Bond Washing For Pensioners

Recently, the TUC have told us about its campaign to keep the public service sector pensions arrangements at substantially their current level. Yes, these are the people who provide us with many services we regard as necessary and yes, the majority are on middling or lower incomes, whose pensions will reflect this.

As ever, the debate has been affected as well as the pension schemes by the activity of rogue elements in the most senior positions who have awarded themselves spectacularly generous arrangements. Not quite in the financial sector class, perhaps, but enough to make the ordinary persons eyes water.

The TUC assures us that the present problems can be “managed” and the money can be available. This depends on which Santa Claus you have been talking to. Also, the TUC gives the impression that all the public sector is equal and more or less the same. Equality, liberty and fraternity, maybe, but life isn’t quite like that.

On 2nd May 2011, this year, in “The History Men” in this blog there was a brief explanation of the teachers superannuation scheme which is unfunded, that is the pensions to be paid out derive, in theory, directly from the money paid in by teachers currently employed and their employers.

Clearly, for this scheme as well as other unfunded ones, if the income stream is not there then the government has to stump up the rest. Currently, because government tax income does not match its obligations this is covered by borrowing. At present, this is at low rates of interest.

Elsewhere, there is a complicated and varied set of arrangements for the many different categories of employees in one or other part of the public sector. Often the government might add to the problems. For example, when some NHS salaries had their huge boost under Labour this translated into major impending pension liabilities. Some senior staff took the money and ran as soon as they could.

Many schemes are funded with the trustees under an obligation to do the best they can. Under Labour at one stage they were urged to get into the big time and take on investment opportunities in the bandit territories of global capitalism.

When this went wrong and our government needed to borrow a lot in a hurry, they were then leaned on to put their pensioner’s money into government bonds. These when bought were low interest bonds which means that the buyers were paying historically high prices for them.

By now, most readers will see where this runaway train is heading. With the stock market highly volatile and dominated by financial sector ups and downs, never mind relentless speculation, there are now suggestions that the bond markets are due for a correction at least, even a crash of some kind.

So all these funded pension reserves could be stuck not only with elements of toxic debt from the past obtained at the behest of government, they could also be stuck with large amounts of reduced value government bonds that pay low interest at a time when inflation is seriously on the up and large numbers of staff are being dumped into early retirement as staff reductions occur.

So either the government has to make up the difference, either by borrowing at greatly increased costs, or by hitting taxpayers very hard either in central government taxes or local taxes. If the bond markets turn nasty then the borrowing option may not exist.

The only way out could be to freeze or even reduce public sector pension payments and to substantially change current schemes to get the unfunded ones back into balance and the funded ones able to sort out their particular mess. There may be some funded schemes that go into default.

Add to that the prospect of radical reductions in pensioner and other consumer spending, something of a disaster in savings and a few other delights such as inflation hitting real incomes and it does not look good. The TUC does not and cannot have a real answer to these problems.

Why are so few people trying to explain this?

Trading For Pluckers

Today, I had an interesting conversation about the backsides of ducks, or rather drakes. It started as one about duck eggs. These are produced by female ducks whiles males are only good for making a lot of noise, breeding and then eating.

If you want to produce duck eggs therefore you need females. However, for the unwary or hasty when offered ducklings for sale it is very easy to find yourself stuck with useless males (where have I heard that before?) because the sellers pluck out the identifying feathers from the rear of the males.

Rogue trading therefore can know no limits to which traders will not stoop as any duck plucker can tell you. Today, we learn of the billions dollar bilker of UBS who was discovered not by ongoing audit, management or accountancy or any of that foll de roll but because the bloke concerned went to a boss, coughed a couple of times and the coughed the lot about his many errors of judgment.

My question is how many more of them are there out in the trading rooms or huddled over home computers bringing about the end of capitalism a lot quicker than any Marxist campaigner ever did. There is a long history of people like this as well as corporations, governments and religious organizations that have ramped all humanity in generations past.

For the most part, humanity just suffers it and accepts that greed, if not good, is always there and to be on your guard. There are laws and systems of justice that are supposed to deal with but quite often do not if the rogues are powerful and connected enough to avoid trouble.

