Wasted Talent?

Biding my time in our smallest room recently, I was confronted by Iman's revelation [The Week, 9.7.11] that, instead of "a dirt-poor goatherd who couldn't speak a word of English" - as American modelling agencies were apparently led to believe when she first came to their attention - she was actually "fluent in five languages and studying political science at university in Nairobi."

Well, what can I say? I guess I'm as surprised by this as Iman's first modelling agent, but it has little to do with her job description. And it's a bit rich now for her to expect us to be impressed by her deep knowledge of languages and political science, having preferred to present herself to the world as a human coathanger.

But, hey, I guess it's never too late.

I don't mean to 'pick on' Iman, but her story presents an interesting illustration of a theme. As Lord Turner pointed out, much activity in the City, for example, is ‘socially useless' and 'of no real use to humanity’. And, I've suggested before, if we are going reverse an ugly trend in our society, we must agree on at least one higher ambition than the accumulation of wealth (or fame, or celebrity).

Perhaps the fact that, notwithstanding fortune and fame, Iman now wishes to flaunt her academic credentials suggests that attaining a decent education is that higher ideal.

Any Similarity?

U-turn On Horse-drawn Carriage Ban A Victory For Common Sense

The decision of the Transport Secretary not to phase out horse-drawn vehicles in the UK over the next 7 years has been hailed as a "victory for common sense" by consumer groups.

A spokesperson for Charioteer.org said, "Seven out of ten people born before the horseless carriage was invented still enjoy the ceremony of parading through the streets in their horse-drawn vehicle. Transport in the modern era is easy-come-easy-go; the ceremony of carriage-riding gives importance to a journey, and reminds people of an era when the ability to travel was a great deal more scarce, and a great deal more valued."

"In this time of great austerity it is important that we continue to support expensive, outdated travel methods abandoned virtually everywhere else," she added. "Otherwise, we'd have no jobs for stable boys and nothing to put on the roses."

A spokesperson for FaceBoogle said, "What's a carriage?"

Sunlight Fades From EU Summer, Hairy Bankers To Holiday In Caves

Well, that's it folks. It's mid-July, and we can all head for the beach, the hills or the village boules court, secure in the knowledge that only 8 banks failed European Stress Tests with a total shortfall of €2.5bn.

Everything will be here when we get back.

Right?

I mean, it's not like Italy's predicament is putting any strain on the zerozone, or the US is in the process of bursting it's 'debt ceiling' and teetering on the edge of a downgrade by those ever-reliable ratings agencies, is it?

And even if the bigger picture does take a turn for the worse, surely the hacks will finally stop hacking celebrity voice mails and warn us?

Wrong.

If we're lucky there might be some hand-wringing and dithering over uncertainty about what's to be done; before a staccato burst of post-Lehman style, over-the-weekend bail-outs, bail-ins sales and mergers involving banks, insurers, pension funds and even whole countries. Greece will become an EU-protectorate - no sovereignty, but a great place to go sailing.

But what's really so uncertain?

When a borrower - be it a country, a bank or anyone else - is insolvent, there's a stark choice for lenders to make. That choice is not between a higher and lower rate of interest or return on your principal. It's about how much of your principal you are prepared to lose. All, or some? A 'haircut' you must have. Like the one Nicholas Brady arranged for lenders to Latin America in the '80s. Louis Gargour of LNG Capital (with whom I found myself chatting about Brady Bonds and short-selling on Thursday night) explains this nicely in the clip below.

In Europe we lack leadership. We lack decisiveness in the face of uncertainty. And, without either, there's little official appetite for sunlight - for hard facts. Officials who are supposed to be 'in charge' placate each other with 'stress tests' and other PR puffery. In effect, they would rather live in the dark and let their hair grow, than lead the way to the barber.

I presume they will holiday in caves.

Cut Greece Loose

Cutting the Gordian knot

Talk about Zeitgeist - last Saturday morning I was in Porto, reading about the Greek crisis in The Economist. It was my first trip to Portugal, which I guess was good timing for them, economically speaking. Next month, Spain receives some of the Pragmatic Pound. And I'd like to think I'm doing my bit for Ireland, albeit on the meter, by assisting a financial start-up there (sorry, still in stealth).

But I won't be bailing out Greece.

Tax-dodging, low productivity and overly generous pensions aside, The Economist reckons the key to that country's dismal plight is political patronage. "Greece needs transparent and impartial rules, but politicians are not keen to limit the scope for dishing out favours." Everything from railways to medical budgets leaks cash to powerful lobby groups.

And, reading on, it seemed to me that in this sense the Greek rioters have more in common with the proponents of the "Arab Spring" than their EU colleagues. As the ebbing economic tide exposes the littered wrecks of corrupt schemes and relationships, the have-nots are descending in droves on the survivors and what's left of their loot. In Syria, the crowds are putting the "squeeze on Assad" by demanding a "civil democracy" that comprises free elections, freedom of speech and assembly, protection of minorities and an end to repression. The longer the government resists, the more citizens withhold labour, and capital flees. In return, the regime dishes out more favours, stokes inflation and the country edges further toward meltdown. Egypt is clearly further along. Libya perhaps further still.

This chaos is vital for renewal - though bloodshed is not essential. Back in June '09 I suggested that the UK's constitutional reform must be a messy process, and it's proving just that, but riot-free (you can ignore the photo calls). A dynamic, open, democratic process that encourages broad engagement by all stakeholders cannot realistically be neat and linear.

Though in May 2010 I also suggested going short EU banks and long riot shields. And if things do turn nasty it's perhaps worth bearing in mind Mathias Koenig-Archibugi's reminder to The Economist of the lines from "The Third Man":

“In Italy for 30 years under the Borgias they had warfare, terror, murder, and bloodshed, but they produced Michelangelo, Leonardo da Vinci and the Renaissance. In Switzerland they had brotherly love, they had 500 years of democracy and peace, and what did that produce? The cuckoo clock.”

The point is, we do the Greeks no favours by bailing out their system of political patronage. The bureaucratic emperors must be shown to have no clothes.

So cut Greece loose, I say. Only then will the Greeks have their Renaissance.