Low Blow Jo

Martin Wolf, Chief Economic Commentator of the Financial Times, had a provocative little programme on the Beeb  (R4 09:00 21/07/2016) about negative interest rates. Very interesting! Monetery Policy may not be your thing but it does throw up some ideas "helicopter money" and a the abolition of cash being some.(Did I hear a German Banker scream...Ed?)  One of them, unless I am wrong and frequently I am, is the printing of money.
Gutenberg Money! Can you see it? The man with the beard and the printing press, stood on the bridge, shouting at a minion who is sweating to screw down the press.
"But Master Gutenberg won't this undermine the whole economy?"
"Shut up and keep printing"

The Panto Season - Madness

A panto was staged the other evening by Newsnight with Dame Violent Elizabeth Tett and three economistas staring into a cauldron of steaming graphs. I felt the chill wind of a more than Shakespearean tragedy looming. The graph which scared the wooly socks off me was the one at the link (image 12 in the slide show) It is titled Chart 1.1 Private sector debt in the UK. Its source is the Office for National Statistics. It expresses that debt as a percentage of GDP and splits the debt into non-financial companies, households and financial companies. In the caption under the graph Ann Pettifor, rightly, points out the comparison between the public debt and the private.

Roughly this is the comparison in 2010 between a poor, wee, sleekit, cowrin, timorous public beastie (~50%) and a private monster (~450%).

Things not to say:-
Interest rates are low:- What forever?
Companies are paying down debt even as we speak:- How much of the £7.5 ish trillion has the private sector paid down in the last 5 minutes and where did they get the capital from?
A big boy called Gordie Broon did it and ran away: Oh no he didn't!
Would you like to consolidate that debt by refinancing sir? Doh!

Questions for the young economist.
How much does it cost to finance this debt?
How much of the profit on the cost finds its way to the Revenue Men.
How much of the profit that does not find its way into the HMRC coffers now sleeps soundly in some tax haven alongside the ill gotten gains of ubercrims and tax dodgers?
Answers please on a used £50 note to Gideon at the usual post box in Zurich.

Full disclosure:-
Having completed his HMRC (Happy) Return, Buddhist Pizza is pleased to announce that he included his Coop. Divi. from which tax has already been deducted and the princely sum of £8 pounds, untaxed, (rounded) which derives from his participation in a Credit Union!

(What about the double blind partnerships which you registered in the Cayenne Islands recently? ...Ed.
Never mind that now!)

Equality

An interesting presentation by Richard Wilkinson on material drawn the book The Spirit Level which he co-authored with Kate Pickett. Lots of good stuff about the link between a relative measure of inequality (the ratio of top to bottom incomes) and various measures of health, happiness, well being and social cohesion in developed economies. And since you asked the more unequal by this measure a society is the greater the problems and measures of the problems. Oh, possibly suicide may be a problem that runs counter to this. Good empirical stuff. See the Equality Trust and its publications. As you can imagine, lots of people want to pick a fight over it. Well they would. wouldn't they.

Heard a bit about tick boxes recently in connection with tax matters. Wilkinson had a nice idea to put forward. A tick box, optional, on tax returns to indicate people and companies would allow information to become a matter of public record. Nice one. We could start, of course, with the disclosure as a matter of public record, the ratio of tax paid to income. Voluntary, to begin with and qualifications in full, 'my dog ate the major part of my income last year'!

Pay up and shame the devil?!

As my mother used to say when it was no longer possible to maintain the balance of payments in our favour.

I believe the largest debtor in the world is facing a few tricky moments in the trousering department. Could be serious but you can see quite clearly how the old Republican and Tea Party have taken up residence in Dagenham, one stop beyond Barking (not that old chestnut again... Ed.) Powerful article by Mr Krugman of the NYT about the need for imbalance and a nice little interactive graphic from those NYT readers who wished to comment on the crisis(Crisis, what crisis? as someone once famously didn't say!) Draw your own conclusions about that and NYT readers from the shades and distribution. Enjoy; as they say but maybe not for much longer.
(You're getting too transatlantic in the old textual department, cloyingly so, if I may mention it...Ed. Also could we not be a bit more upbeat, positive, cheerful even!)

