The king with no clothes

I suppose it is inevitable that the trial of Michael Jackson's doctor should be televised, but I think it is unfortunate. In the news reports you can sense the prurient voyeurism. You wonder whether the people, his fans, wanted him to live a normal life, wanted him indeed to live, or whether they prefer it this way. It seems to have been the latter but now he is dead there are regrets. Did they have to publish a photo of his corpse? Was this the prurience or a lawyer's trick to shock?

And you can sense the desire for a guilty verdict. People don't want to think of their hero as a weak minded, drug dependent automaton who could be got on stage with the right cocktail. So he must have been killed.

I suppose for many this must be compulsive viewing. For me it is repulsive. Michael Jackson allowed himself to be pushed into an ever more artificial life. He was killed by his fans.

A crisis of leadership

Bankers are impatient souls. I know, I worked for what was then a very conservative bank for a decade, and we liked things decided - plenty of caution and deliberation in the decision, of course - but decided, so we knew how to act.

As I have remarked before, the markets are tolerant of the Eurozone, believing it will all come out OK in the end, but this tolerance is beginning to fade.

There was a meeting, if you remember, on July 21st, where the whole damn thing was going to be settled. Now two months later, it still isn't. A greatly delayed decision to give the Greeks another €8bn has still not been approved. Just to put things in perspective, Greece's funding needs over the next three years were forecast at the time of the July meeting to be €172bn (yes, that's a bit more than an eighth of the British economy) over the next three years. Now it would seem to be more. How much more? They haven't a clue.

I seem to remember writing recently that the only people who don't understand that Greece is going to default are the people who matter.

So in the next couple of weeks (no hurry, chaps, don't shorten your lunch) someone will put a figure on how much Greece needs. Clue: it won't be less than the €172 bn thought of before. And then they will start the decision making about what to do. I know, it seems scarcely credible, but that's how it works.

Rumours were pretty heavily spread that the bailout fund would be increased to €2 trillion, but the Spanish finance minister (a possible beneficiary) has said no one has suggested that.

Er..just a tip chaps, if I'm not interrupting lunch or dinner, but the markets were hoping for a bit of leadership. No? OK, then, no. Fair enough, we don't want the political elite to panic.

That's fast

There was a young lady called Bright
Who could travel faster than light.
She went out one day,
In a relative way,
And came back the previous night.

I have just a suspicion that the discovery in Gran Sasso, Italy, of a particle exceeding the speed of light, should be taken with a nanogramme of salt. It was probably a FIAT jumping a red light.

Statistic of the week

Before this benighted global warming stellite fell to earth, NASA said it had a 1 in 3,200 chance of killing someone.

Now I live near a town of more than 3,200 people, so.....

By the way we are now likley to be hit by a German telescope falling out of the sky. Much more of this and I shall be statistically likely to be a goner.

A step backwards

Italian magistrates have demanded the arrest of Marco Milanese, a deputy of the ruling party and principal adviser to Finance Minister Giulio Tremonti, who is accused of corrupt practices.

Unfortunately Mr Milanese cannot be arrested without the approval of Parliament, and the Majority have voted against releasing him to be tried.

I have written before that the Italian people are losing faith in their governing class, La Casta, and this is going to exacerbate the matter even further. Demonstrators outside the Parliament building wanted to know why he should be treated differently to the rest of the population.

This really has got to stop. Italy desperately needs a new revolution - it had thought Berlusconi was one - and corruption, underperformance and overly generous remuneration amongst deputies needs to be ended. Berlusconi has made a serious mistake here: if the people have no confidence in their rulers they will get rid of them.

A satellite falls

The Americans have no idea where their satellite is going to fall - they gave some co-ordinates but it turns out they cover almost the entire inhabited portion of the planet.

We now learn that the satellite was there to monitor global warming. So, not content with telling you life as you know it was about to end, the damn thing might land on your head.

According to the Telegraph: 'NASA has warned people not to touch the debris if they come across it because it is likely to have sharp edges.'

I should have thought sharp edges were the least of the problems you might encounter.

What's in a name?

The FT's Brussels blog asks why there is no nickname for the euro, like a buck for a dollar or a quid for a pound.

What about calling it after the ECB President: a trichet?

In French tricher is to cheat; tricher avec les chiffres is to doctor the figures.

Troy Davis

We cannot, of course, know for certain whether Troy Davis was the man who killed Police officer Mark McPhail, but his appeals were turned down at every stage, including the final one to the Supreme Court, last night. All but a handful of American States have the death penalty and Davis was executed..

However the crime was committed in 1989 and Davis was convicted in 1991. He has spent 20 years, from age 22 to age 42 knowing that his life was at the disposal of the Justice System. Twenty years. I should have thought that was a 'cruel and unusual punishment' as the Eighth Amendment calls it.

Palestine

Mahmoud Abbas, otherwise known as Abu Mazen, Prime Minister of Palestine, is to present a petition to the UN asking to be a recognised state.

I can't help thinking this will do nothing for the people he represents, but plenty for him.

It cannot succeed, in the present form, at least. Everyone believes in a two state solution to the problem, but it must come through negotiation. The Americans, and the British if Cameron has any courage, will veto it. Other Arab countries will vote in favour, but none of Palestine's neighbours, such as Syria or Egypt can do anything practical to help: they have too much going on within their own borders. In any case Arab countries have traditionally shown a reluctance to get involved.

And whom does Abbas speak for? Gaza, supposedly a part of Palestine, is ruled by his opponents, Hamas. If Palestine were to become a member of the UN, it would be a country without borders - the demarcation lines are, at best, in dispute. And for there to be a land bridge between Gaza and East Jerusalem, the consent of the Israelis would be required. A solution as in Northern Ireland where each country recognises the other's independent existence through its constitution would exclude Gaza.

Abbas must know all this, and thus the only possible conclusion is that he is pursuing statehood in order to bolster his own position, at the expense of peace among his people.

This demarche is the last thing Palestine needs.

DSK down and out

Dominique Strauss-Kahn has admitted on French television that his liaison with a chambermaid in New York was 'une faute morale', and that he will not be able to challenge for the Presidency.

Presumably he will have done some private polling and concluded that what with a few other little 'fautes' pursuing him, even the tolerant French electorate will not put up with it all. He will be 68 at the time of the next election and that is probably too old.

