Wednesday, 30 September 2009

Bank says QE is making a difference

"Well, they would, wouldn't they?" - Mandy Rice-Davies

From The Times October 1, 2009
http://business.timesonline.co.uk/tol/business/economics/article6856131.ece

"Gordon Brown isn’t the only one launching a fightback. The Bank of England has started a campaign to win round public opinion. In its case, the Bank is trying to combat scepticism about its quantitative easing policy that injects new money into the financial system."

The BoE is creating money (£175Bn so far via Quantitative Easing - a term apparently invented in Japan in 2001 for economic policies which produced questioned benefit) by buying Gilt-Edged stock at prices which have been pushed up by the Bank's own policy of low interest rates.

Government schizophrenia/doublethink Part 1: The Treasury through the Debt Management Office - DMO - (which formerly reported to the BoE) is busily selling Gilts to fund immediate government current expenditure.

The banks which held Gilts have made capital gains which they have prudently applied to rebuilding their capital reserves which were devastated by their bonus-driven imprudent lending to fund the housing bubble at home and away.

Government schizophrenia/doublethink Part 2: rebuilding balance sheets versus lending.

History

In the US banking system the reserve ratio is fixed a 10% (or 10 times) capital. In the UK the Bank of England now holds to a "voluntary reserve ratio" system having abandoned a compulsory limit. In 1998 the average cash reserve ratio across the entire United Kingdom banking system was 3.1% (approximately 33 times); it has probably been significantly lower since.

UK Reserve Ratios
1968 1978 1988 1998
20.5% 15.9% 5.0% 3.1%

It appears that, the BoE having relaxed its controls, the Financial Services Authority had responsibility for monitoring this situation. No-one is to blame.

Now: the BoE holds Gilts on which it has spent £175Bn of new money a la Weimar/Zimbabwe school of economics.

Sometime not too far away:-
1) the DMO will have difficulty selling x £100Bn and will have to offer higher interest rates.
2) the BoE will become concerned about inflation and will increase the bank rate.

The prices of Gilts will then fall.
“It is unclear quite how the Bank will unwind QE. But it has every reason to take its time.”

As it will be the taxpayer who sustains the loss, I guess this time will be when all those involved (no-one is responsible) have retired on their risk-free inflation-proofed taxpayer-funded public sector pensions.

I shall be delighted if someone can prove my cynicism unfounded and that QE is really the best of all possible worlds - or even all possible multiverses.

“This is, of course, completely impossible.” - Douglas Adams.

“The truth is out there”, doubtless with “42” as a significant factor.

Friday, 25 September 2009

Afghanistan: Letter to Lord Avebury

On Wednesday 23rd September there was a "fringe meeting at the LibDem conference which was addressed by Lord Avebury and attended by inter alia the Afghan ambassador.

Dear Lord Avebury,

I was at the Muslim/Afhanistan meeting in Bournemouth on Wednesday and raised the question about the identity of the "insurgents"

To reiterate and expand the question:

"Insurgent implies outsider. Who are the insurgents?

Why do the Afghan population harbour them?

Are we not seen as the insurgents?

You argued the necessity for the continued presence of our armed forces but with the imperative that they only be applied military targets.

If we cannot identify the insurgents this is impossible.
Indeed, given the inevitable (and horribly euphemistic) "collateral damage" to the civilian population, our actions exacerbate matters.

Lessons of history: this is our 4th Afghan adventure; what makes it different this time?

Surely, our only rational and achieveable objective should be to empower the local communities to resist insurgency whether labelled "Taleban" or "al Queda" or even "another ethnic group" by training the Afghan National Army and police force.

Bright idea?
To assist this process: there are significant numbers of Afghan young men seeking to get to the UK as refugees. We could allow them in on condition that they undergo military training and then return to Afghanistan to directly contribute to the establishment of the Rule of Law thereby removing their need to be refugees.

