Showing posts from July, 2016

The WASPI campaign's unreasonable demand

As my readers will know, I have been watching the WASPI campaign with a growing sense of despair. Every attempt to find a realistic solution to their issue fails because it does not meet their demand for "fair transitional arrangements". But they have steadfastly refused to say what "fair transitional arrangements" are - at least publicly.

The 1995 Pensions Act included transitional arrangements. The rises in women's state pension age (SPA) did not start for 15 years after the Act was passed, so did not affect women born prior to April 1950. And women's SPA was to rise gradually from 60 to 65 over the course of 10 years, from 2010 to 2020. The 2011 Pensions Act accelerated the transition and added an extra year to the SPA for men and women born from 1955 onwards.

Like many, I think the 2011 Pensions Act was unfair, increasing the SPA for some women by up to 18 months ON TOP OF the 1995 Pensions Act rise, with very little notice. I support a campaign to hav…

Bitcoin's security pricing problem

I can't resist this.

Blithely ignoring the utter mess he and his developers have managed to make of the cryptocurrency Ethereum, Vitalik Buterin has written a post on inflation and monetary policy. Wow. Is there no end to his talents?
In this case, there is most definitely an end. Economics 101 is the end, pretty much. I don't claim to be the world's greatest economic expert - not by a LONG way - but the errors in this piece leapt out at me. 
Firstly, inflation. Here is Buterin on inflation: The primary expense that must be paid by a blockchain is that of security. The blockchain must pay miners or validators to economically participate in its consensus protocol, whether proof of work or proof of stake, and this inevitably incurs some cost. There are two ways to pay for this cost: inflation and transaction fees. Currently, Bitcoin and Ethereum, the two leading proof-of-work blockchains, both use high levels of inflation to pay for security; the Bitcoin community presently …

Slovenia and the banks

I bet you've never heard of Slovenia. It's at the north end of the Balkans, squeezed between Austria, Italy and Croatia on the Adriatic coast. It's small, peaceful, and prosperous compared to the rest of the Balkans. It is also stunningly beautiful, in a mountains-and-lakes sort of way. It is in many ways rather like Austria.

But at the moment, Slovenia is famous not for its lovely scenery, or its important history, or its rich culture. No, it is famous for its banks. And not in a good way. Slovenia's banking crisis is a long-running sore.

Slovenia's story is an all too familiar one. When it joined the EU in 2004, it entered the Exchange Rate Mechanism (ERM II) as a precursor to joining the Euro. EU membership requires free movement of capital across borders, and under ERM II its exchange rate was soft-pegged to the Euro. So it effectively lost control of monetary policy. The result, of course, was a mammoth inflow of foreign funds, a huge credit bubble, an enormo…

Grieving for a lost empire

There has been a huge amount of analysis about the reasons why British people voted to leave the EU. Some of it is very good: some of it less so, saying more about the biases of the writers than it does about the motivations of the British (no, I won't link any of those posts here!). I confess, I have added to the literature myself. I leave it to you to judge into which of these categories my contributions fall.

But in all the vast verbiage written on this topic, there appears to be a no-go area - a taboo, if you like. And it is not immigration, nor even racism and xenophobia. Nor is it the loss of Britain's manufacturing and the seizure of its fisheries. Nor the divide between London and other areas, the old-young split, the fact that people with degrees tended to vote to Remain. Plenty has been written on all of these. No, the taboo subject is the legacy of World War II and the loss of the British Empire.

I grew up in the shadow of war. My parents were children during World…

The silent gender divide

Last week, I went to my son's graduation ceremony. He has just completed a B.Sc in sound & light echnology at Derby University. So he is one of the STEM (Science, Technology, Engineering and Mathematics) graduates that we are told this country so badly needs.

As I watched the graduates from the College of Engineering and Technology walking past the dignitaries on the stage, I became aware of a huge gender gap. The vast majority of the young people filing on to that stage were boys. I calculated that only about 16% were girls, and they were concentrated in architecture, computer animation and - above all - mathematics. A number of disciplines, notably civil engineering, electrical engineering and most branches of computer science, had no girls at all.

