Tuesday, 18 April 2017

David Cameron's Last Economic Wheeze....OPM Pension Fund Raid


What could have been a major discussion in parliament has been washed away in the mire of brexit and the Scottish indy 1, is the shift in private pension law. Previously pensions were managed via a very controlled move from pension fund over to a pay-out vehicle called an annuity. This suited the industry quite nicely because most of those reaching pension just carried on in ignorance to this and put it down to jargon and small print, allowing their private pension provider to continue control of their amassed small fortune.

However what Cameron, or rather his economic advisors desperate for growth drivers to inject fluidity in the economy,  noted was that this money is somewhat not the company's it is the pensioner's fund. There was a cash log-jam in the consumer economy to be unblocked just in time for the wave of baby boomers crashing onto the happy shore of retirement. 

 It suits Tory individual freedom of choice to move the law to making it very obvious that the pensioner has control of this in effect, lump sum. Now it has to be said that the pensions industry sell a premise which is building a million pound fund in order to give an annual dividend from interest of between two and five percent of the fund's top line value. Of course the pension's company and their fund managers hope to make a heck of a lot more over 10-20 years of payout of interest on that lump of cash, and over the 30 or so years of contributions have made a very tidy margin on everybody's payments collectively. At death the pension fund passes to spouse or next of kin, and is subject to death duties/ inheritance taxation . 

You could as a prospective pensioner, elect alternatively to balance annual income by drawing down from the pot as well as the interest, but that really would not suit the whole game the pension fund managers play - they need lareg sums to spread bet and expect above 5% ROI year on year as averaged over 10-20 years. Most people do unfortunetly die within 13 years of retiring, and that age is about to fall on average as the unhealthy baby boomers, who have enjoyed too much of fags, drink and nosh ups, hit the buffers earlier. So given you have a million pounds to offer say a £ 25,000 - 45,000 annual income from the old annuity route, you can see that taking 100,000 p.a. for ten years is attractive - in the context then if you do make it past average age of death at only about 77 y.o., and then letting your PAYE pension pick you up if and when you are in your dotage and need to sell your house anyway to fund nursing home

Now of course the government does nicely out of inheritance tax - eventually- but being able to inject a huge amount of cash which is sloshing around in pension company managed funds, internationally it must be said, then the country will gain by short term growth, as in the credit cycle before of the 80s and 1997-2008 periods, with the VAT reciepts and other tax revenues being high. Suddenly the finest crop of baby boomers born in 1950-1953 will discover that they can manage their own capital, and despite what ever smart alec IFAs say to them, they will want to spend, spend, spend and then rely on the state SERP PAYE pensions so many stayed in or had via state employment, for their really decrepit years, where capital penalises you by forcing up your charges in nursing homes.

Pensioners on average are of course not stupid and balancing capital extraction with interest payouts plus your true life expectancy, or qualiyears as some call it then fuck it, live for today..

..A year or two is positively geological time in politics these days , so a 'quick win' was to be had, injecting billions of otherwise locked up pounds into the consumer economy rather than the global investment banker network.

The essence of people's capitalism and self determinisation or just a credit bubble which will squeeze for example, buy to rent prices upwards? It certainly is a little cynical and possibly anarchic, especially if you are a Norwich Union fund manager (for example).

Sunday, 16 April 2017

Say Hello to Madame George

Trans identity and rights have been eclipsed by other madness in world events recently, but one old and very petty little debate won't go away. Say hello to Madame George.

Often held up as a trans song, there is in fact no reality in this, just the misinterpration of words. Van Morrisson wrote Madame George as the second part of a probably a highly autobiographical pair of songs , the other being Cypress Avenue , of course mentioned in the opening line again of the latter in the brace of ballads.

The myth of Madame George being an early pro trans song and alluding to a flirt with blurring the borders of sexuality and the artist's own experimention there in, are completely transparent. Firstly in the very name of the 'lady' being George. Secondly in the general poetic narrative suggesting a forbidden, underground flirtation which could never quite be requited. Thirdly the mention of what some claim is ' playing dominoes in drag' when the police raid the place.

Alas these are just misinterpretations. Firstly George is not referring to a first name, it is a well known second name in Ulster, and as both the well heeled middle class avenue and the 'soldier boy' husband suggests, a protestant one at that. Leading from this, the sexual tension and intrigue is more understandably heterosexual and extra marital, as the swingin late sixties afforded women a greater sexual freedom. Lastly ' in drag' is actually ' an' drag' , and not in, with the word meaning a card game played for petty bets at the time.

Van Morrison has spoken little of his specific inspirations for his modern folk master piece ' Astral Weeks' but he has mentioned that he had an affaire ( or several?) with an uptown lady which meant him walking up Cypress avenue in Belfast. ' Marching with the Soldier Boy Behind' seems to allude pretty strongly to a woman in control of her destiny with some contempt for her husband. This has also though, been 'decoded' to mean a gay lover in tow, walking two steps back to avoid attention.

