Monday, 16 December 2019

The Age Of Conspicuous Thrift Returns With A Vengeance

A decade ago, amidst the echoes of the global financial crisis, we were talking about a new Age of Conspicuous Thrift and the 'counter-Veblen effect' when "preferences for goods increase as their price falls, over and above the traditional supply and demand effect, due to a conspicuous thrift amongst some consumers." A week ago, it was pointed out there are more food banks than McDonalds outlets in the UK. And a survey by Mazuma Mobile, the mobile phone recycling firm, has found that 85% of Brits regularly purchase pre-owned products instead of new, from books and handbags, to computers and mobile phones. In fact, 45% plan on giving pre-owned items as gifts this Christmas and 52% would happily receive them.

Over the past decade we've had very low interest rates, plenty of cheap credit, £36bn in PPI compensation (though some is yet to be paid), strong employment and some feeble growth, yet UK household debt remains at record levels and the UK economy is shrinking. That means 2020 is set to be a very hard year, which explains why so many Brits are battening down the hatches - particularly those in the early stages of their careers. Previously, those aged 25 – 34 were most likely to purchased pre-owned items as gifts, but they've been overtaken by 18 – 24 year olds. 

Londoners (60%) and the Northern Irish (66%) are happiest to receive pre-owned items as presents, yet even the lowest figure is still 43% (in the North West), which means conspicuous thrift, rather than conspicuous consumption has really taken hold in the UK. 

Craig Smith from Mazuma Mobile says: 
“Attitudes are changing towards pre-owned shopping as people become savvier with their cash...  many of us are simply happy to receive something we like, especially when it’s better for the environment and our wallets. In fact, over a third of those we surveyed (37%) said they would consider having an entirely pre-owned Christmas this year, including gifts and decorations!"
The top 10 pre-owned items purchased among the 2,000 people surveyed by Mazuma Mobile via OnePoll in October 2019 were:

1. Books (68%) 
2. Cars (62%) 
3. Furniture (49%) 
4. Clothes (43%) 
5. Jewellery (37%) 
6. Musical instruments (35%) 
7. Mobile phones (34%) 
8. Televisions (32%) 
9. Handbags (29%) 
10. Computers (29%) 

Thursday, 31 October 2019

It's Time To Focus On Johnson's AltRight And Russian Links

With Boris Johnson desperate for a quick General Election, it's important to be aware that the Trump Presidency is simultaneously unravelling over links with Dmitry Firtash, securities fraudster Lev Parnas and the mob and the British authorities are reported to have their own concerns about some of Johnson's relationships. The legality of these need to be clarified if we are to have any chance of avoiding another election featuring fake news and dodgy funding, though Facebook isn't proving helpful either...

Johnson's links with Trump's AltRight pals include Steve Bannon and the Breitbart Boys - like Trump's speechwriter and rally fluffer, Stephen Miller. Bannon has advised Boris Johnson, among other European right wing political party leaders. And Miller attended the Innotech Summit hosted by Johnson's pole-dancing "friend" Jennifer Arcuri, whose links with Johnson are also the subject of investigation. Matthew Elliott chaired Johnson's Vote Leave campaign, and brings an array of AltRight contacts and funding links.

Johnson has also been linked to Russian tycoons Lebedev and Temerko, while Tory Brexidiots and Vote Leave's campaign director and Johnson adviser, Dom Dum Cummings, have long-standing ties to Dmitry Firtash - the same Ukrainian 'oligarch' at the heart of Trump's attempt to lift sanctions imposed on Russia for its invasion of Ukraine and for the Ukrainians to publicly investigate his 2020 campaign opponent - for which Trump is now being impeached.

That's also important because Vanity Fair recently reminded us that:
"...Trump called Johnson on July 26, two days after the new U.K. prime minister took office, apparently to ask BoJo for help compiling evidence to undermine the investigation into his campaign‘s ties to Russia. For those of you keeping up at home, that’s just one day after Trump spoke to Ukraine President Volodymyr Zelensky and asked for “a favor...”
Note that US Republicans consider that donations arranged by Trump henchman Lev Parnas are so dodgy that they were simply returned.

All of this also makes you wonder again where Arron Banks' £8m donation to the Leave cause might have ultimately came from... even if it was not unlawful.

And with Fakebook determined not to police political advertising and yet to admit any wrongdoing to the UK's Information Commissioner over Cambridge Analytica, we could well be in for another dodgy British election.

Thursday, 24 October 2019

Do You Know You Are Using And/Or Exposed To Artificial Intelligence?

Source: datamation
Amid the news that the Department of Work and Pensions is using artificial intelligence to decide benefits claims, a third of UK financial firms recently told the Bank of England and Financial Conduct Authority they were not using 'machine learning' (a subset of AI) in their businesses. That's pretty concerning, given the kind of AI we all use without realising and the fact that anyone wrongly denied benefits will need short term finance. That response also begs the question whether those firms know how their many stakeholders are using AI (whether unwittingly or not). If their suppliers, intermediaries, customers, investors, competitors and the government are using AI, then how does that affect their own strengths, weaknesses, opportunities and threats? And how does that in turn affect their stakeholders? No city on Earth is ready for the disruptive effects of artificial intelligence. Also worrying is the finding that smaller, fintech firms seem to believe that machine learning is no use to them. And given the problems with AI explained below, it's important for everyone to consider whether and how they rely on or are otherwise exposed to the two thirds of financial firms who are actually using AI... hyping the benefits without understanding the shortcomings will harm our trust AI where it could be helpful.

