Sunday, 31 January 2016

Japan's negative rates: the China connection

Japan has just introduced negative rates on reserves, following the example of the Riksbank, the Danish National Bank, the ECB and the Swiss National Bank. The Bank of Japan has of course been doing QE in very large amounts for quite some time now, and interest rates have been close to zero for a long time. But this is its first experiment with negative rates.

The new negative rate framework is complicated, to say the least. The Bank of Japan has helpfully produced a pretty picture to explain it:

The bottom tier is a "basic balance" which is the existing reserve level in the banking system:
The average outstanding balance of current account, which each financial institution held during benchmark reserve maintenance periods from January 2015 to December 2015, corresponds to the existing balance and will be regarded as the basic balance to which a positive interest rate of 0.1 percent will be applied.
So existing reserves will (overall) continue to bear positive interest. Even banks that hold more than their benchmark level may avoid the negative rate, since the Bank of Japan has allowed for a reserve buffer at a zero interest rate:
A zero interest rate will be applied to the sum of the following amounts outstanding.  
a) The amount outstanding of the required reserves held by financial institutions subject to the Reserve Requirement System  
b) The amount outstanding of the Bank's provision of credit through the Loan Support Program and the Funds-Supplying Operation to Support Financial Institutions in Disaster Areas affected by the Great East Japan Earthquake for financial institutions that are using these programs  
c) The balance calculated as a certain ratio of the amount outstanding of its basic balance in (1) (macro add-on).  
The calculation will be made at an appropriate timing, taking account of the fact that the outstanding balances of current accounts at the Bank will increase on an aggregate basis as the asset purchases progress under "QQE with a Negative Interest Rate."  
Banks that manage their reserves cleverly will be able to avoid the negative rate on most of their reserves. Indeed, this seems to be the Bank of Japan's intention, according to a footnote:
A multiple-tier system is intended to prevent an excessive decrease in financial institutions' earnings stemming from the implementation of negative interest rates that could weaken their functions as financial intermediaries.
Those who think that the purpose of negative rates is to encourage banks to lend are now no doubt muttering darkly about bank lobbying and "revolving doors". But the negative rate is not about bank lending. It is in fact a further strengthening of Japan's "quantitative and qualitative easing" (QQE) programme:
The Bank will lower the short end of the yield curve by slashing its deposit rate on current accounts into negative territory and will exert further downward pressure on interest rates across the entire yield curve, in combination with large-scale purchases of JGBs.
And just in case this is not clear, the Bank of Japan explains in a footnote that the purpose of the negative rate is to influence market prices (my emphasis):
A negative interest rate is expected to exert its intended effects on financial markets even under the multiple-tier system where a negative interest rate is applied partially. Transaction prices in financial markets (e.g. interest rates, stock prices, and exchange rates) are determined by marginal losses or gains made in a new transaction. Although a negative interest rate is not applied to the total outstanding balances of current accounts, costs incurred with an increase in the current account balance brought by a new transaction will be minus 0.1 percent if it is applied to a marginal increase in the current account balance. Interest rates and asset prices will be determined in financial markets based on that premise. 
Thus there is no need to penalise banks heavily for holding excess reserves. The negative rate is not primarily intended to encourage banks to lend.

But why is the Bank of Japan so intent on cutting interest rates? After all, it has just produced a pretty upbeat forecast for the Japanese economy. Yes, household spending is weak, and wages are stagnant, but corporate profits are at record highs and unemployment at a record low. Inflation is hovering around zero, but that is largely because of falling oil prices, which is net positive for the Japanese economy as an oil importer. What on earth is this all about?

It's about China, mostly:
Recently, however, global financial markets have been volatile against the backdrop of the further decline in crude oil prices and uncertainty such as over future developments in emerging and commodity-exporting economies, particularly the Chinese economy
The external environment for Japan is becoming increasingly difficult. Central banks across South East Asia are cutting interest rates and putting downwards pressure on their currencies in response to collapsing commodity prices and China's slowing economy. The offshore yuan (CNH) is falling, and China is progressively devaluing the onshore yuan (CNY) in response, in addition to doing various forms of yuan monetary easing. China has now broken the CNY peg to the US dollar, replacing it with a basket of currencies: since CNY is no longer pulled upwards by the US dollar, devaluation seems likely to proceed faster despite China's tightening capital controls.

Japan's exports are suffering from the Chinese slowdown, and from emerging market weakness generally. The trend has been downwards for the last year:

Exports not only to China, but to its other South East Asian export partners - notably South Korea - have fallen significantly. Even exports to the US have recently fallen, despite the strong dollar. And although the balance of trade improved in December, this is only because imports fell even more.

For an economy as short of internal demand as Japan, an external trade collapse is something of a disaster. It has no choice but to respond to monetary easing by its South East Asian trade partners and hope that better times return soon.

Of course, no-one would dream of doing competitive devaluation to gain export advantage, would they? Perish the thought. The Bank of Japan says that the interest rate cut is all about inflation. And indeed it is. Cutting interest rates depresses the exchange rate, and depressing the exchange rate raises inflation. Perfectly legitimate behaviour for an inflation-targeting central bank.

But I'm sorry, they can call this inflation control if they want, but the effect is the same. Deflationary economies desperately seek demand from external sources that they cannot generate at home, and these days they do so by using interest rate cuts and QE to depress the value of the currency while pretending that it is all about stimulating the domestic economy. Japan's move is no different from that of other local central banks: it is externally-driven, and the target is the exchange rate, not domestic interest rates and bank lending. The only difference is that Japan's interest rates were already on the floor because of its long-standing domestic deflation, so protecting against an external economic slowdown inevitably meant negative rates.

This is why Japan has firewalled its banks with a complex three-tier scheme. It has created a structure that will enable it to cut rates far more deeply into negative territory without breaking the banks. There is more, much more, to come.

Related reading:

Yuan vs yen: how China figures into Japan's negative rates - Wall Street Journal
El-Erian says countries weakening currencies in fight for global growth - Reuters

Monday, 25 January 2016

I am not insane

I have to straighten something out.

On 7th January, I made a remark on Twitter which with hindsight was - unwise. Well, ok, it was worse than unwise, it was stupid. I did not think about the consequences. It never occurred to me that issuing that tweet would lead to three weeks of sustained and vicious personal abuse.

For obvious reasons, I'm not going to repeat it here. All I will say about it is that it concerned the sex attacks in Cologne and other German cities at New Year, and it was part of a long Twitter conversation with several people.

And yes, I know the difference between criticism and abuse. I am not afraid of disagreement. On the contrary, I welcome it. I am known for having heated arguments with people on Twitter. It can be uncomfortable for the onlookers, but I learn from those arguments and I almost always finish on good terms with the person I am arguing with. But obscene comments ("she likes Muslim dick") and disparaging remarks about my appearance (ugly), my age (old), my supposed race (Jewish, or a Muslim man in drag) and my alleged beliefs (Liberal lefty fascist feminist) are not "disagreement", they are personal abuse. Alleging that I approve of criminal behaviour ("@Frances_Coppola loves rape of white girls by Arab men") is not "constructive criticism", it is defamation.  