Out of the Mouths of Bankers and Sucklings

A bright spring morn. To the local flea pit for a screening of the film.
Inside Job. Yes, we all know the origins of our current shortage of the old readies. We know our CDOs from our CDSs. We know the perfidy of Lehman and others, the Gargantua of investment banking and the beggaring of a number of countries by Merchants of Greed. (MoGs)

It was good to see it set out so clearly and unequivocally with mug shots of the players Henry Paulson, Ben Bernanke & Timothy Geithner, for example. Whatever happened to them?
Christine Lagarde calling him Honk Paulson, Glenn Hubbard caught in the headlights like a rabbit; it's all good clean fun!

We should not forget what these people did and the effect they will have on the lives of those that are not able to deal with it! But we will, we will.

The director, Charles Ferguson, was asked in October 2010 what the most important lesson in his film was:-

"Oh that's simple. That finance is too important to be left to the financiers."

The MoGs are still out there sucking.

The Blair Rich Project

Groan! Only the Grauniad could come up with such a title. However, a nice little tale to illustrate how you can arrange your tax affairs relatively efficiently, legally of course, and still keep the greedy little people from grubbing through your finances like ferrets in a rabbit hutch.

Given that you may have overindulged recently I would recommend going back to Mr Murphy's analysis to give the old brain a run through. You know those mince pies, chocolates and port will be the death of you.

All irrelevant, of course, if you accept that certain tax documents are matters of public record and should be made available. Oh and while you are at it could we have a league table of who pays what. Thanks Peter, see you on the yacht later no doubt!

Buddhist Pizza Sovereign Funds

There has been a certain amount of rumour, innuendo and tittle tattle about the use of Buddhist Pizza Sovereign Funds (BPSF). I can confirm that the resources of BPSF have been used to assist enfeebled Central Banks and other financial institutions.
An entirely modest sum of up to 100 trillion dollars might have been used in this way but because of commercial confidentiality, our rigorous accounting principles and the fact that we have not gathered up the loose change from the back of the corporate sofa, as it were, the details are not to be made public at this time. We have sought approval from our auditors, Messrs Bent and Curle, to report these matters over an extended period of 50 years because of the adverse effects this disclosure could have on individual organisations and on the global financial system.

Q. Easing,
Chief Finance Officer, BPSF

B. Lind,
For Bent and Curle.

The Relief of Poverty

There have been some reports besmirching the good name of those who work unceasingly and tirelessly to make the world a better place for (all of) us to live in. I do not think that the increase in my salary from £300,000 ( in round figures) to a mere £970,000 over the period 2003 to 2007 is unwarranted, excessive, or in the same kettle of herring as certain other remuneration packages I could mention! For those grubby whistle blowers and dirty delvers I will do the math, as they say. It is an increase of 153 per cent over 4 long, hard and very difficult years. Am I begrudged a yearly increase of 38 per cent, 3 per cent per month or a smidgen over 11 grand each pay day? Any less and it would not be worth leaving the old homestead. Mr Leigh may witter on about not competing for cash and high levels of job satisfaction. It is no joke, poking around some of these hell holes looking for honest Johnnys so we can hand over our ever increasing pile of doubloons. Far better to leave the boodle at home, in the banks.

The Merchant of Venice.

On a very wet Saturday in June, off to Stratford on Avon to see a performance of the Merchant of Venice.

We arrived in near glorious sunshine. Joy at this is enhanced by a certain amount of fizz.

A typical Tudorbethan House and Bicycle.

In the play I am struck by:-

• The power of the language;
• Anti-Semitism;
• Views about money lending.

As I have mentioned before not all bankers are merchants (or Jewish).

But of course banking as we know it, Jim, had a lot to do with those fabulous Medici boys. They found ways for the pope to get round accusations of encouraging usury when he was short of a bob or two!

An expanded view of boodle - by David Boyle in the Little Money Book all good stuff.

If you have a market, you are bound to have market failure and areas where the market does not operate and people to whom participation in the market is refused!

In which case you need a group of people who are beyond the pale and who will agree to operate in the sub prime area. A pound of flesh is a bit steep but I have heard some funny things being pledged in our business!

I thought it was a very enjoyable production. I surprised myself enjoying the complexity and richness of the language and belly laughing the comic touches with the audiences! Not, I am sure, anything to do with the fizz!

Sherry and minced pie charts!

Just when you thought it was safe to break out the sherry and mince pies.

Open Democracy has a very scary article by Ann Pettifor.

Globalisation: Sleepwalking to Disaster!

