An Ecological Basket Case With Nuclear Bombs & Terrorist Problem

I read this article from the excellent Earth Policy Institute (http://www.earth-policy.org/book_bytes/2012/wotech10_ss4) and I struck me that Pakistan’s environmental issues are the elephant in the room that nobody talks about.  It’s issues with terrorism are well documented, concerns about their nuclear weapons programme are frequently voiced, and even broad failings within its economic and political systems are hardly news, but this article brought home to me some very stark issues which could provide the spark to ignite the tinderbox of the other issues.  If ever there is event that is pretty much guaranteed to spark chaos, it is lack of food, and the issues raised here sound like it is a matter of “when” rather than “if” the trauma of widespread famine hits this already blighted country.  This is unlikely to end well.

Nick

US Military Expenditure

This chart shows just how much more the US spends on its military compared with every other country; in fact it spends almost as much as every other country added together. Never in history will a country have had such an overwhelming military superiority over all other countries. The question is whether that improves the security of the world or not? 

http://www.iiss.org/publications/military-balance/the-military-balance-2012/press-statement/figure-comparative-defence-statistics/

Nick

The Modern Face of Segregation (Part 2)

Last Friday I posted an article about the broader issues surrounding the tragic shooting  of Trayvon Martin in Orlando, Florida.  I was provided an update today, (http://www.huffingtonpost.com/2012/03/08/family-of-trayvon-martin-_n_1332756.html#s766192) and incredulously, the security guard who followed him (despite being told by the Police not to do so), confronted him and shot him in “self defence” (despite the victim being armed by nothing more dangerous than a soft drink and some sweets/candy) has not been arrested.  I am not arguing for processes not be followed, or even short-circuited, but if he is not arrested, how can the justice process even be commenced?  Try him before a jury of twelve of his peers and let them decide whether he is guilty, but don’t try and sweep this under the carpet.

Nick

A Turning Point?

Three former directors of The Royal Bank of Scotland, including the infamous Fred Godwin, are being sued by a group of investors for an eye-watering £2.4bn. (http://www.thisislondon.co.uk/business/business-news/former-rbs-top-brass-hit-by-24bn-claim-7562444.html)

I know this is very early days, but if this is successful, this is just the sort of thing that would ensure the directors of banks did not act in such a cavalier fashion in the future.  there is nothing like the threat of poverty to focus the mind!

Nick

The Modern Face of Segregation

I shall leave others to debate the racial undertones of the tragic death of Tayvon Martin in Orlando Florida:

http://globalgrind.com/news/trayvon-martin-shot-and-killed-his-own-neighborhood-watch-details

Race continues to be be too great an issue in America to be covered in one short article.  Instead, I will raise an even broader and less discussed issue that to me appears very pertinent to this case.  The shooting took place in a “gated community”, those ghettos of the better off that are becoming increasingly prevalent across the world.  At the same time, those areas more commonly associated with the word “ghetto”, the housing projects, estates, shanty towns etc. (depending on the local term and circumstances), continue to be black holes into which the poor of the world get sucked into and escape with great difficulty.

So why are we so obsessed with separating people so they only live with other people “like themselves”?  I’m not talking about everybody living in the same size or value of house like some Marxist vision of utopia, I’m asking what is so undesirable about communities that have a mix of people from different social classes and income levels?  Would it not have benefits such as:

• Greater understanding about other people’s lives;
• Raising the aspirations of those who are normally left behind;
• Fostering humility and empathy amongst those with so much; and
• Reducing the kind of irrational fears and prejudices that led to the tragedy above.

I live in an area of London that remains reasonably mixed, both ethnically and socioeconomically, although there are few that you would describe as “rich”.  It is not perfect and has its problems, (especially the SOBs who keep stealing bits off my car!) but nobody gets shot for looking suspicious while they walk back from the store.  I also struggle to think what I would gain by living in a gated community or other exclusive area; why would it make me happier?  

So am I just weird or could I be on to something?

Nick

The Elephant in the Room

Ann Pettifor has written an excellent article on the now little talked about levels of leverage in the UK financial sector (http://www.leftfootforward.org/2012/03/all-the-signs-are-there-for-another-credit-crunch/) which I would recommend to everybody.  I can’t disagree with any of the comments that she makes, but I do think that it leaves one important issue answered - what and who will fill the void left by the banks deserting lending to the productive sectors of the economy as they focus on sorting out their own issues.

