Wednesday, 26 March 2008

New Labour & the FSA Experiment - Res ipsa loquitur

The cacophony of background noise is a trademark of the political theatre a.k.a. - Prime Minister’s Questions (PMQ’s). But occasionally, one can make what I could only describe as rather telling observations.

David Cameron decided to use his “bag of six” – questions that is, to bludgeon the Prime Minster on the Financial Services Authority (FSA) inept handing of the Northern Rock crisis. Unfortunately for him, his observations on ineptitude were partially reciprocated, as he returned the favour; making a poor case for a valid argument.

The fact is we really need not look very far to see an excellent example of effective regulation in action – cue The Federal Reserve Board. Just take a look at how deftly the Fed dealt with the near collapse of Bear Stearns, and contrast this with the slipshod action or “inaction”, of the FSA in conjunction with BoE in dealing with a similar situation – the collapse of Northern Rock. Even as the dust is still settling, it is clear that the American approach of quasi-public regulation is far more superior. More importantly, the Fed as a unitary authority is an approach that while not perfect, has the benefit of pooling resources, and presenting itself to the banking industry as a sole place of reference.

While I am not quite ready to hitch my cart to the Tory economic engine, I most certainly support the Tories premise to hammer home the point that all this talk about New Labours economic prowess is just that – talk! Furthermore; the decision to split responsibilities of banking supervision and regulation between that of the Bank of England and the FSA have proven to be categorically short-sighted and economically sophomoric.

Yes, we all know the ability of Gordon Brown to verbally vomit statistics at will is amazing, if not of a mild autistic savant. However; The Tory party can rightfully argue that the decision to separate the powers of regulatory supervision between the FSA and the BoE was one of poor judgment.

I further opine that in light of FSA admitting in their own style that they are simply not up to the job, that the regulation of addressing:

      • Banking panics;
      • Striking a balance between private interests of banks and the centralized responsibility of the government;
      • supervising and regulating banking institutions;
      • maintain the stability of the financial system and containing systemic risk in financial markets;
      • to be responsive to local liquidity needs

Be solely the domain of a quasi-public Bank of England. As a trader myself I have a keen interest in a stable and efficient market place. If the regulator of first instance can’t be trusted, relied upon or worst – proves incompetent, it affects us all. For all the talk from new Labour on prudence and stability, it’s only when things fail, that we get the accurate picture.

Res ipsa loquitur – it speaks for itself! The idea that the status quo of relying on the FSA to effectively deal with systemic risk and regulation in the banking sector, is clearly no longer a sustainable proposition. I fear however, that New Labours response to today’s report from the FSA will be genetically in the style of New Labour – more regulation! It really is the case that "less is more!"

More regulation in the area of banking would be the wrong response. What is needed here is calm insightful fortitude in dealing with issues in banking, against the current backdrop of “tight” credit markets. I know it would be the breaking of a lifetime habit for New Labour to instead look to the private sector for the experience necessary in dealing with and examining the types of risk that banks take.

The ability of the regulator to understand such operational banking risk, goes some way to pre-empting such catastrophic failures such as Northern Rock. The Bank of England is in the best position to understand this, it would be folly indeed to not re-examine this remit, and learn a few lesson from our cousins on the other side of the Atlantic – The Fed!

Wednesday, 12 March 2008

The Freshman’s Budget

A politician's words reveal less about what he thinks about his subject than what he thinks about his audience. George Will

The Chancellor today presented his budget to Parliament, and I have to tell you after watching and listing with keen interest, I was left recollecting about an interesting traffic sign I once saw – “slippery when wet”. This was a “budget”, and I use the term loosely, that was vexatious in the selective statistics used and intellectually pretentious.

Chancellor Brown, pardon – Darling, took my breath away, when he said: “Britain is more resilient and more prepared to deal with global shocks.” Inebriating incredulity on the Chancellors part comes to mind. The fact is, for all the right decision that the government took in 1997, such as giving the Bank of England its independence; we are now at a state where government finance is in bad shape. Why? Simple, this government failed to set aside or ensure preparedness for the “rainy season”, a staple of all economic cycles.

The government has stated, and nauseatingly so, their adherence to the “golden rule” - Huff and puff all you want Chancellor that rule is the only thing blown over. Mr Cameron was correct when he said, the trade deficit was set to rise to a record £72bn while the rate of investment was "slumping" by two thirds and debt as a share of GDP, if Northern Rock was included, was 43.8%. Clearly this would "bust" the chancellor's fiscal rules.

In October's pre-budget report, Mr Darling forecast growth at 2.0-2.5 percent in 2008 and 2.5-3.0 percent in 2009. This contrasted sharply with a poll conducted by Reuters of 60 economists, whom put economic growth at 1.8 percent in 2008, picking up only slightly to 1.9 percent in 2009.

The persistent conviction of the Chancellor that the economic weather can safely be described as a slight overcast seems to be grossly at odds with most economists who see the high risk of an oncoming storm.

One could not ignore the incessant use of the word “stability”, as if somehow repeated Ad nauseam would produce the result. I would have thought that if stability were desired, a posture of tax cutting to stimulate the economy would have been a more sane prescription.

I am incredulous of stories about “green taxes”. It is patently clear to me that this governments wish to relegate plastic bags, excessively tax alcohol and the automobile, is nothing more than government by authoritative decree. And anyway, we are not stupid; we know a tax jack when we see and feel one. This is really a case of – “I just need the money!

