Malcolm Blair-Robinson's Blog, page 64

Boris: More Hot Air

People who see Brexit as a disaster do so because, by any rational measure, politically, economically and socially, it is. Boris has not, once again, advanced one single fact or figure which can offer any tangible prospect of an uplift in people’s lives as a consequence of this ridiculous adventure. What he did do is to demonstrate, once again, that this weak and divided government is clueless and drifting, out of ideas and very nearly out of time, relying on pointless speeches full of meaningless waffle.

Well, there will be a day of reckoning and it is getting ever closer.

Sea Changes

There are three sea changes in the environment of modern life. These are the beginning. Others will follow. They are diverse at one level, but connected at another. Though each is unique in its time and way, the change process which brought it into being is both normal and good. Because what they are changing is mostly bad.

The first is the social climate relating to misogynistic power, for long tolerated and accepted as normal. Favours were demanded as a right, mostly sexual but not always, as manhood enshrined a notion of power which could be exercised from  hovel to  castle, from family to institution, in education, academia, public service, business, charity, politics, show business; the list is as long as the diversity of human activity and engagement. Well, all that is over. Nobody now is willing to put up with it, nor let it go unchallenged. A sea change in behaviour will become universal and secure. There will always be abuse, but it will not be acceptable as a natural event at the margin.

The second is the disconnection between those who govern, either through politics, media or soft power, and those who are ruled or controlled. Gone is the natural trust in authority. The notion of it is seen as corrupt and many of the great and good are now under investigation in all parts of the globe for corruption. No longer are people willing to accept what they are told. They challenge and confirm for themselves the truth, via a technological information exchange that destroys the whole basis of the structures previously used to inform and influence public opinion. Power is judged not on what it promises nor upon what it claims, but on what it delivers at every level down to the very base of daily life. This represents a sea change in the way power can be exercised and imposes previously unknown limitations upon its effect. Above all it makes it easier, much easier, to take it away.

The third is in the financial sector. The long period of dormant interest rates is over. Like a gently rising tide they are flowing back into the system. They are not entirely within the control of central bankers any more, because governments needing to borrow to repair neglected social institutions and physical infrastructures are increasing the bond supply at the same time as QE is ending and inflationary pressures are mounting. Corrections are occurring between the excessive reliance of asset inflation to redistribute wealth ever upwards and into fewer hands, to a new emphasis on wealth creation through investment, which pushes wealth downwards and outwards so that more and more begin to share it. This sea change will alter the shape of globalisation and Western economic models for the good of the many and for a long time to come.

These changes will be accompanied by turbulence and not all impacts will be positive. But in the round and judged by response to need, all of this is more good news than bad.

The U.S. Federal Budget

This Blog often finds itself defending Trump, or at least taking a positive view of America’s rather turbulent direction of travel. Unfortunately the Trump presidency is always awash with blown up dramas of Trump gaffes, u-turns, insults and self-congratulation which certainly make the news story that he is like no other occupant of the White House ever, but actually have little to do with the ongoing governance of our closest ally. The nation to which we have uniquely close ties across the cultural, professional, scientific, academic, military, security, intelligence, commercial, business and family arenas.  But not politics. The politics of the two countries are very different, usually polite, mostly correct but  rarely close. Moments of camaraderie have happened, but they are the noted exceptions rather than the general rule.

The latest attempt to agree a federal budget brings out two important elements which are to be welcomed. The first is Trump’s own observation that his country has wasted, often under Republican administrations, $7 trillion  in the Middle East, the only good of which is to try and clean up the bad resulting from previous efforts. A continuing and continuous process.

The other is the need to renew and update the national infrastructure, much of which is past its use by date and crumbling, but to put the onus on individual States to do more to renew their own fabric and pay for it. This is entirely right. The American people do not, most of them anyway, like the concept of federal government and all hate federal taxes. So if you want small government you have to do stuff in your own State and pay local taxes for programmes voters approve. Or leave it to private enterprise and pay the tolls to deliver a profit to shareholders who carried the risk. It’s that simple.

Brexit: They Kick The Can On

So the two much trumpeted meetings of the so called War Cabinet, the cabinet sub-committee of senior ministers trying to work out what sort of Brexit they want, failed once again to agree. This is because half of them want to leave the EU without an agreement, cut adrift from everything EU and go WTO. The other half believe such a course is a folly from which the UK would never recover and would trigger a slow decline. Their case is bolstered by the fact that it was the because we were in a decline, having failed to match the unexpected post WWII boom in the economies of France, Germany and Italy,  which drove us to join them in the Common Market in the first place. Meanwhile the hard Brexiteers waffle on about a golden age without explaining one single tangible advantage it will bring and to whom.

