The first issue from my new subscription to The Economist turned up in my letterbox over the weekend, and after getting through a good chunk of it on the train/bus this morning, I already feel a whole lot more intelligent.
[Note: I was about to write “cleverer” there for a second, so maybe not!]
Oh, and a little more inclined to believe willingly in the invisible hand of market forces…
It’s now been 12 months to the day since the British pound sterling was worth more than $2.00 USD. Since then, we’ve seen it dip as low as $1.37, the lowest point in over a decade, with the UK economy feeling the effects of the credit crunch 6-12 months later than the US. It’s made a steady recovery since then, and now sits at $1.65 or so.
Now, I’m hoping that it continues to head upwards over the next two months, so that my holiday in September is cheaper for me than it might have been, in terms of spending. But on the other hand, my company earns in dollars, so the worse the exchange rate, the more I get paid in pounds.
So I’d be happy to see the exchange rate keep increasing until September, then have a massive crash through to the end of the tax year next April. Now, if the opposite were to happen to the Euro, that’d be ideal as I could do next year’s holidays on the continent!
Graph from BBC News website.
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but then why should the rest of us be punished (and punished we will be, yea unto the next generation) for the fuck ups by those departments?
jhnbrssndn in response to my paragraph:
And I have to admit that I agree with that system. Why should you be punished for a fuck-up that someone else in an entirely different department made? You performed well enough to merit a bonus, even if they didn’t…
Not to say that we’re being punished outright, but punishment’s a pretty good word for the debt burden which is going to take many years to pay off. It’ll be a yoke around the neck of the current young generation, that’s for sure.
But I wouldn’t blame the banks entirely for it. They were merely acting within the rules set out by the various governments of the last thirty years. Its our fault as a voting population that we didn’t kick up more fuss about the light-touch regulation which became de rigeur under 80s Thatcherism and was then extended under New Labour.
Unfortunately, our politicians were much more in thrall to big business than by thinking of the consequences. And it’s relatively easy to see why: the Tories are generally in favour of business and the free market, so excessive legislation and restrictions would hinder that free market.
Labour, on the other hand, is historically more in favour of regulation. But their sticking point was the requirement of massive amounts of taxes to fund their expansion plans for the general social welfare state, such as hospitals, schools, and so on. They couldn’t raise income tax too far without losing power, so an easy source was businesses. And to attract businesses to London (for that is where most of them came), light-touch regulation was required.
So yes, the banks were unnecessarily greedy, but the pursuit of profit is generally held not to be a bad thing in modern society. The banks were aided, however, by governments that seemed to rule more for business than for the people.
And we, the voting electorate, must take some of the blame for not realising this and calling for more regulation. Well, not until the horse had bolted from the stable, that is. We were too busy worrying about things like Maddie, brown people and David Beckham’s latest haircut.
Maybe this recession and the various political crises recently (MPs expenses, bank nationalisations/failures, incessant spinning, etc) will awaken today’s British youth to politics in the same way that eight years of Bush finally brought about a massive ground-swelling of political grassroots activity amongst our American contemporaries over the last 18 months.
Here’s hoping.
Reblogged from: jhnbrssndn
Originally posted on: Caz... I'm rad yanno...
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Hang on… would someone please clarify this? Is this real? Every employee of Goldman Sachs is going to get a bonus this big??? I couldn’t fit my answer to caz’s question into 140 characters, but here goes nothing. I did some research on Goldman Sachs’ performance in terms of employee salaries over the last few years, and have come up with the following: In 2006, GS’ net profits were $9.5 billion. Personnel costs were $16.5 billion, which averages out across 26,500 employees to $622,000 each. In 2007, GS’ net profits were $11.4 billion. Personnel costs were $20.2 billion, which averages out across 30,500 emplyoyees to $662,000 each. In 2008, GS’ net profits were $2 billion. Personnel costs were $10.9 billion, which averages out across 30,000 employees to $363,000 each. So far in 2009, GS’ net profits have been $5.2 billion. Personnel costs have been $11.2 billion, which averages out across 29,500 employees to $384,000 each, putting them on course for a final yearly average of $768,000. My financial figures are from Goldman Sach’s 2008 annual report (PDFs, part 1 & 2, with employee numbers from the accompanying presentation. The 2009 data are from the BBC news story linked to above. I also looked at the quarterly reports for the last few years, and it looks like the first half of the year is traditionally stronger than the second, in terms of revenue and profit. So I would expect the 2009 average earnings to be a bit lower than my $768,000 figure, perhaps just below $700,000. Looking at the progression of numbers, it’s evident that 2008 was a really bad year for Goldman Sachs, relatively speaking. Yes, they still made a profit, but not much, and employee bonuses (which is what the vast majority of the above expenses are) suffered accordingly. It’s not the case that people earn these kind of astronomical sums as their salary. Traders generally earn a nominal sum as their salary, and then have to earn the performance-related bonus. Usually, this is in direct relation to the amount of profit they as individuals bring to the company, something that is easily managed when everything is traded electronically. So, in answer to your question caz, not every employee is going to get a bonus this big. The very elite are in fact going to get much bigger bonuses, well into the 8-digit range. But the secretaries, IT guys and all the other lower level staff will see small bonuses on top of their more respectable salaries. The cream rises to the top, unfortunately. As does the money. And in relation to the unstated question about whether these kinds of bonuses are fair or justified, I’d like to point out that it was only really one department of each bank that brought about their downfall (and the extended downfall to the whole banking system): that which dealt with property derivatives. Traders in other departments could quite justifiably point out that they made multi-million dollar profits and as such were entitled to their contractually guaranteed bonuses. This is why so many banks made big losses in 2008 and early 2009: they were legally obliged to pay hefty bonuses to 90% of their traders, because they had made profits which were wiped out by those trading in mortgage derivatives. And I have to admit that I agree with that system. Why should you be punished for a fuck-up that someone else in an entirely different department made? You performed well enough to merit a bonus, even if they didn’t… Like I said, this wouldn’t fit in 140 characters.
