Rebooting

Madness is doing something over, thinking it will yield different results next time:

If all you do is what you always done, all you’re ever going to have is what you always had. (Def Leppard)

Saturday’s Board of Social Responsibility reflected on the need to reboot, using excellent materials from the CTBI Conference in January. At the centre of these was a paper by Bob Goudzwaard, Dutch economics professor, on money and idolatry.

Even in narrow financial terms, some wondered why we are now loading money so freely into the top of a discredited system, rather than financing businesses on the streets, refloating the economy, as it were, from the bottom up. Perhaps it’s time to re-read our own Scriptures in the light of experience, including such concepts as Jubilee, Shalom, and household. This might even mean challenging usury — the making of money out of money alone, with no added work. This cornerstone of recent practice is consistently condemned in the Hebrew Scriptures as unjust, immoral and oppressive in itself.

We need to reboot. But how?With the question ringing in our ears, and the Scriptures at our right hand, it’s interesting to begin by remembering that everything impacts everything else in interesting ways:

It was thirty years ago today...

Mrs Thatcher taught the band to play. On this day in 1979 the Callaghan government lost a confidence motion in the house of commons (by 2 votes in over 600, I seem to remember) bringing to an end postwar concensus government — In Blairspeak, a pivotal point in British political history. The story may demonstrate the peril of delay in politics— it’s arguable that had Sunny Jim gone to the country the autumn before the winter of discontent, he might well have squeaked home on a sympathy vote. Still being counterfactual, had General Gaultieri managed to keep his army in his trousers and off the Falklands, the fortunes of the first Thatcher administration, deeply unpopular in 1982, might have been different. Who can say?

Thirty years on, the historical jury is out on what followed. One narrative says unions were tamed and the economy renewed as an enterprise engine, driven by financial wizards, unbridled by regulation. Another points out that social inequality soared, driven by a housing bubble and short-termism. Both narratives are right on their own buttons. Certainly banks ceased to be rather dowdy traditional “word is my bond” institutions, like the place Mary Poppins kept her umbrella.

Woody Allen once suggested all nature was a vast restaurant, everything eating everything. In that spirit Thatcherism released the genie that transformed all commerce into a vast betting shop. Recently, imagine if instead of bailing out banks from the top, government had helped people paying sub-prime mortgages from the other end. Could we have refloated the banks, through the micro-economy, bottom up? Of course not! That would be subsidizing fecklessness and irresponsibility.

So instead we've squirted billions into the banks from the top down to avert commercial kismet, hoping they’d start doing lovely things with the lolly. I do wonder what Mrs Thatcher’s old dad, a paragon of thrift and hard work, would have made of Fred the Shred, flying in fruit every day from Paris, replacing carpets rather than cleaning them, and sacking staff over the colour of the biscuits, whilst studiously ignoring abundant evidence that he was steering his liner over financial Niagara Falls. Apparently that was not feckless or irresponsible. It was wealth creating. Really?

If RBS had been allowed to go bust...? Among other things, Fred’s pension would have to have been be paid by the guarantee scheme, capped at £27,000. And if he had thought that sum insufficient he could, at the age of 51, have gone out and got a job. I can imagine Alderman Roberts wondering what would be so terribly wrong with that...

One Thing leads to another

What makes everything happen? Us? Chance? God? Advent is a time to speculate and play with the linkages between thngs. In the great scheme of things, all the dominos fall towards eventual glory, says the faith, but in roundabout and counter-intuitive ways.

Corporate reading of Scripture, in season and out of season, unlocks awareness of hidden process. By not ditching it, even when it doesn’t seem relevant, we hold open the possibility of meaning breaking through from it.

I had been thinking how irrelevant the strange psychedelic poetry of Revelation was, and glad we only really encounter it seriously at this time of year, when I was handed a Bible to read from at a lunchtime Eucharist this week, the day after Woolworth’s bankruptcy, only to find it was Revelation 18:

Alas, alas, thou great Babylon, that mighty city, for in one hour is thy judgment come! The merchants of the earth shall weep and mourn over their city; for in an instant no man buyeth their corrupt merchandise any more. Thy merchandise was gold and silver, precious stones, pearls, fine linen, purple silk, and scarlet and fine wood, all manner of vessels of ivory, and of the most precious wood, and thy buildings of brass, and iron and marble, and thy slaves which were the souls of men. Yet now the fruits which thy soul hast lusted after and for which thou hast laboured so long are wholly departed from thee, and all things that were dainty and goodly are departed, and thou shalt know them no more... In one hour is so great riches come to nought...