DSK's big advantage, of course, was that he wasn't Nicolas Sarkozy. But strangely, his troubles rather obscured his policies. Had he stood, it would have been a case of whether you could put up with all the baggage or whether you couldn't, not whether you liked his policies.

In fact DSK is an old fashioned corporate socialist. He likes big government, plenty of interference, and mistrusts free trade. Pretty well exactly what France doesn't need now.

Who will benefit from all this? Sarkozy, of course, who should have an easy run into a second term (barring disasters) and Marine Le Pen, who is likely to beat one of the lacklustre socialist candidates to become the contender.

Passport to anonymity

The UK Passport Agency is considering allowing people not to enter their gender on their passport application, in order not to offend 'transgender' people.

One's gender is, like it or not, part of the identification procedure. It seems an invitation to Muslim terrorists to appear in a burqa, saying they are female.

I should like passports not to contain a photograph, lest it upset ugly people.

Danish Democracy

Denmark has had elections. I have a nice picture of the Danish flag, which due to the incompetence of Google I am unable to show you. Anyhow it is a white cross a little left of centre on a red background.

The election result is difficult so follow me carefully here.

The largest party in the Folketing (parliament), which had a slight increase in its support, will no longer form the government. That will be done by Helle Thorning-Schmidt, whose party, the Social Democrats, had their worst result for 100 years. Such are the vagaries of the proportional representation system, which the poor loves fondly believe is democracy. Still nobody knows exactly what government policy is, because they are in a huddle working out their coalition. Anyway, Ms Thorning-Schmidt is what they have got.

Known as Gucci Helle for her posh clothing, Ms T-S is the daughter-in-law of Neil Kinnock, the former British Labour leader, whose nickname was ‘the Welsh Windbag’. Her solution to Denmark’s problems, quite original given what is going on in Europe, is more government spending.

Poor Denmark.

Italy's budget

Those who were listening to BBC Radio Solent at 7am UK time this morning (OK, not that many, I admit), could have heard my dulcet tones explaining what is going on in Italy.

There was a small riot outside the Parliament building as they passed the budget; at least it was small by Roman standards. Some imaginative soul threw a pig's heart (although the Corriere della Sera says it was a veal heart: I think we should be told; an end to cover-ups!) but otherwise not much. The savings to be made, which are about double those being made in the UK, are, to a large extent agreed by Italians. They are persuaded, in my view correctly, that without these savings Italy would not be able to stay in the euro.

I think it important to think a little about the Italian psyche here, and it applies to the budget and to the Berlusconi case which is warming up nicely (more later). The Italians are not a nation of economists and they are not a nation of puritans. What is of great concern to Italy is the way the world sees it, its bella figura. They believe they must be a part of the euro not for some technical reasons - anyone who knows the least bit of the mechanics of the thing thinks they are mad to stay in - but because they want to retain a seat at the top table. Equally Berlusconi can get up to whatever he pleases until it  gets to the point that he is bringing down Italy (and I believe it may be getting to that point now).

So, there must be savings and there will be suffering. What the disagreement is about, and it is shared by the left and by the Confederation of Industry and by the ordinary people, is that it is too much in the way of taxes and not enough in the way of cuts. In fact, of the €54 billion in the budget, around two thirds is increased taxes and one third is cuts. VAT goes up by 1% immediately.

The reasons for the mistrust of the balance of this manovra are twofold: firstly, as Emma Marcegaglia of Confindustria says tirelessly, Italy's problem is lack of growth. Italy needs government expenditure cuts - in many areas the State chokes out private enterprise - it needs a sell off of State owned assets which amount to many billions and are only there as pieces on the political chessboard, and it needs an overall reduction in day to day costs of the State, a reduction in payroll and a general reduction in activity.

The other side of the argument, held by the left and by the ordinary folk, is that Italy needs to tackle its vested interests. In many ways the budget is targeted at ordinary people and leaves the rich off the hook. A VAT increase hits a family trying to clothe its children, it does not hit the rich and powerful, who don't pay much in the way of income tax either.

This blog agrees with both views: the budget should have been 75% cuts and sell-offs and efficiency drives, and the remaining 25% could have been covered easily by making the ruling class pay its taxes. Many people think they might have done well to copy Mr Cameron and be seen to reduce the costs and numbers of MPs. Vested interests again, and there's no one with the balls to tackle them.

Waking up the dreamers

An astonished euro supporter, that is to say a supporter both of the single currency and of the rest of the ‘Project’ asks what has gone wrong. Sometimes I try to see this in terms of human nature.

There is a certain sort of person who believes that if something is desirable, it must be achieved. They say the magic words ‘it must be achieved’ and sit back waiting for it to happen. Tony Blair was a little like this: he would say something like ‘we shall eliminate child poverty’, hand over the big picture to technocrats who, too scared of telling him it can’t realistically be done, chug along, nudging themselves in the right sort of direction until he has forgotten about it. But at least Blair never pursued something he knew to be impossible – you see, he was a pragmatist and never really believed in anything.

If you couple this dirigiste dreaming with religious fanaticism, however, you have problems. And religious fanaticism is what the euro is all about. Never mind that anyone who understood these things told them it wouldn’t work, a single currency was desirable, we would have it, it was part of The Project. Even now, when it is crashing round their ears, they can’t listen. Tony Blair would have dropped it a while back with a deft speech on how it was a jolly good idea, but one for the future. The people who run Europe can’t seem to do that.

To believe that Greece could have the same currency as Germany you have to be a fanatic, an idiot, or someone who has never left his own small town. The Germans strive to get ahead, they invest for the future, sacrificing present gratification, their system is, largely, incorrupt. It is quite the opposite state of affairs in Greece. This is obvious, but I am saying it now because it is particularly relevant.

Suppose a household has some sudden one-off expenditure but is fundamentally sound. It borrows, against its other wealth, say the unmortgaged portion of the house, and pays those borrowings off in time. That is solving a liquidity problem and borrowing is a very good thing for it.

Greece does not have a liquidity problem, it has a solvency problem. It is as if the members of the household had become unemployable: increasing the debts isn’t the answer. Greece needs to get working: it needs to cut expenditure, let the private sector flourish, collect its taxes.

And yet our euro-masters persist in presenting debt as the solution, because they can’t bring themselves to believe that Greece is different to Germany – they’re both Europeans, aren’t they? So Greece will get worse every year: as it lags further and further behind the others, bogged down by its sclerotic inefficiency. Already it has been unable to meet the targets of the last bailout.

