Stimulus-pocus

The recession is deeper than we thought, the central bankers say.

No shit? Gee, these guys are at the cutting edge. I wonder how they found out – perhaps they saw the unemployment lines…

Their solution is simple – keep interest rates at a record low and erm, print more money.

How much, you ask?

Oh, say another fifty billion pounds…

Quantitative easing. It sounds clever, but that doesn’t butter parsnips.

Why do I get the feeling that the only thing QE is stimulating is the profits of the banks?

Okay, so the bailed-out banks have reported losses – but things are going great for the remaining banks (their investment arms at least!)

As for the real-world stimulus mesures, like the car scrapage scheme and the reduction of value-added tax, these will not be extended.

Why do I get the feeling quantitative easing will be given another go?

Rail for the people – or Brian Souter?

That’s the question. Should we have public transport or a subsidised cash-cow for a man made wealthy by the state?

RAIL UNION RMT today stepped up their pressure on the government to remove National Express from their rail franchises as new research shows that the company has made nearly half a billion pounds in profits from their rail operations in the past 10 years while sucking in nearly £2.5 billion in public subsidy over the same period.

Just under two weeks ago Transport Secretary Lord Adonis announced that he was taking the failed National Express franchise on East Coast Mainline back into public ownership. Since then, the company have made bullish noises that they will fight to retain the rights to run the service and have also thrown down a gauntlet to the government over National Express East Anglia and c2c which they should be stripped of under the “cross-default” clause.

Today, Tuesday July 14, a parliamentary adjournment debate will take place under the title Rail Services on the East Coast Mainline led by York MP Hugh Bayley where a growing number of MP’s will be applying pressure on ministers for National Express to be stripped of their rail franchises.

Bob Crow, RMT general secretary, said today:

“It’s now two weeks since the government announced that they would be taking decisive action over National Express on the East Coast and we are stepping up the pressure for the company to be dumped as a matter of urgency and for their franchises to be nationalised on a permanent basis, not as a short term, crisis measure.

“National Express have been taking us all for a ride. Not only have they milked the best part of half a billion pounds out of their rail operations but they have sucked in £2.5 billion in public subsidies in the process.

“Now National Express are leaving a potential rail funding gap of £1 billion behind after their chaotic performance on the East Coast Mainline and once again it’s the travelling public and rail workers who are left to pick up the pieces. National Express, along with the rest of the rail privateers, should be kicked off the tracks for good.”

I’d go further than Bob – I’d like to see the privateers prosecuted for their theivery.

Banksters Paradise – govt allows bonus culture to continue at our expense

Let’s now consider decency. Or rather, the lack of it.

UKFI, which owns 70% of RBS on our behalf, has approved an obscene pay package for the bank’s boss.

Truly, Fred the Shred will be proud of his replacement.

Stephen Hester will be paid almost ten million pounds for his work – which will include sacking thousands of bank workers whose taxes are invested in RBS.

The govt could have acted to limit bankers’ greed, just listen to what the other shareholders think of this:

Roger Lawson of the RBS Shareholders Action Group said: “It is absolutely outrageous that the government does not use its power to bring the remuneration of bankers in these companies down to a reasonable level.

“Do they need to pay him this much to make him work harder?”

Mr Lawson warned that basing a bonus on share price would “just encourage risky behaviour.”

So, who runs UKFI then?

Richard Murphy lists the people that Chancellor Darling picked to manage our investments:

Glen Moreno – Acting Chairman – ex Citigroup and Liechtenstein banker
John Kingman – Chief Executive – civil servant ex private sector, formerly in charge of financial stability in the banking sector for the Treasury (which he clearly did not get right)
Peter Gibbs – ex Merril Lynch
Michael Kirkwood – ex Citigroup
Lucinda Riches – ex UBS
Philip Remnant – ex Credit Suisse
Louise Tulett – career civil servant

All the bankers are from organisations that failed.

And Darling expects to effect change?

Not a hope – not with this lot.

They’ll do all they can to promote banking – and that’s just not good enough when the real economy needs less banking and more real jobs.

That a Labour government – a Labour government! – is allowing the banks to keep their gravy train going at the taxpayers’ expense should give trade unionists pause for thought. Especially since the banks are cutting thousands of jobs and turfing people out of their homes.

Even the Tories had to criticise the obscene pay-out to Hester.

This will be a major embarrassment for New Labour. It will not be allowed to stand.