What is AI?

The term "AI" embraces a collection of technologies and applications, with machine learning usually featuring at some point:
  • narrow artificial intelligence
  • machine learning
  • artificial neural networks 
  • deep learning networks 
  • automation
  • robotics
  • autonomous vehicles, aircraft and vessels
  • image and facial recognition
  • speech and acoustic recognition
  • personalisation
  • Big Data analytics
At the recent SCL event I chaired in Dublin, Professor Barry O'Sullivan explained that AI technologies themselves may be complex, but the concepts are simple. In essence, machine learning differs from traditional computer programming in that:
  • traditionally, we load a software application and data into a computer, and run the data through the application to produce a result (e.g. how much I spent on coffee last year);
  • while machine learning involves feeding the data and desired outputs into one or more computers or computing networks that are designed to write the programme (e.g. you feed in data on crimes/criminals and the output of whether those people re-offended, with the object of producing a programme that will predict whether a given person will re-offend). In this sense, data is used to ‘train’ the computer to write and adapt the programme, which constitutes the "artificial intelligence".
What is AI used for?

AI is used for:

  1. Clustering: putting items of data into new groups (discovering patterns);
  2. Classifying: putting a new observation into a pre-defined category based on a set of 'training data'; or
  3. Predicting: assessing relationships among many factors to assess risk or potential relating to particular conditions (e.g. creditworthiness).
The Challenges with AI

The primary concerns about AI relate to:
  1. cost/benefit - $50m in electricity to teach an AI to beat a human being at Go, hundreds of attempts to get a robot to do a backflip, but it can't open a door;
  2. dependence on data quantity, quality, timeliness and availability;
  3. lack of  understanding - AI is better at some tasks than humans (narrow AI) but general AI (same as humans) and superintelligence (better than humans at everything) are the stuff of science fiction. The AI that can predict 79% of European Court judgments doesn't know any law, it just counts how often words appear alone, in pairs or fours;
  4. inaccuracy - no AI is 100% accurate;
  5. lack of explainability - machine learning involves the computer adapting the programme in response to data, and it might react differently to the same data added later, based on what it has 'learned' in the meantime; 
  6. the inability to remove both selection bias and prediction bias - adding a calibration layer to adjust the mean prediction only fixes the symptoms, not the cause, and makes the system dependent on both the prediction bias and calibration layer remaining up to date/aligned over time; 
  7. the challenges associated with the reliability of evidence and how to resolve disputes arising from its use; and
  8. there's a long list of legal issues, but lawyers aren't typically engaged in development and deployment.

This means the use of AI cannot be ignored. We have to be careful to understand the shortcomings and avoid hyping the benefits if we are to ensure trust in AI. That means challenging its use where the consequences of selection bias or false positives/negatives are fatal or otherwise unacceptable, such as denying fundamental rights or compensation for loss.

Being realistic about AI and its shortcomings also has implications for how it is regulated. Rather than risk an effective ban on AI by regulating it according to the hype, regulation should instead focus on certifying AI's development and transparency in ways that enable us to understand its shortcomings to aid in our decision about where it can be developed and deployed appropriately.

Monday, 23 September 2019

The Conspiracy Theory Of Conspiracy Theories

I'm fascinated by conspiracy theories, and just happened across the Daddy. Corey Doctorow, the entertaining science fiction writer, believes he's found the source of them all:
"... [conspiracy theories] aren’t attributable to ideology or mind-control rays... at root, they are a disagreement about how we know whether something is true or not. When we argue about the flat Earth, we’re not just debating the shape of our planet: We’re debating the method by which we can know its shape....40 years of rising inequality and industry consolidation have turned our truth-seeking exercises into auctions, in which lawmakers, regulators and administrators are beholden to a small cohort of increasingly wealthy people who hold their financial and career futures in their hands. Industry consolidation makes it startlingly cheap to buy the truth: Once an industry consists of a handful of players, it’s easy for everyone to agree on the play, and the only people qualified to be referees are drawn from the companies’ own executive ranks, whence they will return after their spin in governance’s revolving door."
Not only is this thesis merely political hogwash designed to justify a call to break up certain industry oligopolies, but it also serves to highlight how the human brain works to make conspiracies attractive in the first place (as explored by Nobel prize-winner Daniel Kahneman and Nicholas Taleb, often mentioned here). 

The central problem is 'overconfidence' - the belief that our existence is somehow 'controlled' rather than random (also at the root of creationism vs natural selection, for example).

I mean, just imagine if all the data that every human perceives really were "bought" or curated by "a handful of players" - let alone after only 40 years of trying...

