capital gains tax charge at the current rate of 28% on the topmost layers of wealth [my emphasis], the £155bn gains amassed by the 0.003% over the last three years. That would yield £43bn, more than enough to generate the public investment to create 1.5 million jobs over the next two years.
Oh, heavens above. Tax the wealth! Of course! Because that's not going to produce any form of legal storm as the taxed fight back against classification, shift around asset ownership or head abroad; and raising money for that tax won't involve a huge sale of property at the upper end of the UK property market just when there's no appetite for purchase (because most other purchasers have a similar tax bill). And he's not done yet:
This could then steadily be extended to the remainder of the top 1%, which would provide the funds to widen and deepen the early recovery.

The politics of envy, Mr. Meacher. You assume that Government can spend money with greater benefit to the economy than its rightful owners, even with a huge destruction of wealth implicit in your taxation plans. You're worse than a fool, because even you don't really believe this works.


Hacking 787s for fun and profit

The Daily Mail asks the question on everyone's mind: "Could a vulnerable computer chip allow hackers to down a Boeing 787?"

No. Thank you for asking.

[You'd need to have a physical connection to the chip's programming pins, since it's almost certainly not intended to be reprogrammed remotely, let alone over any form of wireless connection. There's no information on the purpose of the chips; given the difficulty in arguing high integrity levels for reprogrammable logic, I find it hard to believe that the chip is a single point of failure in a high integrity subsystem. For a more detailed perspective on this report, see Errata Security on the subject.]

If you have that kind of access to a 787, there are far more reliable ways of downing the plane. This may not be reassuring, but it's the world we live in.


Perverse incentives

The irascible Inspector Gadget reports on an unexpected consequence of the Winsor report, whereby response police officers who were intended to benefit from increased anti-social shift salaries are now directly incentivised to not arrest people.

While I'm sure Inspector Gadget talks his own book, the facts laid out are difficult to deny:

The only problem is, if you actually arrest someone, and then have to attend court to give evidence, your night shifts are replaced with day shifts.
So then we lose our night shifts to attend court and we lose pay along with it! This means that it now costs police officers money if they decide to arrest someone.
This also applies for attending or conducting training: any additional skill which requires annual training will directly impact the officer's pay packet due to the night shifts being missed.

This is what happens when you big-bang changes like this - the perverse incentives which are an inevitable result of any complex systems of rules will appear all over your organisation and make the regulation designers look like arses.

Of course, there is a school of thought that if the arresting officer has to attend court then he or she isn't suffering the hard work and anti-social hours of a night shift. This is true; however, if an officer has organised themselves a run of nights to avoid switching to and from daylight working hours, a court attendance in the middle of this run makes the subsequent night shift significantly harder for their body clock. On the other hand, if you pay night shift officers for daytime court appearances, you give them an incentive to arrest people left, right and centre so that they are attending court for half their shifts, even if the arrestees are subsequently released without a stain on their character. You can't win.

It may just be fairer to create a class of police officers who are normally expected to book on night shifts, pay them an annually fixed bonus for working in that role, and start clawing back the bonus if they don't work more than a certain fraction of night shifts. That's going to screw over officers who only work a small fraction of night shifts (no financial benefit) and officers who work nights most of the time (no additional benefit compared to regular nights officers) but I think it's clear there's no good solution, no matter what the Government, police or population believe.


£110bn a year from taxpayers to borrowers

Two Bank of England academics calculate that UK banks benefited from implicit taxpayer guarantees to the tune of £200bn or so in 2009 and 2010:

The authors said that while it was difficult to quantify the implicit subsidy received by Britain's banks during the crisis, the Bank had estimated it at £100bn in 2009. For 2010 it said estimates varied from £30bn to £120bn, depending on the methodology used.
"All measures point to significant transfers of resources from the government to the banking system," they added.

Government funds the evil bankers! Except - wait - UK banks didn't make anything like that much profit: best guess for 2010 was about £25bn. Instead, those borrowing from the banks could take advantage of the lower rates for funding that the banks could achieve. Additionally, the Government doesn't actually have any money of its own; it all comes from various forms of tax and business rates, so the transfer of wealth came from the source of those taxes.

Let's rewrite that conclusion:

The authors said that while it was difficult to quantify the implicit subsidy received by Britain's mortgage and credit card debtors, the Bank had estimated it at £100bn in 2009. For 2010 it said estimates varied from £30bn to £120bn, depending on the methodology used.
"All measures point to significant transfers of resources from the taxpayer and businesses to the homeowners and irresponsible spenders," they added.


Why not the UN to regulate the Internet?

The US House of Representatives is debating a proposal to give the ITU more control over the Internet. This organisation, the UN agency for information and communication technologies, is so important to the operation of telecomms and the Internet that I'd never heard about it until now.

Apparently, this transfer of control is a good idea: lots of major countries agree.

The proposal is backed by China, Russia, Brazil, India and other UN members, and would give the UN’s International Telecommunication Union (ITU) more control over the governance of the Internet.
Let me repeat, that's China ("Great Firewall of"), Russia ("Spam and Internet Crime Central"), Brazil ("Internet connectivity provided by 2000 miles of wet string") and India ("pre-screen content to stop people saying bad things about anyone who matters"). Well, I don't know about you, but I'm convinced.

I browsed the ITU site, and five minutes of reading the Newsroom articles had me wanting to pound a wooden stake through their skulls. They don't actually do anything that anyone cares about! I'd be the first to admit that ICANN has its problems, but compared to this alternative they're a combination of Bruce Willis and Mahatma Gandhi.