One of the least understood, but potentially most lethal financial products they have engineered - away from the regulatory scrutiny of central bankers and finance ministries - is called a credit default swap (CDS). In reality, they are not "swaps", but a form of insurance.....

The International Swaps and Derivatives Association, in its most recent biannual survey (covering the second half of 2007) assessed the total notional amounts of CDSs outstanding at $45.5 trillion. This staggering figure is about twice the value of the United States stock market, and three times the value of the gross domestic product of the US ($13 trillion).

If you find these figures difficult to believe, let alone understand, I would suggest some holiday reading:- Cityphylia in the LRB by John Lanchester. (Thanks to John Naughton's blog for the link and suggestion)

Damn! I've just had my first mince pie and I thought it was Xmas.
Wrong again!
Very scary numbers.
Now where is that sherry?

Crunchy and good!

Nice explanation of the little local difficulty in the wonderful world of wonga (WWW?) which I might have mentioned previously.

Thanks yet again to John Naughton and his contact. I missed it too.

Crunch

Well don't say I didn't warn you.
Not being entirely at one with capitalism it did give me a mild frisson when I heard about the guy who took over 150k of his savings out of Northern Rock, allegedly, yesterday! I wonder if that was in used fivers?
No it is not the 'credit crunch' that caught my eye it was 'super crunchers'; people who process a lot of data.

Within the linked article is a nasty little tale.

Ian Ayres, Yale Law School professor, Forbes columnist, and data fanatic, has now written a book on data mining, Super Crunchers: Why Thinking-By-Numbers Is the New Way to Be Smart.

On determining the presence of racial discrimination in auto loan rates:

While most consumers now know that the sales price of a car can be negotiated, many do not know that auto lenders, such as Ford Motor Credit or GMAC, often give dealers the option of marking up a borrower’s interest rate. When a car buyer works with the dealer to arrange financing, the dealer normally sends the customer’s credit information to a potential lender. The lender then responds with a private message to the dealer that offers a “buy rate” — the interest rate at which the lender is willing to lend. Lenders will often pay a dealer — sometimes thousands of dollars — if the dealer can get the consumer to sign a loan with an inflated interest rate …

In a series of cases that I worked on, African-American borrowers challenged the lenders’ markup policies because they disproportionately harmed minorities. [Vanderbilt economist Mark] Cohen and I found that on average white borrowers paid what amounted to about a $300 markup on their loans, while black borrowers paid almost $700 in markup profits. Moreover, the distribution of markups was highly skewed. Over half of white borrowers paid no markup at all, because they qualified for loans where markups were not allowed. Yet 10 percent of GMAC borrowers paid more than $1,000 in markups and 10 percent of the Nissan customers paid more than a $1,600 markup. These high markup borrowers were disproportionately black. African-Americans were only 8.5 percent of GMAC borrowers, but paid 19.9 percent of the markup profits….

Now doesn't that just give you confidence in the ability of the market to screw you and your friends and relations.

Cautionary Tales for Young Economists

A hot and sticky day spent in the middle of England in the company of moneylenders and lawyers.

Remember, I am an altruist and wish to make the world a better place for me to live in!

Paul pulls Steve's leg about default rates. Emotional temperature in room rises by about 500 degrees Kelvin. Its a boys' thing. It looks a bit stickier.

A flash in my mind, I know not from where, and in the stentorian strains, which I can do occasionally, I enunciate clearly:-

"Let him who is without default cast the first stone!"

We've all been there. Emotional temperature in room falls by about 500 degrees Kelvin.
Back to work.

Glossary of Financial Terms.

I was writing about Community Land Trusts
in an email to a colleague recently and the ravages of age, alcohol, and stubby arthritic fingers produced the word LOANDOWNERS instead of LANDOWNERS.

Out of the mouths of babes and sucklings.

I knew immediately that whatever terms were used in the official terminology of our portfolio of loans, PAR would always be LOANDOWNERS; amen!

Subprime Warriors

FT ( June 30,2007)

There were several articles identifying a nice little earner, a wheeze, that appears to have started to decompose at the heart of the beast!

You may not be familiar with the term subprime. Think high interest lending, think doorstep lending, no put that baseball bat away, it is all perfectly legal, just a little usurious, allegedly. Subprime in the US includes a lot of iffy mortgages, or ‘overvalued junk debt’ as some commentators would have it.