I asked my son about this. He doesn't have an answer. But he commented that even in his own discipline (sound & light engineering), of 34 people who started the course, only five were girls. However, all five girls gradua…

Reshoring is hype

This chart has been doing the rounds on Twitter (h/t @dbcurren). It shows manufacturing employment in the USA. 

See that huge drop? That's the drain of manufacturing jobs to South East Asia.

And see that uptick since 2010, that appears to be tailing off? That's the return of manufacturing jobs to the USA. What they call "reshoring".

Reshoring is hype, isn't it?

Related reading

U.S. reshoring: over before it began? - ATKearney (pdf)

Gazing into the distance

The result of the EU referendum was a considerable shock - not just to the UK, but to the EU and indeed to the whole world. Just how big a shock it was is evident from the fact that the OECD has suspended its forecasts until September. It usually only does this for "significant unforeseen or unexpected events", such as a major earthquake or a tsunami. Brexit is a shock to the global economy of a similar order. And it has permanently changed the world. Whatever the future holds, we can be pretty sure that it will be very different from the dominant paradigm of the last forty years.

The vote was highly disruptive. It created chaos in the UK, anger and confusion in the EU, and puzzlement and concern further afield. But as the fog clears, markets return to some kind of normality and a new UK government takes the reins, we can perhaps begin to discern what the future might hold.

To everyone's relief, the UK's banking sector appears resilient: bank share prices have fallen…

The untold story of the UK's productivity slump

The ONS has produced a fascinating discussion of the UK's productivity puzzle, with some great charts. This one shows just how much the UK's productivity has slumped:

Notice when productivity started to slump. It was much earlier than 2008. In fact the data (which ONS have helpfully provided in Excel) show that output per hour started to fall in Q4 2006. The productivity slump, therefore, cannot be caused by the financial crisis. I suspect we have a "third variable" problem here. It seems likely that the financial crisis and the productivity slump are both symptoms of an underlying shock. But what was that shock?

To shed some light on this, here is another great ONS chart from the same publication:

In the middle of this we had the biggest financial crash since the 1930s, so the productivity drop for financial services is not surprising. What is surprising is that it is by no means the biggest productivity drop. There has been a catastrophic productivity collapse in e…

Short-run effects of the Brexit shock

The Governor of the Bank of England's opening remarks at the release of today's Financial Stability Report were stark:
At its March meeting, the FPC judged that “the risks around the referendum [were] the most significant near-term domestic risks to financial stability.” Some of those risks have begun to crystallise. The Governor was admirably calm and balanced in his press conference. But nevertheless there was a degree of schadenfreude about his remarks. Prior to the referendum, the Bank of England was severely criticised by the Leave campaign for scaremongering. It was accused of overstating the economic risk in order to support the Remain campaign. But it is already clear that the Bank's analysis was accurate, as least as far as the near-term risks are concerned.

The principal risks identified by the Bank of England are threefold. Firstly, the financing of the UK's current account deficit is coming under pressure as inward investment flows slow down or reverse. Se…

Parliament and Brexit

I spent much of this weekend arguing on Twitter. (Yes, I know, nothing new there....) Specifically, arguing that Brexit cannot go ahead without Parliament. I said that before Article 50 is triggered, the result of the referendum must be debated by the full House of Commons, and ratified by a free vote.

Unsurprisingly, since I openly supported Remain, a number of people assumed that I was suggesting this as a way of overturning the result. They are wrong. I think a Parliamentary vote is necessary not to overturn the result, but to confirm it.

This referendum was in many ways a travesty. It did not require an absolute majority: even a few votes would be sufficient to end forty years of EU membership. There remains a grumbling unease that a majority of the UK population did NOT vote for Leave. and as I have noted before, the conduct of the campaign was shocking. The lies and deception on both sides were so extensive that people cannot possibly have made a fully informed decision.

All of…