Jonathan Freedland is no economist

Some might call this a compliment, but I intend anything but. Freedland's encomium to Ed Balls in CiF today is significant for the question it fails to ask.

He correctly points out that Balls was questioning the effects of austerity nearly 2 years ago:

In the summer of 2010, when the coalition was young and Labour was gazing inwards to choose a new leader, Ed Balls broke with what was then a near-uniform consensus to declare that a rushed austerity programme made no sense when the economy was so fragile.
and claims that, now the economy is slumping, Balls has been vindicated.

One slight problem, Jonathan my chum. The Chancellor has to make a choice on fiscal policy, and live with it. All you've seen is the results of Osborne's choices in parallel with the fiscal events in the rest of the world. What you (implicitly) claim is that Ed's alternative of a splurge in Government spending for two years would have improved matters. Except... what do you think the odds are that the UK would have retained its AAA rating in such circumstances? Even in 2011 the UK was spending £50bn/year on debt interest, and that is only going up. Where was Balls going to find the money without generating a vicious circle of increasing gilt yields and debt interest?

Another question that is significant for its absence in Freedland's article: what would Balls spend this extra money on? Government is notorious for its ability to sink money into pointless infrastructure or "investment", that at best just breaks even and at worst falls down a black hole of civil service incompetence and private sector sharks. The closest he gets at a hint is:

Doling out money to the unemployed, who would no longer be paying taxes, would only see Britain's debts get bigger, not smaller.
Well whoop-de-doop, Jonathan. What would Balls do instead? Pay them for a full-time minimum wage make-work job? I assure you, they are going to be very little better off, if at all, and the overheads in Government job creation will make this a terrible spending proposition.

Who is this jerk, anyway?

Jonathan Freedland writes a weekly column for the Guardian. He is also a regular contributor to the New York Times and the New York Review of Books, and presents BBC Radio 4's contemporary history series, The Long View.
Ah, clearly a man whose economic expertise towers over my own. That's all right then.


Spain must not win the Eurovision

Pastora Soler, the Spanish entry in the Eurovision Song Contest, has been instructed not to win the competition because Spain can't afford to host it.

It gives me great national pride to know that the UK entry has no need to be told this.


Dutch DoubleThink

A fascinating review by Canada's favourite neocon writer Mark Steyn who writes the forward to Geert Wilders' new book "Marked for Death". I thought, and I still think now, that some of what Wilders says is distasteful and not entirely justified by the available facts. Nevertheless, you can't deny that the man has the courage of his convictions. The horrible end of Theo van Gogh, fellow Dutchman and critic of Islam was evidence enough that a small but violent section of Holland's Muslim population were not going to bear quietly criticism of their religion.

Steyn accurately and painfully pillories the Dutch attitude to the evident problem with some of their immigrant population:

The geniuses at the University of Amsterdam concluded that the attackers [of a gay USA newspaper editor in Amsterdam] felt "stigmatized by society" and "may be struggling with their own sexual identity."
Bingo! Telling Moroccan youths they're closeted gays seems just the ticket to reduce tensions in the city! While you’re at it, a lot of those Turks seem a bit light on their loafers, don’t you think?
Before we start getting too smug about the Dutch problems, it's also worth noting that the UK isn't that hot on Wilders' free speech:
The British Home Office banned Mr. Wilders as a threat to "public security" — not because he was threatening any member of the public, but because prominent Muslims were threatening him: The Labour-party peer Lord Ahmed pledged to bring a 10,000-strong mob to lay siege to the House of Lords if Wilders went ahead with his speaking engagement there.
I can see why the Home Secretary wasn't keen to have riots in London because of the turbulent speech of a visiting foreigner, but I can't help feeling that political calculation in this case played into the hands of Lord Ahmed and his chums who will now feel emboldened in their ability to shut down free speech with which they don't agree.

Steyn puts his cards on the table:

It’s not "ironic" that the most liberal country in western Europe should be the most advanced in its descent into a profoundly illiberal hell. It was entirely foreseeable, and all Geert Wilders is doing is stating the obvious: A society that becomes more Muslim will have less of everything else, including individual liberty.
And, in common with most of what Steyn says, you may dispute the detail of his conclusions, but it's darn hard to argue with the facts he has clearly laid out to this point.

I'm still not sure whether I'll order Wilders' book. However, given the list of unsavory characters who would threaten me if they knew I was thinking of such a purchase, the Imp of the Perverse on my shoulder is making me want to click the Amazon link, and let them be damned.


There is a word for people like Elizabeth Moon, and it's not just "idiot"

She thinks that everyone should be given a unique barcode at birth because that would make it easier to identify anyone. She's correct in that assertion, but really struggles to connect this to "and therefore this is a good idea":

Having such a unique barcode would have many advantages. In war soldiers could easily differentiate legitimate targets in a population from non combatants.
This could prevent mistakes in identity, mistakes that result in the deaths of innocent bystanders.

Yes. Um. So you take the population database and run a filter to set the "innocent" Boolean field appropriately, distribute that database to all weapons in the field, and everyone's happy.

For someone who's a science fiction author and History BA, Elizabeth Moon sure didn't pay much attention in the important history classes.

