Showing posts from October, 2015

No apology, just an explanation

My Forbes post on the threat to democracy in the EU touched a nerve. Well, several nerves, actually. Some people regarded my invocation of the Prague Spring as insulting to the people who suffered under Soviet oppression: others objected to my comparison of the benevolent EU with the evil USSR: and a few complained that I had presented the Syriza government as "martyrs", when they are nothing of the kind. And lots of Portuguese called me out for misrepresenting how their parliamentary democracy works. First, let me deal with the Portuguese. I'm not going to discuss the Portuguese semi-presidential political system, here or anywhere else. I don't claim to be an expert on the political system of my own country, let alone someone else's. In the Forbes post, I was careful not to suggest that the Portuguese President had exceeded his constitutional authority. I criticised his words, not his actions. Unfortunately it appears that my post, like others on similar

All Your Cars Are Belong Us

Did you know that most cars do nothing for 23 hours a day? Yes, they are totally idle. Sleeping safely in their owner's garage, or on his drive, or at her place of work, or in the station car park. Shocking, isn't it? What a terrible waste of assets. We should ensure that all these cars are DRIVEN. All the time. But there is a reason why all these cars are idle. Their owners are busy doing something else. Many people who drive to work, or to the station, do jobs that they love, that they have the skills to do, and that earn them a good living. Should these people give up their jobs and embark on new careers ferrying people around for money, just so their cars don't stay idle for large parts of the day? Really? No-one in their right mind would give up a job that was sufficiently well-paid for a quality car to be affordable, in order to drive for Uber (or any other "car sharing" business, for that matter). The remuneration just isn't that good.


In Dickens' " A Christmas Carol ", the miser par excellence, Ebenezer Scrooge, is frightened by the Christmas ghosts into uncharacteristic acts of generosity. But I have always wondered how long his change of heart lasted. After all, Christmas lasts less than 2 weeks....then the decorations come down, the lights go out and we all start our post-Christmas diets. The abundance of Christmas is followed by the scarcity of Lent. I fear that Scrooge's habitual miserliness would have made a swift return once the visions faded and the grim reality of a diminishing hoard started to bite. As  Fagin  says, "In this world one thing counts,/ In the bank, large amounts".....even if the price of your wealth is the poverty or the loss of others. Scrooge and Fagin are brothers under the skin. Yet our economy runs on generosity. Everything we have, we have because of the generosity of others - the people who produce what we invent, buy what we produce, give us their time, t

The shabby economy

Yesterday, I attended a panel discussion on the "Sharing Economy" at the Battle of Ideas. Benita Matovska, who describes herself as "chief sharer" of the comparison website Compare & Share , enthused about how the Sharing Economy would build communities, transform capitalism and restore the planet. "It's all about trust," she said. No it isn't. It's all about money. Here's what Matovska herself says on the Compare & Share website. I was trying to book a family holiday in Morocco - when we travel as a family we're quite adventurous, we like to share, meet real people and have those amazing money can't buy experiences.... I'm sure everybody would like to have experiences money can't buy. But actually she wasn't after a "money can't buy" experience. She was after an expensive experience at a cheap price: I spent hours searching through site after site and not finding the unique holiday exp

The UK Government is spinning a yarn

At Prime Minister's Questions the other day, Jeremy Corbyn produced a case study of a working single mother who would suffer a substantial real fall in income due to tax credit cuts despite the NLW and tax threshold rise. In response, David Cameron claimed the new National Living Wage and tax threshold rises would mean that working people on low incomes would be better off by 2020. Who is right? The National Living Wage will improve earned income for a high proportion of families. The Resolution Foundation estimated that : 4.5 million employees will see their hourly wage rise as a result of introduction of the NLW in 2016. Of those, 1.9 million earning less than the NLW are set to be brought up to at least that level, with a further 2.6 million gaining from spillovers.  By 2020, a total of 6 million employees – 23 per cent of all employees in Britain – are likely to have received some increase in their pay as a result, with 3.2 million being brought up to at least the NLW