I would remind you of your own words from 4th December 2008:-
"My Lords, a few hours ago the Minister said that we invaded Afghanistan to prevent it becoming a haven for international terrorism. She did not remind your Lordships that that was also one of the excuses given for the invasion of Iraq, which, as President Mubarak said at the time, was likely to create 100 bin Ladens. He was probably out by a factor of 10, but that has happened. It has also involved us, as the noble Baroness said, in a £700 million contribution so far towards reconstruction, has placed huge burdens on our Armed Forces, and is an ingredient in the motivation of terrorists across the world."

I would also remind you of the words of another (then) Liberal:-
"The inhabitants of these wild but wealthy valleys are of many tribes, but of similar character and condition. The abundant crops which a warm sun and copious rains raise from a fertile soil, support a numerous population in a state of warlike leisure. Except at the times of sowing and of harvest, a continual state of feud and strife prevails throughout the land. Tribe wars with tribe. The people of one valley fight with those of the next. To the quarrels of communities are added the combats of individuals. Khan assails khan, each supported by his retainers. Every tribesman has a blood feud with his neighbour. Every man's hand is against the other, and all against the stranger."
- Winston Churchill 1897

Yours sincerely,

Candidate Selection Criteria

No further comment needed

http://www.timesonline.co.uk/tol/news/politics/article6848320.ece

From The Times September 25, 2009
Hired guns take aim at target Tory seats

Today's disclosure challenges David Cameron?s promise to usher in a 'new politics'

Dozens of Conservative parliamentary candidates are working in the lobbying industry that seeks to influence their party’s leadership.

An investigation by The Times has found that 28 prospective candidates who have a good chance of becoming Tory MPs are working as lobbyists or public relations consultants on behalf of businesses and other interests. More than a quarter got their jobs after being selected to fight seats.

Several acknowledged that they had set up meetings for clients with Shadow ministers, MPs and officials. More said that they had been asked to provide advice on the party’s direction. A few admitted to having pressed clients’ cases to Tory frontbenchers.

The disclosure challenges David Cameron’s promise to usher in a “new politics”. More than a fifth of his 150 candidates most likely to win seats for the first time will have done public affairs work, although a handful have since left the industry. By contrast, only seven Labour and three Liberal Democrat prospective candidates with realistic hopes of victory have jobs in public affairs or communications.

The influence of paid consultants was thrown into sharp relief this year when President Obama announced that he would block the revolving door through which lobbyists moved in and out of US administrations. Neither Labour nor the Conservatives have issued any such edict.

Francis Maude, the Shadow Cabinet Office Minister, said last week that lobbyists could face statutory regulation if they did not volunteer more information on clients and consultants. “Greater openness and transparency is needed to help ensure high standards in public life,” he said.

Last night the party declined to comment on the disclosure that so many candidates were working in the industry or the evidence that lobbying firms were keen to build bridges with a party on the cusp of power.

Senior Conservative sources have told The Times of their unease over how former party advisers have moved into lobbying before the election. Several firms now advertise their Tory credentials; others have been hired to change policies on gambling and home improvement packs.

The British Horseracing Authority said that it chose a lobbying firm partly because it employed a prospective parliamentary candidate. “It’s certainly helpful,” said Will Lambe, the organisation’s head of public affairs.

The Lisbon Treaty Referendum: William Ress-Mogg

From The Times September 21, 2009
http://www.timesonline.co.uk/tol/comment/columnists/william_rees_mogg/article6841737.ece

Rule Britannia? Not if the EU gets its way
We should have the referendum we were promised, whatever the result of the Irish vote on Lisbon

Early in the election campaign of 2001, I was asked to write a couple of regional reports for The Times. I visited seats in the West Midlands, and another group in Scotland. In the West Midlands, one of the Labour women candidates was outstanding. Gisela Stuart was already a junior minister in the Department of Health. When I interviewed her I was impressed by her intellectual approach, perhaps derived from her German upbringing and early education.

At the election, she held Edgbaston, her Birmingham seat, quite comfortably, but had the misfortune to be present when Tony Blair, campaigning in a local hospital, was upset by an angry woman complaining about the poor treatment her partner was receiving for cancer.