A moment's thought, let alone a cursory read of James Gleick's excellent history of humanity's attempt to master information reveals this would not be possible. And many different conspiracy theories abound in the many different communities around the planet.

Even complaints about deliberate misinformation causing the outcome of specific votes, like Brexit, are overdone. As Taleb points out, such outcomes may be classified as Black Swans - surprise events that we try to rationalise by hindsight. Lies and misinformation might be part of the swirl surrounding Brexit, yet may really only correlate with the result without being causative - they could be just as symptomatic of a deeper malaise as the result of the vote itself. 

That's not to say lies and electoral violations should be overlooked or go unpunished - or that we should not try to rectify obvious economic mistakes or life-threatening misconceptions like the "Anti-Vax" movement. But ultimate 'control' just isn't an option. We can only minimise our exposure to the downside, and maximise our exposure to the upside, of the major events that shape our history.

Applying that to Doctorow's theory: the break of up of industry oligopolies may be worthwhile for certain reasons, but that process will not somehow restore human control over the 'truth' - any more than it will alter human psychology.

Saturday, 14 September 2019

Why Suggest A Bridge Between Scotland and Ireland?

Popularity develops through the snowball effect and the bandwagon effect. Some things or people are popular because they're useful, solve a real problem or are widely appreciated for some intrinsic quality: the wheel, a rock song/group, the telephone...  But what if you have nothing genuine to offer? How do you create your own snowball and bandwagon effects out of thin air? 

You do what every snake oil salesman in the Wild West did, what Bernie Madoff did, what every religious sect leader has done, what reality TV show producers do - and what the likes of Farage, Johnson and Gove have done...

You create or 'boost' something hugely ambitious, unique, deceptively simple, vaguely plausible but not actually 'real' in the sense of being achievable or demonstrable. Something in which your victims can only have faith.

Committing to solve a really big, actual problem is out of the question. Firstly, it's really hard and will take a long time, because it involves changing actual behaviour and fighting inertia - the resistance to change. Secondly, it won't make you exclusively popular because you'll likely be competing with lots of others trying to solve the same problem. You won't stand out in the crowd. You won't capture peoples' attention.

And real problems won't capture your followers' imagination or their faith.

To make your victims cling to their belief for a long time, you also need a goal that’s really big and ambitious - because, if they go for it, a big project will commits lots of people, money and resources that can't easily be redeployed.

And if the goal isn't 'real' it can never quite be achieved or delivered or found (think the Holy Grail): the quest is never-ending. Once you’ve got your popularity snowballing it's just about the journey, not the destination. Nobody wants to stop believing (and spending). Negotiating trade deals is an endless process - the job of leaving the EU successfully will literally never be "done". There's no easy way to leave the cult. Inertia is now on your side!

Here are some examples of projects that were or are hugely ambitious, deceptively simple, vaguely plausible but not actually achieved or achievable that seem to have been conjured up to boost someone's popularity... You'll see that Johnson's proposal for a bridge between Scotland and Ireland fits right in - get that feasibility study started!
  •  Farage's decades long quest for Britain to leave the EU;
  • the 'Leave' campaigns, as backed by Johnson/Gove and Farage/Banks;
  • donate X% of your income for eternal salvation;
And finally, a word from the perpetrator of the biggest fraud of all time... (or is it?)...

Thursday, 12 September 2019

Which UK Government Policies Would Prevent Free Trade Deals?

We know that the Johnson regime wants a No Deal Brexit, and that Labour only opposes that subject to agreeing its own form of Brexit. But any form of Brexit would doom the UK to lengthy trade talks and related political turmoil in a situation where Brits can no longer live and work freely in 30 other countries or trade freely with the EU and other countries under EU free trade deals. A limited 'transition' or 'implementation' period merely sugar coats the pill: Brexit spells the end of freedom of movement for labour, goods, services and capital.

In this context, the prospects for new free trade arrangements are absolutely critical, and a key consideration is whether any UK government policies or party conference 'manifesto commitments' stand in the way of negotiations. 

I've started a general list below, including policies that could either directly prevent a deal being agreed and those that could discourage businesses from a partner country actually investing in the UK or undertaking trade anyway:
  • capital controls: the UK government might first introduce controls aimed at preventing the flight of funds resulting from policies that are not compatible with existing foreign investment or that will make the UK uncompetitive with other investment opportunities. Nationalisation plans would be a particular problem given the amount of foreign ownership of utilities and other formerly public assets. There must also be concerns that foreign nationals will want to get their assets out when they wish to leave (and before any capital controls come in). Capital controls are also part of a country's monetary armoury for numerous other reasons - especially when an economy is teetering on the brink of disaster. Capital controls are excluded in US free trade deals and would likely be contested in international arbitration, subject to the IMF's power to require them to safeguard its resources. We've heard nothing from Johnson's crew on this (although the Tories have been traditionally very reluctant to introduce meaningful constraints on dodgy funds flows and Johnson cares even less about the rule of law), but John McDonnell has tried to assure people that Labour won't introduce capital controls while talking about plans that effectively require them. Problem is that governments may not warn people before introducing capital controls for obvious reasons...;
  • breakdown in the rule of law - traditionally not associated with the UK, but that reputation has been vastly undermined by the antics of the Conservative Party during the past four years and particularly the Johnson crew during the Leave campaign and over the past few weeks. Threats not to implement customs checks or to withhold payments due to the EU under budgetary commitments are particularly concerning. Nobody wants a deal that involves constant disputes and endless international arbitration proceedings; and businesses won't trade in violation of terms where that lands them in hot water or isn't otherwise in their interests.