The subject matter is though more clearly upon setting in context of the young openly heterosexual artist's formative years, centred around an affaire or unrequited relationship wirth a femme fatale. She may have been from the Republic due to the references to a police raid on their gambling den, and Van Morrisions seemingly obsessional need to get the train back to Belfast from Dublin. This seems also to refer to the innapropriateness of having a liason with perhaps a lady into her forties, and Van Morrison's dubiouty over the relationship

For me Madame George is then and Ulsterian Mrs. Robinson. She is a chance encounter for the artist. Out of boredom or awareness of her sexual needs, she leads the teenage protege into unchartered adult waters.

Tuesday, 17 January 2017

Trumpman's New, New Deal

Trumpanomics Round the Corner, or More of the Same-Old-Same-Old?


President Elect Trump's inauguration is just a couple of days away, and he has in his latest interview continued his hard line on ripping up a bad trade deal. The balance of trade with China in particular is staggering. He is really talking about protectionism.

For the last thirty years, protectionism and tightening national border customs control have been very untrendy. In fact they have been consigned to the extremes of politics, with entities like the Italian Communist Party and some of the Neo Fascist organisations being the only ones who support a retreat from internationalism in economic policy.

The thing is that the West can live with a bad trade balance as long as it has a positive investment balance ie companies are listing in the west. Reselling and design in the west, build in the east is highly profitable and efficient in the eyes of investors because it avoids all that nasty risk of having to manufacture yourself and face things like skills shortages, trade unions and wage pressure.

The Liberals Got Shafted By Accepting Neo Liberalism


When Bill Clinton signed the first major free trade deal with China it was in the 1990s when US manufacturing was doing rather well, having modernised and been able to get itself away from the bad days of excessive trade union power. The concept was then that rise paddy land would buy our higher value western consumer goods in return for commodities and the type of low tech, high labour intensive work the west had "grown out of". This has become a complete nightmare of a mirrored situation from anticipated, where China has eaten up all the manufacturing jobs and rendered much of that hidden under-belly of the US to what is called the 'rust belt'. All forms of jobs apart from retail and personal services, and of course public sector, have been going east.

It just doesn't matter to the major brands where their product is made or what politics it is made under. This extends also to the major web sites - the mega cyberbrands - and mobile app's too, which are increasingly being programmed in China and India. Worse that just losing jobs, the west are also losing brand dialogue and suppliers. The growth markets in the east have massive untapped potential- already the affluent middle class in China, India and the Island Belt (SingMalDesia as someone called it) is approaching half the entire population of the USA. Brands look to their tastes and needs first now.

Strategy for Balance of Trade based on Financial Markets, Premium Goods and Brands, Has Failed 


Selling our high value goods to this massive growth market has just not been a job creator. In fact the opposite, because some of these brands have been bought out by eastern investors, including those supported by good old Keynsian cash from national banks. Incredible that we allow a government and credit fuelled group of Tiger economies behave like this while the western worker has to accept that such spending is interference with natural market mechanisms. We forget all too quickly that there are other economic models than the neo liberal one, and that it has taken Trump of all people to drag off those ideological emperor's new clothes from the ruling elite in their Davos coseyness.

The biggest issue for the Democrats and left in the EU countries is that they swallowed the 'new consensus' on more free trade and less borders is always good. In effect there became no fundamental opposing economic policy, rather with the Clinton period and New Labour period, and the Social Democrat period in the EU and scandinavia of the 1990s, it was on who couls spend the tax best and offer the consumer a better deal on their visa card.

Real Living Cost Inflation and Erosion of Wages As Bad as The 1970s?


We are in fact also in a wharped mirror decade which is looking a lot like the 1970s to people who have to balance family budgets. Then we had an energy crisis, and overly powerful unions which lead to high inflation in retail prices and a devaluation of western currencies over the course of seven years or so. Now in fact we have of course real living cost inflation in that housing, commuting and utilities are all costing more, but none of these show on the consumer price index which is the great beaming siren of health in the economy. Only it of course is an outdated index in terms of erosion of spending power and standard of living.

What capital has been able to pull off is a health chart for the patient which shows there is no disease in the west, that we only need to all work harder to get on. Their capital assets and income increase in value based on this rentier economic investment in housing, privatised utilities, transport, health and retail. There is no consumer price increases which worry the currency markets, who are myopic to the balance of trade. IN fact you could say that the anarchic currency trading system is exacerbatic to real inflation for ordinary employees because it values also a high total stock value and private equity flow into the country's housing market. That keeps demand for dollars up.


Neo Liberalism is the Run Away Goods Train of Ideology Which Has Delivered Social Unrest


What the left really did not realise is that Neo Liberal globalisation is a hurtling goods train for the delivery of poorer living standards for a very large proportion of the workforce. It not only exposes workers in manufacturing to the global pressure to compete with the lowest common denominator, or the highest secretly subsidised state. The management philosophy sweeps sideways into the domestic service economy and over into those middle class, high value added jobs which now have wages which are stagnant, and thus become eroded Unemployment and oversupply of graduates is good for the bad bosses out there, because it means they can offer take it or leave it initial conditions, and even reduce wages or increase working hours on an unpaid basis. In several professions in the US now, it is necessary for ordinary workers to do an extended period of wages free internship. This is all just the market, the facts of life, the value you have as a person versus the next man or woman in line.