At the time, I thought what I said was reasonable. But the watchers thought otherwise. They leapt on it like a pack of wolves. The tweet was retweeted, reweeted and retweeted again, with ever more unpleasant comments and criticisms. Most expressed outrage at my suggestion that someone other than refugees might have done this. But often the reasons for the outrage, far from being rational, were along the lines of "Muslims are rapists and you are a rape enabler", or "refugees are rapists and you are a terrible person for protecting them". Some even accused me - bizarrely - of blaming the women concerned.

I tried again and again to explain my point. But my attempts at explanation fell on deaf ears. The Twittermob did not want to know. They were furious and out for blood. Not only this tweet, but others too were screencapped and circulated - a "selection" of my tweets which reinforced the idea that I was some kind of lunatic conspiracy theorist, or worse, someone whose view of justice was so skewed that I regarded protecting refugees as more important than identifying and prosecuting sex attackers. Nothing could be further from the truth. The WHOLE POINT was that I wanted the real perpetrators of this crime brought to justice. Clearly I explained this extraordinarily badly. But when those with agendas can select the comments that can be used to support their case and discard those that do not, it is all too easy for views expressed in a public forum such as Twitter to be fatally twisted.

As the tweet went viral, it attracted the attention of the American far right.

By "far right", I mean those who believe that white people should rule the earth and that other races are inferior. The hardcore racist and Jew-hater Andrew Auernheimer (twitter name @rabite, have a look at the timeline if you have a strong stomach) screenshot my tweet and told me he would make sure it never disappeared from circulation:

He meant it. He repeatedly circulated the tweet to his 29,500 followers.  

Not only that, but he decided to take what he thought was my job, too. He found out that I write for Forbes. Suddenly I became not just "financial writer", but "Forbes journalist". I am not, but no matter, no-one cares about the difference between "journalist" and "contributor". Someone created a standard email complaining about me and demanding my dismissal, which was sent to Forbes by hundreds of people. Fortunately, Forbes - who have always made it clear that contributors do not in any way represent them - ignored the emails.

But incorrect though it is, "Forbes journalist" has become a meme. The Infowars account @Prisonplanet tweeted the screen shot of my tweet with a comment saying "Forbes journalist wins herp derp of 2016 so far.". That went to another 114,000 people, who retweeted it in turn and.....Try as I might, I now cannot convince people that I am not a journalist.

If I WERE a journalist, I might have had rather more protection: the media does try to give its staff some protection from online abuse, and Twitter verification gives journalists some ability to filter out trolls and abusers. But I'm not employed by mainstream media, I don't have legal or management protection, my Twitter account is my own personal account and Twitter does not see fit to verify it. The Twitter community has dubbed me a journalist, but I have none of the privileges of a real journalist. So when the American racist right attacked in force, I had no defence.

Maybe I've led a sheltered life, but I had never before encountered hardcore racism on such a scale. I've encountered racism, of course - dammit, I worked for a while as a housing officer on one of the roughest estates in London. But I'd never seen anything like this. Not only anti-Muslim tweets - though the murderous* term "kebab" was new to me - but also anti-black and anti-Semitic tweets were directed to me, many of them obscene and some of them violent. I was described as a "filthy Jewess", and told to "get gassed, yid" and to "put a gun in my mouth". There were also helpful suggestions that I would benefit from being raped by a Muslim, and - inevitably, since I am neither young nor pretty - the comforting observation that no man would want to rape me.

This last speaks volumes about the attitude of these people to women. Civilised people do not judge women's worth by their attractiveness to rapists. Their outrage had nothing to do with the rights of women - indeed many of them were rabidly anti-feminist. No, it was all about "whitey". They were appalled at the idea that "their" women could be attacked by men from inferior races, and even more appalled that I dared suggest that white men might behave in the same way, even though the obscene language they used suggested that they were only too familiar with such behaviour. These were cavemen, through and through. And they all supported Donald Trump. God help America.

When something like this happens, you find out who your friends really are. And surprisingly, among those who were most vocal in my support were some who had been severely critical of my original tweet. They did not agree with what I had said - they still don't - but they were absolutely going to defend my right to say it. THAT is free speech. Not the faux "you can say whatever you like, but if we don't like it we will silence you" of the self-proclaimed "free speech" supporters who follow the likes of Milo Yannopoulos (@Nero on twitter).

I blocked hundreds of people, I think. I had to block instead of mute, because they were feeding off my timeline, retweeting and screencapping new tweets as I made them. But in a way, blocking made matters worse. They treated being blocked as a trophy, crowing about it and circulating screen prints of the block screen. I became known for blocking people - me, the person who has always hated blocking and feels bad about doing it. I started to receive tweets asking if I was turned on by blocking people (no, I won't repeat here exactly what was said).

Eventually, on the advice of some of my critical but supportive followers, I protected my tweets. I hated doing it: it felt like giving in. And the Twittermob hated it too. They raged about "bitch has protected her tweets!" @PrisonPlanet circulated a screenshot of the protected screen with a comment saying "Forbes journalist retreats to her safe space". Of course, it wasn't all that "safe", since I continued to receive abusive comments. I routinely blocked the originators and reported threatening tweets, and Twitter suspended a few of those accounts for breaking the rules. But at least locking the account stopped them feeding off my timeline: I could talk to my followers without my words being seized upon, twisted and circulated, and I could prevent sockpuppet accounts from following me in order to troll my timeline and harass me. And eventually things started to calm down.

After a week, most of the abuse had stopped and I unlocked my account again. Using a locked account has a cost for anyone who is promoting their own work on their Twitter account, or even just issuing other information: you cannot retweet protected tweets, so items simply don't circulate as they would from an unlocked account. So both I and my followers wanted the account unlocked. When I unlocked it, I was promptly trolled, of course, but it wasn't as bad as before: it was easily dealt with by judicious use of blocking, muting and occasionally reporting. I've continued to receive abusive tweets ever since, as the screenshot of the original tweet has continued to circulate.

But the fact that the screenshot of the original tweet is still circulating means it can be used by the press and by writers, even though I deleted the original over two weeks ago. It was quoted by James Delingpole in Breitbart, and misinterpreted (though not quoted) by Deborah Orr in the Guardian. Auernheimer was right: my ill-considered words live on and cannot be forgotten. Have I done my reputation permanent damage? Perhaps. But that is partly because of another mistake that I made yesterday.

Three weeks of constant abuse has left my nerves very frayed. It has also affected my health, since my asthma is triggered by stress: I had to take a few days off work because my breathing was so bad. But the frayed nerves are a much bigger problem. I am over-sensitive and my judgment is impaired. My usual clarity of thought is no longer there. I overreact to things that I should have the sangfroid to let pass. So when a blogger quoted my tweet in a post yesterday, I reacted very badly.

