TODAY’S FAYRE

TODAY’S FAYRE – Sunday 24^th February 2013

“Your hands, my dear, adorable,
Your lips of tenderness
-Oh, I've loved you faithfully and well,
Three years, or a bit less.
It wasn't a success.

Thank God, that's done! and I'll take the road,
Quit of my youth and you,
The Roman road to Wendover
By Tring and Lilley Hoo,
As a free man may do.

For youth goes over, the joys that fly,
The tears that follow fast;
And the dirtiest things we do must lie
Forgotten at the last;
Even love goes past.

What's left behind I shall not find,
The splendor and the pain;
The splash of sun, the shouting wind,
And the brave sting of rain,
I may not meet again.

But the years, that take the best away,
Give something in the end;
And a better friend than love have they,
For none to mar or mend,
That have themselves to friend. 

Rupert Brooke – soldier & poet – 1887-1915

Are you sitting comfortably, children? Then I will begin!

A STORY OF MISMANAGEMENT, DECEIPT, INTRIGUE AND HEARTACHE

Chapter 1  “The land of ‘Milk & Honey’ and how it turned sour!”

Once upon a time – in fact it was 10 years ago, a ‘Big Bad Wolf’, called Gordon Brown took up residence in 11 Downing Street.  He was advised by a number of cubs from his wolf pack and amongst them was an erudite, smart and particularly ‘yappy’ cub called Ed Balls. Together they controlled the purse of the United Kingdom.  They did an awful lot of talking and very little listening.  They had inherited such a sweet economy from an affable cigar smoking, claret drinking wily old fox called Ken Clarke.  For 3 years from such a position of strength, it was not possible to make really earth-shattering misjudgements that could irrevocably damage the country’s economy.

Eventually they found a way of causing devastation.  They both listened to a mad old professor called Alan Greenspan and he told them that the best way of avoiding a recession was to encourage banks to lend money indiscriminately to all comers without proper regulatory controls, allowing some bank balance sheets to reach gargantuan proportions. Eventually the ‘Big Bad Wolf’ moved in to the house next door to be head of the pack. By then the dye was cast and the UK, in concert with other countries, faced the biggest recession since 1929, with the government, the banks and the consumer drowning in debt that all the respective parties had no chance of repaying.  The country suffered a devastating fall-out and bankruptcies of epidemic proportions it had not seen for decades.  Eventually this ‘Big Bad Wolf’ was booted into the long-grass of political anonymity.

Chapter 11 – “Get the economic show back on the road!”

In 2010, after some deft manoeuvring by the Bank of England, which included quantitative easing, two young bucks, at the behest of the democratic process, took up residence in No: 10 and No: 11 as PM Dave and Chancellor George.  However there was an excessive of baggage that accompanied them in the form of the Liberal-Democrat party.

It was clear that cutting the astronomically and indecently large public sector debt and the borrowing requirement was the government’s number one priority.  The policy adopted was that it should be halved in 5 years.  Markets, the IMF, the rating agencies and the world at large accepted this clear policy as sensible and against a background of almost zero interest rates, which were likely to prevail for a few years, the UK maintained its AAA credit rating and found borrowing long-term money relatively easy thanks to policies adopted and superb financial engineering at the DMO (Debt Management Office).  The government’s stall was set down. In 2.5 years 1 million jobs have been created in the private sector and nearly 400,000 have been cut in the public sector.  Work in progress

Chapter111 – “Neglecting the world for the EU!”

What the government failed to legislate for was the fact that growth declined measurably – to nothing in that period – much of it the fault of the previous administration and the Tory one before that – both of whom attached far too much credence to trading with Europe, this neglecting, the Commonwealth, Africa, Asia, China and the Americas. This has been a costly error of judgement.  As has been witnessed the EU remains in the vortex of economic despair.  Consequently it has meant that revenues from companies and the consumer resulting from zero growth have fallen short of meeting requirements. The opposition and its caravan of intellectual geeks keep on bleating and thus blaming the government’s policies for what has transpired, resulting in Moody’s late Friday night cutting the credit rating of the UK’s debt from AAA to Aa1.  This was always on the cards, as the debt has not been sufficiently cut.  Frankly we have not seen any real austerity.  Unemployment is falling gently. Chancellor Osborne needs to up his war on waste and excessive public sector commitment, APART FROM ESSENTIAL SERVICES, measurably!  People won’t like what I have to say. However excessive debt held by governments, banks and the consumer is the greatest threat to democracy. Don’t worry too much about Moody’s downgrade.  Chancellor Osborne attached unnecessary credence to it!  Suffice to say Moody’s confirmed AIG AAA status one month before it went down the plug-hole!  It is, however, essential that the UK debt is cut!

Chapter1V – “The last throw of the dice for the coalition!”

At the same time it is essential that stimulation must be provided from two sources.  Firstly from the government in terms of tax cuts for SMES and for that matter large business, greater tax concessions for ‘start-ups’, cuts in the ludicrous level of bureaucracy plus a continued drive to help exporters. These initiatives must be laid down at the Budget on 20^th March 2013. The PM, Chancellor and Dr Cable must stop droning on about the banks and their lack of lending.  If the politicians create a better environment by improving confidence and business sentiment, then bank lending will come automatically. Though I suspect QE may well stoke inflation, and if so, so what for the time being; the BOE must keep its foot on the pedal.  

CONCLUSION –

Let us not suffer from amnesia. When the world needed the rating agencies to rate bonds, mortgages and banks in 2007/8 accurately, they were nowhere to be seen!  In fact such is the virulent contempt for their inability that I think I am right in saying that Standard & Poor is likely to be sued for $5 billion by some regulators for negligence over the rating of some US mortgages. Rating agencies are now an interesting barometer, but no more; it will be the market who tells us whether the government is doing enough to cut its debt.  This cut by Moody’s is not unexpected though frustrating.  The yields to borrow long term money for the UK have increased from 1.70% for 10-years to 2.11% in recent months.  The yield on 10-year US Treasuries is 2%; Italy 4.5%, Spain 5.4%, Greece 11.5%.  On Monday morning I doubted these yield would alter much and they didn’t.  The pound may fall another cent to $1.51.  As for equities, well an inconclusive result from the Italian general election will contribute more to a fall in equity prices than Moody’s downgrade.  Chancellor Osborne must keep his boot on the neck of the public sector; if not the market will rumble his lack of fortitude and yields will head north.  Who will pay?  You the taxpayer!  A weak pound could affect the cost of imports including oil – inflationary – so back to austerity please!

Just look what a mess France is in, pleading with Brussels for another year to get its financial act together? NON! France has a bloated public sector with powerful unions enshrined in demarcations and restrictive practices! Wake up President Hollande or you will end up like Spain!

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