Clearly, any government also has to be careful not to lose sight of many other factors that contribute to people and businesses' assessment about the relative attractiveness of doing business in a country more generally - such as unusual or extraordinary taxes on income, property and transactions.

Thursday, 13 June 2019

The Latest Designer Drug: 1D10C

Drug classes A, B and C to remain
UK drug enforcement officials say a new drug has taken hold in Britain, pushing 'traditional' class A drugs aside.

Code-named "1D10C",  the new drug comes in powdered and liquid form, and can be administered through any external body orifice, with many even preferring to receive it in the form of inhalers, eye drops and ear drops, making detection almost impossible.

Effects include unexplained euphoria, self-confidence and loquaciousness - the tendency to be overly talkative.  

Side effects include paranoia, delusional episodes, lack of concentration, the inability to grasp complex problems, lack of empathy and poor verbal and non-verbal reasoning.

While not yet classified, officials have begun investigating the sources and usage patterns of 1D10C in Britain. Recent admissions of drug usage among political candidates has drawn officers' attention to their ranks, as well as individuals working in media, public relations and political lobbying organisations, as well as large political donors.

While declining to give further details or to be named, one senior investigator said, "We see the flow of political donations in support of projects that are obviously flawed or based on a mistaken understanding of how certain processes or industries work as likely indicators that this drug may be being distributed and abused in large quantities." She declined to say when the investigation would end, or the likely outcome, but one possible result would be a recommendation that the drug be classified in order to restrict its availability.

Both the Conservative Party and the Labour Party declined the opportunity to comment.

Tuesday, 30 April 2019

Is BigTech Still Battling The Entire Human Race, Or Just Some Of Us?

Readers will be familiar with my view that we consumers tend to be loyal to 'facilitators' who focus on solving our problems, rather than 'institutions' who solve their own problems at our expense. Previously trusted service providers can also lose their facilitator status, and I'd argue that Facebook has already done so (owing to privacy, electoral and extremist content scandals) and Google is firmly headed in that direction (through behaviour incurring massive EU fines). Yet, despite announcements designed to suggest increasing transparency, it seems BigTech is actively resisting independent human oversight and the perceived battle between computers and the human race is far from over...

Part of the problem is that 'BigTech' firms still operate as agents of retailers and other organisations who pay them vast amounts of money for exploiting our personal data targeting advertising at us, rather than as our agents for the purpose of finding what we need or want while shielding us against exploitation. In fact, this is the year when digital advertising spend will exceed spending on the old analogue 'meat space' channels

Combine that exploitative role with rogue artificial intelligence (AI) and you have a highly toxic reputational cocktail - particularly because AI based on machine learning is seemingly beyond human investigation and control. 

For instance, Amazon found that an AI programme used for its own recruiting purposes was terribly biased, but could not figure out what was going wrong or how to fix it, so had to simply shut the thing down.  Alarmingly, that suggests other AI programmes that are already notorious for being biased, such as those used for 'predictive policing', are also beyond fixing and should be shut down...

Many BigTech firms are appointing 'ethics boards' to try to avoid their AI programmes heading in inappropriate directions. Trouble is, not only is there doubt about what data scientists might view as inappropriate (which drove the appointment of ethics boards in the first place), but these boards are also generally toothless (only CEOs and main boards can decide the actual course of development), and tend to be populated by industry insiders who sit on each other's ethics boards

It is unclear, for example, whether the recommendations of the ethics committee overseeing the West Midlands police 'predictive policing' algorithm will be followed. Meanwhile, 14 other UK police forces are known to be using such AI programmes...

Another worrying trend is for AI firms to prevent investors voting on the company's plans, using "dual class" share structures that leave voting control with the founders rather than shareholders. Lyft is the latest to hit the news, but other offenders include Alphabet (Google), Blue Apron and Facebook, while Snap and Pinterest give shareholders zero control. Those firms might argue that stock prices are a check in themselves. But the stock market and investor greed are notorious for driving short-term decisions aimed at only maximising profits, and even giant regulatory fines are subject to appeal and can take a long time to be reflected in share prices. Voting power, on the other hand, is more qualitative and not simply a function of market forces - and the fact that it is being resisted tells you it's a promising tool for controlling BigTech.