He had used the tweet as an example of temporary "insanity" in a normally rational person caused by a highly emotive event. Had I been thinking straight, I would have seen that this was what he meant. But I'm not thinking straight. I took it as yet another personal attack - an attempt to stir up the whole tweetstorm all over again. I told him to take down the section referring to me or face libel charges.

That was both unfair to him and very foolish. There followed an unpleasant argument on Twitter in which I tried again to explain what the purpose of the original tweet was and he insisted that I did not mean that - all of it watched by a huge crowd who were mostly not on my side. It achieved precisely the opposite of what I wanted: not only did the blogger refuse to amend the piece, the piece ended up being circulated far more widely than it probably would have been, and a new tweetstorm developed, this time expressing outrage at my allegation of libel. I am now receiving personal abuse again, though not on the scale of two weeks ago. I've muted lots of people. But muting doesn't work, really: I still see the comment before I mute. A few hundred nasty tweets and I'm a nervous wreck, whether or not I mute the originators.

My attempt to resolve the situation by leaving a comment on his post and retweeting it myself also appears to have backfired, though it was intended as something of a climbdown. The blogger has now written a very angry post about me. I have to say that although the criticism he levels at me in this post is harsh, it is deserved. I have handled this very badly indeed and am genuinely sorry about the mess I have made. I have left a comment on that post apologising for accusing him of libel. 

But until yesterday, I was not guilty of anything more than stupidity. And heaven knows, people make stupid remarks on Twitter ALL the time. I did not deserve weeks of obscene personal abuse and threats, not only on Twitter but also in comments on my own blog, and even by email. Nor did I deserve to have attempts made to destroy my livelihood. And I am damned if I am going to be hounded off Twitter by what is the online equivalent of a lynch mob. 

This must stop. 


* The term "kebab" is used pejoratively by the American right to mean Middle Eastern Muslims. I have been told that it comes from a music video created by Serb musicians in the Bosnian war. The video was originally entitled "Remove kebab" - an approving reference to the genocide ("ethnic cleansing") of Bosnian Muslims. Hence it is both racist and murderous, not simply anti-Muslim. 

Tuesday, 19 January 2016

Much Ado About (Almost) Nothing

President Juncker's European Fund for Strategic Investments (EFSI) has produced an update on its progress to date. The update is a lovely piece of work, with elegant graphics and breakdowns of projects and investments by country and by sector. Really impressive. Kudos to the content management team.

But the content - oh dear, the content. The triumph of image over substance. From the EU-wide State of Play document, here is the total amount invested so far - projects and SME financing - and the countries benefiting from this investment;

However, exactly how much is being invested in each country, and on what, is buried in country-specific documents. So I've tabulated it here.

Obviously, it's incomplete. For about half the countries in this list, there is NO information. Well, this is awkward.

Fortunately, help is at hand. A calculator, in fact. The totals show that the EFSI has actually invested more than this, so the remainder is presumably going into cross-country projects and investments. There is (I assume) just over 1bn Euros going into cross-country projects and a further 1.2bn (approx) going into cross-border SME financing via unspecified financial intermediaries. Fair enough, but this is hardly comprehensive or transparent information, is it?

The cross-country projects can be identified from the sectoral analysis. Well, one of them, anyway. This map says that one of the projects in the Circular Economy sector is cross-country:

The cross-country project in question is an infrastructure fund in France & Belgium which is described as an "equity fund investing in transforming former industrial sites into uncontaminated and habitable areas". It has no funds allocated to it yet.

But this is the ONLY project identified as cross-border. So where on earth 1bn EUR supposedly invested in cross-border projects is actually going remains a mystery.

I was going to tabulate the projects by sector and cross-reference them to their countries. But I gave up when I discovered that construction of a bio-tech mill in Finland was listed under both Agriculture and Circular Economy. No doubt there are other examples of double counting, too. To be fair, the State of Play document does say that some projects are multi-sector. But the innocent could be forgiven for thinking that these were two separate projects. I think they call this obfuscation.

More importantly, though, there is no information anywhere in these documents on whether these are new projects, or projects already funded under existing EIB schemes that have simply been shoehorned into the new scheme to big up its numbers. The proportion of funding going on energy/climate change is highly suspicious:

The lead time for large renewable energy and transport projects is considerable - but the EFSI has only been in existence for a few months. And this paragraph from the Energy sector sheet suggests that there are as yet very few, if any, new projects:
In the first months of 2016, the regional groups established to oversee the implementation of the Projects of Common Interest (PCIs) will discuss eligible projects that the EFSI could help finance. The EU budget for 2014-2020 already increased the energy sector allocation and the EFSI should complement it to give EU consumers access to secure, sustainable and competitive energy. The EFSI can be combined with other sources of funding in the EU budget for particular projects and platforms, in particular Connecting Europe Facility (CEF) financing (both grants and financial instruments) and European Structural and Investment Funds (ESIF). The effectiveness of the EFSI could benefit from the combination of financial instruments, EIB loans and grants in a "blending approach".
 I've highlighted what is an extraordinary statement in this paragraph, given what we already know about the capital sources for the EFSI. Here is the diagram from the original EFSI proposal document. Look at the footnote:

So the EFSI, which already has 3.3bn EUR of capital diverted from the CER, proposes raiding it again. This isn't "new" investment at all, is it?

I seriously doubt if there is much financing of genuinely new projects going on. I think that EU governments have simply seized on this initiative to reduce the impact on their own budgets of already-planned infrastructure investment. For example, one of the projects financed is the UK's Smart Meter rollout programme. But the UK government has been planning this for years. The rollout would have gone ahead without EFSI funding. Kudos to the UK government for its opportunism, but providing funding to rich countries for infrastructure developments that they were intending to do anyway is surely not the point of this initiative.

But whether or not there are genuinely new projects involved, the financing is pitiful anyway. Spain's total capital investment (including capital for SME investment) is 597m EUR, which is supposed to result in 1.6bn EUR in project financing and 731m EUR in financing to SMEs, a total of 2.331bn EUR. That is about 0.2% of Spain's GDP, and most of it is expected to come from the private sector. It is hardly going to make a significant difference to Spain's fortunes - especially if much of this is simply refinancing existing projects.

Nor is the money going where it is needed. For example, most people acknowledge that Germany is desperately in need of investment, and very reluctant to do it because of its fondness for trade and fiscal surpluses. You would think that Germany would have put out lots of applications for project funding under this initiative, wouldn't you? Not a bit of it. There is only ONE project application from Germany, and that isn't for actual infrastructure development - it is for a "renewable finance guarantee", which is described as a "risk-sharing facility for loans to renewable energy projects in Germany and France".

