Thursday, 23 October 2008

Thursday, October 23, 2008

Another day, another admission

Typically, the journos miss the point, although this article is by Richard Spencer - a China hack, not a financial specialist.

However, because Howard Davies, former head of the Financial Services Authority, is speaking in Peking – no doubt after flying out first class and being put up in a five star hotel – his views are reported by Spencer, who focuses on Davies's comments about Iceland.

This is fair enough – Spencer is a half-way decent journalist – but embedded in his story are some much more tastier fish. For instance, Davies opines that, "Financial regulation is too heavily dominated by Europe and America," in what is described as "a sweeping attack on the failure of economic control systems to heed warnings about impending crisis."

Thus, we are told, Davies "contradicted the notion that the breakdown in financial markets had come as a surprise." He says "economists and others had been drawing attention to the imbalances in the world economy for years," but "regulators and politicians were too slow to react, and when they did, failed to co-ordinate their positions despite the globalised economy."

Well, knock me down with a feather. All these high-priced "suits" lapping up the cream in their gilded offices did know after all? When economic illiterates like us were picking it up in 2004 and 2005 - and we’re a politicalblog, I suppose we can be thankful for small mercies that they were aware that something was going down. But, it seems, when it happened, they were "too slow to react". Can't have everything, I suppose.

Even at a relatively late state though, we imagine, intervention could have taken the edge off the crisis, especially as those world-class financial experts were writing of the situation:

All of this invokes vague presentiments of gloom and there are plenty of bears ready to sustain fears that we are on the brink of economic meltdown. Small wonder we are agape as Gordon Brown continues to parade his "economic competence". We seem to living on "funny money" and no one seems to want to take responsibility.
Waaaaaaaaahhhhhhhh …

That was us, the economic illiterates, writing in January of this year under the heading, "funny money". And the "suits" didn't notice something then, and think about taking action?

But never mind, Howard Davies, one of the "suits-in-chief" is now on the case. From his gilded palace in Peking, he loftily tells us that the European Central Bank brought the extent of the crisis to public attention in August last year, by pouring in liquidity into the system. But, he complains, "the first comprehensive international summit to address the crisis is not taking place until this November or December, 16 months later." So! They didn'tthink about taking action!

Unabashed, Davies moves on to give as an example of the problems in the regulatory sector the "reforms" to the Basel Committee on Banking Supervision guidelines. These, he says, took ten years to produce. If a bank decided to reform its rules on risk management but took ten years to do so "people would say you were mad", he admits. And what does that make the Basel Committee?

Then, of course, we get part of the explanation: "It was telling that of 13 nations represented on the committee, ten were from Europe," says Davies. And, surprise, surprise, "Even the European Union had been unable to act in concert when the crisis struck."

Is it just me, or do I sense that we have a gang of people here who are simply not up to the job, running regulatory systems designed for the Stone Age? Well, Mr Davies, God bless his silken socks and his $1000 suits, seems to agree. "We need to improve the legitimacy of bodies that set international standards," he says. "The ones we have reflect the world as it used to be not as it is."

And the word from Parliament about all this is?

Can we even begin to hazard a guess as to when our honourable and dligent MPs are going to notice that there has been a king-sized global regulatory cock-up, and make some intelligent comments about it?

"Hush yore mouf chile! Dey iz de man!" comes a voice from the darkness. "Yo mussn't sez zose fings!"

COMMENT THREAD

This is not a game


Two days in a row, we find ourselves in almost total agreement with a Daily Telegraph columnist. Yesterday, it was Heffer and today it is Iain Martin.

The target of our approval today muses on the state into which the Conservative Party has descended, observing thus:

The metropolitan elite into which the Conservatives are being sucked is not actually particularly interested in ideas, or reform, and, unfortunately, senior Tories have too often given the impression - crucially, not Cameron himself - that they have become so pragmatic that they long ago forgot what they hope to achieve by winning office.

Having an ideological compass is what matters when the water gets choppy. Unless a new government has a clear idea of what is wrong with the country and a plan to do the hard work of reform to fix it, then its ministers will be blown about and will achieve little.

There is much that needs addressing in Britain - what with flat-lining social mobility, a crushed economy and the threat to free markets - and there is little time for more frivolity. This is not a game, but this week many voters will be thinking the Tories regard it as just that.
Martin, I think, is capturing the mood of the nation, from which the Westminster chatterati, in their little bubble, seem horribly insulated. If they are not very careful, they will be like the French ancien regime who first discovered quite how unpopular they were when the tumbrels arrived at the front gate to take them to the guillotines.

The new mood is partly captured in an interesting exchange on the Tory Diary comment section, with yours truly playing away from home again. But it clearly has not percolated Iain Dale's blog, where he insists on scoring PMQs as if they were a football match.

For sure, politics does not have to be serious all the time and, as Jim Greenhalf illustrates in his latest post – with quotes from Aneurin Bevan's speech on the British invasion of Suez in 1956 - humour and irony can be deadly weapons in the right hands. If we were any good at using either, we would try them more often. A cudgel is more our style.

With due respect to Iain Dale, who does actually put in a lot of work and does occasionally produce some good material, I do wish he would stop his silly "scorecard" posts on PMQs. I know a lot of MPs hate it and squirm with embarrassment at the trivialisation of what should be a serious occasion. It does them no favours.

And if you need any reminding about how serious it all is, The Daily Telegraph today retails a report that suggests 20,000 more pensioners could die this winter as they try to cut back on heating following the sharp rise in energy prices.

We take issue with the focus entirely on the rise in energy prices. Energy costs are also inflated by the government's "Carbon emission reduction target" (CERT), the EU's emission trading scheme, the Renewables Obligation and, of course, VAT. Apart from VAT, none of these costs are declared on utility bills yet they are substantial additions, set to increase even further.

Yesterday, in PMQs, Mr Cameron called for more transparency in accounting while Lib-Dem leader Nick Clegg wept crocodile tears about fuel poverty. Yet both parties, as far as I am aware, support policies which add these costs to energy and presumably, support the idea that pensioners, dying in isolation and penury for want of being able to afford them, should be kept unaware of their existence.

Thus, as Mr Martin so rightly cautions, this is not a game. Voters are going to be in a pretty unforgiving mood if politicians – on both sides of the House – do not wake up to that simple fact.

COMMENT THREAD

Factoid alert

According to Bloomberg, Britons waste £900 million ($1.5 billion) a year by leaving lights, televisions and other electrical appliances switched on when they're not needed. This gem came to them via the UK Energy Saving Trust.

Let's see now: 60 million people and 365 days a year. For each of us, that works out at about £15 each per annum or 4p a day, if my arithmetic is correct. This, I believe, is not going to break the bank.

COMMENT THREAD

Out of bubbles

We are now out of bubbles and ability to support bubbles, and America (and the world, in fact) is out of the ability to support more debt. 

Jaan Kenbrovin would be turning in "his" grave: "I'm forever blowing bubbles, pretty bubbles in the air...".

COMMENT THREAD