Regulation will also be important, since fines for regulatory breaches are a source of revenue for the public sector that can be used to clean up the industry's mess and to send signals to management, investors, competitors and so on. I'm not suggesting that regulatory initiatives like the UK Brexidiot ToryKIP government's heavily ironic "Online Harms" initiative are right in the detail or approach, but Big Tech certainly cannot keep abdicating responsibility for the consequences and other 'externalities' associated with its services and approach. There has to be legal accountability - and grave consequences - for failing to ensure that AI and the firms themselves are subject to human control.

I guess the real question might be: which humans? 

Monday, 29 April 2019

Are England & Wales Ready For A Hard Border With Scotland By 2023?

With Brexit madness in full flow the case for a hard border with Scotland by 2023 is also gathering momentum. Here's why...

If Brexit proceeds, the UK government believes the British economy will under-perform by about £15bn a year in terms of government tax receipts, meaning it will need to borrow more and more to maintain current spending. Even if you believe in unicorns , it's therefore likely that extreme pressure on public spending across the UK will mean declining public services and increasing misery for many. 

Against this backdrop, the economic concerns during the first Scottish independence referendum seem less troubling. After all, Scotland (population 5.4m) is larger than 7 EU member states and even if it's economy is more precarious than other small EU members, it might prefer the protection of the world's largest trade bloc to a flat-lining UK. This could also mean that qualms about accepting the Euro would fall away.

At any rate, Scotland now intends to hold a second independence referendum by 2021. As Brexit impact and uncertainty worsens, it is likely that bruised Scots will be more likely to vote for both independence from the UK and for membership of the EU.  The original margin against independence of 55:45 could therefore easily reverse.

Of course, the sensible option is to revoke the Article 50 notice and stop all this nonsense entirely, but British politicians are too scared of the fascists for that...

Tuesday, 26 March 2019

Why Laura K's Kasual Reference To The KKK Kan't Stand

Theresa May is no stranger to race scandals. As Home Secretary she engineered the "Hostile Environment" policy that resulted in the wrongful detention and deportation of lawful immigrants (the Windrush scandal) and has since insisted it remain government policy.

So it was no real surprise that 'Theresa The Appeaser' would invite a bunch of white male 'hard Brexiteers' for Sunday lunch at Chequers. 

But it was surprising to learn that a mysterious "couple" of "insiders" now refer to said Brexiteers as the "Grand Wizards" - a title favoured by the Klu Klux Klan, the banned hate organisation that recently reared its hooded head outside a mosque in Belfast.

What was shocking, however, is how we learned this, and the lack of any disclosure as to whether senior KKKConservatives are referring to themselves as leaders of a hate organisation - or what activity has led other "insiders" to use this specific title in relation to them.

Laura Kuenssberg, the BBC's Political Editor, clearly had the inside story on the latest internal machinations of Theresa May's lunch guests and introduced the news of another meeting by stating that "The 'Grand Wizards' (the new name for the Chequer's (sic) daytrippers apparently) also had another meeting this morning, were (sic) they discussed again whether they could get on board to back the PM's deal...". 

Wait, what?

An hour later, Laura claimed to have checked her Tweets and had a bit of rethink. Not much of one, though, because she made the situation worse by stating: "...for the avoidance of doubt, couple of insiders told me using the nickname informally, no intended connection to anything else".

This demonstrates that the "couple of insiders" and Laura herself knew of the outrageous nature of the reference to the KKK generally as well as how it might be taken in this context. Yet there was no sense that she understood that this was itself newsworthy (as subsequent events are proving) - indeed what other journalists might well have considered a 'scoop'. 

Were the "couple of insiders" who informed Laura K of "using the nickname informally" in fact any of the Brexiteers themselves?

It's worth noting that Sarah Vilethe wife of Chequers attendee Michael Gove had tweeted on Saturday the word "lynched" in reference to the People's Vote March and hubby has previously likened himself to the Grand Wizard... stating in a speech in Oxford on 7 September 2016 that: 
“I feel rather like the grand wizard of the KKK giving an address to the AGM of Black Lives Matter.” 
(thereby neatly taking the opportunity to poke fun at the latter organisation and what it stands for - two dog-whistles to far right, white supremacists in one!).

Sarah Vile Vine has since also Tweeted "In fairness, not clear that THEY have given themselves that name." [My underlining of the weasel words, her capitals].

In other words, it remains entirely possible that one or more of the hard Brexiteers have indeed given themselves that name - and we need to know whether that is the case.

To be able to guard against the spread of hate and racism we need to know whether the KKKConservatives - and the Prime Minister herself - are making the KKK welcome. And, indeed, if this is something the BBKC itself is happy to condone - or at least ignore - rather than stamp out.

Our votes - and the BBKC's licence fee - depend on it.

Monday, 25 March 2019

29 March: Just Another Day

There's some confusion over whether the 29 March might still be "Brexit Day", but that is not legally possible. 

Article 50 of the Treaty of the European Union governs how member states may leave - by giving two years' notice. The UK gave notice, but couldn't agree a deal in that time, so asked for an extension. The European Council decision on 22 March approving that request is a legal instrument that immediately extended the leaving date under Article 50(3) to either 12 April or 22 May 2019 (on certain conditions which the UK agreed). But even those deadlines could change - or disappear altogether.