Mr Blair seems somehow to have blamed Miss Stuart for this hitch. In his post-election reshuffle she was dropped, a loss to the Government.

She was subsequently appointed to an important role in European politics, becoming the British representative on the Presidium of the Convention on the Future of Europe, with the ex-President of France, ValĂ©ry Giscard d’Estaing, in the chair. The Presidium produced its draft for the European Constitutional treaty. That treaty was rejected in referendums held in France and the Netherlands.

Miss Stuart and her Conservative colleague on the Convention, David Heathcoat-Amory, had fought to introduce a modicum of democratic liberalism, but were overruled. President Giscard was not interested in cranky English notions of habeas corpus or electoral accountability.

After its rejection, the treaty was rewritten in a bureaucratic dialect, and resurfaced as the Lisbon treaty. Britain had been promised a referendum on the Constitutional treaty by all three parties in the 2005 general election. The Labour Government and the Liberal Democrats did not honour these commitments when it came to ratification by Parliament.

One could reasonably describe this change of policy as dishonest and shameful.

Britain is now waiting for the result of the repeated Irish referendum on October 2. In their first referendum, the Irish voted “no” to Lisbon, but now they are being asked to overrule themselves, and may do so. If this happens, there do not seem to be any further obstacles to the monstrous fraud of Lisbon being trundled past the winning post by its dubious acolytes.

Last week Miss Stuart warned of the potential constitutional consequences. She said that the Lisbon treaty puts the future of democracy in Britain at stake, that it would allow the European Union to launch power grabs unchecked, that it would leave a “democratic deficit”, in which the EU’s leaders would be accountable to no one, and that it would breach the democratic principle that voters can get rid of those in power. All of these criticisms are true and important. They would have been true of the original Constitutional treaty, which Miss Stuart and Mr Heathcoat-Amory fought to amend, and they remain true of the Lisbon treaty.

Lisbon would in effect repeal all the main legal safeguards of British liberties. The European Arrest Warrant has already repealed habeas corpus; Lisbon would repeal Magna Carta and the sovereignty of Parliament. The EU might as well have inserted a clause repealing “Rule Britannia”, and particularly the assurance that “Britons never, never, never shall be slaves”. We are already much less free than we once were.

There is also an immediate threat. The Lisbon treaty contains a proposal to create a European president, who might well be Mr Blair. Like the Mayor of London, the president of Europe will be tempted to interpret his powers so as to expand his jurisdiction. How can those who object to Mr Blair becoming president of Europe give any expression to their opposition? The Europhiles always rush to explain that the fears of Eurosceptics are mere bogies.

I would put a question to them.

How can I vote against Mr Blair as my president? Who will provide me with a ballot paper on which I could vote for some other candidate, preferably one who has not helped to trick Britain into the Lisbon treaty, without a referendum? To that question there is no answer. Mr Blair cheated the British out of a referendum; if he becomes president, there will be no referendum on that.

This faces David Cameron with a dilemma. If the Irish vote “no”, the Conservatives would undoubtedly call a referendum, but if they vote “yes”, as they probably will, the Lisbon treaty could become law before the next British election.

The constitutional issues are so serious that the Conservatives should promise to hold a referendum even if the treaty has already become law. The EU countries have known throughout that the British electorate was promised a referendum by all three parties. They were co-conspirators in the deception. They can scarcely complain if a referendum is in fact held.

If Britain were to withdraw from the Lisbon treaty because the British electorate had voted against it, that would be a healthy challenge to Europe. It is possible that the EU would then break up, but it is unlikely. The trading Europe is too valuable for Britain and the other EU countries to wish to lose it.

The Commission and Mr Blair himself might be annoyed by a British declaration of independence but Lisbon is deeply flawed, as Miss Stuart has shown. Europe, as well as Britain, would benefit from a new and more democratic approach.
******************************************

RT Comment

David Cameron appears to have already committed to a referendum on the Lisbon Treaty; unless he changes his mind we are guaranteed the opportunity to vote on the matter - hopefully once and for all.
There remains the not insignificant matter of how The Question is worded.
I suggest that this must form part of the Conservative Manifesto.