IMF hates pensioners, wants them to die in poverty

Well, that's the natural conclusion to draw from Christine Lagarde's recommendation that the BoE cut interest rates another 50 basis points to a big fat 0. After all, what could go wrong? You'll note the sterling (badoom tish) success that zero interest rates have been in Japan and the USA -- well, the Fed funds target is 0-0.25 but that's close enough for Government work.

Why should we do this?

Christine Lagarde has said that the move will be good for UK homeowners and businesses
Well, great! Of course, everyone else in the country will get it in the shorts. But hey, more fool them for not sinking themselves deep into debt in a housing market bubble. It's at times like this I'm tempted to believe the esteemed Mr. Wadsworth's position that the economy is run for the near-exclusive benefit of home owners.
Her intervention raises the prospect of the first zero per cent interest rate since the Bank of England was founded in 1694. Japan cut rates to zero in the 1990s when it suffered a decade-long depression.
...which it is still in. Well, that sounds good to me!

Dear Christine, my reply is in three parts:

  1. No.
  2. Hell, no.
  3. Please explain why we want our economy to function with the same dynamism as Japan's. Really. I'm curious.


Losing Face(book)

That squeal from the general direction of Wall Street this morning? It was likely the Facebook underwriters being taken roughly from behind. Facebook closed at $34.03, slightly further than the 10% drop I proposed on Friday.

Why the lack of faith in Facebook's business model? Tekpersona's J. C. Kendall analyses the business profile of the social model and fails to be impressed:

Resolved: The Facebook IPO was necessary for shareholders to cash out before you find out exactly what I am about to tell you.
It's entirely believable that the shareholders were happy for the underwriters to get it in the shorts as long as they could exit their shareholdings at north of $38. What's surprising is that the underwriters were sufficiently poorly informed that the shareholders could get away with this. Had the underwriters been reading Mr. Kendall's article, their attitude towards a $38 launch price might have been different:
It is 100 times more likely, that I will come across an ad on Google or Bing and clicked through to conversion long before I ever end up on Facebook, to find a Brand page, find a product, and look for a conversion link or ad that makes Facebook money. Sure it happens, because Facebook does make money from Ads. The problem is, that almost no vendors (except those selling information about how to make money on Facebook) will ever turn a measurable profit.
While the singular of 'anecdote' is even further from 'data' than its plural, I have never clicked on a Facebook advert or 'followed' a business's Facebook page. I have, by contrast, followed businesses on G+ and clicked on ads in Google search results (and been happy with the resulting purchase). I think Kendall nails it.

Where now for Facebook (and Zynga?) There's another 6 months until many employees can sell their shares, and 8 days or so until short selling FB shares is permitted. Facebook will still make many millionaires, but one has to wonder about California's forecast of $2bn in Facebook IPO-related tax revenue.


Greeks not let off scot-free

Sam at Counting Cats makes a timely assessment of where the fault lies for the whole Greek shenanigans:

So the Greek government has spent money like it was going out of style for decades and now that the well has run dry, it’s the well's fault?
He goes on to deconstruct the claim "it's all down to the bankers!" and points out just how far down the hole the Greek government, egged on by its population, spent itself. Perhaps the banks should have stepped in and said "no, hang on, no more" but you can just imagine the pre-2008 attitude towards anyone trying to tell a sovereign nation "hey guys, it's time for the party to close".

Sam lays out the option the Greek demos had:

But they could have voted for small-government, fiscally-responsible, liberals who would have tried to change that (reducing the tax evasion problem into the bargain, as per Laffer). They, in general, didn’t.
Contrast this with the British media and trade union attitude towards below-inflation raises in Government spending ("savage cuts") and one has to wonder whether, if not for the example of the Greeks and other Mediterranean nations, we'd have been in the same hole in 10-20 years time.

I am reminded of My Big Fat Greek Wedding

Gus Portokalos: There are two kinds of people - Greeks, and everyone else who wish they was Greek.
I wonder what a 2012 sequel would be like:
Angela: There are two kinds of people - Greeks, and everyone else who gets down on their knees and thank God they are not Greek.
But, to be fair, Toula nails the Greek character:
So, what happens is my dad and uncles, they fight over who gets to eat the lamb brain. And then my aunt Voula forks the eyeball and chases me around with it, try to get me to eat it, 'cause it's gonna make me smart. So, you have two cousins, I have 27 first cousins. Just 27 first cousins alone! And my whole family is big and loud. And everybody is in each other's lives and business. All the time! Like, you never just have a minute alone, just to think, 'Cause we're always together, just eating, eating, eating! The only other people we know are Greeks, 'cause Greeks marry Greeks to breed more Greeks, to be loud breeding Greek eaters.
It's a miracle they kept in the Euro this long.


Banks on a knife edge

I don't know why this hasn't been trumpeted louder: it seems as if the Facebook IPO underwriters have been left holding the baby:

Company filings after the market closed on Friday night however revealed the extent to which the banks who led Facebook’s initial public offering - in which $16bn of shares were sold to new investors - were forced to move in to the market and buy shares in order to keep the price above the $38 level. Morgan Stanley, Facebook’s lead financial adviser, ended the day with 162m shares, worth $6.16bn. Other banks including JP Morgan and Goldman Sachs also bought shares, ending the day with $3.2bn and $2.4bn holdings respectively.
Nice. So $11.7bn of shares held: if FB drops to $35 next week with investors having little appetite to buy, that's a $600mm hit to Morgan Stanley, and a similar amount spread across JPM and GS. There goes their underwriting fee, and then some.