If the UK's House of Commons does not approve the current draft of the withdrawal agreement during the week commencing 25 March 2019, the UK will leave the EU on 12 April 2019 unless before then: 
  • The European Council, in agreement with the UK, unanimously decides on another extension to the Article 50 period; or 
  • The UK revokes the Article 50 notice; or 
  • A withdrawal agreement is concluded with a different commencement date. 
If the House of Commons approves the withdrawal agreement in the week commencing 25 March 2019, the UK will leave the EU on 22 May 2019. Certain other conditions apply, but these are the new dates. 

The Brexit saga is far from over.

Thursday, 14 March 2019

UK Government Must Revoke Article 50 Notice By 11pm On 29 March

The UK Parliament has recently rejected both the UK's proposed withdrawal agreement with the EU and any potential 'no deal' scenario (which some refer to as 'trading on WTO terms'). Today, the government is asking Parliament to vote on whether it wishes the government to seek an 'extension' of the expiry date of the UK's "Article 50 notice" to withdraw from the EU, from 29 March to 30 June, which would require the unanimous consent of all other EU member states. This is both illogical and unnecessary.

The European Court of Justice has already ruled, however, that the UK can freely withdraw its Article 50 notice at any time before midnight UK time (11pm in Brussels) on 29 March, without needing any consent from the EU member states, and without preventing it from giving another notice at a later date.

An extension of the current Article 50 notice period is also pointless, since the EU will not negotiate the current 'deal' any further and Parliament will not allow a no deal situation. Relying on an extension to Article 50, which the EU has to agree to, is also surrendering the UK's sovereignty and control over the terms of any departure to the EU. Revoking Article 50 is soley within the UK's control and allows it to determine the timing of any second notice it might wish to give in due course.

Therefore, the only way for the government to deliver on Parliament’s “instructions” (a term that Theresa May likes to uses to refer to the non-binding EU referendum, so must accept when referring to ‘non-binding’ Parliamentary votes) in rejecting her 'deal' and ‘no deal’ is to revoke the Article 50 notice.

The Prime Minister complains that Parliament only states what it does not want, rather than what it wants. Yet she repeatedly presents Parliament with the same choice between her 'deal' and 'no deal' when it has rejected both, and now wants an extension to do that again. She cannot have it both ways. There must be no extension and the Article 50 notice must be withdrawn. 

Another government can always try to muster support for Brexit at a later date, as the ECJ has said is permissible.

Tuesday, 26 February 2019

Forever Blowing Debt Bubbles... When Will The Latest Burst?

I found myself watching The Big Short again on Saturday, and made a note to catch up on the current state of various debt bubbles that have cropped up in the news during the past few years. The signs are not good, given we're yet to recover from the ill-effects of the last financial crisis. Check 'em out...

UK consumer debt hit new heights in July 2018, and hit a new peak in January 2019, while household savings are at historically low levels. I wonder if there's an event about to hit UK consumers that we should be concerned about...?

Meanwhile, concerns about 'leveraged' corporate loans began circulating in 2018, and a fresh warning came from the OECD yesterday. Not only have companies with lower than investment grade credit ratings been borrowing a lot of 'cheap' money at low interest rates, but about 80% of such loans are also on terms that leave lenders much less protected than usual ('covenant-lite'). So if these less-than-investment-worthy corporate borrowers default, the proportion of loans recovered will be much lower than normal.

Again, is there an event looming that might add to financial stress for corporate Britain...?

Of course these leveraged loans are securitised or packaged into asset-backed securities ("ABS") known in this market as "collateralised loan obligations" or "CLOs") to enable investors to speculate in bonds based on the performance of these loans. I saw analysis last year that suggested recovery rates about 15% lower than lenders would typically expect. Here's a more detailed discussion on that from April 2018 - a picture which will no doubt have worsened since then...

Here’s another problem area: more Americans than ever are 90 days late in paying their auto loans, a trend now in its third year.

Of course, auto loans are also securitised into ABS so investors can speculate on the performance of the underlying loans. The issuance of bonds based on auto loans hit a post-financial crisis peak in 2017 and kept going. Here’s what was said about the ABS market for auto loans a year ago - well before 90 day delinquency hit record highs.

Fasten your seat belts...

Thursday, 31 January 2019

Brexit: WTO Terms Are The Chasm, Not The Bridge!

Leave Means Leave campaigners like to say that "trading on WTO terms" is a "bridge" from EU membership to an EU free trade deal. 

Not true. But this helps paint a picture of exactly what Brexit really means.

The WTO was set up in 1995 as a way for all countries to agree ways to trade more freely with each other ("trade deals") and some very basic rules for fair trade if they cannot agree a trade deal ("WTO terms").

So think of "WTO terms" as the chasm or valley between two countries who want to trade with each other. 

It's a long way down, because those are the best/worst trading terms that all countries say should apply where there is no other deal agreed.

In other words, to improve on WTO terms, you need a "trade deal" between countries - like membership of the same regional or other type of free trade bloc (like the EU, for example) - or a "free" trade agreement between the trade bloc and a non-member country (like EU-Canada).