Reblogged from: caz
Originally posted on: Caz... I'm rad yanno...
Noraleah’s post with a very informative, visual guide to how the recession is affecting different areas of the US reminded me that I’d seen something pretty similar for the UK on the BBC News site earlier today.
The BBC has been tracking such data points as unemployment, house prices, repossession rates and so forth, and has put them together in a great map so that you can instantly see which regions are being hit hardest by the recession in the UK.
The interesting tool is the slider at the bottom. You can see how the whole country has progressively turned a darker shade of blue over the last 18 months. But it’s worth pointing out that the areas which already had above-average unemployment remain those with the highest jobless rates. The recession isn’t really affecting one region worse than any other; it’s affecting everywhere equally badly.
I read the below article on my way home this evening, and was thoroughly annoyed by it. I have written a lengthy response to it, which I have sent to the journalist in question, and the letters page of his newspaper. That response is published below the reproduction of the article itself.
Shoppers hit by inflation shock
Jonathan Prynn
24.03.09SOARING prices and a weak pound have brought the shock return of inflation, it was announced today.
The Government’s official measure, the Consumer Prices Index, jumped from three per cent to 3.2 per cent last month.
It stunned City economists, who had been predicting a fall to 2.6 per cent.
The increase was also attributed to rising supermarket prices and many shops’ decision to reverse the 2.5 per cent cut in VAT brought in by the Government in an attempt to stimulate the economy. Gas prices went up year on year by 33 per cent.
Another major contribution to the rise in the CPI came from fresh vegetables, which have gone up 23.8 per cent in a year and almost five per cent in a month. The Office for National Statistics said carrots, cucumbers and courgettes were among those rising fastest in price. Other foods that have gone up dramatically include pizza and mayonnaise. Richard Lim, a spokesman for the British Retail Consortium, said: “The weak pound has increased the cost of imported food, such as certain fruits and vegetables, which aren’t harvested here at this time of year.
“The weak exchange rate has also made UK produce more attractive for overseas buyers, restricting supplies of beef and lamb at home and pushing prices up. Non-food goods such as clothing, footwear and some electricals are cheaper than they were this time last year.”
Alan Clarke, UK economist at BNP Paribas, said the inflation figure was “much higher than expected, with the exchange rate probably to blame for now.”
Transport prices also rose, reflecting an increase in the price of petrol of 3.2p per litre between January and February, the ONS said.
About 70 per cent of fresh fruit at this time of year comes from overseas.
ONS statistician Rob Pike added that the cut in VAT from 17.5 per cent to 15 per cent which was introduced in December, was being reversed on the high street. He said: “We have seen many prices return to the previous selling price in November, or even gone beyond that. And that is quite widespread.”
The broader measure of inflation, the Retail Prices Index, did fall slightly from 0.1 per cent to nought per cent, but this was also less than expected.
Most forecasts predicted that the RPI, which includes the cost of housing, would go negative for the first time since March 1960, ushering in a period of deflation.
The RPI is widely used by employers as a benchmark for wage increases and its fall to zero means that most workers will get a pay freeze or only a nominal rise this year.
John Philpott, chief economist at the Chartered Institute of Personnel and Development said: “For millions of workers, this will be a spring and summer of pay depression, as pay rises give way to widespread pay freezes or pay cuts.