Mr Barroso has stated that the solution to Europe’s problems is further integration. The Commission has proposed eurobonds as a solution, even though a decision of the German Constitutional Court only last week has said they would be unconstitutional.

French banks, immersed in the crisis of 2008, were told they had to hold more liquidity. Very good. What constituted liquidity for these muttonheads? Why, euro sovereign bonds. They chose Greek ones because Greek ones paid the best (they didn’t ask why – surely the bonds of all European countries are the same, aren’t they? I mean, they’re all European). When Greece started to get into trouble the French and European regulators told them to write down 20%. It should have been at least 45% then, and it should be at least 80% now. So this morning the French banks are downgraded.

Everybody knows Greece is going to default except the people who matter. These people need to be taken outside and repeatedly slapped until they come to terms with reality. Now they have left it so late it is not just Greece.

Libya - how we are helping

New Libyan Flag

Mustafa Abdul Jalil, the leader of the Transitional Council in Libya has declared that Sharia Law will be the main source of legislation in the new Libya.

So we have fought a war to ensure public executions, mistreatment of women and homosexuality punished by death.

I said at the start that we didn't know much about the people we were helping and now we know a little bit more.

Ring Fencing the banks

Today the Vickers Committee on Banking published its report and, as predicted, came out in favour of ring fencing.

The idea here is that investment banking and commercial banking are two quite different types of risk and one type should not subsidise the other. The first instance of this was in America in the 1930s and called the Glass-Steagall Act (GSA). The GSA however simply forbade banks from operating the two different functions: they had to be one or the other. As I outlined in a much earlier post, total separation is not however necessary. Ring-fencing would mean Barclays Group could own Barclays Bank and Barclays Investment Bank but that one bit couldn’t subsidise the other.

I am broadly in favour of Ring Fencing but with a few caveats. The first thing is that it isn’t the be all and end all of solving banking risk. It really isn’t too difficult to go bust as a commercial bank, either by making too many bad loans, as several banks nearly did in the 1970s and 80s, or by getting the funding wrong, as Northern Rock did. ‘The Rock’, as it was mistakenly called, didn’t have an investment banking arm and no amount of ring fencing would have saved it.

And then, of course, when a commercial bank was in trouble, it might be useful to rely on the funds of a successful and profitable investment bank: I have repeatedly said ‘one shouldn’t subsidise the other’ and whilst the Vickers Report seems to think the risk is that investment banks will get into trouble and take away the capital of commercial banks, it can go both ways.

The other caveat is the cost. Some figures suggest that it might cost the City $7 billion to implement the proposals and whilst others come in lower there will definitely be a substantial cost to this, just at a time when we need the banks to be doing more lending to private sector companies so they will expand and take on workers formerly in the unproductive public sector. Competing financial markets in America, the Far East and Europe aren’t proposing ring fencing.

My view is that we should do this, but not until there are clear signs that we are through the worst. And that isn’t now.

9/11

As everyone in the world, I suppose, already knows, this is the tenth anniversary of the attacks on the World Trade Centre and the Pentagon. It changed the world, mainly but not exclusively for the worse.

At the time, America had not suffered from terrorism and there was an uncharitable but understandable view current after 9 / 11 that it was probably better for all of us that they now had some experience of it. Something like 3,000 people died in the attacks, almost as many as died in the Northern Ireland ‘Troubles’, which had in part been encouraged by American politicians such as Ted Kennedy. Still, the ‘Troubles’ lasted thirty years whilst 9/11 happened in a few minutes.

It was shocking not just for the loss of life but for its symbolic importance. The Word Trade Centre was a totem of America’s economic might, in the heart of its chief city. There was a feeling that nothing would ever be safe any more.

The Second Iraq War and the war in Afghanistan would probably not have happened without 9/11, and the N. Ireland Troubles would not have been nearly so bad if the Americans had known what terror attacks on the civilian population was like. I don’t think, though, that it pays to dwell on these things.

The projection of power after 9/11 was so quick and so unsuccessful that we can say that those few minutes ten years ago have made the world doubt the use of military intervention. That might, I suppose, be a good thing.

One strange development was the extraordinary attitude of the British and European Left, who professed that America had somehow deserved this. I think you have to be a pretty strange person to adopt this view, although the Guardian newspaper and the BBC portrayed it as normal.

Lastly we have the conspiracy theorists, who have had a good ten years. A short trawl of the internet can reveal that George Bush organised the bombings so he would have an excuse for a war; that Israel was in fact behind it, following the false rumour that no Jews died in the blasts, or that Dick Cheney wanted an excuse to clamp down on civil liberties. They are the only light relief in the whole sorry business.

Opportunities to remain silent (2)

Pope Benedict XVI has reportedly blamed the recent riots in England on a moral relativism which has swept the country.

He may well be right, but, and I have said this before, this is from a former member of the Hitlerjugend who turned a blind eye to child molestation in his church. Despite his exalted position I am not sure I want to hear about moral relativism from this quarter.

I recommend to His Holiness the words of Seneca: 'It is a great thing to know the season for speech and the season for silence.'

Structured Co-operation

Don't know what 'structured co-operation' means? But you should, you should.

As you can imagine from the almost meaningless juxtaposition of two words, it comes from the European Union. What it means is that the unelected political class which runs Europe found it difficult to get along with this tricky democracy business and decided to enable a system whereby if some countries didn't vote for their policies, others could go ahead and enact them.

In this case it is having a military headquarters. Not content with NATO, the quintet of France, Germany, Italy, Spain and Poland have sent a letter to the amazing Baroness Ashton saying they are going to go ahead. Britain has of course said no and there can't really be a European military structure without Britain, but they have decided to spend the money anyway.

The reason is that their 'united' Europe has to have all the accoutrements of a nation state; an army, or at least the top brass bureaucracy of an army (apart from France none of these countries has anything like a significant military), is important.

Never mind the fact that Europe is breaking up, it's full steam ahead towards a disunited Europe!

Hypocrisy (No. 341)

John Galliano used to be the head of design at the fashion house Dior. At the beginning of this year he was sacked for having made anti-Semitic comments including, to the owner of a Paris bar, 'People like you would be dead today, your mothers, your forefathers would be gassed.' Today, because expressing your own opinions if they disagree with the State is illegal in France, Mr Galliano was given a suspended fine and told to pay the costs of a number of hangers on anti-racist groups.