We used to call this DOLE RULE and we used to something about it via organising our labour. Post war we, the western middle class, strung out our time of imperialism, and protected our imperial markets to a large extent allowing slow growth in bilateral international trade. We rebuilt europe on keynsian principles, and the US white worker at least, never had it so good under the 'virtuous cycle' of the 50s and 60s. Keynsianism. Protectionism. Collective Bargaining via Unions. Free Education. All these bads. Yet our economies grew faster in that peiod than the subsequent three decades, there was a higher spending power and lower basic costs of living relative to wages. In fact inflation during this period is lower than it was in the last three decades.

It all went wrong in the 70s with several key factors, one of which was unrelated: the arabian oil crisis. The other one which was political and local was on the one hand powerful unions and on the other management struggling to raise investment for new technology and plant to increase productivity. We entered a kind of perfect storm of inflationary pressure and decline in those companies which did not modernise production or methods. We saw rising automation too, but it was general difficulties in teh economy coupled to the baby boomers being too proliferate which lead to job losses. In fact unemployment and in particular under employment became a lot worse in the 1980s, but this is a little facile because women entered the work force as full timers en masse and this was also a disruption. A lot of things caused the malaise of the 1970s and set the route to slavery the Neo Liberals pushed us out upon in the 80s.

The net result is the US Rust Belt and growing social unrest in the old west. Scapegoats are easy to find, and the free movement of Labour and blind eye to Mexican labour the Neo Liberal epoch permitted is coming to an abrupt end with Trump's wall and Brexit. We want your markets, but we don't want your people and we won't buy our brands made in your country any more.

 In the UK, there is a surprise low productivity to economists, but if they bothered to look away from the Financial "City" and the North Sea, they would see everyone selling insurance and cappucinos to each other, or offering nail manicures, or being marginalised in privatised services into low wages and temporary contracts. We are in a malaise, and the lower third of society are paying highest for it, yet often lack the articulation or understanding for how they were put in this situation of stagnant wages and a hard labour market yet with rising living costs.

Trump knows that the balance of trade is paid for somewhere. It is paid for by the personal credit mountain and government spending. In part of course, the government had to prop up and subisdise the failing financial credit industry, in a similar way to the sick car industry of the 1970s. In other ways, a large part of the economy is driven by imports being sold to people on the public pay roll, and an increasing proportion of American internal industry is paid for by government spending such as Medicare and defence. Because the market for labour is so saturated, employers can get away with marginalising retail and service workers into precarious low hours , taking top up benefits from the state.

The trouble is of course that Trump does not just oppose an Ideological Economic Epoch, he also opposes huge vested interests in the USA and lobbying power in Senate and Congress on both sides of the house. China is a major investor in both the stock exchange and private equity (mostly real estate). The big brands don't want to have to manufacture in the US when they can do it easier and cheaper in China, and get loans there from the state's back door. Retailers are a powerful lobby who dont want inflationary pressures or a threat to their supply of cheap labour. Health companies and defence manufacturers dont want the US public purse to get a 'better deal' as Trump wants. He faces entrenched political channels for all these interest groups, and a stock exchange and currency market which may punish him.

Further to all this picture of Trump being perhaps the Left's new surprise hero or stalking horse to more equitable national economic policy, he has reiterated this week his committment to building infrastructure in the US. This is a keynsian and Federal approach to fixing problems, both of which are abhorrent to Neo Liberalists. It starts to look more like Truman's New Deal than Reaganomics take II.

These ertswhile socialist policies though are not going to be brought in with a punative taxation plan for the upper third and top 2% of society, quite the contrary. Trump looks to balance the books over 5 years via productive activity in the economy dragging the labour maket up, and a better more symmetric trade deal with China. He will cut defence if he can get away with it, and ease the sense of  New Cold War growing with Putin. He will cut propping up Israel. Trump's economics seem to be from the radical left mixed with Thatcherism of the purse strings in the handbag. Trump has been a supporter of the democrats before. Who is this man really? A lot of republicans asked the same question during the primaries, but now he has his uber right power base established they do not dare dissent before they see weakness down the line. A republican " house and hill " is quite a rare combination taken in the context of the last half century. It is seen as political opportunity for other reforms and regressions of laws and systems. Also they know now that people do not beleive in the revamped Bushanomics offered by their other presidential candidates.

The Neo Liberal, globalised model is broken for the US working class and has also eroded the standard of living for the middle class. Like Lenninist Marxism in the USSR, the public finally find a mouth piece in the corridors of otherwise entrenched doctrine and ideological worship. Trump is that Gorbachev for Globalist Neo Liberalism.


Simplistic solutions for limiting immigration and negotiating better trade deals behind closed doors seem to favour the worker in the street, but the structure of the national economies are not there to actually make the change. They are still oriented around globalisation and Neo Liberal anti organised labour policy. It will take brute force to shift this old epoch out of the way and it is Trump and Brexit which are either those forces or the stalking horses to a new era. It is going to be different.

If you say that Brexit and Trump have pushed through a log-jam of political correctness, in fact it is far more true in motivation to vote, that they are a move away from Economic Correctness in the Neo Liberal epoch.