This is what you get if you decouple reward and results

Anyone who has worked in a non-unionised private sector job is liable to spray coffee at their screen when they read what civil servants who work over 36 hours a week can do:

A growing number of officials are understood to be working nine-day fortnights by cutting short their lunch breaks and extending normal hours by staying in their offices until 6pm. Civil servants are also allowed to count delays in arriving for work because of late trains or traffic congestion towards their contracted working week.
Until 6pm! Those poor slave-driven creatures. The irony of London Underground Government employees reducing the hours worked of other London-based Government employees is delicious. Unless you're the poor schmuck paying taxes to fund this.

We shouldn't be surprised at this. It's the natural consequence of the fact that there's a very loose connection between civil servants' presence in the office and the practical output of their department. It's even possible that there is a positive result for the tax payer, in that the natural tendency of office-based Government employees is to obstruct and destroy practical productivity by the rest of the nation; few indeed are the non-vocational Government employees whose hours in the office make a positive contribution to the nation's GDP.

The Civil Service’s "flexitime" document, which covers the working conditions of tens of thousands of officials, says that "with the exception of the senior Civil Service, all staff are eligible to work flexitime".
It says that the standard working week is 36 hours in London and 37 hours outside the capital. This means the standard working day is slightly longer than 9am to 5pm, with an hour for lunch.
May I quote Dilbert: "Work can be very rewarding; you should try it."


It's not your gender, pet

Shock! Horror! The BBC discovers that Women are losing their jobs!

Beneath the headlines are many puzzling aspects of the jobs market, one of which is that female unemployment has been rising a lot faster than the male total.
Now, why might that be? Well, the public sector has been losing a lot of jobs recently, and women are overrepresented in that sector (not least because of its positive attitude towards flexible hours and part-time working). Oddly, the article doesn't follow that line of enquiry.

Instead we get a parade of anecdotes, which the author hopes will add up to actual data:

Jessica Beale, who is in her 30s, has a son at primary school and is his sole carer. She needs to find work which will allow her to fit in her childcare commitments. [...] Jessica Beale fears her need for flexible working hours is affecting her chances of getting a job
Well... yes, it would do really. Her situation immediately limits the kinds of job she can get, and places her in competition for the remaining jobs with all the other part-time or reduced-hours mothers. And yes, it is almost always the mothers rather than the fathers in this situation.

And on the more educated end:

Rose McConnachie, 27, has a degree and postgraduate qualifications from Edinburgh University. She cannot find any work relevant to her training in psychology and criminology, so has widened her search for any paid work. But she has drawn a blank.
I'm not surprised that she can't find relevant work - for criminology, I can only think of a few potential employers and they're all in the cutbacks-and-no-recruiting parts of the public sector. Unfortunate timing by Ms McConnachie, and I can't help but wonder why she thought that taking a Masters (I assume it's not a Ph.D.) in the subject would help her prospects at all.

However, Rose is looking for paid work outside her specialist sector. Why has she drawn a blank?

"I mean, I'm great! I'm very clever, I'm very talented, I've got a lot of transferable skills and I'm very employable, but there just doesn't seem to be anywhere for me to be utilised for anyone's benefit."
Oh Lordy. I think I see the problem. While I'm sure part of the issue is that she's 27 years old and therefore many employers are automatically assuming she'll get pregnant within a year of joining, a much more immediate issue is that she thinks she walks on water.


Buy Facebook, it can only get bigger!

You know what they say when you can't tell who the mug is at the poker table?

Investors small and large have been vying for the stock before its Nasdaq debut, but only those with large accounts at leading investment banks or top brokers are likely to succeed.
Smaller players such as 11-year-old Jade Supple, whose father is planning to bet her college savings on Facebook shares, will have to wait until Friday.
Oh dear. I hope Jade's a bright button and in a position to win a full scholarship. This whole thing reeks of disaster waiting to happen; think Time Warner purchasing AOL kind of disaster.

In unrelated news (no, not really) General Motors is pulling its Facebook ads because apparently they don't work.


The Emperor has no austerity

Well, this isn't going to win Tullett Prebon any friends. They come out and says that there hasn't been any detectable austerity in Britain no matter what Cameron et al might claim.

Clearly he doesn't read the Guardian, except maybe for a laugh.

It's hard to fault their reasoning or indeed their forthrightness:

"Government has done very little about its spending, has appropriated three-quarters of all gains in economic output for its own use, has carried on piling up debt – and has tried to pass all this off as 'responsible austerity'."
Harsh, but fair.

The Government, of course isn't taking this lying down:

Ministers have insisted that public spending is being cut at a rate not seen since the Second World War and trade unions have launched mass protests about reductions in the public sector.
As far as I can tell, though, both sides are correct. Government is spending more than ever, though an increasing fraction is going on servicing debt costs, and so actual non-debt spending is just about going down (kinda, if you squint at it, in real terms). Yet the demands of welfare, NHS and pensions are such that significant cuts to public services are inevitable - the slices of pie are just being shifted around, there's not a detectable difference in the overall amount of pie served.

Where now? I think Tullett Prebon are piddling into the wind a bit here. The uncomfortable truth is, no matter how half-arsed the Government austerity is, they're still more responsible than many other Western nations. This is somewhat depressing unless you're well stocked up with gold bars.