In March this year, dismissing Mr Galliano from his post, the Chief Executive of Dior, Sydney Tolledano, said Galliano's comments 'totally contradict the values which have always been defended by Christian Dior'.

Er, no. Christian Dior made his name and his money during World War II dressing the wives and girlfriends of Nazi officers and collaborators.

For Mr Tolledano this would have been, as Jacques Chirac once put it, 'an excellent opportunity to remain silent'.

Abortion: the Dorries-Field Amendment

Nadine Dorries MP

Nadine Dorries MP is photogenic and also good copy, so it is perhaps not surprising that she should have received most of the publicity over the recent proposed amendment to the Government’s Health Bill, more than her co-promoter Frank Field, a long serving MP who seems to be about the only person in the House of Commons who is universally liked and respected.

Ms Dorries is a bit of a terrier, and refuses to let go of something once she has got her teeth in it, a quality perhaps better in an MP than it is attractive in a person.

Their proposal was that organisations who perform abortions for money should not also give ‘independent’ counselling: they are clearly not independent.

Unfortunately every suggestion concerning abortion is treated by the Left as an attack on abortion itself.

This was not, however, an attack on abortion, of which Ms Dorries declares herself to be in favour. There was no suggestion that a woman should not have the right to an abortion, only that the counselling she receives should not be from someone who stood to make money from her having the abortion.

I must say I had no idea that this could go on and was quite astonished. How many people do they counsel not to have an abortion?

Mr Cameron in particular has behaved disgracefully over this. He promised to support the amendment, and then when his coalition partners the Liberal Democrats said they wouldn’t agree, withdrew his support. At Prime Minister’s Question Time Ms Dorries had the courage to ask him when he would stop giving in to everything the Deputy Prime Minister demanded, and remind Mr Clegg who was boss. Mr Cameron began his answer with ‘I know the Honourable Lady is frustrated...’ and when there was a puerile outburst of giggles in the House, gave up and sat down.

Mr Cameron should apologise to Ms Dorries and explain to the public why he thinks it better that a woman should receive abortion counselling from the organisation which is going to operate on her for money.

PS Mary Wakefiled points out in the Spectator that one pregnancy in five is terminated in the UK, twice as many as in Germany. Why should this be so?

Four years

This blog began on 8th September, 2007 with a post on the fallout from the subprime fiasco, which seems less pessimistic than hindsight would demand. During these four years I have received some 33,000 page views.

There will be some changes to the format of the blog over the next few months but nothing dramatic.

I thank you all for reading it.

More changes....

Right at the last moment, Italy has given way to persuasion from its European partners and proposed what must be the fourth version of its budget in as many weeks. This time there is something to upset everyone: a wealth tax which Berlusconi initially refused to contemplate, a rise in VAT, which Tremonti the finance minister had previously rejected, and pension reform which Umberto Bossi, Berlusconi's main ally, said he would not tolerate.

So, that seems fair.

The problem is that all this uncertainty has painted a clear picture for investors of a government which hasn't a clue what it is doing.

More of the same

The German Constitutional Court, or Bundesverfassungsgericht, has, as expected, approved the Greek bailouts, rejecting a claim that they breached the Consitution.

This is good news in that a rejection would have thrown the markets into turmoil, but bad news in that it gives the green light to more of the same expensive and ineffective policies to prop up a currency which is entirely a political construct.

The Court has said, however, that future bailouts must be referred to Parliament, where Mrs Merkel is finding it difficult to maintain her majority.

Who are the rebels?

The case of Abdul Hakim Belhaj is nothing if not thought provoking.

What is alleged is that Belhaj was captured by the CIA in Thailand in 2004 following a tip off from Britain. It seems his associates told British diplomats in Malaysia that he wanted to claim asylum in the UK, that he got on a flight and was snatched by the Americans at Bangkok where he was tortured, and then flown to Tripoli where he suffered years of abuse in prison. He is now a rebel commander.

I am perhaps alone in the view that people get a little hysterical at the thought of torture. In this regard the chattering classes are not in the same place in the argument as the ordinary man: if someone knows of a plot to blow up a bus or train his daughter might be travelling on, the ordinary man wants the guy tortured.

In this regard Belhaj was a member of the Libyan Islamist Fighting Group, which had strong links to al-Qaeda. Whilst it is a little bit sneaky allowing the guy to board the plane in order to claim asylum – he had no visa – it was a bit sneaky of someone who had terrorist links to claim asylum in the UK in the first place.

The British and Americans wanted Belhaj removed from operations and who better than Gadaffi to do that: Belhaj was Libyan (albeit with a range of false passports) and the Colonel saw LIFG as a threat.

What I want to dwell on for a minute is that ‘Islamist’ in the title. Belhaj has renounced terrorism, he says, and severed links with al-Qaeda, but is he an Islamist, wanting, like the Taliban, to restrict individual liberty, by force if necessary, in conformity with their interpretation of the Koran?

I have written before that we don’t seem to know much about the people we are supporting, and this guy was not so long ago regarded as sufficiently nasty that we handed him over to Gadaffi.

A politician by any other name

James Perry

I have written before about British politicians such as Gideon 'George' Osborne, Alexander 'Boris' Johnson and John 'Vince' Cable who for some reason don't want to go under their given names, as if they were hiding from their creditors.

But it is not just a British phenomenon; I now learn that the front runner for Republican Presidential Candidate, Rick Perry, is in fact called James.

PS his wife is called Anita Thigpen, which nobody could have made up.

A service to the world

From the Daily Telegraph: 'They were the Tripoli rebel underground, the people who kept the resistance fire burning in the heart of Gadaffi's capital....And one of their main leaders was a NHS dental surgeon from Cardiff.'

Strangely enough Bashar al-Assad, President of Syria, was an ophthalmologist in London, Col. Gadaffi received military training in England and almost every tinpot dictator on the planet has studied at Sandhurst.

Britain is obviously providing a service to the world, even if sometimes you wonder which side we are on.

Auxology and the aubergine

Auxology, not in my Oxford English Dictionary, is apparently the study of human growth, and according to the Auxology Institute of Milan, Italians are growing more than most. Outwards, that is, not upwards.