"The Ultimate Question of Life, the Universe, and Everything"?
42 will be there somewhere.

From http://www.conservatives.com/News/Speeches/2009/05/David_Cameron_Fixing_Broken_Politics.aspx

David Cameron: Fixing Broken Politics Tuesday, May 26 2009

"We will therefore hold a referendum on the Lisbon Treaty, pass a law requiring a referendum to approve any further transfers of power to the EU, negotiate the return of powers, and require far more detailed scrutiny in Parliament of EU legislation, regulation and spending."

Thursday, 24 September 2009

Foreign Policy: Blair's Principles for Intervention

http://www.number10.gov.uk/Page1297

Doctrine of the International Community [24/4/1999]

Extract from TB's speech

Looking around the world there are many regimes that are undemocratic and engaged in barbarous acts. If we wanted to right every wrong that we see in the modern world then we would do little else than intervene in the affairs of other countries. We would not be able to cope.

So how do we decide when and whether to intervene. I think we need to bear in mind five major considerations

First, are we sure of our case?
War is an imperfect instrument for righting humanitarian distress; but armed force is sometimes the only means of dealing with dictators.

Second, have we exhausted all diplomatic options?
We should always give peace every chance, as we have in the case of Kosovo.

Third, on the basis of a practical assessment of the situation, are there military operations we can sensibly and prudently undertake?

Fourth, are we prepared for the long term?
In the past we talked too much of exit strategies. But having made a commitment we cannot simply walk away once the fight is over; better to stay with moderate numbers of troops than return for repeat performances with large numbers.

And finally, do we have national interests involved?

*****************************************************

So Tony (& Gordon): How have you applied these principles in the last 10 years?

Foreign Policy: Idealism versus Pragmatism

http://www.timesonline.co.uk/tol/news/world/middle_east/article6846763.ece
The Times September 24, 2009

Britain is appeasing Iran, Nobel laureate Shirin Ebadi says

The only Iranian to win the Nobel Peace Prize accused Britain of ignoring the regime’s savage suppression of opposition in order to safeguard talks on its nuclear programme.

*********************************************************
In May 1997 the late Robin Cook as Foreign Secretary in the incoming New Labour government enunciated:-
".. the fourth goal of our foreign policy is to secure the respect of other nations for Britain's contribution to keeping the peace of the world and promoting democracy around the world. The Labour Government does not accept that political values can be left behind when we check in our passports to travel on diplomatic business. Our foreign policy must have an ethical dimension and must support the demands of other peoples for the democratic rights on which we insist for ourselves. The Labour Government will put human rights at the heart of our foreign policy and will publish an annual report on our work in promoting human rights abroad."

Searching the Foreign & Commonwealth Office website does provide an update from the current incumbent David Miliband in interview with David Frost:-
DF: ".. Robin Cook used to say those words that he probably regretted saying but he said that there should be a more ethical foreign policy, do you agree with him on that?"
DM: "Well a foreign policy without values is not a foreign policy that’s worth having."

NuLab's record hardly positions UK as an exemplified leader in this area; one can only work to encourage the next government to be more principled.

"A Conservative Government's approach to foreign affairs will be based on liberal Conservative principles.
Liberal, because Britain must be open and engaged with the world, supporting human rights and championing the cause of democracy and the rule of law at every opportunity. But Conservative, because our policy must be hard-headed and practical, dealing with the world as it is and not as we wish it were."

Monday, 21 September 2009

Lovely new aircraft carrier, sir, but we’re fighting in the desert

http://www.timesonline.co.uk/tol/comment/columnists/guest_contributors/article3423663.ece

From The Sunday Times February 24, 2008

Lovely new aircraft carrier, sir, but we’re fighting in the desert

Money is squandered on equipment that is useless in either Iraq or Afghanistan - or in any foreseeable theatre

19 months on nothing has changed