Wednesday, 28 January 2009

Don't mess with the Royal Navy

Check out this baby...

That's HMS Daring, the first of the Royal Navy's order of six Type-45 destroyers. Its primary function is air defence, and in this role it is supposedly the most capable ship in the world, able to track and engage up to six cricket-ball sized objects travelling at three-times the speed of sound at the same time. It can completely command the airspace within a [classified] mile radius (thought to be more than a 100 miles!)

One slight ouch, it cost six-and-half billion pounds!

However naval officers from around the world who have been on board are said to be drooling with envy.

Sister ships Dauntless, Diamond, and Dragon are already in the water, although not handed over to the navy yet, with Defender and Duncan still in the shipyard.

You see Gaza, you needed one of these!

New debt will take 20 years to pay back

The Institute for Fiscal Studies (generally considered a neutral think-tank) has calculated that the new debt being created to cope with the current recession will take twenty years to pay back. Young people just starting their careers today will spend half their working lives being taxed to pay for this government's ineptitude; an extra £20bn a year in tax yield will be required.

Of course Gordon Brown hasn't stopped throwing money around. Every day seems to bring a new dispensation. Yesterday he flung £2.3bn at the automobile industry. And, I for one, don't believe he has the self-discipline to start debt repayment anytime soon so that 20 years could easily balloon to 50 or more.

In fact I don't think Gordon has any plans to behave responsibly. Why should he? He'll be booted from office in under two years. I think he is happy to let his successors carry the can.


Perhaps now is the right time to introduce the word "depression". What is a depression? Economists don't have a precise definition. A recession is two consecutive quarters of GDP shrinkage; and the consensus seems to be that once you've been in recession for 3 years - it's a depression.

Monday, 26 January 2009


Here's a nasty little graph from the BBC...

(You may need to click on the image to see it in its entirety)

It begs speculation has to how the curve will pan out of the next few quarters. The plunge is already a fair bit steeper than our last recession.


Icelandic government has collapsed

Iceland's coalition government has collapsed under the strain of an escalating economic crisis.

Conservative Prime Minister Geir Haarde announced the resignation of his cabinet, after talks with his Social Democratic coalition partners failed.

He said he could not accept the Social Democrats' demand to lead the country.


Well, no one can say the writing wasn't on the wall! I guess they should count themselves lucky they haven't been lynched considering how badly they've managed the financial sector of their economy over the last few years. Or rather, not bothered managing it.

A year ago one US dollar could be purchased for a mere 60 Icelandic Krona (ISK). Today the Icelander would be forking out more than 120 Krona. They've lost half their wealth in slightly over a year. Ouch!

So, it's back to fishing, metals and tourism for Bjórn and Bjórk

Wednesday, 21 January 2009

Protests in Iceland

Generally ignored by the English-language mass media there seems to be increasing disorder in Iceland as people protest at the mismanagement of their economy.

Blogging here:

Article: Reuters

New president

Yesterday, at Midday Eastern Standard Time, one Barack Hussein Obama (announced to the jubilant crowd as "Barack H. Obama") took the oath of office and became the 44th President of the United States. Two million people attended the ceremony and many of them cried.

What has BHO done to merit this adulation? Nothing of course. He has never run so much as a whelk stall (as we say in the UK.)

The only undeniably good thing about him is that he isn't George "W" Bush.

However crowd hysteria has promoted him to the rank of a new Nelson Mandela. For here on there can only be disappointment.

Brace yourselves for hyperinflation

Last night at a CBI dinner the governor of the Bank of England, Mervyn King, used the words, "[The MPC] may need to move beyond the conventional instrument of Bank rate and consider a range of unconventional measures." I imagine this is a coded reference to printing money - as do most commentators.

(The supine BBC failed to report these words, on its website at least, for several hours. Sky and the newspapers had no such inhibitions.)

It should be self-evident that when more money is created from nothing the existing money loses value to a commensurate degree. Money losing value is known as "inflation".

However there are considerable deflationary pressures in the economy at the moment: the oil price has fallen, house prices are falling, commodity prices generally are falling, and unemployment is rising. These all force down inflation so the devaluing effect of printing money, although inevitable, will be postponed until the deflation has left the system. The government will be counting on this lag to get away with their money printing at least long enough to get them past the next election.

However, although the macro-economic effects may not materialise immediately, investors' and savers' sentiment is likely to change rapidly; sterling is now an unsafe store of value. Anyone with sterling savings should probably be considering moving them to a stronger currency or more tangible asset.

The High Street banks offer foreign currency accounts, and if you keep a certain balance some banks don't charge a fee. Others, eg HSBC, charge quite substantially and are best avoided.


Tuesday, 20 January 2009

Inflation rate is falling

The inflation numbers for December are out. In the year to end of December CPI was 3.1% (down from 4.1% in November) and RPI was 0.9%, down from 3% in November. The big fall in RPI was due to mortgages getting cheaper because of the interest base rate being reduced from 4.5% to 3%. CPI fell less because it doesn't include mortgages; the main reason it fell was the VAT rate being reduced from 17.5% to 15%. This reduction is, of course, temporary; the rate will return to normal at the end of this year.

Perhaps the most telling thing about these numbers is that despite the UK being in the worst financial situation since the 1930s the CPI inflation rate is still substantially above its 2% target! In fact it is still in "letter writing" territory where the governor of the Bank of England has to write a letter of explanation to the chancellor of the exchequer.

BoE Link
BBC Link

Monday, 19 January 2009

Another bung for the banks

The government has today flung another £50bn at the banks to keep the wolves from the door. This is so routine I'm surprised I'm bothering to write a post on it.