Despite being famed for its Mediterranean diet, Italy has the highest proportion of overweight children in Europe. The diet has, it would appear, been abandoned for the sort of fast food the rest of Europe eats.

One issue must be that more Italian women are working and haven't the time to cook for their children.

So as the British increasingly eat like Italians, Italians increasingly eat like British. It seems a shame, really.

Fiddling while Rome burns

There have already been more than 1,000 amendments to Italy's budget, and it is not over yet. The Government seems to have given in on something like €4bn so far.

Berlusconi is a politician - as I said in the previous post on the subject, if there were a public clamour for austerity he would provide it. But there isn't.

Italy now desperately needs a respected figure to persuade the Italians that all this is necessary. The next election will be too late. The only figure I can think of is Montezemolo. But Italy needs someone and now.

Frau Lagarde

Is Christine Lagarde, the new head of hte IMF, proving a little less French than I had feared?

At the Jackson Hole comference of central bankers she shocked everyone by saying that Europe should attend to the recapitalisation of its banks. This was strongly denied by Brussels, which is another reason we should take it seriously.

Despite two attempts, European banks have still not endured an adequate stress test; in particular their holdings of suspect foreign sovereign debt have not been properly scrutinised.

Lagarde is at least half right. Europe should worry about its banks, but stop bailing out its sovereign members.

Chutzpah

It used to be said that the definition of chutzpah was a child killing its parents then asking for the mercy of the court because it was an orphan. But how about this?

The family of Abdelbaset al-Megrahi, the convicted Lockerbie bomber who was released from a Scottish prison, has appealed for Scotland to send doctors to treat him, on the grounds that he didn't trust the Libyan ones.

Constitutional Limits

A big case has been made in Europe for countries to pass a constitutional amendment limiting the size of the permitted deficit.

And on the surface it sounds rather good.

Spain has just reached agreement between the two main parties limiting its deficit to 0.4% of GDP by 2020, which sounds too good to be true (you will remember that the Eurozone tried to limit deficits to 3% and neither France nor Germany was able to do it, thus rendering it a nonsense).

But the terms of the proposed Spanish constitutional amendment allow for this limit to be abandoned in times of natural disaster, economic recession or other exceptional circumstances.

So actually it's quite worthless.

In the end, a constitution is just a set of laws which require a larger majority to amend them. But it can be amended.

Italy's budget

Emma Marcegaglia, head of the employer's federation Confindustria, is in my view one of the few impressive public figures in Italy. She has just pronounced on the budget, or manovra, rightly pointing out that it consists largely of taxes, whereas what Italy needs is expenditure cuts and growth measures. What she regards as the only useful bit, the employment measures, has been denounced by the left who say they will not accept it.

For myself I never really believed that the Government had any intention of putting this stuff into practice; they just wanted to silence the markets. Unfortunately the markets are in possession of, and can understand the real figures. We are not talking about fooling the Gazetto dello Sport here.

But Ms Marcegaglia takes it seriously and so should we. Italy's problem is that the State is too big and the individual is too small. It's not just that the public debt is too large - in fact it is at almost comic proportions - it is that this state of affairs, seen mainly in undeveloped and dirigiste economies, encourages idleness, corruption and the favouring of special interest groups (it's the squeaking wheel that gets the grease) at the expense of the overall economy and thus of the people. Even without the debt it would be necessary for Italy to reduce the size of the State; with the debt it is only a question as to whether they can do it in time.

Instead, Italian politics is a matter of balancing the various vested interests and the Government, wary of upsetting the wrong people (that is to say important people, not the people themselves) has relied on raising taxes.

Italian growth has for years lagged behind that of the rest of Europe, and raising taxes will inhibit growth, reducing the country to stagnation and inflation while it remains in the euro and cannot devalue.

Many commentators believe that for the necessary reforms it will be necessary to remove Berlusconi, but I think that misses the point. Berlusconi is a butterfly, and if there were a massive popular movement to cut back the state, he would flutter in that direction. But there isn't, and most people realise that the left returning to power would be even worse, even more anti-reform.

All that can save Italy, and perhaps Europe, is a massive stirring of the political pot. For myself I hope that Ms Marcegaglia rises to the top.

The new France?

Marine Le Pen's party, the Front National, is close behind Nicolas Sarkozy in the opinion polls. She has done a rather interesting interview jointly with the Spectator and the American Spectator. Here is what she says about Europe.

‘The EU has become the Soviet Union of Europe, it was created without the consent of the people, and often against the people. It crushes us with rules, regulations and norms, while suffocating our economies with the straitjacket of the euro.’

 I'm not sure I much like her views on other things, but this seems spot on.

Obesity

Caroline Flint Fat enough?

Recent panic about obesity left me with that dulling of the senses you get when a newspaper is short of things to publish and English pseudo scientists are keen to get a grant. You’re reluctant to disbelieve it but at the same time reluctant to believe it.

Of course they recommend a fat tax on junk food. I suppose however this would be a little unfair if I went jogging every day in order to enjoy a Big Mac – I would be paying the tax without being overweight. But there are problems in imposing a tax directly on fat people, hauling them by crane to be publicly weighed and denounced, problems which even this nannying government would resist.

But it is the veracity of the findings I want to take issue with. Reading them I had a sense of déjà vu and I am grateful to the Velvet Glove Iron Fist blog for helping out with some facts.

According to the BBC 40% of British men – up from less than a quarter – could be obese by 2030.

The last obesity panic was in 2006. The Prime Minister, Tony Blair, in accordance with his unwavering policy of having to be seen to be doing something (as opposed to actually doing it) had appointed a Fat Minister. At least she didn’t look very fat, so may not have known anything about the subject.

Now in 2006 the experts reckoned that by 2010 – only four years away – the obesity rate for men in Britain would rise from 23.1% to 33%.

So how did it turn out? The obesity rate didn’t in fact rise but fell to 22%.

Now are these the same experts with today’s prediction?

More mindlessness

The Telegraph reports that the Government is to give its consent to a new European Directive which allows agency workers - temps - the same rights and benefits as others.

While one side of the Government (Gideon 'George' Osborne) assures us that there will be measures in favour of jobs and reducing regulation, the other side (John 'Vince' Cable) comes up with this idiocy. In the midst of an awful recession and rising unemployment the Government proposes to increase the costs of employing people. We can almost forgive the unelected bureaucrats in Brussels who came up with this idea, because they don't have to live in the real world. But the elected government of the UK does have to live in the real world and they have completely lost it.