True, Germany has received 203m EUR in funding for SME investment - the public development bank KfW has benefited from this, among others. But Germany has a massive capital surplus which it exports all over Europe. Why, in heaven's name, is this scheme providing capital to German financial institutions to support investment in SMEs?

I am, frankly, underwhelmed by this piece of marketing spin. Admittedly it is early days yet, but the combination of pitiful results with typical EU fudge and obfuscation does not bode well for the future. At present, Wolfgang Munchau's prediction that the Juncker fund would not revive the Eurozone appears all too likely to come true.

Related reading:

Investment Plan - State of Play January 2015 - European Commission
Juncker's CDO
Austria's folly and Juncker's madness - Pieria

Sunday, 17 January 2016

A countercyclical credit bubble?

Over at VoxEU, Philippe Bachetta and Ouarda Merrouche have a surprising take on "countercyclical" lending. They show that lending by US and European banks in US dollars to European non-financial corporates massively increased from 2007-2009, and that this helped to soften the effect of the European credit crunch on employment:
Over the period 2004 to 2009, we find that foreign credit denominated in dollar to non-financial corporates is countercyclical – it increased sharply (relative to domestic credit) in response to the sudden tightening of credit policies at domestic banks (Figure 1)
Here is their Figure 1 chart showing the growth of US$-denominated syndicated lending:

Well, ok. US$-denominated syndicated loan issuance did indeed increase massively from 2007q1 onwards. And European banks did indeed tighten credit standards from late 2007 onwards, in response to the failures of IKB and Northern Rock due to the market freeze in August 2007. The chart appears to show correlation between these events. On this basis, the researchers claim that foreign lending acted as a countercyclical buffer, preserving lending to corporates and therefore preventing a large rise in unemployment as the 2007-8 financial crisis hit.

It is evident in this chart that the increase in US$--denominated syndicated loan issuance led, rather than lagging, credit tightening by European banks. By quite a bit, in fact. Not only did issuance start to rise fast while European banks were still loosening, not tightening, credit conditions: issuance fell dramatically after the failure of Lehman brothers in September 2008, but banks went on tightening credit conditions for some time after that. According to this chart. European credit conditions were at their tightest in early 2009 - but US$-denominated syndicated loan issuance was already collapsing.

What we are seeing in this chart is a short-lived bubble in US$-denominated commercial lending. Now call me cynical, but I find the idea that a cross-border bubble in commercial lending could ever be "protective" frankly incredible. As every emerging market country could tell you, the sudden withdrawal of cross-border lending when a bubble bursts has catastrophic economic effects. It is very evident from this chart that there was such a "sudden stop" in the fourth quarter of 2008. Why do these researchers think this bubble was benign?

The researchers observe that it was US banks in particular that drove this bubble, and offer two possible explanations:
A first explanation, for which we do not find supporting evidence, is that low Fed rates may have induced a search for yield among US banks. The other explanation is that the retreat of domestic banks meant less competition in the riskier segment of the market, and this coupled with the fact that US banks were subjected to less risk-sensitive capital requirements implies that US banks had both greater opportunities and (unlike other foreign banks) also strong regulatory incentives to shift to riskier borrowers. Since US banks were operating under Basel I the shift in risk within the same asset class had no repercussion on their capital requirement.
I'm afraid these explanations do not stack up. The researchers correctly note that low Fed rates do not appear to have driven a search for yield, but this is irrelevant anyway: the Fed started to raise rates in 2004, and when the US$-denominated bubble was growing at its fastest rates were near their historical average. Low, they were not.

More importantly, the fact that the credit bubble led, rather than lagging, the tightening of credit conditions does not support the idea that US banks stepped into the space left by domestic banks. It rather suggests that this was lending to borrowers who under normal conditions would not be able to obtain lending because of their riskiness. The researchers show that it was lending to risky corporations in particular that grew during this period:

But they fail to draw the obvious conclusion that this was excessively risky "bubble" lending to marginal borrowers which was abruptly withdrawn after the fall of Lehman, with catastrophic consequences for European economies. There was nothing benign about this bubble, and it was in no way protective.

However, the researchers are right about the role of regulatory arbitrage in enabling this bubble to grow. And they also correctly note the importance of currency, though they do not draw the right conclusions. Unfortunately, though, they have misunderstood the role of European banks in this disaster.

I have written previously about the enormous growth of the Eurodollar market in the years before the financial crisis, driven by regulatory arbitrage. US banks, regulated under Basel 1 and (in the case of broker-dealers) a leverage ratio, lent initially to US households in US$ for property purchase, then securitised the loans. European banks, regulated under Basel II and therefore much more risk-sensitive than US banks, loaded up on those securities (RMBS and their derivatives). But as US households pulled back on borrowing and the securitisation engine started to falter from 2006 onwards, US banks looked elsewhere for high-risk, high-return lending to prop up their return on equity without hitting their balance sheet leverage limits. This is why the European corporate credit bubble grew. The risk-averse stance of European banks undoubtedly contributed, but the principal driver was the failure of the US residential mortgage market.

And this, I'm afraid, invalidates their conclusion. The US$-denominated commercial lending bubble in Europe was part and parcel of the excessively risky bank lending that directly caused the 2008 financial crisis. Yes, those corporations that were able to borrow in US$ may have reduced unemployment less than those that did not. But the collapse of this bubble itself contributed to the deep recession that affected the whole of the Western world after the fall of Lehman. To assert that this bubble was in any way "countercyclical" and "protective" to European economies is thus, I'm afraid, absurd.

Related reading:

Financial hurricanes
European banks and the global banking glut - Pieria
Countercyclical foreign currency borrowing: Eurozone firms 2007-9 - Bachetta & Merrouche

Friday, 15 January 2016

The untimely end of a flamboyant dictator

At Forbes, I have posted the latest episode in the long-running saga of the failure of Hypo Alpe Adria:
The story of the failed Austrian bank Hypo Alpe Adria (HAA), and its transformation into the world’s worst “bad bank” – the insolvent HETA – resembles a Hollywood blockbuster. Complete with a cast of thousands, colorful principal characters, an extraordinary range of special (legal) effects and a reach far beyond its national borders, the HETA saga is long, staggeringly expensive, mind-numbingly complex and at times unintentionally hilarious.
HETA’s liabilities are mostly guaranteed by the government of the province of Carinthia. Under its flamboyant far-right governor Joerg Haider, Carinthia provided deficiency guarantees for over 11bn EUR of bonds and subordinated debt issued by HAA. These would be triggered when HETA is wound up, forcing HETA’s losses on to Carinthia and – by extension – on to the Austrian sovereign. But Carinthia’s current government – now bereft of Haider and his minions – insists it cannot pay. And the Austrian government doesn’t want to pay. It has made repeated attempts to wriggle out of the guarantees and impose losses on creditors. 
But the creditors are fighting back. And the mess is becoming ever more widespread. You can read all about it here.

Now, what about that colourful charlatan Joerg Haider?