What do you do if you are a poor struggling banker with voracious and unrelenting shareholders to feed and a high junk habit of dodgy debt to support?

Well the first thing you can do is turn to the Subprime Warriors. These guys will take your debt which is, let’s say, less than colourful, and wave their ‘high tech wands’ over it. Suddenly, something which looks as bankable as a three legged dog at The Stow becomes collateralised debt obligations, CDOs (never mind the quality, feel the width, it sparkles, it gleams) and you can sell it on like hot cakes because it is repackaged with bonds and all manner of beautiful things; sliced diced and presented with a variety of risk attached!
Sell me another, Tory!

It has not been a quiet week in Moneytown.
US regulators issued guidance for the moneymen to

“lay off de liddle guys with de bad debts, ok!”

or words to that effect.
Pangs of conscience for homes lost, lives ruined?
Vulture Capitalists going vegetarian, vegan even?
Not quite Chancellor Copper!

Investor jitters about a credit crunch, the Old Lady herself warning of the vulnerability of the global financial system point to the possibility of more than a slight ‘market correction‘. Eyes have rolled, heads even, hands have been wrung, warning bells have been rung, prodigal chickens have been seen roosting, sacrificial calves have not been fattened, deals have faltered……

Yeah, yeah… split caps; Enron; Blah Blah Blah; BCCI; Blackwheneveritwas; the end of capitalism as we know it, Jim?
Possibly not but consider this.
Our man Lex at the FT points out that while the usual suspects may claim ‘nothing major has gone wrong’ he estimates that losses from CDOs and junk loans for leverage buy-outs could break the $100bn barrier.
Is this good, bad or indifferent and change?
Not good!
US banks, as quoted in Lex’s column, are estimated to have $850bn capital.
(That’s one matchstick for every $100bn and split the last one in half. No, it doesn’t matter if it is the half with the red bit on.)

But the banks won’t take the hit alone. This will be spread across alternative vehicles where liquidity and capacity needs are not currently known or clearly understood. Good for the banks but probably not very good for us then, a rotting pile of paper and a bad smell coming from god knows where. I bet those poor struggling bankers feel a bit more comfortable now though.

Spot the new kids on the block with the big bonuses and the shiny, shiny cars.

Subprime Warriors!

Me, I’m here in the kennels at The Stow; looking after this three legged mutt that has such a sweet face.

Vulture Capitalism

Last night an exemplification of the term vulture capitalism, which I have used before, was given on Newsnight.

Vulture funds - as defined by the International Monetary Fund and Gordon Brown amongst others - are companies which buy up the debt of poor nations cheaply when it is about to be written off and then sue for the full value of the debt plus interest - which might be ten times what they paid for it.

The money men have a huge responsibility for additions to the suffering of the poor but the providers of food which we all consume do so too.

George Monbiot highlights abuses which, foolishly, we thought had long since passed when we gave up sweeties and choco bars in our campaigns. Also one of the best quotes I have seen for a long time

Panaceas are rare in medicine, but the mammary gland is one.

Amen brother George! Read the link.

One extreme to another. Part 2

Tim Harford writing the undercover economist column in the FT magazine references work explaining how very poor people make money, and how they spend it.

The ”very poor” are those who live on less than a dollar a day. The benchmark - a rare piece of brilliant marketing from the World Bank - is both more generous and more frugal than it seems. Generous, because the benchmark dates from 1985 and has been adjusted since to take account of inflation in each country and is generally now more than a dollar a day. But frugal because the dollar is adjusted for purchasing power. In other words, a Kenyan farmer might have 50 cents a day to spend but still not count as ”very poor” because 50 cents in Kenya buys more than a dollar would in the US. However you look at it, a dollar a day is a tiny income.

Ok so "A dollar a day" goes down in the category of statements about the human condition that start with:

You only need 1 cubic metre of water for survival - a year!

My own approach to the redistribution of wealth has been to have conspicuously little of it. Additionally, I encourage the provision of access to resources by combining in mutual organisations which provide finance at non exploitative rates. Well it keeps me off the streets.

Imagine my interest in another article entitled "Uncommon Wealth" by Chrystia Freeland in the FT Weekend A-Train column on March 31 2007 where she states

. .. even people who have a lot of experience with a lot of money, such as Wall Street investment banker Felix Rohatyn, admit that the magnitude of today’s wealth is hard for them to fathom.