I wonder what the evaporation of all the mighty city’s wealth in an hour meant in the first century — certainly a phenomenon you would have to be a wacky psychedelic apocalyptic poet to imagine. The sober fact is that today, like global destruction, we have the technology. When apocalyptic suddenly leaps off the page in this way, it’s a powerful reminder that the framework in which we take such pride, and from which we derive such security, is, in fact paper thin. Everything is connected, fragile, vulnerable and dependent on God — to use a slightly eggheaded word, contingent:

Woolworths bankruptcy: end of era?

Back in the 1930’s one iconic sign of the great depression in Jarrow was that the town’s Woolworths couldn’t stay open. Now that’s in danger of happening to us all, as Woolworths calls in the receivers — bad news for 30,000 staff, suppliers, and even competitors who may well find their businesses hit by the dumping of a large amount of liquidation stock on the market in the run-up to Christmas. Of course times have moved on, and Woolworth’s, like the rest of the high street, was in big trouble from out of town competition before ever the credit crunch came along. Ironically, Woolworth’s original winning formula was based on providing a comprehensive range of everyday practical goods conveniently under one roof — exactly the battleground on which it has been beaten by today’s out-of-town supermarkets.

All the same, Woolies’ demise after 99 years marks the end of a much-loved national institution. We Brits excoriate those national institutions we love best. Here, from earlier and kinder days, is affectionate comment from Brummy legend Jasper Carrott:

As the circle of businesses affected by the current troubles expands, one or two colleagues have discussed with me positive practical attempts to offer love, prayer and personal support to people in the broader communities they serve who may be feeling isolated and vulnerable. I’m more than happy to know of good practice. Can we spread ideas around?

Banks, Bandaids and Badinage

UK Satirical magazine Private Eye provides its own narrative of our recent financial plague month, with cartoons:

The root of all this isn’t some quantum of greed beyond the rest of us, but something we all do given half a chance:




Funnymoney is ultimately, er, funnymoney:





The result has been, depending on your point of view, a Massive Bank Nationalisation to make Lenin blush, or an act of (compulsory) mass investment beyond Mrs Thatcher’s wildest nightmares. Same difference?



Meanwhile the Wilson family has been fiddling while Rome burns in our own sweet ways. Catherine made Anna a Deep Chocolate and Fresh Raspberry cake for her birthday yesterday, whilst Stewart and Nick have made an creditcrunchable escapist movie — Jim & Jam’s Bicurious Adventures:

FTSE 4435: Bank Crisis. Bingo!

Whilst heading for the Earth’s Core yesterday, the FTSE-100 plumbed the magic depths of 4366, passing 4435 on the way — its monthly low when the Blair government was elected in 1997. So there you have it, folks. All the puff and funnymoney was soapy bubbles after all. When everybody gives up making anything or saving anything to become a property wideboy instead, we all end up in the poorhouse. Bailouts follow overtrading as night follows day. Borrowing short and lending long is fun for an afternoon, but hopeless long term. Big unearned bonuses make wasters. Loss is loss, and as poor old King Lear pointed out years ago on his way to the Funnyfarm, nothing will have nothing. Fancy that. Now What?

Bank crisis: last gasp of a gilded age?

Reflecting of recent financial news, this weekend has produced two articles that have had me rocking on the seat crying “Amen, brother!” — Incisive, creative, and understanding reponses to the recent UK ban on Short Selling in the City.

Giles Fraser in the Church Times puts in a good word for the short sellers. We’ve all been on the game, and the easiest thing in the world is to fix on someone to blame, when, to use and abuse a metaphor from the world of choir training, we all need to tighten our underpants. “The Bubble needed to burst.”

... by blocking short-selling, all that the regulator does is to en­courage the value of stock to become over-inflated — and that is precisely the problem of our world markets. For instance, there is no way of short-selling the housing market. As a result, house prices have become absurd.