The free trade agreement or treaty (such as EU membership) is the bridge, and WTO terms is the chasm that the countries are trying to get their goods and services across. 

Right now, the UK's goods and services are trundling to and from the EU across the WTO chasm via the bridge of EU membership. And a wise government would not remove the bridge of EU membership without building an alternative bridge over the WTO chasm.

It takes 5 to 10 years to build a bridge over the WTO chasm. But after nearly 3 years of negotiation, Theresa May only managed to get until the end of 2020 - not long enough to build a new bridge, even if she had any real idea how to build it.

So, May's deal and No Deal both involve the UK not so much "driving off a cliff" but "falling into the WTO chasm" as the bridge of EU membership collapses.

The only way to avoid this is to revoke (withdraw) the Article 50 notice before it expires on 29 March and try to leave again later (if anyone can figure out how to do that safely).

Wednesday, 2 January 2019

The Marriage Of Patriotism And Intelligence: Low Expectations With A Chance Of Delight

I can't recall starting any year with lower expectations than I have for 2019.  But the Sun is up there somewhere, and may yet delight. We might even see a decent wedding for a change...

At any rate, 2018 ended so badly that I snatched up a book of Orwell's essays at the bookshop till for light relief. The essays included the excellent pieces Why I Write and Politics and the English Language. The latter should be required reading for Messrs Rees-Mogg and Hannan, by the way. Two of the most pompous people on Earth for whom Orwell may as well have written his essay while watching their lips move: 
The great enemy of clear language is insincerity. Where there is a gap between one's real and one's declared aims, one long words and exhausted idioms, like a cuttlefish squirting out ink... Political designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind.
Nestled between these two venomous little works is Orwell's suggested antedote to fascism, The Lion and the Unicorn: Socialism and the English Genius, written in February 1941.

At this point, Corbynistas will hastily point out that Orwell's real name was Blair and he went to Eton. True enough, but you've already seen his opinion on the Rees-Moggs of his era; and in 1937 he was among the first to actually fight against fascism in Europe and later to advocate the kind of socialism that gripped Britain for decades after the war. Reality is too complicated for dogma.

It's also ironic that given the lengthy socialist experiment that occurred in Britain after the war, UK politics today should so clearly echo Orwell's 1941 view of UK politics in the 1930s. Hitler and Mussolini have been replaced by a wave of American-style Alt-Right Christian fundamentalist populists, while Putin looms out of Russia on the far left and various Islamic potentates ply their trade. UK foreign policy riven with appeasement, inconsistency and conflicts of interest - historically, backing Franco in Spain, arming the Italians and ignoring German rearmament and dithering until too late; now May rushing to hold hands with Trump and Erdogan, arming the Saudis and delivering on Putin's disruptive agenda, not only by pursuing Brexit and ignoring foreign political interference in UK politics from both left and right, but also by being the only conservative EU government to back Hungary's alt right leader. Meanwhile, in the UK, Orwell's "Blimp class" - "the halfpay colonel with his bull neck and diminutive brain, like a dinosaur..." has evolved into our gammon-like 'Brexiteers' and 'Leavers', while the left wing "Bloomsbury highbrow, with his mechanical snigger, is [again] as out-of-date as the cavalry colonel...".

And both eras share the same political stalemate:
Both Blimps and highbrows took for granted, as though it were a law of nature, the divorce between patriotism and intelligence [but] a modern nation cannot afford either of them. Patriotism and intelligence will have to come together again. It is the fact that we are fighting a war, and a very peculiar kind of war, that may make this possible.
In recommending a solution in 1941 that might win the war, Orwell doubted that Britain would be able to fuse patriotism and intelligence in order to resist fascism unless it fought a "revolutionary war" and became a "socialist democracy". He advocated six political goals that he thought would probably take decades to achieve but provide enough incentive to enough people to effectively unite the population (ignoring the small proportion of 'mere owners' of land and capital). Only the first two of his suggested goals are offered by anyone as policies today - namely, nationalising "land, mines, railways, banks and major industries" and limiting incomes so that the "highest tax-free income in Britain does not exceed the lowest by more than ten to one" - but everyone except the Corbynistas has learned from Britain's own disastrous post-war policies, as well as the unfortunate aspects of Russian, Chinese, North Korean and Venezuelan experiments that those goals are economically suicidal.

It remains true, however, that although the NHS is all that's left of its socialist experiment, Britain is much more of a socialist democracy than before the war. And Orwell was probably right about nationalisation to the extent that private sector control of the UK's major industries had to be made temporarily subject to the state's war effort and subsequent reconstruction programme.

Yet 80 years later we find that the apparent marriage of patriotism and intelligence for at least some of that period has ended in divorce.