Professor Bainbridge puts the JP Morgan loss in perspective

I have felt somewhat nauseated watching the news programming over the past few days as various regulatory and legislative vultures (I'm looking at you, Senator Levin) have endeavoured to leverage JP Morgan's embarrassing $2bn loss for their own ends:

Levin said Dimon had argued for the repeal of Dodd-Frank and is also against regulation of derivatives and greater oversight of overseas outposts like London. "All three of those positions have been dramatically proven to be wrong," said Levin.
Really, Carl? Whom has JP Morgan's $2bn loss hurt except for the shareholders in JPM, the JPM executive and the employees in the JPM CIO? Isn't this precisely how the market is supposed to operate - the bank bears the costs of its own stupid decisions rather than offloading them onto the taxpayer.

I particularly liked Mary Schapiro's SEC claiming that it was "investigating" the loss. What's to investigate, Mary? The offending traders are based in London, and JP Morgan is a bank holding company (the number one bank holding company by total assets, beating out BoA), so its primary regulator is the Fed, not the SEC. This looks to me like the SEC trying to make mischief for the Fed and increase its own stature in DC; God forbid that anyone should look at the catastrophic regulatory failures of the SEC leading up to the 2008 financial crisis.

The estimable Prof Bainbridge puts the JP Morgan loss and its implications into a suitable perspective:

The $2 billion figure is a headline-grabber, but it posed no threat to JP Morgan's viability, let alone a systemic threat. Using it to justify more restrictive regulation is thus mere agitprop.
Meanwhile, the US National Debt has continued to increase an average of $3.95 billion per day since September 28, 2007 [...] Maybe we ought to be regulating the feds not the banks.


A derivatives trader says what we're all thinking

If you're not following Joris Luyendijk's excellent Banking Blog in the Guardian, you should rectify that oversight post haste. This week's episode covers a derivatives trader who is forthright on the subject of the FSA:

The trouble is, regulators are idiots. I am sorry to put it so bluntly but you can't expect it any other way. If an investment bank hires a graduate, two years later they will be making over £100,000. Meanwhile at the regulators you are getting £30,000. Why would a smart, aggressive, competitive 22-year-old decide to work for the Financial Services Authority?
He's right. The other end of it is when a banker puts in a number of years but doesn't rise far or accumulate much wealth because he's not great at his job; the only real option for parlaying his position into another finance-related job with a better sweat/bread ratio is for him to head to a reasonably senior position in the FSA on the back of his "experience".

The trader seems to have a refreshingly clear perspective on his work:

"Banking is very honest, you can measure performance and keep score. On the other hand there are so many elements contributing to your performance that you do not control (market conditions, what product you trade, how interested clients are in what you offer them). So sometimes it feels like a very expensive prison term.
Personally I'd be happy to put him in charge of whatever organisation in the BoE takes over the FSA's role, and pay him a salary comparable to his current compensation, rather than the likely parade of "yes men" and professional civil servants that are the likely candidates in reality. We can dream.


Cutbacks at the FSA

So at this point http://fsa.gov.uk/ is failing to resolve, but http://www.fsa.gov.uk/ works fine.

After all, why would the FSA employ anyone who knows about networking? It's not like it's relevant to their mission of regulating financial institutions with a highly connected network infrastructure.

bash-3.2$ dig fsa.gov.uk

; <<>> DiG 9.6-ESV-R4-P3 <<>> fsa.gov.uk
;; global options: +cmd
;; Got answer:
;; ->>HEADER<<- opcode: QUERY, status: NOERROR, id: 1312
;; flags: qr rd ra; QUERY: 1, ANSWER: 0, AUTHORITY: 1, ADDITIONAL: 0

;fsa.gov.uk.                    IN      A

fsa.gov.uk.             1740    IN      SOA     ns0-f.dns.pipex.net. hostmaster.uk.uu.net.
    2012040701 28800 7200 2678400 1800

;; Query time: 37 msec
;; WHEN: Fri May 11 17:58:29 2012
;; MSG SIZE  rcvd: 100

bash-3.2$ dig www.fsa.gov.uk

; <<>> DiG 9.6-ESV-R4-P3 <<>> www.fsa.gov.uk
;; global options: +cmd
;; Got answer:
;; ->>HEADER<<- opcode: QUERY, status: NOERROR, id: 48099
;; flags: qr rd ra; QUERY: 1, ANSWER: 1, AUTHORITY: 0, ADDITIONAL: 0

;www.fsa.gov.uk.                        IN      A

www.fsa.gov.uk.         810     IN      A

;; Query time: 60 msec
;; WHEN: Fri May 11 17:58:47 2012
;; MSG SIZE  rcvd: 48


Fire the 1% - a good start

It shocks me that it has taken this long, but the Government is seriously considering instituting a policy of firing incompetent people in the Civil Service. To this I can only comment "about bloody time!" and "good luck but I don't fancy your chances."

I've worked in the Civil Service and encountered the mind-bending work-to-ruleishness, incompetence, 9-5 mentality and tall-flower-gets-cut-down syndrome that characterises an organisation where it's almost impossible to fire people, promotion is based on fitting in and not rocking the boat, and a promotion "fast stream" promotes university graduates with irrelevant degrees as they are rotated through (and destroy) departments to demonstrate their "managerial" skills.

It is by no means an exaggeration to say that if you have someone in your department who is plainly incompetent, and they don't actually commit criminal acts at work, it will take at least two years to get them fired via the standard procedures. This is a recipe for incompetence, and has been used to bake Civil Service goods for many years.