“For the vast majority of workers, accustomed as most of us are to an annual boost to our pay packets, a pay freeze or pay cut will feel like a hardship, especially while the CPI measure of inflation continues to rise.”
The unexpectedly high level of inflation forced Bank of England Governor Mervyn King to write a letter to Chancellor Alistair Darling explaining why it is still above the two per cent target. Economists pointed to prices that are expected to fall over the coming months.
Gas and electricity prices, though sharply higher than a year ago, are now starting to subside as the effect of cheaper oil starts to flow through.
They also said that the latest rise in the CPI was unlikely to deter the Bank of England from continuing with quantitative easing or keeping interest rates at 0.5 per cent for an extended period.
Vicky Redwood, of Capital Economics, said: “Today’s inflation figures do not change our view that there is a significant danger of a broad and long-lasting bout of falling prices.”
CC: Evening Standard letters page
Dear Jonathan,
To make things clear from the outset, I consider the below email to be in the public domain, and as such will publish the below on my blog, along with the text of your article entitled “Shoppers hit by inflation shock”, published in the Evening Standard on 24/03/09, and available at http://www.thisislondon.co.uk/standard/article-23666051-details/Shoppers+hit+by+inflation+shock/article.do
I consider the re-publication of your article to be legal under the Fair Use principle, but if your legal department has any response to this, please let me know on this email address (rob@gooneruk.com), or by calling [REDACTED].
Unless otherwise explicitly stated at the start of any reply, be it by email, phone call or text message, I will consider any response to also be in the public domain, and will publish that response on my blog as a retort to the publication of the below email. The address of my blog is http://blog.gooneruk.com
With regards to your article entitled “Shoppers hit by inflation shock”, I have a number of queries, as follows.
Firstly, you say that there has been a “shock return of inflation”. How is a small increase from 3.0pct to 3.2pct a “return of inflation”?! Whichever way you look at it, prices are still increasing. In January, the rate of inflation was 3.0pct. This means that prices were still increasing, as a whole. It was not a negative figure, which would mean deflation, and nor was it a figure between 0.0 and 1.0pct, which would imply either stagflation or a likelihood of deflation.
Prices were still increasing, at the rate of 3.0pct. The small increase to 3.2pct which you point to in your article does not mean the “return of inflation”. It means that prices are continuing to increase, but at a slightly higher rate than in January. It is not an almighty swing from decreasing prices to increasing prices, although your article makes it sound as if this is the case.
If I have made a fundamental error in the above, please point it out to me, and I will stand corrected.
Secondly, you state that the rise in the CPI from 3.0pct to 3.2pct “stunned City economists, who had been predicting a fall to 2.6 per cent.” What is your source for this prediction? Is this an industry-wide survey, for which the data is available? Was it conducted by an independent surveyor? No source whatsoever is mentioned in your article, yet it is given fairly high importance, by virtue of its position in the third paragraph.
It is difficult to understand why this figure “stunned City economists” without knowing why they had predicted a smaller rise / actual fall in the numbers. And yet you gloss over this quickly, not even pausing to explain the reasoning. I understand that space is at a premium when it comes to newspaper articles, especially those that make a front page, but to simply state a number and then make no further reference to it later in the (two-page) article leads a reader to question the validity of the rest of the article.
Thirdly, your series of quotes from Richard Lim, spokesman for the British Retail Consortium, seem to be inherently contradictory. He says that the price that consumers pay for non-British foodstuffs such as out-of-season fruits and vegetables has gone up as a result of the weak pound. But equally, he says, the foodstuffs that we produce domestically have gone up because the weak pound has made it more economical to export these goods. It sounds like a case of damned if you do, damned if you don’t.
But with it being cheaper to buy “goods such as clothing, footwear and some electricals” than last year, I struggle to see how he can reconcile this into an overall figure of 3.2pct inflation. To back this up, we need to see statistics of the relative volume of domestically produced goods that are exported, versus the volume sold domestically, across a number of types of product.
Again, I understand that this is difficult to achieve in a newspaper with limited space. Still, to publish these comments without criticism is to fool the reader somewhat.
Fourthly, you do not mention the RPI until at least halfway down the article. As you quite readily admit, the RPI is more important than the CPI because it “is widely used by employers as a benchmark for wage increases”. Yet this index showed a fall in the overall cost of living, and is probably more representative because it includes the cost of mortgages and/or rent payments.
If my mortgage were to go down by £100 per month, but my food bill were to increase by £20 per month, I would be quids in until any pay review. And this is how people think. We genuinely are interested in how much money we will have in our bank account on Day X of any given month. A big part of that calculation is how much we will pay on our mortgage or rent each month. To claim that inflation is making a “shock return” is patently false, given that this number is based on a very small percentage of household outgoings each month.