The truth of the matter is that Mr Cameron's unelected and anti-democratic coalition has to say yes to everything European, however mindless, just to keep the likes of Mr Cable on board. The workers and the unemployed can go hang.

Mindless

What are trades unions for? I ask the question because there is the most extraordinary battle going on in Italy at the moment.

I have never belonged to a trade union because I have worked either for myself or in industries which permitted me to negotiate my own salary and benefits; also where it was simple to move from one job to another. It suited me not to be lumped together with everyone else, I believed, so that if I was better I could be rewarded accordingly.

This applies to many industries but I should have thought to none so much as professional sport and in particular football. There is a discernible difference between Wayne Rooney and an ordinary member of a lesser team and their income is awarded accordingly.

And yet the Italians have somehow contrived to set up a union for top players - Serie A as it is called here and there is an employers' union to match it. And of course they are now on strike.

It doesn't take me much thought to find the prospect of top footballers going on strike - people earning millions a year, don't forget - quite revolting. They are entertainers, nothing more than that, and they should feel gratitude and responsibility towards the people who pay them, the fans. 

US Elections

The Daily Show
Get More: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

American elections, like Christmas and the football season, seem to start earlier and earlier. The next one is due 14 or 15 months away, for a President to take office in 2013, but already it seems to be warming up.

The only candidate I would myself vote for, the libertarian Ron Paul, seems to be popular in straw polls and primaries but the story is no one would actually vote for him.

The popular money, unless Sarah Palin stands, would be for a Republican candidate Rick Perry, with running mate Michelle Bachmann, to stand against Obama.

As far back as I can remember the choices in the Presidential Election seem to have been bleak, and of course some have turned out good and some bad. It may well be that Rick Perry would make an outstanding President; it just doesn’t look like it. He described the prospect of a third round of quantitative easing as ‘treason’; this from a man who once promoted the secession of Texas from the Union, which would have been treason indeed. People who shoot their mouth off can be attractive characters, but not too good, for example, at diplomacy with the Chinese, on whom your country depends to buy its debt.

Nevertheless, the prospect of the British-hating Obama is not appealing from this side of the Atlantic.

One problem for Presidents is government spending. Even Reagan, who used to say that the most terrifying words in the English language are ‘I’m from the government, and I’m here to help you’, raised state spending to uncontrollable amounts. Government debt is now $14 trillion (that’s $14,000,000,000,000). Republicans spend on the military, Democrats spend on welfare, but everybody spends. The only candidate with any kind of policy for reducing it is Ron Paul, who, as I say, is unlikely to be chosen.

America has the choice of debt management or decline. This election is important, or would be if anyone had anything useful to say on the matter.

The euro: trouble at home?

The German Bundesbank, in its latest monthly report, says that the agreement cobbled together on 21st July 'threatens the principle that elected parliaments should control budgets'.

The Bundesbank believes that either the Eurozone should stick to the 'no bailout' rule, which is what the treaties currently in force say, or there should be new treaties permitting them.

The German constitutional court is due to rule on the legality of the bailout fund, the EFSF, in late September. If it rules against the EFSF, recent market attacks on the Eurozone will seem like friendly gestures.

Libya: further in

Mr Cameron, in a press conference designed to make him look Prime Ministerial, has refused to rule out the use of ground troops in Libya.

In a separate development China has said that the West must pay for the reconstruction in Libya, and clean up its own mess.

There is a terrifying inevitability about all this. We must watch while we are dragged gradually further into another pointless conflict, another war without gain.

Libya

I have been surprised at the turn of events in Libya. Firstly, although Gadaffi was better prepared against insurrection than his counterparts in Tunisia and Egypt, I had not expected it to last 6 months (it started in mid-February). Second, I had expected the Gadaffi clan to go down like Saddam Hussein's, with guns in their hands, but the sons have apparently allowed themselves to be captured.

Once Gadaffi is taken or killed, and it seems likely to be sooner rather than later, we and the French and the rest must pull out. This is not our war and we have stretched the UN Security Council mandate to its limit: it was 'to protect civilians' which should also include Gaddaffi's civilian supporters (Gaddafi himself holds military rank and therefore doesn't count). Instead we have clearly taken sides, without really knowing what 'our' side is like. The French have even been supplying the rebels with armaments, it is said, manifestly against the UN-imposed ban.

Now, this week probably, is the time to return our planes to their original bases and pull out the 'advisers' and go home. Then, as we should do after every military involvement, we should have a debate in Parliament as to whether it was a good idea. In my view it wasn't.

Culpability

Stockmarkets fell through the floor yesterday and are looking weak again today. Much of the blame for this, and the resulting loss of savings, diminishing of pensions and difficulty for companies funding themselves must lie at the feet of Nicolas Sarkozy and Angela Merkel, whose silence on Tuesday was the clearest possible indication that they are trapped in the politics of the euro and unable to offer the slightest clue as to solving the economic issues which threaten to strangle Europe.

Elections are for 2012 and 2013 in these countries and it is to be hoped that electors who have lost money due to this duo's lack of understanding of markets and terminal indifference to anything but politics will remember and cast their vote accordingly.

Cameron's coglioni

The markets think it likely that much of the peripheral European countries' debt can never be repaid. So in the middle of a crisis which threatens the very existence of the eurozone, Merkel and Sarkozy stand up.. and have nothing to say. It would have been better if they had not had the summit at all.

The leitmotif of German-French thinking is, as discussed before, moving towards a common economic government for Europe. This however will take time - years - whilst the crisis is on us right now.

The proposal for a tax on financial transactions, or Tobin Tax, at an EU not just eurozone level, is both silly and dangerous. It would particularly damage the City of London, which provides massive tax revenues to the UK.

The question is, does Mr Cameron have the courage to put a stop to this, or does he just do what Merkel and Sarkozy tell him? It should be against government policy for there to be any Europe-wide tax.

Cameron should speak, and he should do it now.

On the shoulders of giants

From Max Hastings in today’s FT:

“Cometh the hour, cometh the man“ is a foolish cliché: history is replete with dramas that caused nations to look expectantly at the door, only to see someone no larger than French president Nicolas Sarkozy walk in.