When humanity does take action and often extensive and dangerous action is when the trading in food becomes disrupted or destabilised by the actions and dealing of people who knowingly distort the market pricing.

The latest Ecologist newsletter that landed in my mail box this week has a lot to say about what it claims is happening at present and two links on the issues are given below.

http://www.theecologist.org/News/news_analysis/1045181/banks_should_end_secretive_trade_in_food_commodities.html

http://www.theecologist.org/News/news_analysis/1045180/how_goldman_sachs_started_the_food_speculation_frenzy.html

What the media have said little about in the many disturbances around the world is how many of them are triggered not so much by political belief but by the fact that world food prices may be rising at levels that put real pressure on the incomes and standards of living of the poor.

Moreover, it is not just the poor that are feeling the pinch. The prices impact on the middling orders in a variety of ways notably in their patterns of spending. The less you have to spare when the food has been paid mean less to spend on other consumer goods. We, like others, have discovered that our food is costing much more and requiring reduced spending elsewhere.

In the developed west in the recent past we have had cheap food and for many the food bill has shrunk as a proportion of our living costs. This may well have ended and we are faced not simply with natural food price rises but the effects of an out of control trading system across the whole food supply chain.

In the foreseeable future it could be that our rioters will not be looting shops for fancy goods and gizmos but for bags of spuds and any cabbage they can find.

Perhaps how to tell a plucked drake from a duck needs to be taught in schools.

Stand To The Guard

With all the troubles about this currency and that and these worrying figures and those our many and various leaders seem to be at a loss to know what to do next.

Looking around the web, it seems that they are not alone, and while everyone is worried nobody has any real answers.

For some reason both Merkel and Sarkozy, never mind Cameron and Miliband, in their different ways remind me of the sentry in the cartoon above.

Train Pain And Gain

Travelling by train, we are told by a government minister, is becoming strictly for the rich in that many of the lower paid cannot afford the fares. He may be right, but in my memory rail travel always made a hole in the personal cash flow.

There were a number of offers, certain cheap day returns, excursion trains and the occasional special for one reason or another. But in the mid 20th Century and earlier despite the flim flam of the films most people did not travel much having neither the time nor the cash.

It was why Beeching took the axe to so much of the rail system. There seemed to be little hope for increasing rail travel use and all the signs of a collapse in the passenger numbers due to the increasing car ownership which impacted directly onto rail’s key market segments (how about that?).

With freight demand also on the wane, partly due to reduced costs of road transport, better delivery possibilities and far less pilfering, especially in the parcels traffic, some places were notorious, there was little hope of making rail carriage for goods cheaper by taking advantage of the increasing demand for consumer goods.

Today, despite the huge subsidies and elaborate financing mechanisms, it is still a form of transport that has relative costs. Certainly, more people have been using rail lately and the numbers are well up. But with an increasing population that is more adult and the sprawl of modern life it is arguable how much traffic is being taken off the roads and just arises from natural increases.

Where services have been greatly improved or introduced to meet modern needs the use has been much greater, notably on the Chiltern Lines, again this may be due to urban sprawl in the South East. Also, with the Cotswolds increasingly part of the commuter belt you would expect more bottoms on seats, or rather squashed up against each other on the old GWR.

The real problem is that between the Ministry of Transcendental Meditation, formerly Transport, Network Rail or whoever it is and the various companies there is a muddle of thinking compounded by lurches into prestige projects like HST2 and schemes in the South East designed to create increased property values along selected corridors.

There is not much joined up thinking, nor for that matter joined up networks and facilities. At the same time there is talk of the need for infrastructure projects to deliver investment in the UK that retains the spending in the UK monetary system.

Which brings me back to the Big Idea for Railways. This is the decision that was ducked after the 1923 Rationalisation and the 1930’s Scotch Expresses and the 1947 Nationalisation and the Beeching years and then the turn of the 21st Century.

It is spurred on this time by the complaints of M.P.’s in the South East over the winter fiascos that badly affected the old slow third rail systems. Their hopes of a better type of electrification have been quickly put into the back of the bottom draw of the Ministerial filing cabinet.