So the hapless May, lacking the courage to cut adrift from the hard Brexiteers, led her ministers on a continuing can kicking exercise down a road to a destination, which they all very well know cannot be reached. This is the notion of leaving both the customs union and single market, whilst enjoying open borders and frictionless trade with the EU of which we cease to be a member, yet without acceding to the rulings of the ECJ and without the four freedoms of movement of capital, goods, services and people.

Such a deal is not available and never has been. For the EU the Union is not about trade and trade will never be given priority over the integrity of the political union. It is the political union and its guarantee of the four freedoms which has brought peace and harmony to a continent torn by near continuous fighting since the fall of Rome. Trade is the extra benefit, but to enjoy it free of tariffs and borders, you have to accept all the political consequences.

For some reason the Tory government is unable to get its split head around that.  Ever in hope of Bavarian car makers demanding  the EU to do GB’s bidding, they were yesterday faced down by UK Japanese car makers saying that if it is a hard Brexit, they’re off. Wow.

 

Trumpenomics? More Likely An Overdue Re-Balance

It is an inherent feature of Trump’s persona is that he only does beautiful. Put simply he claims the credit when things go right, but tries to duck away when things go wrong. So when he claimed the credit for the record rise in US stocks, he also bought into ownership when the market crashes. Whether this is a major correction, a minor blip or a big panic is not yet clear at the time of composing this post. What is clear is that there are some very real problems which may well become a major threat.

As this Blog has pointed out so many times tax cuts, and infrastructure investment go hand in hand. The cuts are the cart to the investment horse. As we all know you should not put the cart before the horse. What should have happened is for the Republicans to formulate and push through a major infrastructure renewal programme of FDR proportions, needed in a country which at some levels and in some places is falling to pieces.   The surge in revenue resulting from the economic reboot, allows tax cuts to hand back to consumers a greater slice of their increased earnings. This they spend. This pushes the economy on an upward trajectory which is secure and dynamic.

Unfortunately the fractured Republican party argued for too long and in the end went for the tax cuts first, which means the Government has to issues bonds, ie  borrow money, to pay for them. It might come good, but it might not. There are the political questions about whether the infrastructure deal will happen. But also there is a big adjustment going on in the world economy.

Money is shifting from assets to production. This is because, since the 2008 financial crash, the US, UK, Japan and later the EU have been buying government bonds on a massive scale with printed money, which then flies into assets, which inflate through stoking demand. Interest rates are held at near zero so investment becomes leveraged because the profits can be eye watering even using borrowed money.

But the programme of quantitative easing is being wound down everywhere and interest rates are likely to rise. Moreover central banks are preparing to sell back into the market their vast stocks of bonds. At the same time as the US has to issue a whole lot of new ones. That will depress the bond market, effectively pushing up interest rates whether the central banks act or not. All of that will weaken the balance sheets of banks. That will make credit tighter and more expensive. You can see the drift. Most likely is a volatile market drifting downwards as capital re-positions towards wealth creation rather than asset inflation, ensuring a better reward for both investment and labour going forward. Leveraged speculators may burn, but most will come through fine.

But it is a dangerous moment. If you hold ready cash you could be in for a killing. But if your company, or you personally  are over borrowed, it might be time  to dust off Plan B. At the end of the day the world economy remains strong. The weakness is in the financial structure underpinning it.

 

Brexit Confusion

No wonder Michel Barnier has said that trade barriers are unavoidable if we leave the customs union and single market. The government talks with many voices, all of which are conflicting. The hapless Brexit Committee is to meet twice this week to try to agree something, but there is no point in coming up with an aspiration which cannot and will not be achieved. At every level the British people are being misled, mostly by Brexiteers, but also by former remainers like May, trying to appease elements of the Tory party diametrically opposed to the voice of reason.

The present position can be summed up thus. A confused passenger at an airline terminal demanding to fly the Atlantic, but refusing to do so in an airplane.

May, The Tories And Brexit.

Whilst in China May declared that she wants to negotiate the best deal for Britain, without specifying what is best, for whom  and why. Thus neither her Cabinet, the EU, business, the public sector nor the person in the street has a clue what she wants. This is because the Tory party is split between two diametrically opposed positions. The closer it comes to having to decide, the wider the split becomes.

