Au revoir and Vaarvel

Let’s give David Davis the credit he deserves. I mean he really is outstanding. So good he performs so well out of his depth. In fairness, I think anyone is out of the depth when agreeing to hold the reigns of the worst known set of political and economic negotiations since the 1939-45 war….without your top man. Even Sir Ivan knew as early as January that this was a sinking ship and grabbed one of them strong and stable lifeboats. But what do experts and professionals know? Good riddance, we don’t need you. You lost. Move on. Brexit means Brexit. Remoaner! 

On the other hand Jacob Reese-Mogg knows better. Apparently the Gravity Model of Trade is “comprehensively wrong” however he didn’t really come up with any alternative except good ol’ wishful thinking. No sorry, he did come up with something, “classical economic thinking”….BOOM! At least wishful thinking and classical economics are not mutually exclusive unlike the Irish Border conundrum.

One musn’t digress though, the focus is on Davis. Mogg, you’ll have your day!

As silly as it sounded at the time, we were assured by Davis back in April this year that the two EU agencies located in Canary Wharf would not leave London. Nevertheless, all we hear is that “the UK is leaving the European Union” and “when we leave the European Union”. Even ‘Remainers’ shout it from the rooftops above as if they have bought into the silliness of it all. So, I ask the same question then as I do now, how can the UK hold onto EU agencies if “we are leaving the European Union”?

Well, it was all theory back then I guess, wasn’t it? But Davis had the audacity to suppress it as scaremongering thus stating that it fell within the realms of the Brexit negotiating table. Fast forward just 7 months and the practice has been firmly put into place. It appears that the EU can pull out agencies whenever it wants from whoever it wants. Yes, the agencies have gone! From tonight! To Paris and Amsterdam. Au revior & vaarwel.

Interestingly, the European Banking Authority only hires 150 staff but lets read in between the lines. London is the financial heart of, er, Europe. I really thought Frankfurt would be candidate as an emerging location to be a new financial hub for the EU but Paris has triomphed and one can see a lot of positives in the EU making that move, one notably being that it’s only two hours train ride away from London. This will also benefit London whilst it takes on the world, new opportunities, new tech, brexit means brexit, get over it……oops, we did that bit, didn’t we? No seriously, I see the transition being very smooth indeed for the short term, quite possibly in the long term too but jobs will be lost.  No, jobs have been lost…FACT! Read the above article in the previous paragraph. Brexit, on the other hand, does indeed provide a unknown opportunity but it’s more disruptive as staying in because there’s no real certainty. Ah, driverless cars. No, we’ll have driverless cars! At least spreadsheet Phil has a solution.

I’m thinking aloud here now, completely cynical. So cynical I now class myself in the same ‘silly’ bracket as David Davis. I do pay close attention to Sunday politics, daily politics, watch news, read news, chat to economists, etc. I attended a Dr. Angus Robertson seminar last week as he delivered the topic of new macroeconomics. While everybody else complains about hangovers and nurses them by zombie-walking to the nearest Wetherspoon for a cheap Brexit-supporting breakfast, I’m in position to consider the level of silliness that people like David Davis are capable of delivering. That’s my Sunday breakfast. Chewing the fat of lies, deceit and madness. Other reasonable, God fearing folk just generally have loads of stuff to do and rely on politicians to act in our best interests. Please note: they don’t! But why believe me. Listen to people like David Davis get things horribly wrong by ruling out economic and political theory altogether from people that do know. So let’s give Davis the credit he’s due.

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Uncertainty

“The culprit was caned and lessons carried on as usual”.

“Generation snowflake”.

I can’t even imagine the “sheet of flame” scenario ridiculous as it sounds. Just what kind of fire is that and how was it suppressed?

Before going any further, you might be best to refer to this interesting article and readers comments at the end.

I think I can see the correlation in this reader’s comments between a complete disregard for people’s health & safety and that of the now fashionable post-Brexit, criticize-if-you-dare,”back in the day”, inward-facing mentality. Health and safety of today is built on the basis of lessons learned and on risk assessment thank goodness, however in terms risk management it is obvious that risks change over time, all thanks to shifts in technological and social trends which is a result of our appetite to improve our lives and well-being in every way possible.

Thankfully, the school had an automatic fire suppression system installed which not only acted in the interests everyone’s safety, in particular the pupils, but it also ensured the continuity of business. I don’t mean business in the sense of the perverse anti-capitalist mindset but rather that of uninterrupted provision of education . Although a day had been lost the students had returned to class the following morning as opposed to a maximum loss scenario (i.e.. complete destruction, as seen in those schools in Essex and Sussex last summer) which would have ultimately guaranteed uncertainty as to when the school would reopen again.