Labour’s recession is far from over

The big story of the past week, along with the preceeding resignations by Blairite ministers trying to topple Brown?

Millions of Labour supporters stayed home; two fascists won seats in the European parliament on a reduced turnout. Yes, their vote fell, but they won seats because of the low turnout.

I won’t give you the obligatory post dedicated to how and why they made a breakthrough. Oxygen of publicity and whatnot.

So, Brown’s clinging on, having ceded more power to Lord Mandelson, who is now virtually deputy Prime Minister – and unelected, like many in the reshuffled Labour cabinet. Having faced down the parliamentary party in a stage-managed meeting, Brown’s hoping that an economic recovery will save his premiership.

Darling, in situ as Chancellor, despite rumours the PM wanted to replace him with Ed Balls, warns against complacency in seeing “green shoots” of recovery. As well he might, he knows how much government spending will have to be directed towards those made unemployed. Oh, and the banks – mostly owned by the public these days – they aren’t lending to our manufacturing base…

Mandelson, negotiating with the new owner of Vauxhall, is unable to guarantee jobs will stay in the UK. So much has been devoted to bailing out the banks, there’s not much room for manuoevre – not unless there’s another radical change in approach.

A senior Tory let slip that they intend to cut spending by 10% on all but health, education, and international aid, if they win the next election. To Labour’s cries of “Tory cuts!” – the nearest they get to a class analysis of Her Majesty’s Opposition – the reply comes, from both the Tories and the corporate press, that Labour is committed to 7% spending cuts across the board.

As Ann Pettifor has pointed out, to cut spending in the next few years will be a disaster for an economic recovery:

As things stand, any fragile signs of economic recovery will quickly be crushed by the failure of government to intervene and spend at an appropriate level. Instead, government cutbacks will impact with considerable force on the fragile economy, and will hurt the middle and working classes. As the year proceeds many will discover the true, and often pitiful value of their pensions, and will be hurt by cuts in services and job losses in the public sector. This will hamper recovery and deepen, if that is possible, the alienation of British voters from the Labour government.

And don’t forget, this is the woman who was writing about the debtonation before it began.

She continues in the same article to outline the blades which may slice through any “green shoots”:

Foreign direct investment could fall globally by 45% this year, according to the same report, and corporate profits will decline by 20-25%. Global trade is down 25%, and the EIU predicts trade will be down by 10-15% by year end – the worst figure since 1945.

In April this year, consumer prices turned negative in the US, the UK, Germany and Japan. This may be good news for consumers, and may help lower food prices for the poor, but it is not good for the economy as a whole. Businesses cannot profit from negative prices, so they are bankrupted and lay off employees. The rocketing numbers of unemployed (whose plight is seldom taken seriously by orthodox economists) will cut back on borrowing and shopping and may even default on loans. This is not good news for the productive sector of the economy, and it’s very bad news for the banking sector. Banks have still not fully de-leveraged the debts on their balance sheets. Now, thanks to rising unemployment, non-performing loans are “set to rise sharply around the world over the next 12-18 months” according to the EIU. This is very scary, if one considers that there are still $600tn of liabilities in the form of derivatives on balance sheets out there – backed up by a mere $38tn of so-called credit default swaps (in reality a form of insurance on derivatives).

More banking trouble, in other words…

Pettifor concludes:

Nothing has been done to restructure the global economy and limit financial imbalances – including Anglo-American deficits and the Chinese surplus. Indeed these matters were not even discussed at the last G20 summit. Big, reckless money continues to be made from currency speculation, just when the global economy requires currency stability.

We – employees, consumers, investors and borrowers – have been misled and fooled by the economics profession and finance sector for years before this crisis. As a result of our gullibility, we lost $60tn of wealth in the past year. We would be wise now to dismiss their vain efforts at confidence-boosting, and instead rest our judgments on the real world economic outlook.

Back to politics, word is that Balls and Darling are split on how to present the supposedly “inevitable” cuts in public spending.

Hardly confidence boosting!

As far as this modest blogger can tell, the debate isn’t on what to cut, but on when to admit the cuts are coming.

In the leadership challenge that never was, the unions didn’t bark – despite the looming cuts and failure to aid the car industry. For sure, a change of leader – even to someone more in touch with the needs of ordinary people – would bring forth a general election at the worst possible time. With MPs expenses hanging in the air, Labour voters are unlikely to show up at polling stations and register support for the party any time soon.