Unlike other corrupt politicians and bankers, Haider is not enjoying his ill-gotten gains somewhere in the Bahamas, safe from the reach of the tax authorities authorities and the law. He died in a car crash in 2008.

The official explanation is that he hit a street lamp while drunk. Secret Ledger on Twitter explains:

He went off the road at 88mph, hit a wall and a tree....the rest is history.

The car looked like this:

But there are always conspiracy theories, of course. See the hole in the car roof (white circle)? The link provided by Secret Ledger - from which this picture comes - suggests that the hole was made by an explosive device (translation by Google):
Conceivable would be an explosion, triggered for example by a mounted on the roof or an explosive fired by a drone missile that at the moment in which it has taken its goal this seriously injured and himself largely destroyed. This process would have taken place just before the car is out of control. The car would be in the event that this scenario is true, become a 'non-steerable floor' - not, however, because the driver had tried in vain to bring the car back under control, but because - as stated in an article [14] Jörg Haider at this time already turned and was therefore unable to somehow act on his car. The hole in the roof of the car speak for these assumptions, the lack of skid marks, just above the driver's seat, the severity of injuries and the pressed-out, flung onto the roadway the driver's side doors.
Certainly, Haider's death was awfully convenient, given that Hypo Alpe Adria was by then already in very deep trouble. It's all a bit like the death of Princess Diana, isn't it?

We will probably never know what really happened.

Related reading:

Investigative reporter offers murder theory over the death of Joerg Haider - Effedieffe

Wednesday, 13 January 2016

The changing nature of banks, post-crisis edition

Courtesy of Dr. George Selgin comes this chart from FRED:

Dr. Selgin has added a vertical line to indicate when the Fed imposed interest on excess reserves. I don't propose to discuss that here, since I have engaged in an interesting and spirited discussion with Dr. Selgin and others about it on both Forbes and Twitter. I am more interested in what else this chart shows. It is truly fascinating.

The first thing to note is the fast rise in bank reserves from the latter part of 2008 onwards (blue line). This is due to emergency liquidity support and distressed asset purchases in the immediate aftermath of the 2008 financial crisis, and of course to QE.

Unsurprisingly, there was a sharp fall in interbank lending at the time of the crisis. It recovered somewhat early in 2009, but then interbank lending fell again during the main phase of QE1. This is not surprising, since QE1 gave banks more than enough reserves to settle deposit withdrawals. They had no need to borrow from each other.

Also during this time there was a considerable decline in bank lending, and a rise in purchases of safe assets (Treasury and Agency securities). Banks appear to have been substituting safe assets for risky ones. Reserves are, of course, safe assets. But it looks as if large though the reserves increase was, it wasn't enough to meet the needs of damaged, distressed and risk-averse banks - or substitute for the loss of private sector "safe assets" when the market valuations of private label RMBS and their derivatives collapsed.

This is interesting enough in itself. But this chart ends in 2009. It only shows the acute phase of the crisis and ensuing recession. I wondered what happened next. So I've created another version of Dr. Selgin's chart, covering the 10 years from January 2006 to January 2016:

This chart is even more interesting than Dr. Selgin's.

Firstly, the three phases of QE can be clearly seen (sharp rises on blue line). Large though the rise in bank reserves was after the financial crisis, it is dwarfed by subsequent rises, particularly QE3.

It also seems that despite the Fed's reinvestment policy, bank reserves decline slightly when QE ends. The sharp drop in reserves at the beginning of 2016 is due to the interest rate rise in December 2015, and in particular, due to overnight reverse repo operations (ONRRP) enabling certain non-banks to deposit funds at the Fed. When non-banks deposit funds at the Fed instead of commercial banks, the effect is a reserve drain.

And the interbank market is all but dead. There is little doubt that this is due to the fact that QE gave bank far more reserves than they actually need to settle deposit withdrawals. If banks don't need to borrow reserves, they can't lend them either: thus, when banks are awash with reserves, the natural level for the Fed Funds Rate is zero, regardless of the state of the economy. The December rise in the Fed Funds Rate was important for what it signalled, not for its economic effects. The principal instrument of monetary policy is now the interest-on-excess-reserves (IOER) rate (or deposit facility rate, if you are an ECB-watcher), which the Fed backs up with ONRRP operations. This will remain the case as long as there are excess reserves in the banking system - which may be for a very long time. Welcome to the new normal.

Should the Fed have raised the IOER rate in December? Well, it had few alternatives. Since the interbank market is dead, it is not possible to raise the Fed Funds Rate by means of open market operations. Raising the IOER rate has the effect of drawing the Fed Funds Rate upwards. The only alternatives are unwinding QE or raising reserve requirements to near 100%. Unwinding QE would be a very sharp monetary tightening, but even more importantly, dumping all those securities on the bond markets would have dramatic and highly destabilising effects. The Fed has wisely ruled this out. The alternative would be raising reserve requirements to near 100%, thus creating artificial shortages of reserves. Do we want to go down the full-reserve-banking route? Some would like this. But the effects on commercial lending need to be considered carefully. At present, the Fed is not opting for this alternative.

In the present circumstances, and absent a major change of policy direction regarding bank regulation, saying that IOER should not have been raised is tantamount to saying that the Fed's December Fed Funds Rate rise was a mistake.

So banks don't lend to each other any more, much. But they do lend to non-banks. Despite QE, IOER and ever-tightening macroprudential regulation, bank lending to households and corporations has been rising steadily since 2012. Unlike Europe, the US fixed its banks quickly. It is clear that excess reserves do not prevent banks lending, and although there is something of a shortage of counterfactual evidence, it seems unlikely that paying IOER at a few basis points has much effect on bank lending either.

But the really interesting feature of this chart is the red line. Bank purchases of Treasury and Agency securities have risen steadily since the financial crisis. The only time this tailed off was during QE3. The combination of large quantities of reserves with higher levels of Treasury and Agency securities suggests that banks have massively de-risked their balance sheets, no doubt under regulatory pressure to shore up capital and liquidity buffers.

We have stopped short of full reserve banking, but banks are far better reserved and have much higher levels of capital than they did before the crisis. The price for this, of course, is increased dependence of banks on the sovereign. Substantial parts of bank balance sheets are now made up of sovereign liabilities, both reserves and securities. For the US, which is the world's premier sovereign reserve currency issuer, this is unlikely to be a problem. But in the Eurozone, bank dependence on sovereign liabilities is a problem - one to which as yet there seems no solution.

The increasing proportion of sovereign liabilities on bank balance sheets - and the intrusive regulation that forces them to adopt such a risk-averse balance sheet management strategy - raises serious questions about the direction of policy. How can we pretend that banks are private sector agents, and demand that any losses are borne only by other private sector agents, when so much of their asset base is made up of public sector liabilities and so many of their activities are subject to public sector regulation?

Far from making banks truly responsible for their own safety, we are creeping ever closer to de facto nationalisation.