Thanks to effective risk management, and in insurance terms, a probable maximum loss scenario is what occurred here, nevertheless what is startling to see in the news article is that the sprinklers appear to have contributed to the inconvenience and because of this the decision was taken to close the school. Yes, in this real-life event water has created a flood which is the inevitable result when extinguishing a fire but what is remarkably downplayed is the efficiency in the way the automatic fire protection system operated. Even the head teacher has gone as far as comment that “the smoke and water caused by a small fire” was the main reason instead of pointing out that the proximate cause, the fire, if uncontrolled can actually destroy schools completely. The reason why the fire was so small was thanks to the sprinkler activation – this is what it does, it keeps small fires small and extinguishes them using water. Had firefighters been on the scene a minute from the fire inception and sprayed water all over the place would the head teacher have mentioned the problem of water damage? Most probably not, and quite the opposite perhaps, given firemen do brave things all the time when called into action and are warmly congratulated, medals, photo opportunities etc. etc. I am being cynical of course but is still fact. In contrast, we have sprinkler engineers who install and maintain systems and just get on with the job of ensuring and continuing the trend of zero lives lost in a sprinkler protected building.

Once again sprinkler systems are downplayed and this doesn’t help to raise society’s awareness of their importance. It could be argued that this article builds on the fallacy that all sprinklers are activated since it seems we have a case of a school being flooded with smoke damage. Yes, OK a slight exaggeration, however I have had a discussion before with asset managers where the understanding was that in the event of a “small fire”, say, in the corner of a open-plan office floor, that all sprinklers heads across the floor would activate.

We have seen it right before our very eyes with the Government’s approach to curtail the requirement for new schools to invest in this highly beneficial protector of lives and buildings. My recommendation, in this cold bitter austere economic climate, is to simply calculate the payback period on investment because there will be savings on the insurance premium in the mid to long run. Surely this would be a sustainable approach whilst providing a robust defence in every sense of the word. Failure to do so only creates more risk in an already uncertain environment whilst 2016 has already proven alone that uncertainty in Political, Economic, Social and Environmental terms is just around the corner…in fact, right….this…..moment…now!

So, what’s wrong with a little inflation?

Although inflation has recently increased to 1.6%, understandably through the devaluation of the pound sterling since the result of the EU referendum (more than 11% on the Euro, more than 16% against the Dollar) and the rising price of oil, it is still an increase which falls within the Bank of England’s 2% target, a target I might add which aims to achieve price stability and is set by Government. So, what’s wrong with a little inflation?

Although this should not be alarming to the consumer, it most probably should be. It was not long ago the now ex-Chancellor of the Exchequer, George Osborne, indicated that 0% inflation in 2015 was a ‘saving to consumers’, contrary to the inflation figure set for the Bank of England to achieve (and to report on if not reached). Now, although to an extent this is true, a continued fall can also curb consumer spending as one may hold out for a better price hence the need to keep inflation up year on year to limit this uncertainty. The mood would be terribly important too, so if the population is generally happy then consumer spending will continue without further ado and might even see an increase in purchasing

Apart from a period in 2009 during the Great Recession, the RPI (Retail Price Index) is almost always higher for those that have mortgage repayments, therefore homeowners could feel an added pinch in the propensity to spend. Importantly to note, as of November 2016, personal credit is at an all-time high and thanks to the positive mood spun by the press just a couple of years ago when CPI was at all-time low we could see spending now being curbed on the back of rising everyday costs combined with increasing and potentially unmanageable credit debt. For some it could be untenable to control given unemployment is expected to rise throughout 2017 which in turn will affect the the UK economic outlook leading to a a negative downward spiral effect.

So, I ask again, what’s wrong with a little inflation? Well, if the starting point for consumer saving and spending was at 0% then surely anything above and beyond is going to negatively affect spending, especially for so-called JAM’s, the Government’s branding of those that are ‘just about managing’. On the flip side, however, had Mr. Osborne indicated that inflation at 0% was negative for consumers then the spiral of deflation could well have continued as mood, or “animal spirits”, again, has played an umeasurable role, professed of course by an economist not widely supported by neo-liberals, John Maynard Keynes.

The above is not exhaustive, nevertheless it’s important to be critical about what happens next as all facets of the economy need to know the extent of the deepest reaches of a Europhile’s thinking as well as taking on board the ultra-positive outlook from hard Brexiteers. Hard is now clean, soft is now dirty but still the UK Government has a hard task ahead of satisfying 48.1% of the UK population who up until last June probably ‘never had it so good’…where matters are more certain remaining ‘in’ as opposed to being ‘out’.