One sensible, pragmatic and public spirited section, probably the biggest in the Commons but smaller among the rump Tory membership in the country of mainly old men, is aiming for a light Brexit, which favours the economy, jobs and the kind of freedoms of travel, work, study, domicile and investment which we have over the years acquired through our membership of the EU. This would keep us in, or close to, the customs union and the single market. We would be excluded form the European Parliament and the decision making processes which make new rules and regulations with which we would have to comply. This is becoming known as Brexit Light.

The other group, which has no majority in either parliament or the country, want a clean break so we cut adrift from every institution and commercial connection which has become part of the fabric of our very existence and national social, commercial and political structure over the last close to fifty years. This includes any connection to the customs union or single market, free movement as well as vital institutions enabling drugs, aviation, nuclear materials and manufacturing. Not only would the EU become a collection of foreign countries but British citizens would be denied all sorts of freedoms they now enjoy and sovereignties they share. Moreover the 750 trading agreements with countries all across the globe in which we are now enrolled , we would exit and have to start again from scratch. The economic shock and social disruption would take at least a generation to resolve and it is unlikely that GB would ever recover its current position or economic prospects. This is known as Hard Brexit.

Neither of these choices is rational, when compared to continued full membership of the EU, which is why this Blog believes this is a crackpot project which must be abandoned. May’s insistence that she will get a deal on her terms is a fantasy. She claims credit for the agreement she achieved at the end of Phase One. In fact she finally, when faced with failure, agreed to the EU’s terms as offered at the beginning.

 

Educational Tolerance

The Chief Inspector of Schools has rightly pointed up the fact that in our drive to show tolerance to all forms of religion we have allowed the setting up of educational programmes which teach extreme intolerance of many aspects of our culture and way of life.

This Blog has from the very beginning been opposed to setting up so called Faith Schools. In is an absolute rule of a tolerant, open and inclusive democracy that education, especially if it is publicly funded, remains secular and teaches social attitudes and behaviors as well as responsibilities and obligations, which are based upon established best practice and especially the law of the land.

There is no place at all for funding faith schools of whatever denomination with public money and there is no excuse for schools of whatever financial provenance which teach intolerance and social practices which are divisive and unacceptable. Church is for faith, school is for education. The two are not, repeat not, the same. You can believe in what you like. But you must behave according to the law.

Is Trump Now Secure?

The answer is Yes, with a proviso at the end of this post. Oddly Fire and Fury has helped Trump as much as it has enriched its author. Without getting into the argument of how much of the book is true and what is invention or misinformation, the disclosures about the shock in  Trump Tower at winning and the muddle and infighting in the early days in the White House in an administration without political experience and unversed in the structure and powers of the presidency, not only come as no surprise, but they actually explain a lot.

As for the stuff about Trump being like a child wanting instant gratification; that has been obvious to everybody for years. It is these very flaws in his persona and his project that make Trump attractive to a large swathe of US voters and underscore his greatest attraction; the outsider who does politics his own way. Even his Twitter account, which so many dislike, works for him, not because voters dislike what Trump says to them on a whim, but because he is the first president to say anything to them at all. First the people, second Washington. It is a very powerful brand.

The high poll ratings for his State of the Union address suggest that more people are beginning to come to terms with Trump’s odd ball ways and are beginning to see the opportunities these are opening up for America. His future and that of the Republicans will be determined by how big a slice of America benefits. But what is for sure is the fact that nothing about Trump shocks, because it is expected. So gaffes, disclosures, accusations and actions which would sink many leaders have no effect on Trump at all. He has become bullet proof. Even the Russia investigation is now swinging away from the White House and back into the FBI itself. So one year in, things for Trump look pretty good.

The one bullet which would blow the Trump presidency apart would be proof, not rumour, that sanctions had been broken to fund either Trump’s business or his campaign, with Russian money.

May Does Not Do Quitting

May is right to say she is not a quitter. She is nothing if not stubborn. But she lacks imagination, she finds intuitive decision making impossible and relies on an almost never ending process of review and research as the best way forward. The result is lofty speeches on intentions but total failure to deliver outcomes in the likes of housing, health, social care. prisons, the justice system (a new evidence disclosure crisis here), education and so on. And then there is Brexit, chaotic, confused and undecided.

Clearly as a prime minister she is a disaster. But the Tory party needs to know that it cannot replace her and remain in government. If they try to get rid of her they all go over the cliff together.