He finds

.... the mass of money that is being accumulated by individuals staggering, If you suddenly have $4bn in your bank account, I don’t know what you do. It is one thing to decide how you will deal with a fortune of $500m. I used to think that was a huge amount of money. But, to a lot of people, it is not any more.

I am staggered by the amounts but lets qualify the phrase 'lot of people' and not get carried away shall we!

The significance as far as Freeland is concerned is that Soros, Gates and Buffet, to name but a few, have added -

new energy, and star power..... to promote social change

I have always found Peanuts a great consolation at these troubling moments of indecision about the meaning of life, the universe and everything else! Basically, I am an altruist. I want to make the world a better place for me to live in.

Ojala!

One Mouse Per Child

There are some really interesting developments at the moment in the area of microfinance, IT software and equipment.

The Cambridge Ndiyo project ndiyo.org has been working with partners in Bangladesh and I imagine a whole raft of applications will come out of that.One that seems to be working is the putative 'Grameem Internet' built on the back of the GrameenPhone.

Having heard, ad nauseam, about one laptop per child, I much prefer the more realistic and co-operative idea of

one-mouse-per-child

Anyway! I found the story below interesting and a small glow for me at the end of the year if mince pies and mulled wine are not enough; they may not be.

http://www.prweb.com/releases/2006/11/prweb477752.htm

My thanks to John Naughton and the Ndiyo blog for setting me off on this one!

The Luck of the Spanish!

I returned from a trip to the square mile of capitalism on Thursday. I had been learning how to be a better moneylender (in the nicest possible way of course) There on my doormat was a letter from Spain with my footprint on it. Imagine my delight to discover that I had been approved "for a lump payout of 615,810 euros". I had won the "euromillones loteria".
Joy was replaced by amazement on two counts. In the first place A is the one in our house who dices with probabilities, we jokingly refer to it as her pension fund. I have never knowingly, when sober, bought a Spanish Lottery ticket. Secondly, despite my Celtic origins I am an underachiever in the luck department. I am not complaining I am fortunate, very fortunate indeed, it is just that I think I have only ever won two things. One was a sherry decanter set with hunters and hounds etched on its pink glass. This went down well in our TT, non hunting household, but as it was one of my few achievements at infants school it was displayed prominantly in our living room. The second prize I am inordinately proud of. Doing the Guardian prize crossword has become a habit and knocking them off and faxing the solutions in is just a part of life. I was really amazed and happy to receive, unexpectedly, a copy of a decent dictionary. This was my reward for cracking a puzzle by the late, much loved by me anyway, Bunthorne. My general lack of confidence niggles away even now that (because Bunthorne was definitely regarded as a bugger among setters in the sloving fraternity) not many people had bothered that week.
But to get back to my win! Luis Alberto, Vice Presidente, for it was he, advised me that my name had been selected from thousands across five continents. All I had to do to claim my prize was to fax my details, including my bank details, to Don Pedro. Don Pedro is the Foreign Operations Manager ( Does he do broken legs and facial reconstruction?) of Vergino Europia Security company, alegedly! He is willing, I am led to believe, to smooth the way to my boodle for a mere 10%. Now let's see that would leave me with 554,229 euros and you can keep the change Don Pedro! I have to admit, replace the car, make a contribution to A's pension fund, start some cul-de-sac Rochdalist madcap enterprize. Nah, I tell you what, in the unlikely event that you are reading this Don Luis and Don Pedro here's what we will do.

I herebye renounce all title and claim to the 554,229 euros in favour of the following:
Amnesty International - 100,000 euros;
Oxfam - 100,000 euros;
Medical Foundation for the care of Victims of Torture -100,000 euros;
Medical Aid for Palistinians - 100,000 euros;
Grameen Bank - 100,000 euros;
fair finance - 50,000 euros;
Suffolk Librarians - 4,000 euros;
Dick Cheney - 229 euros on the strict condition that he has to purchase and wear a bright orange jump suit , a set of ear defenders and lace trimmed black blindfold, handcuffs and shackles, so that he can explore his inner self. It will help fill the time between now and 2008.

So! Sorry about that last one Don Luis and Don Pedro.
Hasta la pasta!

Not a Merchant Banker

Muhammad Yunus sought an ending
to extortionate lending.
He thought microfinance more appropriate
and became a Nobel Laureate.