It is to electrify the whole system to a single standard, join up a lot of lines that would benefit from it, add schemes like the Oxford to Cambridge link between the South West and the East and others and perhaps rationalise stock as well to decent modern and fast running standards.

Alas, that one would not make for either easy headlines or short sound bites.

The Falling Leaves Of Autumn

Great international organisations in the modern world tend to have a shorter life than most of the empires and great alliances of the past. After World War I the idea (or ideal) of a League of Nations was created to ensure that such a conflict never happened again. Unluckily, President Wilson, who presided over its inception, failed to secure the agreement of the USA to join.

It did not take many years before all the great ideals were lost and it was back to basics in international relations. The years 1918 to 1939 are often called “between the wars” but just look at where British troops were deployed in that period. In the early 1930’s there was a full division in China.

So in the 1940’s the League had to be reinvented as a United Nations and this time the pressure was on to gain its acceptance and validity. Agencies and bodies were created to spread the word. This has lasted as an organisation but it has not stopped the wars, it has simply institutionalised them giving a patina of justified policy to an often grubby business.

In the meantime, European politicians, unable to find ways of making trade agreements between each other came to the conclusions that some sort of bigger club was necessary. The history of all this is on the web. It was all done to stop wars between us and so divert spending on the military to consumerism.

Unluckily, the drive to consumerism and money creation needed a single currency because a number of states were unable to manage their finances and economies to allow reliable exchange of currencies and other complications. So we have the Eurozone.

This was a political decision, the economics we were all told would have to follow and it would all mean that busts would be abolished and life was going to one long boom so get out there and borrow and spend. The idea of getting and spending was old style economics, we were now in a new world.

The governments went out and borrowed and most of their peoples did the same. The UK, not in the Eurozone but too closely linked because of trade and finance to avoid it, like all the others found ways of disguising debt and putting off payment.

Now it is falling apart in its present form and all the effort is being made to prop it up and keep it going until at least the next election here or there or until someone invents a perpetual motion machine that will allow perpetual energy.

One Big Idea is the political union of Europe so that real decisions can be made and applied. That this will be done by a largely unrepresentative government which has shown staggering incompetence in financial and other management does not seem to matter. It is posited as the only answer.

Putting Brussels in charge of the riot is a little like locking all the violent drunks in the local distillery. It may look the only place for them in the sort term, but what happens when they have to be let loose?

In the last century or a little more, the Chinese Empire fell apart and look what happened, ditto The Ottoman Empire, The Austro-Hungarian Empire, The Russian Empire and the British Empire. When Empires fall it is usually a bad business.

Next up as well as The Fall of the American Empire, will we have The Fall of the European Empire?

Shock Thought For The Day

Just as Anand Giridharadas in the New York Times on 9 September said, I never thought to see the day when I would be retailing some of The Thoughts Of Sarah Palin. They are about what government we have in our modern “democracies” and who controls it.

For some of us in the UK do these ideas strike a chord? It is a pity that because of the UK media such views are unlikely to be given any coverage in our own. Hat tip to Some Assembly Required one of the liberal web sites of the USA.

Quote from NYT:

So here is something I never thought I would write: a column about Sarah Palin’s ideas………………..There was plenty of the usual Palin schtick, words that make clear that she is not speaking to everyone but to a particular strain of American. ………But when her throat was cleared at last, Ms. Palin had something considerably more substantive to say.

She made three interlocking points.

First, that the United States is now governed by a “permanent political class,” drawn from both parties, that is increasingly cut off from the concerns of regular people.

Second, that these Republicans and Democrats have allied with big business to mutual advantage to create what she called “corporate crony capitalism.”

Third, that the real political divide in the United States may no longer be between friends and foes of Big Government, but between friends and foes of vast, remote, unaccountable institutions (both public and private).

In supporting her first point, about the permanent political class, she attacked both parties’ tendency to talk of spending cuts while spending more and more; to stoke public anxiety about a credit downgrade, but take a vacation anyway; to arrive in Washington of modest means and then somehow ride the gravy train to fabulous wealth.

She observed that 7 of the 10 wealthiest counties in the United States happen to be suburbs of the nation’s capital.