History teaches us that humans are adaptive, and when something fails, however disastrously, that alternative solutions are found and better ways are developed.  Tomorrow morning I am attending the launch of the “Next Generation Finance Consortium”, which brings together a number of alternative business finance providers, especially in the nascent area of peer-2-peer finance provision.  Banks are fundamentally involved in a process of intermediation - borrowing from people with excess capital (i.e. taking in deposits), and then lending to those people who need capital.  Historically people have needed banks to provide this function as this has enabled risk to be spread and managed, but is this function becoming increasingly redundant, both because the banks themselves have changed from being conservative custodians of our deposits into financial traders and because improvements in technology allow us to be our own intermediary?

More to follow after tomorrow’s event.

Nick

Spain is the New Greece

As 25 of the 27 EU leaders signed up to the new “Fiscal Compact” (http://www.bbc.co.uk/news/world-europe-17230760) to try to prevent another crisis akin to that happening in Greece, and Greece itself sinks into further economic oblivion (http://www.bbc.co.uk/news/business-17238523), concerns about the “next Greece” have subsided from their peak.  When the European debt crisis first developed, Ireland and Portugal soon followed Greece down the bailout path and concerns were raised about both Spain and Italy, before the focus fell strongly on the latter.  Italy has seen its Prime Minister change and a degree of confidence return in its economic management.  This focus on Italy and the rapid deterioration of Greece’s situation has seen the eyes turn away from Spain, but is this where the biggest risk lies?

News today that Spain will miss its deficit reduction target by a massive margin (http://www.bbc.co.uk/news/business-17235179) - with a forecast deficit of 5.8% in 2012 compared with a target of 4.4%, a difference of over 30% - demonstrates how little progress it is making.  At a recent seminar I attended the speaker described the situation in Spain in stark terms  - “the Spanish are lying”.  The Spanish property market has collapsed, but the banks are hiding the pain.  They reposes houses, but rather than record them at their open market value, they show them at the value of the loan.  Many of the cajas (roughly equating to British building societies) only keep going on the back of funding from the European Central Bank, a significant proportion of which I understand they have used to prop up their failing pension funds, much to the disgust of Northern European central bankers.

Unemployment recently passed 5m (http://www.bbc.co.uk/news/world-16754600), equivalent to 22.8% of the working population, while youth (16-24 years old) unemployment has hit an eye-watering 48.6%.

Although Spain has a much greater industrial base than Greece, much of it world class, (Seat cars and a significant element of Airbus aircraft for example), so much of its economic effort in recent years has gone into one area: residential real estate.  While the building of houses is clearly a worthwhile activity, creating both employment and trade at the time of construction and homes for people to live in, when this activity turns speculative, it can become corrosive to the economy.  No longer primarily a place for people to live, it becomes instead an asset to buy in order to appreciate in value, despite not actually producing any economic activity once construction is complete.  Spain is now paying the price for this folly.  Just as in other countries such as the UK, USA and Ireland, appreciating house prices have given the Spanish people the illusion of rising prosperity, while the reality is one of rising debt levels rather than increasing trade, productivity or innovation.

The rising oil price could provide the straw to break the camel’s back.  Spain has no indigenous oil supplies and car ownership levels some 16% higher than the UK.

So, keep your eyes on Spain, I believe it could be an “interesting” few months ahead.

Nick

Local Mutual Savings Banks as Catalysts for Regeneration

Regeneration Model.pdf Download this file

I posted this last week but I understand that the file was difficult to access, so I am re-posting in a different way.

The linked file details a model for the use of local mutual savings banks as a catalyst for economic regeneration.  The model is based on legislation in the UK, so would need tweaking for other jurisdictions, but the principles have broader application.  The aim of this project is to build a framework around which a town or borough can build a local approach to financing and building job creating businesses in their locality.  It utilises existing legal structures and regulations, so requires no changes at a national level, but combines them in a creative way so the whole is greater than the sum of the parts. I would be interested in any feedback.

Nick

Why is employee ownership not more popular?

The University of Leeds published some research on employee owned businesses (http://bit.ly/xgnd77), highlighting their success, especially during the current economic difficulties.  It makes me ask the question as to why they are not more popular?  The logic for employee ownership is compelling; it clearly aligns the interests of capital and labour, so why so little take up?  I shall ponder this one further.....

Nick