Fifthly, I would like to point out that the Evening Standard has a history of publishing this kind of article (dare I say scaremongering?) every month when either the CPI or RPI numbers are released. From a very quick search of the Evening Standard archives, I can point out the following articles:
It’s disappointing to see a lack of direction in these articles. One moment, high inflation is a terrible affliction to avoid at all costs, and the next, too low inflation or the spectre of deflation is equally horrifying.
I was genuinely disappointed today to read this kind of article in the Evening Standard, and especially alarmed to see it given front-page prominence. It is an alarmist piece of journalism, and in places I would claim that it is actually false, or at best undocumented.
I look forward to your response, and repeat my statement from the start of this email:
I consider the [above] email to be in the public domain, and as such will publish the [above] on my blog, along with the text of your article entitled “Shoppers hit by inflation shock”, published in the Evening Standard on 24/03/09, and available at http://www.thisislondon.co.uk/standard/article-23666051-details/Shoppers+hit+by+inflation+shock/article.do
I consider the re-publication of your article to be legal under the Fair Use principle, but if your legal department has any response to this, please let me know on this email address (rob@gooneruk.com), or by calling [REDACTED].
Unless otherwise explicitly stated at the start of any reply, be it by email, phone call or text message, I will consider any response to also be in the public domain, and will publish that response on my blog as a retort to the publication of the [above] email. The address of my blog is http://blog.gooneruk.com
Best regards, Rob [REDACTED]
Karl Marx, Das Kapital, 1867
I don’t agree with everything Marx wrote or said, but he’s nothing if not damned accurate in his predictions.
[EDIT: I understand that this quote has been falsely attributed to Marx: more details]
The aftermath of today’s Closing Down sale at Woolworth’s. This lone oven glove is pretty poignant, I reckon.
It’s a shame that this iconic/legendarily crap chain of shops is closing. My home town has one, and as it was the only shop that sold music in my town I have many memories of buying CDs there, as well as pic’n’mix and various other bits and pieces.
Unfortunately, the shop as a whole was always just a bit crap and naff.
It wasn’t a music/DVD shop like other specialists were, as it had a tiny and somewhat sporadic back catalogue for both. Its clothes range was cheap and cheerful, but was only for kids up to about 10 years of age at best. Its homeware wasn’t as good as other shops, although the toys section was pretty good.
I think its saving grace over the last ten years has been the property portfolio. Woolworth’s owned hundreds of prime, town centre and High St locations, and with the property boom the worth of the company on paper was always increasing, even if profit margins on actual sales of goods were decreasing. When the property market turned sour, so did Woolworth’s prospects.
I’m sure it’ll be replaced by something equally crappy yet loveable. Poundstretcher, anyone?
Before now, Buffett has held only government bonds and Berkshire Hathaway shares in his personal account. But now’s the time to buy, he says.
…
There are many speculations as to what Buffett actually has in his personal portfolio. You can probably take a good guess based upon his recent investments and Berkshire Hathaway’s American holdings, below: …
dihard, make up your mind. Either Buffett has never invested in anything other than government bonds and BH shares, or he has had a diverse portfolio over a number of years.
I’ve seen no evidence in the course of my reading about Buffett that his investments have been either double-blind or controlled by himself. In fact, I’ve read a hell of a lot more that says he is fully in charge of his money/investments, and chooses himself to get in and out of positions at certain times.
Therefore, you can’t have it both ways and then try to use them both as reasoning behind your post. Either you admit that he invests his own money according to his own whims, and is therefore a reliable sage of the market, or his money is invested for him, and he merely has a group of good advisors around him.
When you base your posts on facts, they are genuinely insightful and intelligent. When you copy-paste, they fall apart.
Reblogged from: dihard
Originally posted on: What I Learned Today
And this is one of the real effects of the so-called credit crunch for ordinary people like me. The danger isn’t retail banks going under or people losing their savings. The governments around the world won’t let that happen, one way or another. Individual’s savings are guaranteed up to a pretty decent level, and competition laws are being waived to allow bank takeovers.
The problem is inter-bank lending, which has completely dried up because of a lack of trust in the other’s liquidity nowadays. And the trickle-down effect is that rates on retails loans such as mortgages are going up.
Read the quote again. National interest rates have fallen by 0.75%, but the rate for new mortgages has increased by 0.22%. So in real terms that means it’s a 1% rise for the mortgage-buyers. 1% doesn’t sound like much, but when you’re talking numbers around the £200,000 mark, and it’s 1% per year, it soon adds up.
So even though house prices are falling (quite considerably too), it will cost more to take out a mortgage on that house. This is what the credit crunch is really about, not savings in a bank account.