Related reading:

Floors and ceilings
The liquidity trap heralds fundamental change
Not all sovereign currency issuers are equal (Rethinking government debt)
The Fed's Brave New Interest Rate World - Forbes
It Was The Financial Crisis That Stopped Banks Lending, Not Interest On Reserves - Forbes
The Fed's IOER Policy Is Not Paying Banks Not To Lend - Forbes
Regulation, regulation, regulation - Pieria
Interest On Reserves (i) - George Selgin
Interest On Reserves (ii) - George Selgin

Monday, 11 January 2016

Germany's Sparkassen: banking on capital exports

My latest post at Forbes takes a close look at Germany's much-praised Sparkassen and their odd relationship with other German banks. It's not quite as it seems....
The German Sparkassen (public savings banks) are widely praised for their stability and their service to German savers and small businesses. They survived the 2008 crisis largely unscathed; the few failures were handled within the network, and depositors were compensated from a fully-funded deposit insurance scheme, with no public funds involved. 
Other countries, especially those with more concentrated banking systems, look enviously at the Sparkassen. In October 2015, the Demos thinktank produced a report arguing that the UK should create a similar network of not-for-profit banks. But are the Sparkassen really such paragons?
Read the rest of the post here

Pensions and stuff

I'm collecting here all the pieces I have written on the UK state pension and its problems. What a shambles. Here are my recent posts, in disaster order.


As I explain in these posts, I would be supportive of WASPI if they were only concerned with addressing the blatant injustice of the 2011 acceleration of the pension age rise for women. But they aren't, and what they are actually after is seriously unfair to other groups. So I can't support them. And I don't like the way they and their supporters behave towards people who don't agree with them. 

But the 2011 change IS unfair. Kudos to Mhairi Black of the SNP for getting the 2011 acceleration debated in Parliament, and a very impressive result - 158 to ZERO in favour of rethinking it. 

Here I stand, I can do no other (Position paper on WASPI)

The new State Pension

The new State Pension is an unutterably inadequate response to the pensions timebomb. It enshrines expectations that we already know to be unsustainable, and sets up intergenerational injustice on an unprecedented scale. Not only that, but Treasury penny-pinching makes it unfair to a good many older people, too. It is a disaster. 

Where do we go from here?

My Forbes post at New Year traced the history of the State Pension and explained how we got into our current mess. We are at a turning point. Something radical has to be done, and the new State Pension isn't it. 

Unfortunately the Slog took exception to this piece on the grounds that it didn't support the WASPI argument for restoration of the state pension to 60 for all women born in the 1960s. Since the piece wasn't about WASPI his demolition of it was distinctly odd, but he didn't like me pointing this out. I've included this piece here because it makes the same point that I made in the WASPI position paper. The solution to these cliff edge and entitlement problems is a Universal Basic Income. 

(I'm told the Slog has written another demolition piece. Frankly I can't be bothered to read it.) 

In summary:
  • the existing State Pension system is complex, irrational and not fit for purpose, and attempts to tinker with it over the last few years have only made matters worse. 
  • the new State Pension is set fair to be a foul-up on a similar scale to Universal Credit, and the fallout will last for decades. 
Oh, and while I am on the subject of the disaster that is the benefits system - which Universal Credit will make worse - here is my post on the sheer hideousness of benefit sanctions. They deliberately hurt people. And they don't work anyway. This matters, because those people who don't qualify for pensions (including quite a lot who thought they did) have to claim benefits instead. We cannot reform the State Pension without also reforming the benefits system. 

Can we please have a comprehensive review of the entire State Pension AND benefits system, with a view to replacing the whole lot with something that actually works? 

Tuesday, 5 January 2016

In the bleak midwinter

In the latest of his excellent reports for the BBC on the refugee crisis in Europe, Feargal Keene focuses on the plight of children. A baby, only a month old, makes the hazardous crossing from Turkey to the Greek island of Lesbos. Little children, freezing cold and wet through, climb the muddy path up from the beach. Volunteers from many nations provide food, blankets and medical care for these tiny lives.

But Lesbos is only the start of their journey, And in Europe, it is winter. Across the continent, refugees - including many children and babies - huddle round camp fires at the borders, waiting to be admitted. But the signs are up everywhere. "No room....."

At this time of year, Christians sing carols about a baby born in a stable, because there was no room in the inn. A baby born to a migrant mother, in freezing conditions in the middle of winter. "Behold a silly tender babe, in freezing winter night, in homely manger trembling lies. Alas, a piteous sight", wrote Robert Southwell in the 16th century.

Indeed, a piteous sight. Though these days it would be a tent, not a stable. Along Europe's refugee routes, babies are born every day to migrant mothers. In a report produced in November 2015, Unicef describes the plight of these babies and their mothers:
Women who have recently given birth are less resilient to the stresses of the journey and risk being unable to continue breastfeeding, as families are swept along migration routes, through reception centers, and loaded onto buses and trains. Babies are born every day along the migration routes – in very unfavourable conditions – and carried along as newborns.  
Jesus started his life as a migrant, and continued it as a refugee. He fled with his parents to Egypt to escape the insane despotic tyrant Herod. But although he escaped, others did not. Prudentius, writing the 5th century, speaks with grief and anger of the little boys murdered by Herod:
Are these the first blood-offerings
to come before the Christ - a band
of babies playing on the altar-steps
with palms and coronets? 
What use this rash enormity?
What profit in this wasteful wrong?
So many deaths, and Christ alone
escapes from Herod's questing hand.
So many deaths.....Unicef reports that 30% of over 3,500 migrants who died in the Aegean in 2015 were children. In October alone, at least 90 children died, of whom one fifth were under two years old: twenty of those deaths were in one shipwreck on 28th October. Babies and small children are particularly at risk of drowning, because they can slip from their parents' arms in the turmoil of a shipwreck.

And the risk does not end at the shore. Unlike the Palestinian West Bank where Jesus was born, winter in much of Europe features freezing conditions, snow and ice. "In the bleak midwinter" was never an accurate picture of Jesus's birth: but it is all too real for babies and small children on the refugee trail. They have heightened risk of dying or becoming seriously ill from hypothermia or pneumonia.

Unicef reports that over 1 million children made asylum applications in Europe in 2015. Many more have yet to make applications. And every day, more arrive. Most of these children are from Syria, Afghanistan and Iraq, fleeing the conflicts there: many of the older children are unaccompanied, and at risk of trafficking and abuse. They shiver with cold on the borders, and tramp wearily from country to country, while European countries argue about who should house them.   

Because Jesus was born a migrant and became a refugee, Christianity emphasises the importance of welcoming the "outcast and stranger". But the supposedly Christian countries of the West have no welcome for the people on their borders. Forgetting the demands of their religion, they refuse to open their doors to today's "outcasts and strangers". They condemn Muslims who commit violent acts in the name of their religion. But what they are doing is worse. There is nothing humane, let alone Christian, about letting children drown, or die of cold, hunger, exhaustion and illness. Today's Holy Innocents are the little ones washed up on the beach in Greece and buried in unmarked graves along the refugee trail.