For the Labour grassroots, there’s no difficulty in choosing between Trident, PFIs, the Afghan war, ID cards – or investing in a new generation of social housing, a Green New Deal, and helping workers to stay in their jobs. However, there’s no means by which the party’s grassroots can influence policy; even the parliamentary party has a tough time defeating unpopular measures, like Royal Mail privatisation, which hasn’t yet been ditched.

According to opinion polling, most voters agree Labour has abandoned its traditional supporters and believe that the Tories are most interested in helping out the rich. So what gives with the BNP victories, then? Well, it’s worth remembering that the Green vote was up – they campaigned on job creation through a Green New Deal to invest in energy efficiency and renewable energy industries, all very practical. But if your main themes are not echoed in the media, it’s difficult to get ahead. The upcoming by-election in Norwich could see the Greens win their first MP, should the support be forthcoming.

In the meantime, I’m wondering exactly where this announcement by John McDonnell will lead:

If we go beyond November without real change visibly under way, what hope is left of Labour not only remaining in government but also surviving as an effective political force at all?At that stage the only responsible act in the long-term interests of our movement would be to offer a real change in political direction by mounting a challenge to the political leadership of the party and letting the members of the party decide. Let me give notice now that this is the path I will take. If this route is blocked again by MPs failing to nominate, then the alternative is Labour MPs making it clear at the next election that they stand on a policy platform of real change as “change candidates”.

Of course, they will be standing as Labour candidates but binding together as a slate of candidates committed within Labour to advocating a change programme, setting out the policy programme they will be advocating as a group and supporting in parliament if elected. Only in this way can we demonstrate to the supporters that want to come home to Labour that there is the hope and prospect of change.

I can’t see a policy debate being tolerated, not without the capitalist media emptying another bucket of shit over the heads of New Labour and calling for a Cameron coronation. Hence the talk of the Blairites toppling Brown without recourse to either the PLP, the members, or the unions – with the Cabinet nominating one of its ranks to become party leader and PM.

So, the question is, will McDonnell and co. defect to form a new workers’ party? If not, will parties like the Greens back this new “change candidates”?

Millionaire Mandelson picks Tory banker to oversee Royal Mail sell-off

Solomon Hughes reports in the Morning Star:

PETER Mandelson has picked a new post boss. His choice of Donald Brydon as new chairman of Royal Mail shows that, when in doubt, Labour reaches for a banker.

Brydon will get £200,000 a year for his two days a week at Royal Mail. This might seem like a lot to you or me, but he has become used to big money from his long banking career.

Brydon started off with a 14-year stint at Barclays, followed by a job as chief executive of Axa Investment. He still sits on Axa’s board, although he stepped down as CEO in 2002.

He has always been an outspoken banker, but unfortunately spent a lot of time getting it wrong in a loud voice.

In 2003, leading investor Warren Buffet was predicting that complex financial derivatives were “financial weapons of mass destruction.” Buffet is not a radical – he is one of the world’s richest men, equally happy helping Arnold Schwarzenegger or Barack Obama.

But when Brydon heard Buffet’s warnings, he felt the urge to speak out. He seems to have been particularly worried that criticism of the financial system had come from within, from a businessman like Buffet.

Brydon chose to respond at a joint conference of British and US bankers. “We all need to be on guard lest regulations stifle initiatives in the retail application of derivatives,” he warned.

With his help, the meeting turned out to be something of an anti-Buffet rally, with other speakers denouncing Buffet as “frustrated.” As it turned out, Buffet was right and Brydon was wrong.

Brydon also felt the need to stand with then US Federal Reserve chairman Alan Greenspan against the critics of derivatives.

In 2003, Brydon claimed that, “as investor confidence has been rocked so the importance of risk mitigation instruments such as derivatives has increased.”

But derivatives actually added to the instability of the system – had they been properly regulated in 2003, we might not be in the mess we are in now.

Brydon’s worries that derivatives might be reined in stemmed from his general broad dislike of regulation.

He was also head of the Financial Services Authority “practitioner panel,” a group of bankers brought in to advise Britain’s financial regulator.

Unfortunately, their voices were heard all too well. The FSA remained deferential to the bankers and failed to stop the financial recklessness that caused the current crisis.

Brydon used his place on the panel as a pulpit from which to attack the “regulatory burden” and argue for the “need to remain vigilant that, in developing regulation, a point of no return is avoided where innovation, flexibility and competition are threatened.”