Royal Bank of Scotland

The Royal Bank of Scotland (not to be confused with the Bank of Scotland) which owns Ulster Bank and NatWest has today reported financial results which are worse than anything ever reported on the London stock exchange before.

They've lost £28bn on the year. The first £20bn of loss was somewhat outside their control - it relates to the takeover in 2007 of the Dutch bank ABN Amro.

However the remaining £8bn is more concerning - it's the simple trading loss they made in 2008 for which there is little excuse; the credit crunch started in September 2007 after all - there should have been no surprises in 2008. Although ABN Amro lending £2.5bn to a Russian tycoon who isn't planning on giving it back can't have helped.

RBS results
Russian tycoon

Friday, 16 January 2009

Fun with the 1911 census

The British 1911 census has been put online and can be searched here. Althought it will mainly be used by amateur genealogists researching their own ancestry, I thought it might be illuminating to extract a few general statistics.

Here's a table of common surnames and the number of occurances in the 1911 census.

So much for a "mongrel nation"!

Wednesday, 14 January 2009

William Grove

William Grove: Hero

Meet William Grove, 84-year-old, late of the Royal Air Force, and by late I mean 65 years ago. Whilst walking down a London street Mr Grove chanced upon two local simians engaged in breaking into a jeweller's using hammers. Using his training from 65 years previously he accosted one and managed to get its mask off, thus allowing the police to use DNA from the garment to apprehend one, and later convict both, would-be thieves.

Mr Grove isn't unique in his crime-fighting but there is one particularly admirable aspect to his actions. When asked why he did it, he said, "Because I was the nearest." It's that old-fashioned attitude that any upright citizen can and should intervene which is to be treasured.


Monday, 12 January 2009


Pakistan means "Land of the Pure" in Urdu. "Stan" is land, "Pak" is pure and "Paki" is the genetive formation.

Afghanistan means "Land of the Horse", although you have to go back to Sanskrit to get Horse from Afghan.

I trust everyone who considers "Paki" an unacceptable abbreviation for Pakistani is equally scrupulous about avoiding "Afghani".

Wednesday, 7 January 2009

The Jews are fighting the Arabs again

I suppose something should be said about the current situation in the Middle East. Hamas, based in the Gaza strip (a 30 mile long, 10 mile wide strip of land on the Med coast which would be prime real estate in other circumstances) have fired several hundred Iranian-built rockets, smuggled in through Egypt, into southern Israel and successfully killed three Israelis. In retaliation the Israelis have dropped American bombs from their American F16s and killed about five hundred Gazians.

Hamas seem to favour storing their munitions in, and launching them from, mosques, schools and hospitals. Their logic might be that the Israelis won’t shoot back because of the danger to non-combatants. That might have been their logic the first time they tried it. Since they now know that the Israelis will always shoot back, regardless of the risk to innocents, it can’t be their logic anymore. So their current logic must be that the deaths of innocents including children and hospital patients at the hands of the IDF is actually a good thing because it makes the Israelis look like villains.

So we can safely say:

1) It’s a very dirty little war.

2) It’s a proxy war. The Americans are fighting the Iranians; both sides using proxies.

I suppose one could ask: which side is in the right?

Well, the Gazians shouldn’t be sending rockets into Israel, but Israel shouldn’t have founded their state in someone else’s land. So the Hamas action could be regarded as defensive or retaliatory, but the (modern) state of Israel was founded in 1948 so it might be time for the Arabs to accommodate themselves to the fact. Probably the best any third-party involvement can hope to achieve is a return to a peaceful status quo.

New year, new problems

Happy New Year, folks! I’m back from my hols and I see the UK situation has not improved in my absence. Today we have 27 store closures and 1200 redundancies from Marks & Spencer, Woolworths closed for good yesterday, Viyella is in administration and sterling has just pulled back from parity with the euro. (At launch one euro was worth 72p.)

The government has a plan for the economy though. They are going to drip-feed in £18bn of new (borrowed) money. This will be going into apprenticeships, infrastructure projects and anti-jobloss measures. I’m afraid that’s chickenfeed – the economy has a £50bn-a-year MEW habit to sustain. Or put less ‘street’, the economy is currently configured to benefit from people increasing their mortgages and spending the house price ‘gain’ on consumer items and services. That £50bn-a-year cash injection has gone away now and isn’t coming back any time soon. The economy will need to adjust to a business environment where discretionary spending doesn’t happen to anywhere near the same extent.

But the real problem is the pound sterling. A few days ago it came close to parity with the euro. It now struggles to buy one and a half US dollars. It has lost 30 percent of its value in Swiss Francs over the last three months. This loss of confidence in our currency is not surprising. Does anyone really believe the government has the fortitude required to defend its value? That would require restraining public sector spending, running a budget surplus in fact, and raising interest rates to lure in foreign investors. I can’t see any of that happening in the near term. The government will turn a blind eye to the problem until it feeds through into the inflation numbers; and that won’t be until the current deflation caused by the economic collapse has bottomed out. (I say deflation; the inflationary pressure of all the government’s borrowing is so high we may never actually see real deflation, ie negative RPI or CPI, just lower numbers than we’d have otherwise.)

So sterling is going to drop like a stone and the government will ignore that for a while. Then inflation will take off with a vengeance and the government will either fight it, or let it rip. Given the level of sterling-denominated debt, both public and private, it seems almost inevitable that the government will opt to surrender to, rather than fight, inflation.

When that happens, it will actually be quite beneficial to have an inflation-proof asset such as a house, and a large sterling debt to fund it. The real value of the debt will evaporate but the house will largely hold its value. In the meantime cash reserves should probably be kept in a strong foreign currency. I favour the Swiss Franc. There is also gold.