There are more ways than one of committing murder.

Image is of the Tented Crib at Rochester Cathedral, England, Christmas 2015. Photographed by me with kind permission of the Dean and Chapter. 

Monday, 4 January 2016

Dylan Thomas and the Furies

Do not go gentle into that good night, 
Old age should burn and rave at close of day; 
Rage, rage against the dying of the light.
I have reluctantly decided to withdraw from engagement with the WASPI campaigners and their supporters, and to end my public discussion of their cause. Near-constant public commentary, much of it ill-tempered, on this subject is upsetting my followers and damaging my reputation. More importantly, the stress caused by sustained and deliberate misrepresentation and personal abuse from WASPI supporters, now including a high-profile blogger, is affecting my health. Stress triggers my asthma. I am now having to use inhalers for the first time in months. Clearly, this must stop.

But I do not go willingly. I started writing in 2010 because I believed my voice could make a difference. I did not want to be one of those who - in the words of Dylan Thomas - rage about death because they have never made their mark:
Though wise men at their end know dark is right,  
Because their words had forked no lightning they 
Do not go gentle into that good night.
My words have indeed "forked lightning". Of that, I can be proud. But lightning burns when it strikes. Clearly, the WASPI campaigners were burned by my words. Was I right to say them? I do not know. Sometimes lightning strikes in the wrong place and burns the innocent. But I can only write as I believe. I wrote with honesty, conviction and compassion for the poor and vulnerable, and I stand by what I said.

And yes, I rage against the dying of this light. I wanted to engage with them, to participate in open and democratic discussion. But open and democratic discussion was not what they wanted. They wanted to inform, not to debate: to garner support for their campaign, not to explore alternative solutions. Disagreeing with them was "insult": reasoned criticism of their aims was "detraction".

Some WASPI supporters have pursued me relentlessly, rather as the Furies of Greek and Roman mythology pursued their victims. I have been told I am a "sad, bitter old troll who should stick to singing". I have been called a "mischief maker" and "toxic". I have been described as a "ne'er-do-well" and a "disgruntled 1960s-er who is cross at being excluded". I have even been called a "traitor" and told I need "stringing up". These are merely examples of tens if not hundreds of abusive tweets I have seen or received over the last few weeks. I've blocked more people for rudeness than ever before. I even blocked WASPI supporters for retweeting me, especially if they had already blocked me themselves, because too often a retweet was followed by a stream of abusive tweets from their friends. Perhaps predictably, they then criticised me for blocking them. They seemed oblivious to the effect of their behaviour. Or perhaps they didn't care: I was just a "detractor", to be silenced by any means available.

And silenced I now am. This has gone so far now that I doubt if the WASPI campaigners could stop it even if they wanted to: once items posted on Twitter have gone viral, they are impossible to withdraw. So I have no alternative but to retreat, raging, into darkness. They have won.

No doubt the WASPI campaigners will regard this as a just victory. The Furies were not evil. Rather, they were the guardians of justice and vengeance. Wikipedia describes their role thus:
Their task is to hear complaints brought by mortals against the insolence of the young to the aged, of children to parents, of hosts to guests, and of householders or city councils to suppliants - and to punish such crimes by hounding culprits relentlessly.
I am a younger woman who has opposed the claims of older women - claims they consider just. That is intergenerational insolence. In ancient Greece, the punishment for this was to be driven mad, and the job of the Furies was to deliver that punishment. Similarly, the behaviour of some WASPI supporters towards me seems to resemble punishment for the crime of opposing their cause.

Interestingly, since nearly everyone was guilty of intergenerational insolence at some point in their lives, calling the Furies by their proper name of Erinyes (the "angry ones") was avoided, since it attracted their attention. Instead, they were often euphemistically known as the "Eumenides" - the "gracious ones". Justice can be severe, but it can also be gentle: Mrs. Bedonebyasyoudid in Charles Kingsley's The Water Babies could be both cruel and benevolent, depending on the behaviour of the children to whom she gave gifts. Similarly, those same WASPI supporters who are harsh towards me are kind to those who support their cause.

But I'm afraid this does not justify their behaviour. Regardless of the justice (or otherwise) of the WASPI cause, hounding someone into silence is targeted harassment and violates Twitter's rules:
We believe in freedom of expression and in speaking truth to power, but that means little as an underlying philosophy if voices are silenced because people are afraid to speak up. In order to ensure that people feel safe expressing diverse opinions and beliefs, we do not tolerate behavior that crosses the line into abuse, including behavior that harasses, intimidates, or uses fear to silence another user’s voice.
And bullying me (and others) into silence may yet prove a Pyrrhic victory. The behaviour of some WASPI supporters has not gone unnoticed. By behaving like harpies, swooping on those who say things they don't like, they have damaged their own cause.

Poetry quotations are from "Do not go gentle into that good night", by Dylan Thomas, full text here.

Related reading:
Dear Anthony
Here I stand, I can do no other
Trolling, cyberbullying and constructive debate
Twitter rules

Saturday, 2 January 2016

Dear Anthony

This is my response to the Slog's takedown of my Forbes post on the UK state pension system. I am addressing it directly to Anthony Ward, the author of the Slog blog. For obvious reasons, I have not provided a link to Anthony's post. 

I can't begin to tell you how upset and horrified I was by the post you wrote today. It was factually incorrect (I shall explain the factual errors below). But more importantly, it was an unfair and brutal attack on me, for no reason that I can see other than you wanted to find an "opponent" to knock down and I was an easy target. Given that you know there have been sustained and very unpleasant attacks on me from WASPI supporters in the last few weeks, what you wrote could hardly have been more hurtful or damaging to me. It amounted to pouring a large amount of petrol on an already raging fire.
As I pointed out on Twitter, you misrepresented my Forbes post in order to justify your support of the WASPI cause. When I explained that it was not about WASPI, and asked you to change the post to make this clear, you failed to do this.  

But there is worse. You said that my Forbes piece asserts the following:
First, that the problem can only be solved by a retreat by the government from the benefits offered: second, that the "losers" referred to in her Forbes piece - not the word I would have chosen - had plenty of notice about retreats: and thirdly, that future benefits must come largely or solely from private/Bourse owned companies.
I made NONE of these assertions in the Forbes piece. Not one.

Firstly, I said nothing about "retreating from benefits offered". What I said was that the post-WWII NI-funded pension system is no longer fit for purpose and a radical rethink is needed.

Secondly, I said nothing about notice of changes to pensions or benefits: What I said was that in the transition to whatever pension scheme we have in the future, some people will inevitably lose out. That is not a reason not to change the scheme. It is a reason to give far more thought to transitional arrangements than has hitherto been the case.