Her second point, about money in politics, helped to explain the first. The permanent class stays in power because it positions itself between two deep troughs: the money spent by the government and the money spent by big companies to secure decisions from government that help them make more money.

“Do you want to know why nothing ever really gets done?” she said, referring to politicians. “It’s because there’s nothing in it for them. They’ve got a lot of mouths to feed, a lot of corporate lobbyists and a lot of special interests that are counting on them to keep the good times and the money rolling along.”

Because her party has agitated for the wholesale deregulation of money in politics and the unshackling of lobbyists, these will be heard in some quarters as sacrilegious words.

Ms. Palin’s third point was more striking still: in contrast to the sweeping paeans to capitalism and the free market delivered by the Republican presidential candidates whose ranks she has yet to join, she sought to make a distinction between good capitalists and bad ones.

The good ones, in her telling, are those small businesses that take risks and sink and swim in the churning market; the bad ones are well connected mega corporations that live off bailouts, dodge taxes and profit terrifically while creating no jobs.

Strangely, she was saying things that liberals might like, if not for Ms. Palin’s having said them.

“This is not the capitalism of free men and free markets, of innovation and hard work and ethics, of sacrifice and of risk,” she said of the crony variety. She added: “It’s the collusion of big government and big business and big finance to the detriment of all the rest, to the little guys. It’s a slap in the face to our small business owners, the true entrepreneurs, the job creators accounting for 70 percent of the jobs in America.”

Is there a hint of a political breakthrough hiding in there?

The political conversation in the United States is paralyzed by a simplistic division of labor. Democrats protect that portion of human flourishing that is threatened by big money and enhanced by government action. Republicans protect that portion of human flourishing that is threatened by big government and enhanced by the free market.

What is seldom said is that human flourishing is a complex and delicate thing, and that we needn’t choose whether government or the market jeopardizes it more, because both can threaten it at the same time.

Ms. Palin may be hinting at a new political alignment that would pit a vigorous localism against a kind of national-global institutionalism.

On one side would be those Americans who believe in the power of vast, well developed institutions like Goldman Sachs, the Teamsters Union, General Electric, Google and the U.S. Department of Education to make the world better.

On the other side would be people who believe that power, whether public or private, becomes corrupt and unresponsive the more remote and more anonymous it becomes; they would press to live in self-contained, self-governing enclaves that bear the burden of their own prosperity.
No one knows yet whether Ms. Palin will actually run for president. But she did just get more interesting.

Unquote.

Ms. Palin has had some rough handling by the US and World media and indeed may not be amongst the intellectuals or even those who are best educated. But perhaps her critics have been protesting too much.

An Anniversary And Questions Of Security

There is enough comment about the tenth anniversary of 9/11 for me to avoid saying too much. What I can say was that with two of ours working over the Atlantic at that time, in and out of New York and the World Trade Centre on occasion it was much too close for comfort.

It was at just on 2.00 p.m. UK time that I got the call from Miami to tell me to stay out of London and look at CNN news, so I was watching from then on. We did go to the Prom’ the next day and there was a good deal of discussion about how the BBC might react with the Last Night.

In 2001 a good many of the Arena season ticket holders including ourselves decided not to go to the Last Night because it was going to be an awkward compromise. But for most of us the fact that on the Friday night there was to be the Verdi Requiem was the best way to finish the season.

One of the ‘planes that was used in the attack flew out of Boston Logan and it was only days later that we flew in. The flight was less than half full. The security at Logan was a shambles. But the Americans were both surprised and happy to see us.

We were staying with family and meeting their friends and others and I think saw the reactions as typical of the great majority of Americans at that time. It was a severe shock then and it is a shock that they have not forgotten. Much as I have not forgotten what happened to Bootle and Liverpool.

When the London 7/7 bombings occurred again we were up in London the following day. It was very quiet and people left early to go home. The security at the Prom’s Last Night two months later was almost as bad as that at Logan. There was too much posturing and too little effective communication by the security goons.

The threats are still there and perhaps it is only a matter of time before in one place or another that the next bad one will occur. Can we get our act together?