So the semi-competent to competent majority of Civil Service bods should welcome this streamlining of the firing process. Right? Well, anyone who has read "Yes, Minister" knows how the senior Civil Service CMGs and KCMGs will view this.

Speaking to The Daily Telegraph, before the latest round of industrial action, Francis Maude, the Cabinet Office Minister, said: "It is a myth that you can never sack a civil servant."
"It is not easy to sack anyone, nor should it be. But it is no more difficult in the civil service than it is anywhere else, on performance grounds."
Oh, Francis. You were doing so well until that last sentence. It's bloody difficult in the Civil Service to sack someone who plainly cannot do their job. In industry they wouldn't make it out of their probationary period.

How many staff should go?

It is understood that the Prime Minister’s advisers are privately urging Mr Cameron to go further and dismiss tens of thousands of officials.
The major banks let go about 5% of their staff, on average, each year. These are almost exclusively the bottom-performing 5%. You can say a lot of things about the banks, but everyone working there works hard and is at least competent at their job, or they're out in short order. This is probably more ruthless than the Civil Service wishes to be, so let's let go the bottom-performing 1%, and incorporate the past 5 years. 400k Civil Service bods x 5% == 20k firees. Sounds about right.

The Government has noticed the lack of competence:

Since entering government, ministers, especially those with a background in business, have grown frustrated at the slow pace of work in Whitehall departments and the lack of creativity among staff.
Personally, I'd demand that departments use the savings from firings to compensate better the high achievers among them. But I don't have any illusions that the senior Civil Servants will do anything with this money other than reward those who show the signs of being "one of us" (c.f. Kim Philby, Guy Burgess etc.)

JP Morgan takes a bath

Well, this one came out of left field: a $2bn loss for JP Morgan this quarter from "bad execution, bad strategy, but also the environment -- because this is mark to market" according to Jamie Dimon, the man who could previously do no wrong.

Investors were not amused and (to use a technical term) took a large and smelly dump over JP Morgan shares, leaving them down 6.75%, burning up $10.8bn of share value

Dimon said the losses were caused by "errors," "sloppiness" and "bad judgment."
Well Jamie, those are certainly necessary, but I'd bet they're not sufficient for this magnitude of screw-up at JPM. Some searching questions are going to be (or should be) asked about the controls and risk management at JPM.

This apparently happened since the start of April, and there is speculation that credit default swaps purchased by a London-based JP Morgan employee may be at the root of the losses. The story on this one is going to be really interesting when (and if) the FSA and Fed finally tease out and publicise the details.

JP Morgan, like Goldman Sachs, is supposed to be a master of risk and mark-to-market; look at how adroitly they avoided the worst of the 2008 financial crisis. Quite where all this went wrong is anybody's guess; if they were truly marking to market, why didn't they spot the losses building up? I don't believe the markets have moved unusually sharply in the past month, so a sudden unforeseeable event seems... unlikely.

Now everyone is wondering: a) what other dangerous positions are under-valued for risk at JP Morgan, and b) if this could happen at JP Morgan and show up almost immediately due to rigorous mark-to-market, has it happened at other banks which are even now desperately trying to sweep it under the carpet with a mark-to-fairyland approach?


Sour grapes at Diageo

Apparently, having a craft beer company winning 'Bar Operator of the Year' didn't go down too well with the Diageo reps at the British Institute of Innkeeping (Scotland) awards:

A representative from Diageo, who has not been identified, was allegedly overheard threatening to withdraw the drinks giants' sponsorship from future BII awards if BrewDog was declared the winner.
Sources at the dinner at the Grand Central Hotel in Glasgow claimed the trophy had already been engraved with BrewDog's name and judges were shocked when another bar, Behind the Wall in Falkirk, was announced the winner of the category.

The judges were shocked? I'm shocked that a giant of the drinks industry would stoop to such behaviour. Oh, my mistake, it wasn't an official policy or anything:

Diageo said in a statement: "There was a serious misjudgment by Diageo staff at the awards dinner on Sunday evening in relation to the Bar Operator of the Year Award, which does not reflect in any way Diageo's corporate values and behaviour.
Yes, because the fact that Diageo employs and promotes people like that has nothing to do with Diageo as a corporation. Umm. And by "serious mistake" you just know that the spokesperson means "got caught".

This is what really grips my chaps about the Borg-like FTSE and Dow giants. On the occasions where staff members do something dementedly tyrannical (depressingly frequent) and get caught (depressingly few) the company points to its policies and "values" training and says "hey, nothing to do with us, we condemn behaviour like this." But anyone with experience of their working environments and the practicalities of promotion and advancement within the company structure can see that bullying, arrogant and borderline sociopathic behaviour is disturbingly effective at helping one to rise to positions of power. I'm sure no-one sat down and designed the company that way, but that's how it turns out. That which you reward, increases.

I'm glad to see that BrewDog, the real winner, isn't a meek and mild organisation though:

The group has also riled health campaigners by producing high strength brews such as "Sink the Bismarck", which at 41pc is believed to be the world's strongest beer.
You just know that they'd bring a keg of that along to a brewing festival in Munich, don't you?


Joined up transport - go Dutch

I'd like to endorse heartily the sentiments of White Sun of the Desert writing of his experiences of the Dutch transport systems. Having flown into Schipol myself, it all rings true; someone has actually sat down and thought about what arriving passengers need in terms of information and facilities to buy tickets, and taken care to ensure it's in the right place. Read the whole thing.