And finally, I said nothing about future benefits having to come largely or solely from private sources. I said that is the direction in which we seem to be travelling at the moment, but I did NOT say I agreed with this. Indeed, given my long-standing and widely known support for a Universal Basic Income, and my extensive writing about the responsibility of government to provide safe assets at low stable yields for citizens to save for their futures, it would be extraordinary if I did agree with it. And it is even more extraordinary of you to present this as my view, when it so clearly is not.

I turn now to the factual errors in your post. There are two, of which the first is by far the most serious as far as your argument is concerned. 

1. Discussion of pension age changes.  

You said:
Those who today call themselves WASPIs were unforgivably encouraged, by almost every politician in the country, towards a belief in cast-iron guaranteed pensions for men at 65, and for women at 60. That undiluted encouragement extended way past even Margaret Thatcher....none of whose administrations even hinted at changing the pension age.
This is not true.

I grew up in the 1960s & 70s. Like all women of my generation, when I started work in 1978 my state retirement age was 60. But already by then there was extensive discussion about the need to equalise men's and women's pension ages. This was not for cost reasons, but to end sex discrimination against women while retirement at the pension age was compulsory, and against men after compulsory retirement was abolished.

The discussion continued throughout Mrs. Thatcher's time in office and led eventually to Ken Clarke's decision in the Major government of 1993 to increase women's retirement age to 65 - a decision he still supported when I heard him speak recently. This is the relevant excerpt from his 1993 Budget statement:
After careful consideration, the Government have decided that the state pension age should eventually be equalised at the age of 65. The change will be phased in over ten years, starting in the year 2010, so it will not affect anyone currently aged 44 or older. By the year 2020, the state pension age in Britain will be broadly in line with that of most of our industrial competitors, although we will still have more generous arrangements than in the United States, where the pension age is to be equalised at the age of 67. All developed countries are making similar changes for similar reasons. Women nowadays tend to spend more of their lives in paid employment. They also live longer than men. Pension schemes need to recognise this, and end the current discrimination between the sexes.
In the next century, the ratio of working people to retired people will fall sharply, and the burdens on taxpayers will rise. The Government's decision will moderate those burdens, eventually by some £5 billion a year, and so help to ensure that they are sustainable. The basic pension is, and will remain, a cornerstone of the welfare state. The Government are committed to it and to retaining its value. 
Clarke's decision eventually came into force in the Pensions Act of 1995.

It would be fair to say, however, that the discussion was not always about changing women's pension age. During the high unemployment of the late 1970s and early 1980s, discussion centred on reducing MEN's retirement age to 60, not on increasing women's to 65. Indeed, because of high youth unemployment, the government at that time introduced a form of early retirement for men in the Job Release Schemes, in the belief that this would free up jobs for young people. Sadly, research by the IFS in 2008 showed that the Job Release Schemes created no more jobs for young people. Earlier retirement does not "free up" jobs for the young.

2. Post-war women's participation and fertility rates

You said:
The average level of all female employment outside the home during the 1930s was 10%, let alone full time jobs.
This is incorrect. Female participation in the 1930s was about 30%. Only one-tenth of MARRIED women worked outside the home, but these were concentrated in the mill towns of the industrial North, where the participation rate of women was far higher than anywhere else. My comments about lack of maternity provision and unfair distribution of domestic and childcare responsibilities apply to them.

That said, the participation rates from the 1940s onwards were very different from those in the 1930s. Women entered the workforce in WWII, and many of them remained in it after the end of the war. In 1945 the participation rate was 46%: by 1965 it was 55%. There was extensive discussion of the "double burden" of married women at that time, and it is the principal reason why women's earlier pension age was retained in the 1946 National Insurance Act and subsequent legislative changes.

Regarding women's fertility rates: women's fertility was considerably higher in the 1930s than it is now, but infant and neonatal mortality was also much higher. Your statement that if working class women had a child every year there would have been a baby boom in the 1930s is based on a wrong assumption about child mortality rates.

And finally. You made false, and very damaging, allegations about me in the final section of the post. I asked you to correct the worst of them - your unfounded statement that "Frances chooses to blame the women". I note that you have changed the wording, but the substance of the allegation remains.
You said:
On the issue of State pensions, Frances chooses to accuse the betrayed recipients of "not helping".
This is once again a misrepresentation of my Forbes post. I repeat, my Forbes post IS NOT ABOUT WASPI. Nor, indeed about any "betrayed recipients", of whom WASPI are only a small proportion. "Older people" includes, among others, me. My point was that a radical rethink of pension provision is needed because older people have a responsibility to future generations. I have said this before, most recently in my WASPI position paper on Coppola Comment:
What is the responsibility of older people towards future generations? This needs serious discussion. The unborn, and the young children of today, have not agreed to the "entitlements" and "promises" claimed by older people. They have no voice. Who will speak for them? 
While older people forget about responsibilities, and speak only of entitlements and claims, we will not get the focus on radical reform that you and I both want to see.

And this leads me to the most hurtful feature of your piece. You portray me as representing the forces that want to tinker rather than reform:
Frances I feel wants to justify how we got to here and then find a pragmatic solution. I want to condemn how we got to here, and then show how we can make a long-term difference with a more radical realism.
This is a colossal misrepresentation of my position. It puts me in a reactionary establishment camp of which I have NEVER been part. I described "how we got to here" for the purposes of explaining why we are at a turning point and there must be radical reform. In my WASPI position paper, I even said what I thought that radical reform should be. I called for fundamental change not only to state pensions, but to the entire toxic benefits system, and invited WASPI to join me in campaigning for a Universal Basic Income and a progressive tax system:
This problem would be entirely solved by a universal basic income coupled with a sensible progressive tax system. Can't we stop fighting over scraps, and campaign together for a really radical reform that would benefit everyone?
Is this not radical enough for you, Anthony? How radical do I have to be to satisfy you, and those with whom you have thrown in your lot?

I am bitterly, bitterly disappointed by your attitude. The sheer pettiness of your commentary added to the head of the post after I asked you to revise it is beyond belief. Yes, I publicly told you on Twitter to revise your post. That is because you had released your post on Twitter for all the world to see - including the WASPI women, with whom I had delicately been trying to repair relations. You completely undermined my efforts and exposed me once again to inaccurate and insulting comments from them, both on Twitter and now also on your post. I had to set the record straight, publicly and immediately. However, I did not make "accusations": I simply explained in what respects your post was wrong and damaging to me. And I am in no way responsible for the comments made by others on Twitter.

You conclude:
I do not propose to make any further revisions to the content below. The only thing revised in my mind is the previously very high opinion I had of Frances Coppola.
I'm afraid I have also revised my previously high opinion of you. You released a post containing factual errors, false allegations and damaging assertions, then when I asked you to revise it you responded by attacking me. So much for honesty, fair dealing and caring about others. You don't give a damn.

Goodbye, Anthony.