I am not alone in thinking that the term "patriotism" in that context was misunderstood. Writing The Lion and The Unicorn in 1941, Orwell himself merely referred to patriotism as "national loyalty" and considered that Hitler and Mussolini rose to power because they recognised it as being a greater "positive force" than Christianity or socialism. But by 1945 their downfall had clearly caused him to consider the difference far more carefully (my emphasis added):  
Nationalism is not to be confused with patriotism... two different and even opposing ideas are involved. By ‘patriotism’ I mean devotion to a particular place and a particular way of life, which one believes to be the best in the world but has no wish to force on other people. Patriotism is of its nature defensive, both militarily and culturally. Nationalism, on the other hand, is inseparable from the desire for power. The abiding purpose of every nationalist is to secure more power and more prestige, not for himself but for the nation or other unit in which he has chosen to sink his own individuality.
Nationalism, in the extended sense in which I am using the word, includes such movements and tendencies as Communism, political Catholicism, Zionism, Antisemitism, Trotskyism and Pacifism. It does not necessarily mean loyalty to a government or a country, still less to one's own country, and it is not even strictly necessary that the units in which it deals should actually exist. To name a few obvious examples, Jewry, Islam, Christendom, the Proletariat and the White Race are all of them objects of passionate nationalistic feeling...
A nationalist is one who thinks solely, or mainly, in terms of competitive prestige. He may be a positive or a negative nationalist — that is, he may use his mental energy either in boosting or in denigrating — but at any rate his thoughts always turn on victories, defeats, triumphs and humiliations. He sees history, especially contemporary history, as the endless rise and decline of great power units, and every event that happens seems to him a demonstration that his own side is on the upgrade and some hated rival is on the downgrade.
But finally, it is important not to confuse nationalism with mere worship of success. The nationalist does not go on the principle of simply ganging up with the strongest side. On the contrary, having picked his side, he persuades himself that it is the strongest, and is able to stick to his belief even when the facts are overwhelmingly against him. Nationalism is power-hunger tempered by self-deception. Every nationalist is capable of the most flagrant dishonesty, but he is also — since he is conscious of serving something bigger than himself — unshakeably certain of being in the right...
From this description it is suddenly easy to see why "nationalism" - whether in the form of religious fundamentalism or a passion for a post-Brexit Britain - is not enough to sustain a marriage with intelligence, if they ever become truly married at all. Intelligence heads for the door as soon as nationalism is exposed by the facts and becomes dishonest. Intelligence cannot live with a lie. That process of exposure can take time, but it is inevitable. By contrast, "patriotism" does not involve any collision with the facts because it is not a quest for power and there is no need to impose a strongly held view on others. Plenty of happily married couples differ in their likes and dislikes - even find their differences funny - but the fun stops when one imposes a preference on the other.

Orwell avoided the question of how nationalism takes hold, although the fact that he was concerned to expose it as a writer spoke volumes, as it were; and later studies of German propaganda in the 1930s and modern day 'fake news' of the kind distributed in the 2016 Leave campaign - and even by the Tories in 'selling' Theresa May's Brexit 'deal' - show quite clearly how nationalist beliefs can be encouraged and spread widely where the facts are less available or less attractive.  Indeed, both Britain's main political parties are dominated by extreme "nationalists" who are holding the UK economy - and voters' own wellbeing - hostage to their own political views. Both seek to impose Brexit in the face of widespread agreement that even after 15 years of trying to put the impact behind it Britain will produce less than it would have by remaining in the world's largest trade bloc. "Fuck business!" says one Brexiteer, "people have had enough of experts" says another, while the 'opposition' even sought to ignore Brexit as an issue altogether - as if a smaller economy could magically spend more on neglected public services. If they succeed at this, their supporters will believe anything. Intelligence will be banished from the family home.

But I think Orwell's key insight was that nationalistic beliefs exist in everyone, and it takes moral effort to think clearly. 
The ...nationalistic loves and hatreds that I have spoken of... are part of the make-up of most of us, whether we like it or not. Whether it is possible to get rid of them I do not know, but I do believe that it is possible to struggle against them, and that this is essentially a moral effort. It is a question first of all of discovering what one really is, what one's own feelings really are, and then of making allowance for the inevitable bias. If you hate and fear Russia, if you are jealous of the wealth and power of America, if you despise Jews, if you have a sentiment of inferiority towards the British ruling class, you cannot get rid of those feelings simply by taking thought. But you can at least recognise that you have them, and prevent them from contaminating your mental processes. The emotional urges which are inescapable, and are perhaps even necessary to political action, should be able to exist side by side with an acceptance of reality.
In other words, it is fine for you to believe that London is "the best city in the world" to live in, for example, but you must accept that others' opinion and passions may differ in terms of their own experience of London, preference for other cities or indeed no city at all. You do not need to see the downfall of Leeds or Paris, or ensure the good residents of Scunthorpe are much worse off, in order to enjoy living in London (or indeed, the other way round). Equally, however, you must recognise that if the majority of people with day-to-day business responsibilities within the UK's financial, medical, pharmaceutical, scientific, automotive, aerospace, creative and other industries generally agree with the senior civil servants who have responsibilities in those areas that Britain will be worse off under any form of Brexit, then you must resist the temptation to keep insisting that Britain will somehow be better off...

On that note, I wish you a happy and prosperous 2019.

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