The Slough of Despond

I'm bored. Bored with this crisis. Bored with endless calls for bank reforms. Bored with never-ending stories of inadequate bank resolution and legal battles which benefit no-one but lawyers. Bored with ineffectual monetary policy and fiscal gridlock. Bored with seeing the same things proposed over and over again, even things we know don't work and will never happen. Today, Mike Konczal wrote a piece on why restoring Glass-Steagall wouldn't solve anything. He's right, of course. But it is now seven years since the crisis, and we have known for most of that time that restoring Glass-Steagall wasn't going to happen and wouldn't solve anything anyway.Why are we still discussing it now? Why can't we just accept that Glass-Steagall is dead , and move on? Today, I had to explain YET again that although banks create money when they lend, that does not mean lending doesn't need funding. Payments are deposit outflows. That applies whether the deposits co

The dangers of historical taboos

The Group of 30 central bankers and economists has produced a new report, "Fundamentals of central banking: lessons from the crisis". It traces the history of central banking theory and practice, including the economic thought that underlies it. And it draws from it some important lessons about the causes of the 2008 crisis and the reasons for the very long, slow recovery. I've discussed the main themes of the report here (Forbes). But in this post, I want to focus on a particular piece of economic history. This chart leapt out at me from the report: Note that this chart starts only two years after the Weimar hyperinflation, hence Germany's elevated inflation rate at the start. This is important, as we shall see. What struck me is how similar the profiles of the two countries are during the Depression. Both experienced Fisherian debt deflation - annualised CPI fall at peak was 10% for both countries. And both had very high levels of unemployment. German unem

Posts on Russia

I wrote a number of posts on Forbes about Russia at the back end of 2014. At the time, there was a lot going on with the currency, the central bank and the banks. So for ease of reference, I've collected them here, in chronological order. Why the Russian Central Bank can't defend the ruble Has the Russian Central Bank thrown in the towel? The Russian Central Bank is regaining control, but for how long? Oil, sanctions and Russian politics How to destroy a currency, Russian style Russia and the banks How OPEC destroyed the Russian ruble Russian ruble: Let it fall, let it fall, let it fall The Great Russian Bank Bailout Why does Venezuela think Russia is its friend? No doubt there will be more in due course. Russia and its problems are not going away any time soon.

The "something for nothing" society

While visiting Germany in the summer, I was struck by the prevalence of adverts saying something on the lines of "Sie sparen können". I've never seen a society so obsessed with saving, not in the sense of putting money away (though they do that too) but in the sense of reducing costs. Never mind the quality, look  at the price. "You can save". Always. Penny-pinching is by no means limited to German households. Ever since we collectively decided, on September 16th 2008, that the money had run out, we have all - households and businesses - been scrimping and saving like mad, reluctant to spend money in case we too run out. We look for bargains, delay purchases until end-of-season sales, and avoid paying for things unless we absolutely have to. We have become a "something for nothing" society. At an individual level, this seems sensible. Most people have limited incomes, and wages have stagnated for a long time now. Businesses, too, have felt the

Capital, liquidity and the countercyclical buffer, in plain English

The FT reports that due to “modest but rising credit growth”, the Bank of England’s Financial Policy Committee (FPC) considered raising banks’ countercyclical capital buffer. According to the FT's Caroline Bingham: This measure requires lenders to build up capital in good times to draw down in more challenging times.  And she goes on to say this: The prospect of yet more capital that banks must set aside would come on top of capital rules on a European and global basis that lenders must implement. They complain that these ever-increasing buffers weigh on their profits and therefore lending ability. No, Caroline, no. Banks do not "build up" or “set aside” capital. Capital is an integral part of the balance sheet structure. As the Bank of England explains , it is a form of funding: It can be misleading to think of capital as ‘held’ or ‘set aside’ by banks; capital is not an asset. Rather, it is a form of funding — one that can absorb losses that could otherwis