Saturday, 8 March 2008

Jacqui Smith, The Charlatan Poseur

The political nomenclature of today throws up some rather interesting results when one begins to scrutinize New Labour. Leadership has been substituted with political ignobility, and frankness, with that of subterfuge. The most deleterious act this week, would have to be the failure of Parliament to live up to its promise of giving us the people the right to vote in a referendum, on the European Constitution. I am mindful to point out that this was promised by all major parties in the last general election.

Cowardice's it seems, knows no lower boundry. Just when you though this government could sink no further, they surprise you. I refer to this governments fervent belief that George Orwell’s novel, “Nineteen Eighty-Four” was a treatise to be adopted. New Labour it appears, are determined to whittle us down to nothing more than a bar code, supporting as they do the implementation of identity cards.

The most interesting fact to come out of the whole discussion on ID cards, is that Home Secretary Jacqui Smith is using the “back door”, to get the ID card into the building. This “sleight of hand” would make even Robert Houdin blush!

What is most egregious of all, is the copious amounts of unnecessary and intrusive information that the government wishes to collect on us. Name and address just will not suffice this insatiable appetite to “know us just a little better”.

As a voter, I am deeply concerned with the government’s impetus to implement ID cards and I can’t for the life of me determine why they feel it a necessity to collect the amount of information they intend. My “red line” has been drawn firmly, boldly and forcibly on the topic of biometric data collection. Why the government feels my DNA is their property I will never understand.

If you had asked me about a year ago, was I in favour of identity cards, I would have said yes. However in light of the events of the last 12 months, the government has proven beyond all reasonable doubt, that they are incompetent and indifferent with we the citizens personal data. I could no longer support this position. When you couple this fact with the notion that the government had always intended to go further with the information that they wish to collect, I could only come to the conclusion that permission would be tantamount to ascribing the Orwellian premise.

For all the talk that Jacqui Smith puts out, with her promise to engage with the people on this topic, one can’ help but conclude that she, and New Labour to which she represent at its upper echelons, is nothing more than a charlatan poseur. We all fell this once; it won’t be second time lucky!

Tuesday, 4 March 2008

The European Beast is feeding again!

I have been following with great interest the ratification of the European Union Constitution as it makes its way through parliament. Yes, I called it the European Union Constitution, for that’s exactly what it is. Any attempt to refer to it as something else, is disingenuous at best, or dissembling at its worst.

You don’t have to take my word when I say it is the same old constitution that the liberal elite of Europe tried to pass and failed miserably in 2005, when it was rejected by the people of The Netherlands and France, here are some quotes worth repeating:


“The substance of the Constitution is preserved. That is a fact.”

(Angela Merkel, German Chancellor, Telegraph, 29 June 2007)


“We have not let a single substantial point of the Constitutional Treaty go… It is,

without a doubt, much more than a treaty. This is a project of foundational

character, a treaty for a new Europe.”

(Jose Zapatero, Spanish Prime Minister, speech, 27 June 2007)


“90 per cent of it is still there... these changes haven't made any dramatic change

to the substance of what was agreed back in 2004.”

(Bertie Ahern, Irish Taoiseach, Irish Independent, 24 June 2007)


“As for our conditions… I outlined four red lines with respect to the text of the

Constitution: to keep a permanent president of the EU, to keep the single overseer

for foreign policy and a common diplomatic service, to keep the extension of

majority voting, to keep the single legal personality of the Union. All of this has


(Romano Prodi, Italian Prime Minister, La Repubblica, 24 June 2007)

Still not convinced? Here is one quote from the author of the original constitution:

“This text is, in fact, a rerun of a great part of the substance of the Constitutional


(Valery Giscard d’Estaing, Telegraph, 27 June 2007)

This clearly reinforces my belief that the bureaucratic beast, a.k.a. The EU wishes to gorge itself further on powers hitherto the domain of member states. For the sake of clarity, and to ensure that there is sufficient “clear blue water”, between myself and others whom simply can’t stand or tolerate Europe at all, I need to make it clear that this is not the train I am hitching my cart to.

What I object to, and vehemently so, is the insatiable appetite of the European Union beast to emasculate national governments and their representatives of their fundamental purpose, of being accountable to the people they represent.

Proponents of this constitution can not argue with the fact that ratification would mean surrendering vetoes, in somewhere between 45 and 70 policy areas. The tactic of using gobbledygook to write and explain the constitution won’t work either. We the public can see this for exactly what it is – get the constitution through by any and all means necessary. Just look at what Belgian Foreign Minster said on the constitution:

"The aim of the Constitutional Treaty was to be more readable; the aim of this

treaty is to be unreadable… The Constitution aimed to be clear, whereas this

treaty had to be unclear. It is a success.”

(Flandreinfo, 23 June 2007)

This is breath taking! The politicians failed to win the argument and now they have decided in their collective wisdom, to precede full stop with their project irrespective of what we the public think. This can not be right! We are constantly told by New Labour and the Liberal Democrats that the EU is there for the people, which begs the question, which group of people?

Prime Minster Tony Blair in the last election promised that there would be a referendum on the constitution, and Gordon Brown went further as recently as June 24 2007, when he stated:

“The manifesto is what we put to the public. We've got to honour that manifesto. That is an issue of trust for me with the electorate.”

I will be most appreciative of anyone who can explain to me what part of “trust” did the Prime Minster have trouble understanding. Perhaps I just did not realize it was yet another “aspiration” of New Labour and not a promise. If we can’t count on the Prime Minster to tame the beast of Europe, we might as well pack up and go home.