His own firm Axa showed why tighter regulation should have been imposed. In 2003, Axa Investment boss Brydon argued for less FSA regulation. In 2004, the FSA hit sister firm Axa Sun Life with a record £500,000 fine for misleading customers.

Mandelson described Brydon as “a proven business leader and successful chairman.”

Brydon’s experience certainly extends beyond banking. Unfortunately, he seems to have brought a banker’s mind to his industrial jobs.

He became chairman of high-tech medical firm Amersham and sold the company to US giant GE. He then became chairman of engineering firm Smiths Industries and promptly sold off its aerospace arm, again to GE.

The Independent was driven to say: “The former fund manager seems to be developing something of a knack for selling British publicly quoted assets at supercharged prices to overseas concerns.”

Subpostmasters and posties will not be reassured by a new boss who loves to flog things off.

Like many new Labour appointments, Brydon is also a longstanding Tory. As a student, he was president of the Edinburgh University Conservatives, befriending fellow Tories such as Malcolm Rifkind.

In 2001, he signed a letter to the press describing Ken Clarke as “the best hope to lead the Conservative Party back to government and create the social and economic climate necessary for business to flourish.”

Obviously this is handy, because Ken Clarke is likely to be his boss after the next election.

Unless of course the plans to sell-off our postal service, and other unpopular ideas, are dumped along with slimeballs like Mandelson.

What more evidence do you need? Does this sound like a Labour man to you… the man is a millionaire who helps out his fellow millionaires – to hell with the rest of us. Get this:

The Business Secretary has refused to reveal detailed information about his financial affairs despite the possibility that they could directly influence his ministerial decisions.

Instead, he has declared only that his “financial interests have been transferred into a blind trust”. The contents of the blind trust – which may include shares, properties and other investments – remain secret.

The existence of Lord Mandelson’s blind trust came after the Cabinet Office released a list of minister’s financial interests. The interests are those declared by ministers to Whitehall officials.

It is the first time that the list has been released and only interests “which are, or could reasonably be perceived to be, directly relevant to Ministers’ public duties” have been publicly disclosed.

The Business Secretary is one of five Government ministers to have set up blind trusts. The others are Ben Bradshaw, a health minister; Lord Myners, the City minister; Lord Davies, the trade minister; and Lord Darzi, a health minister.

A further nine ministers, including five members of the Cabinet, also disclosed that their spouses or close relatives are “consultants”. Few details about who they work for are revealed, raising questions about potential conflicts of interests.

Blind trusts have traditionally been set up to allow ministers to put their financial interests at arm’s length. Trustees are appointed to manage the trust and ministers are not supposed to have any role in deciding whether and when investments are bought and sold.

However, the arrangements have been criticised in the past. Tony Blair set up a blind trust after becoming Prime Minister. However, it later emerged that Mr Blair’s wife, Cherie, had directed the trustees to use the trust to buy two flats in Bristol.

Lord Sainsbury, the former science minister, also set up a trust to hold his multi-billion pound stake in Sainsbury’s supermarkets. The shares were not sold while he was a minister.

Officials have conceded that ministers will be aware of the investments held in the trust and that such an arrangement may present a “conflict of interest”.

Last night, it emerged that Gordon Brown revised the ministerial code to remove specific guidance to ministers on blind trusts. The official code of conduct previously warned that ministers with trusts may have to step aside from decisions related to their financial affairs.

The previous code stated: “It should also be remembered that even with a trust the minister could be assumed to know the contents of the portfolio for at least a period after its creation, so the protection a trust offers against a conflict of interest is not complete…In some cases, it may not be possible to devise such a mechanism to avoid actual or perceived conflict of interest.”

All references to blind trusts have been removed from the revised code of conduct drawn up by Mr Brown after becoming Prime Minister.

Westminster insiders have expressed surprise that the Business Secretary, a career politician, is wealthy enough to justify establishing a trust.

Accountants believe that Lord Mandelson must have assets worth at least £500,000 and probably more than £1 million to make it worthwhile setting up a complicated trust. Annual fees must be paid to accountants and lawyers running the trusts.

Mike Warburton, an accountant who runs trusts at Grant Thornton, said: “I suspect the trust is going to be in excess of £1 million or why bother. The concept of a blind trust has always struck me as a bit dubious as you are only going to appoint a trustee who is someone you know pretty well and trust.”