Every day is a bad news day under this government

Living in Britain at the moment is a tougher experience than we have been used to. While we continue to struggle to make ends meet, every day it seems as though there is another piece of news that is a slap in the face to us all. Each helping of gloom is supported by a source, which cumulatively are broad and inclusive.

Wednesday 27th February

Centrica, the private company that owns British Gas posts a tasty £606m residential profit in 2012 - up 11 percent on the previous year. In November 2012, the company put up gas bills by 6 percent.
Source: Which (consumer group)

Thursday 28th February

The bank that needed to be bailed out by the government, the Royal Bank of Scotland, made a pre-tax loss of £5.17bn. Many of the losses were due to PPI claims and fines. Bonuses remain set aside for staff. Astonishingly, the hapless organisation has been praised by the government.

Source: BBC

Friday 1st March

The pound plunges to a two-and-a-half year low against the dollar following a "shock" fall in manufacturing output. I place the word "shock" in quotations on purpose, for many of us would hardly be shocked by a fall in manufacturing under a Conservative-led government.
Source: Sky

Saturday 2nd March

From the file marked 'how to win friends and influence people', Philip Hammond, the Secretary of State for Defence decided to suggest that spending cuts should be made to welfare rather than his war chest. Great. We can all starve, but at least our military will be kept strong. Nothing like North Korea at all, of course.
Source: Independent

Sunday 3rd March

The Conservatives are now making noises about withdrawing from the European Court of Human Rights after the next election, in what is seen as a populist move as a knee-jerk response to some high-profile defeats for the government regarding the deportation of terror suspects. A move would put Britain in a minority of two, alongside Belarus – at present Europe’s only remaining dictatorship.
Source: Independent

Monday 4th March

Government policy to encourage banks to lend in order to breathe life into the economy is a catastrophic failure after banks and building societies slashed lending by £2.4 BILLION in the three months to December. The government’s “Funding for Lending” scheme was meant to encourage the banks to lend.
Source: Evening Standard 

Tuesday 5th March

In a slap in the face to all those struggling to make ends meet, George Osborne went to the European Union finance ministers’ meeting to fight the corner of the bankers by voting against a cap on bankers’ bonuses. He lost 26-1.
Source: Telegraph

 

And you wonder why Labour are 13 points ahead in the polls.

Con-Dem government sell Northern Rock at a loss

The incompetent Tory-led government have sold Northern Rock - the bank rescued by their predecessors during the credit crisis. The price at just £747 million is almost half the £1.4 billion invested by the taxpayer, though there is the possibility of a further £280 million. Angry? You should be.

Over thirty years, the Tories have repeatedly shown they have failed to learn from history and are doomed to repeat their own mistakes. In the same way they handed over Britain's utilities for the financial equivalent of peanuts in the 1980s and 1990s (those utilities that now change hands for billions, and charge their customers extortionate fees), they handed over the bank, almost at the first opportunity.

If a director of your company paid to acquire a struggling company, steadied the ship, then sold it for less than paid for it, would you have confidence in that director? No you would not. And I do not have faith in this government.

Introducing Vulture Funds

Picture the scene: you are broke, you need money, you borrow money from someone who knows you cannot afford to pay it back, who then kindly sues you for 100 times what you borrowed. This BBC report explains the controversy of a character called Peter Grossman, who runs what the BBC describes as a 'vulture fund which buys up the debts of poor nations cheaply and then sues for 10 or 100 times what they paid for them'.

At a time when there is a global financial crisis, such a practice is a highly unappetising thought. It is also a reminder that while many people around the world suffer financially, there are people out there who are profiting from the misery of others.

Illegal in the UK, charities are calling for a block on Grossman's gross attempt to sue the DR Congo for £100m through a loophole that enables him to make the claim in Jersey.

And rightfully so.

Where has all the money gone? (Part Two)

Almost a month has passed since I pondered the causes of all the seemingly missing money in the world. Apart from the reminding ourselves countries have run out of cash, that banks are not flush with cash and the general public certainly have little in their pockets, nothing is clearer. As a self-certified non-economist, the best I can do is produce crude theories. Here is one such theory.

I see the world as a massive game of poker. And it follows logically that there are only so many chips on the table. We all know that governments try to avoid printing money because it makes bad things happen, such as hyperinflation. So there is always a limited number of chips.

Eventually one person ends up with all the chips in the game of poker. As far as I can make out, something remarkably similar has happened to the world financial fluidity. Of course this game of global poker is so large no individual ends up with all the chips as they would in poker, but some definitely end up with greater piles than others. Worse than that, just as with poker, when someone has a big pile of chips, it becomes easier for them to take a great deal more chips from others.

It is enough to convince me that the theory of economic success is in fact a fallacy. A successful company is based on a flawed notion that those industries and companies (who, in poker analogy, have most of the chips) must keep increasing their income year-on-year. For example, company X may make a £275m profit on the year, but this is considered failure because the previous year they made £300m. What happens when all this money is lying around static in corporations? What happens when someone retires as a Chief Executive with more money than he or she will ever be able to spend?

The answer is we end up with money that is fenced out of the system and leads to a constraining of future economic success, as well as the limitation of the economic capability of those who have to share the rest of the shrinking pot between ourselves.

What does everyone else think? Have I got it completely wide of the mark - as Tories with economic qualifications will take great delight in saying I have? I may not be an economist but I do not think so. More to follow on this no doubt....

Where has all the money gone? (Part One)

It seems as though the world has been consumed by a vacuum, which has taken all our money from us. The UK is struggling to make ends meet. The USA legislatures have spent the week scrambling around to increase the country's credit limit. Greece, Portugal and Ireland are among a group of countries that have teetered on the brink of going under because of their debts. Who is owed all this money and where has all the money gone?

Are the debts owed to other countries? If so, which ones? If the USA cannot pay its bills, then I doubt many countries are doing any better. Or maybe these countries have borrowed from the banking sector? That cannot be the case either, as governments had to bail them out for their incompetence.

The problem is I am no economist, so I do not have the answer. It seems as though dollar bills and pound notes have just vanished off the face of the earth. Maybe an economist has an explanation for this. Is it possible for money to just vanish? More reflections to follow later in the week or at the weekend.