The Eurozone: papering over the cracks

Angela Merkel and Nicolas Sarkozy meet in Paris today. The circumstances of their meeting are such that at least they won’t be short of things to talk about.

Since they last met the spotlight of investor concern has settled on France, the ECB has felt the need to buy some €22bn of Spanish and Italian debt in order to keep the markets quiet, several countries have banned short selling of financial institutions’ shares and this morning we learn that German growth is almost stagnant.

One thing on the agenda might be what to do if there is renewed selling of French credit default swaps, pushing up the rate France has to pay on its borrowings. France will say that the ECB should intervene as it has with Italy and Spain but what happens if the ECB isn’t keen, reserving its firepower for those in dire need? Would France claim it has lost its AAA rating because Europe let it down? Is intervention a political decision or an economic one? I am afraid they are already getting into this mess – confusing politics and economics – and it will be hard to get out.

The story being pushed about is that Merkel refuses the issuance of eurobonds. It seems that the mainstream of German politics believes it is an idea for the future: for a time when there is Eurozone-wide economic governance and countries will not be able to spend and borrow in the knowledge that Germany will bail them out.

I have been corresponding with my friend Claude Nougat (see her post of 8^th August) who takes the opposite view to me and is worth reading.

The Italians and the French are keen on eurobonds but there again I think the cause of monetary stability would be served if my overdraft were guaranteed by a consortium of Richard Branson, Bill Gates and Silvio Berlusconi. What I think is clear is that to introduce such an instrument now, before some sort of fiscal union is created, would be bad for Europe and bad for Germany. Otmar Issing, the first Chief Economist at the ECB and one of the founders of monetary union, a convinced Federalist, says that such a scheme would amount to taxation without representation, in that without having a vote on it, citizens of richer countries would find themselves paying for the mistakes of smaller countries. And many Germans say they don’t think they should bail out Greece when the Greeks retire earlier than they do.

What can we deduce from all this? Firstly that it now appears to be a choice between eurobonds and break up of the euro. Second, that eurobonds seem to be the way things are heading. But eurobonds cannot realistically be introduced without a common fiscal governance. Lastly, to avoid Issing’s charge of taxation without representation there will have to be some democratic input (something our euro-masters are none too keen on). If this were the case, several countries would not be able to go forward, so there would be a new politically integrated eurozone of hard-core economies.

Which is what they should have done in the first place.

My guess, though, is that they will try to paper over the cracks and dither a bit more.

Silvio sees sense shock

Actually I rather think Silvio has had sense thrust upon him. After the recent budget when all the cuts were backloaded until after the election he has recanted and introduced a new budget in the amount of €45bn with serious cuts to planned expenditure for 2012. The basics of the budget have almost certainly been written by Angela Merkel.

The important thing now is whether the reformed Silvio is more credible than the old one. The Italian for budget is the word for manoeuvre, and there seems plenty of room for manoeuvre at present. Nobody even knows for certain whether this budget is on top of the last one or instead of it. And the detail is far from definite. If the markets don't believe in this new attitude Italy will be in trouble. An interim non-political team of technocrats appointed by the President would be almost inevitable.

For myself I would require a lot more detail before trusting this. It was done in a hurry to please the markets and it is far from clear that the political will exists on either side of the spectrum to carry it out.

The mood in Italy is hard to read at the moment. It seems the people are reluctant to suffer cuts, but at the same time increasingly resentful of the political class. Highly popular on the Internet is the Senate lunch menu, leaked by the Italy of Values party. It shows how the senators are dining at around a fifth of the cost of a meal in central Rome (see it here). Voters are beginning to demand transparency and that, at least, is a start.

Britain burns

It is a good rule of thumb that whenever you hear the word ‘community’ someone is trying to pull the wool over your eyes. We’ve heard it a lot recently regarding the recent riots. In Tottenham, north London, one part of the population is looting and burning the houses and businesses of another part. One thing it is definitely not is a community.

The disturbances are spreading to other parts of London, other cities. The causes are not racial, as David Lammy, Tottenham’s black MP confirms. So what is behind it?

How long have you got? The kids are uneducated, and that is our fault; they come from dysfunctional families – what sort of parents allow children as young as seven to be out all night, without knowing where they are?; they hear repeatedly of venal politicians, greedy bankers, bribed police; and there are no jobs. They do not feel a part of society; they have no sense of community.

The police response was late – people had time to try on shoes in shops they had broken into – and it is only now that they seem to be belatedly getting a grip as the Prime Minister and the Mayor return from their holidays, in the Mayor’s case, at least, two days late. But locking up the guilty – necessary though it is – is not the solution here. The problem started some time ago in the comprehensive schooling system, modern teaching methods, an indiscriminate welfare system. The family system, the very bedrock of society, has broken down. The sense of family pride in doing the right thing and the sense of shame which made people polish their front doorsteps have disappeared.  Instead, part of the population watches and sneaks on the other part, the councils film people going to their bins in case they break some minor regulation.

This will take years to fix and in the meantime there will be further outbreaks of violence. But we should at least start the process.

Government by petition

All the rage in the UK at the moment are E-petitions. The way it works is that if you can get 100,000 people to sign your petition it will be ‘eligible’ to be debated in parliament.

I rather think that the optics of this – Mr Cameron saying smugly that parliament should not be divorced from the views of the British people – are more important than the substance. It’s not much of a concession if Parliament doesn’t in fact have to vote on it at all.

Anyway, the two front runners are, as you can imagine, for restoring capital punishment and for a referendum on continued membership of the EU.

The first, led by blogger Guido, can be signed here, and the second, organised by The Daily Express can be signed here.

Reintroducing capital punishment would involve withdrawing fro the European Convention on Human Rights. There are several good reasons for tearing up the ECHR but in my view capital punishment is not one of them. I am however in favour of leaving the EU, and am confident that a referendum on the subject would produce a resounding majority for doing so. Which is why we won’t have one.

Neither of these motions has the faintest chance of success and nor have any of the others. The political class is revolted by the idea of the country being run by popular outcry. But I think Cameron may have made a mistake in raising the hopes of the British people only to dash them.

USAA+

Standard & Poor’s has downgraded America’s credit rating from AAA, for the first time ever.

No one can say this was completely unexpected but, like 9/11, it is a shock when it happens.

There will be worldwide implications, short- and long-term.

Interesting times.

How to.....