For anyone who's ever arrived at a British airport, this will evoke disbelief:

Immigration in Schiphol took one minute, and my bag arrived in less than five. And even while I was waiting I was able to buy a train ticket as in a stroke of genius you’d seldom find anywhere else in the world, there were ticket machines in the baggage hall.

For the record, Den Haag (whence I travelled after arriving at Schipol) was quite possibly the cleanest, quietest, safest city I've ever been in. Figuring out the public transport system was a breeze despite not speaking a word of Dutch. The hotel and restaurants were painfully expensive - I remember the hotel receptionist quipping that there were only three real cities in Holland, with Rotterdam where all the money was made from trade, Amsterdam where the money was made from vices, and Den Haag, free from trade and vice, where all the decisions were made about where to spend the money.

WSotD nails the reason why building a transport system like this wouldn't work in Britain:

For sure, the Brits would have conspired to ensure getting from Amsterdam to Eindhoven would have taken three trains, the first being undersized, the second leaving from somewhere near The Hague and costing a fortune unless you booked two months in advance, and the third running via Antwerp and taking as long as the flight into Holland.
The Guardian columnists and railway unionistas can complain all they like about the cuts in government funding, but it's no good spending all the money in the world on the UK transport system when it's so annoyingly Balkanized and intransigently opposed to making the customers' lives easier.

So about these Golden Dawn chaps...

doesn't their flag remind you of something? Reading their list of "interests" it seems like a group that would cause the BNP to step back and say "hang on, that's going a bit far isn't it?"

According to Greek election exit polls they look like getting a 7% share of the national vote. I don't know what this signifies for Greek politics and the Eurozone, but suspect it's not pretty. Nearly 25% of the vote went to the far left (Syrizia) or far right (Golden Dawn), and over 60% to anti-bailout parties. What with Hollande winning in France, it's looking a bit "interesting" for the Eurozone.

When the markets open this week, it's going to be an entertaining ride.

[Hat tip: Zero Hedge]

The ambassador to the Malvinas is at it again

Argentina's ambassador to the UK, Alicia Castro appears to be in the UK for the sole purpose of stirring the pot with regards to the Falklands. Does she ever do anything else?

This time, the appeal to history having failed, she has the islanders' "best interests" at heart:

Ms Castro said: "Is it rational that a small community, in the name of very particular wishes and interests, are against any dialogue?
"Does it make sense that because they are not regarding the interests of the 60 million British people, they are not regarding the interests of the 30 million people in Argentina and they are not regarding their best interests, which would no doubt be better preserved if they were linked to the continent?"
Well, Alicia my heart, it may or may not be rational or make sense. However, because the UK believes in the right of the Falkland Islanders to self-determination they are totally free to make irrational or nonsensical choices as they wish.

Talking of which, it was very sweet of you to offer educational aid to the islands:

Describing the islands as a "colonial enclave", she said her government would send teachers to the islands to teach Spanish
One can only imagine the textbooks they would use. Perhaps we could also get some INDEC statisticians to explain how to measure national inflation in the islands' high school maths classes?


Boris is Mayor - again!

Congratulations to Boris! And he's straight into anticipating the forthcoming Olympics in his acceptance speech. Just remember, Boris, we're counting on you to embarrass at least four major heads of State at the opening ceremony. If two of those could be China and Argentina, that would be fantastic.

Update: Just heard Ken's concession speech. You know, Ken, it is actually possible to be gracious in defeat, not blame your loss on "media bias" and avoid "if only"s. The more I hear from him, the more pleased I am that BJ won.

This woman has never played with a cat

"Sure, I'll go into that enclosure with two cheetahs that are bigger than me, what could possibly go wrong?".

Mrs. Violet D'Mello is now no doubt looking up the definition of "wild animal" in a dictionary. I have to say though, kudos to husband Archie whose photos of cheetahs chewing Violet's head were quite stunning. I hope the DM paid well, because I'm fairly sure he'll be sleeping on the couch for a while.

Anyone who has been owned by a cat will recognise the situation; there you are stroking the animal's fur when suddenly it lays its ears back, wraps paws around your arm and tries to chew your hand off. This is why petting six-foot-long cats is a bad idea, m'kay?


'We love animals and especially cats as we've had some of our own.I worried about the little children being so close to the cheetahs but I never imagined for a moment they would attack an adult.'
(facepalm) This lady needs a better imagination. Still, live and learn.


Apposite names

Det Supt Dominic Scally, of Greater Manchester police...
should be ashamed that his force locked up Peter Flanagan for 3 days.

So four coked-up men in their 20s, armed with at least one machete, break into a 59 year old man's house and threaten him with that weapon: the 59 year old (Mr. Flanagan) grabs a carving knife:

A struggle ensued between one of the burglars - former soldier Wesley Gibbons - who swung the 12 inch machete at Mr Flanagan, who countered the blow in what he described as a 'fencing match'.
The machete flew into the air and was grabbed by Bennell.
Mr Flanagan said that, after grappling with Bennell, he inflicted a couple of quick, short jabs, which he thought were to his hand or stomach
I'm fascinated why Greater Manchester police had any reason to believe that Mr. Flanagan had committed any sort of crime, let alone arresting him on suspicion of murder. How does that work? I can certainly understand them wanting forensics from Mr. Flanagan and his house, and arresting him on suspicion of manslaughter would make some kind of sense, but in what country does an old man suffering an armed multiple-person home invasion find himself under suspicion of murder?