The next in an occasional series for any young man or woman starting out on a career in life. This time it's 'How to handle a financial crisis in 5 easy steps'

1. Dither
2. Come up with an agreement to keep the markets quiet.
3. When that doesn't work, come up with another agreement to keep the markets quiet.
3. Say nothing when it emerges that the second deal is not in fact agreed, and may be unconstitutional in several places
4. Blame speculators for being biased against you
5. Go to the beach until September

A question of maturity

Many years ago the head of the largest bank in the world, Walt Wriston, Chairman of Citibank, said ‘People go bust, countries don’t’. Shortly after he said this we had the debt restructurings in S.America and one wondered whether the great man hadn’t been talking complete tosh.

Now Big Walt is dead and his bank pretty well went belly up in the crisis, and the sovereign debt problem is closer to home: Italy, a G8 nation, is thought by many to be about to descend into the abyss.

So how does this work? How was Wriston wrong? Italy borrowed at presumably acceptable rates so unless the economy is going steadily backwards (it’s not, it’s just not going forward very fast) why should it not be able to pay?

This table shows the average maturity of a few countries’ debts in years:

Britain  13.8

Italy       7.1
Spain     6.2
Japan    5.8
USA      5.1

So the US has to refinance one fifth of its debt each year. Normally we would have said that is OK for the US because it is the richest country in the world with the most developed bond markets. These are not normal times, but that is a story for another post. Let’s compare Britain and Italy, two countries about the same size economically with the same population.

Britain has to refinance its debt every 13.8 years, that is to say about 7% of it each year, or in $ equivalent around $105bn. When the bond markets are in a bit of a spin (an understatement, I know) they mark up the rate a country will have to pay on its debt and that applies to the new debt, not the old. So the new rates Italy has to pay now, some 3% higher than at the start of the year, will be paid on the amount it refinances each year.

An extra 3% on borrowing costs would subject the UK taxpayer to $3bn in the first year, the same amount extra in the second, etc.

Italy not only has more debt, but has to refinance nearly double that percentage, around 14% or $350bn each year. So the extra 3% borrowing costs Italy has suffered will cost an extra $10bn each year, money which has to be borrowed.

In addition, any deficit adds to the overall debt and that would be new debt.

No one knows at which point Italy runs out of cash but many economists think the balance is tipped at around 7% -only 1% higher than now.

It’s close.

Christine Lagarde

The new head of the IMF, against whom this blog warned at the time of her appointment, is under investigation by the French courts for misconduct while French finance minister. It is alleged that she intervened in a dispute between Bernard Tapie and the bank Crédit Lyonnais when it was none of her business.

M. Tapie trousered €285m as a result of an arbitration decision which her opponents say she should not have ordered. M. Tapie was a supporter of President Sarkozy.

This is very serious and Mme. Lagarde ought to resign.

She won't, though.

Happy birthday, Mr.President

Barack Obama is 50 today. He was born in the Presidency of John F Kennedy, for whose 45th birthday the song was famously sung by Marilyn Monroe. So if you think 50 is young....

Fortunately for Obama, the Republican Party has yet to come up with a credible contender. It might, though.

Mubarak comes to Court

At the trial:

‘I would know by what power I am called hither, by what lawful authority’

‘Then for the law of this land, I am no less confident, that no learned lawyer will affirm that an impeachment can lie against the King, they all going in his name: and one of their maxims is, that the King can do no wrong.’

At the execution

‘but I must tell you that [the people’s] liberty and freedom consists in having government... It is not their having a share in government; that is nothing appertaining unto them. A subject and a sovereign are clean different things.’

It was over 350 years ago that these words were spoken by Charles I of England. It was one of the most important moments in history, showing that the people could choose their rulers, and that a crime committed against the people could be punished.

Hosni Mubarak, if he were a better educated man, might reflect on this today, as he is brought to trial in Cairo. These were crimes against his own people which he committed, believing, perhaps not like Charles I that he had a divine right to do as he pleased, but at least that he was inviolate.

It is a moment to be celebrated by democrats everywhere, but much more so in Egypt. These people have been ruled by Britain and its puppets, then Nasser, Sadat and Mubarak. No one alive in Egypt has known what it is like to choose your own rulers. No wonder they are massing outside Mubarak’s courtroom: they are fascinated by their own power.

‘Bliss it was that day to be alive, but to be young was very Heaven’ wrote Wordsworth of France in 1789. How true of today’s Egypt, and what a thing to tell your grandchildren, that you were there, in Tahrir Square!

Edgycayshun

A new report by the Department for Education says a third of children in the UK leave primary school (ie at 11 years old) without reaching the required standard in reading, writing and arithmetic.

I have probably said this before, but it is almost as if we were determined to make sure the working classes weren't educated, so they didn't get ideas about self-advancement. As it is, with education improving at dramatic rates in India and China, and the young people there prepared to work for far lower wages than ours, many will be reduced to welfare dependency for life.

Tony Blair came to power saying his three most important tasks were education, education and education. What we didn't realise then was that he thought just saying it was enough.

Now, something needs to be done.

August

Politicians all over Europe, or at least in France and the South, take the month of August off, and the private sector can't seem to grasp it. In the real world, above a certain level, you are contactable 24 hours a day, seven days a week. It is quite common for your boss to tell you, just as you are packing your bucket and spade, that your holiday is off, and in these days of smartphones to be told to get on the next plane home. It's a different world in the State sector, and particularly among the priveleged political class.

So the political elite of Europe has disappeared for a month, while the guys who buy and sell their countries' debt are still at work. As Italy goes away, the amount it pays for its benchmark 10 year bond has reached 6.26% and there is still a lot of borrowing to be done this year.

Spain's borrowings have reached 6.46% and the Prime Minister, José Luis Rodriguez Zapatero (it sounds like a name from a comic opera which would be quite appropriate) has delayed his holiday. Unfortunately the markets felt that for an olive belt socialist to delay his holiday things must be even worse than they thought and they have marked the debt down.

Note to the Italian Treasury: you may find it unsporting, but this is not a game. They are allowed to make you bust during August, and will expect you to be at your desks.

Ramadan

Today is the first day of the month of Ramadan. It is based on a purely lunar calendar, unlike most religious calendars based on the moon which add a thirteenth month every few years to keep up with the solar calendar.

As a result Ramadan is variable throughout the year on a cycle of about 33 years, so someone living past 33 will have fasted on every day of the year