Bennell's father, Gary, asked Det Supt Scally if a statement issued by the Prime Minister regarding self-defence in the home two weeks before the incident had coloured the police investigation in any way.
It's understandable that Bennell senior is grieving the loss of his son - but really, Gary, how could this whole incident be the fault of anyone other than your son and his thieving "friends"?

Oh my goodness, I'm agreeing with Polly Toynbee

I feel so dirty, but her piece on what we should pay MPs actually makes sense. Excuse me for a moment, I'm going to have a glass of something to steady my nerves.

Being Polly she has to get in a dig somewhere, in this case in favour of state funding of political parties:

Voters so detest politics that they won't even pay a paltry 50p tax a year to end big donations.
and of course I would demur, pointing out that it's better for real people to spend their own money on political parties they choose than to have a quango divvy up a pool of taxpayer money according to arcane and incumbent-favouring rules (and in a quid-pro-quo I would mandate that parties publish the real name and verify the citizenship of any donor of more than £250).

Still, that hiccup aside, there's lots to like here:

Some say an MP should earn the same as the average voter. Yet set pay too low and good professionals will be deterred, leaving only the wealthy, such as the Tory front bench, to stand. It was Chartists, not toffs, who demanded MPs be fairly paid.
It's true. The reason we get a lot of financial and political incompetents is that a well-qualified engineer, software developer, financial analyst or investment manager can earn 2-4 times the basic MP's salary; as a result, Government only gets the burn-outs, retirees and the failures. For 650 MPs with an average constituency size of 45,000 voters, we're not even paying them at the level of responsibility of a secondary school headmaster as Polly notes. (For those in the audience claiming that the last thing Government needs is more bankers - wouldn't you prefer bankers who actually know what they are doing?)

I'm even behind Polly in her quest to nail expenses:

Professor Vernon Bogdanor blames Margaret Thatcher for giving the nod to using allowances as pay instead of a rise – leading to duck islands and moats. He would abolish second London homes and put MPs into a decent state-owned block of flats to stop property speculation on expenses.
Works for me. They only need to overnight there a few nights per week; if they have serviced apartments then there's no need to spend their valuable time on second home maintenance. Keep the allowance for their MP's office, and cover the travel costs of the more remote MPs, but beyond that they can spend their own money at their own judgement.

As a bonus question, why do you think we have so many ex-lawyers in Parliament when they could earn many multiples of the MP's salary?


Merv the Swerve is not amused

There must be something in the air (besides the rain); just over a week ago we had the outgoing head of the FSA, Hector Sants, blasting the financial sector for causing the financial crisis, and now outgoing BoE head Sir Mervyn "Swervin'" King weighs in with a similar polemic against the banks.

On one hand, since both these august figures are about to leave their jobs, we should listen carefully to what they have to say; neither of them has any particular financial interest in their current position, so they are moderately free to say what they like. On the other hand, they are clearly keeping one eye on the history books and trying to ensure that their actions in one of the worst financial crises in UK history aren't damned to hell and back. So what do we learn?

Merv is clear that the FSA needs to shoulder a lot of the blame in the handling of the run-up to the crisis, and that the BoE was essentially impotent:

However, he claimed the Bank was hamstrung by the decision to move regulation to the Financial Services Authority (FSA) in 1997 – a reform "that would return to haunt us". It left the Bank with the limited power of "publishing reports and preaching sermons". Regulation is now being moved back to the Bank.
but as regards the root cause of the crisis he's still pushing the Glass-Steagall Act:
"We don't build nuclear power stations in densely populated areas, nor should we allow essential banking services and risky investment banking activities to be carried out in the same 'too important to fail' bank," Sir Mervyn said on Wednesday. "It is vital that Parliament legislates to enact these proposals sooner rather than later."

Well, Merv, many of the notable failures in the UK included Northern Rock, Bradford + Bingley and other building societies that came a cropper over their funding model. That doesn't sound very investment-banking-related to me. RBS came a cropper due to a demented acquisition strategy and a board who followed the "all in favour, bleat like sheep" strategy. HBOS overstretched itself in mortgage lending, thanks to the Halifax (ah, who remembers the Howard Brown adverts?) and was handed like a poisoned chalice to Lloyds TSB by Gordon Brown. I note that the big investment/retail hybrids in the UK were Barclays and HSBC, and they seem to be doing just fine (modulo shareholder revolts over pay at Barclays).

Hector, by contrast, weaseled, using the "true but irrelevant" strategy:

He said: "Ultimately, management are responsible for running firms and ultimately firms fail because of the decisions taken by their boards and their management. These decisions are made within a firm's corporate governance framework.
"The crisis exposed significant shortcomings in the governance and risk management of firms and the culture and ethics which underpin them. This is not principally a structural issue. It is a failure in behaviour, attitude and, in some cases, competence."
That's right, Hector; financial firms are not perfect, often greedy and they take sometimes excessive risks. That's why we pay large amounts of money to fund the regulators who are supposed to spot this happening and act on it. Sound familiar?

Mervyn at least was honest about the fallout:

As well as moving regulation back to the Bank and ringfencing retail banking, the Bank will have new powers from next year to "prevent a hangover by taking away the punchbowl just as the party in the financial system is getting going".
Some of those powers, such as possible loan-to-value caps on mortgages, "won't make us popular among bankers, politicians and even at times some of you [the public]", he warned.
About bloody time, I'd say.