Householders may scream blue murder if the value of their property goes down, but it ought to be clear to most people that a great many houses are vastly overvalued. It is just this overvaluation that generated the sub-prime crisis in the first place.

Short-sellers are a vital corrective to the instinctive bullishness of most city traders. Sure, it is immoral to sell a stock, talk it down, then buy it for a large profit. But that is no different from buying a stock, talking it up, then selling it on at an inflated price — the “pump-and-dump” man­oeuvre.

Modernity has given us the myth of continual improvement; that technology and human advancement will lead us ever onward and upward. It is the philosophy of New Labour’s “things can only get better”.

And it is the naïve mantra of the city trader for whom the stockmarket always goes up. Such a philosophy encourages us to borrow money against our ever-rising fortunes. In such circum­stances, making money is easy: bor­row as much as you can, and invest. It is a proven recipe for boom and bust

My other weekend serendipity was Andrew Brown’s Guardian article. He starts from the twaddle the ignorant and foolish produce, painting Rowan as a crude Marxist (actually ludicrous, if you know anything at all about where he’s coming from) and draws attention to his work on Dosteyevsky, in which Rowan

...hates the consumerist ideology of limitless choice because he thinks it tears us way from our real and limited wants; and he sees it prefigured in some of Dostoevsky's villains, for whom "Everything depends on choice, and what is chosen today need have no relation to what is chosen tomorrow or what is chosen by anyone else". Reading these words detached from their context, it's obvious that they are also the perfect description of the workings of an untrammelled market, which may go up, down, or merely sideways depending entirely on the free choices of participants today. For Williams such a market is dehumanising and by extension diabolical:

What is depicted as The Devils moves towards its conclusion is the process by which the elevation of choice increasingly produces an evacuation of desire.

Bruce Springsteen put it in rather fewer words: "57 channels and nothing on".

...Williams's real objection to the market is that it turns its participants into things to one another – and that, he believes, is a blasphemy because we are not things, but, in some sense, images of God. Money allows us to treat other as impersonal means to an end, and this offends both his reactionary and his socialist instincts profoundly. In 19th-century Russian literature, it is almost always nobler to be a serf than a wage-slave. Though the relationship between a serf and his master is based ultimately on violence, it is personal violence, not the impersonal and invisible transaction of the market, and so it has more room for virtue, and for growth.

...There's a great deal that could be said about Williams's particular critique of the markets: although he's a very clever man, I don't suppose he knows any more about economics than all the other very clever people currently bewildered by the question "What should we do?"; and to know that the archbishop supports a ban on short-selling doesn't make it much clearer that this ban is a good thing.

But the one thing you can't say is that this is a knee-jerk response, or a piece of publicity seeking. The belief that capitalism tends towards evil is one of his deepest convictions.

This is not crude Marxism. The old puritans drew all their theology from what they called “total depravity”. The current bonfire of the vanties on Wall Street is its own critique of human tendencies to build castles in the air out of fantasy. Perhaps the whole sorry business started in the garden, when Adam and Eve chose “choice.” It’s no more realistic to point a grizzled finger at City Traders as though they were somehow qualitatively more selfish than the rest of us — Christian views of the human condition caution about idolising “choice”. We are all in need of redemption, including our fears and fantasies... interesting times!

Look out there's a monster coming

A vicar was telling me about a close encounter this week with a city trader. The guy’s face was Pale Grey. We are now definitely in uncharted territory, apparently. On Thursday Andrew Brown drew attention to a new form of “socialism” that, having privatised the profits is now socialising the losses. Commenting on an FT Editorial Andrew suggested:

Extraordinary to reflect that I have lived long enough to see communism die and then the capitalism that replaced it too; to see the nation state and the empire wither away in Europe, and now to return in Asia, and that I have managed to do this without getting very old at all.

As various big UK names hit the skids, naturally, action is being taken to see if financial institutions can renormalise everything. Short Selling was one way institutions seemingly alchemized increased profits (“fertilizer”) out of falling prices (“manure”). Now it’s off the UK menu until next January.
Can the various other ripping wheezes that have inflated fantasies all round get us all back to where we thought we were?

Striding towards canary Wharf from just below the horizon, come various other Bogeypersons, threatening the way things have been:

• An increasingly embattled dollar, withering as the oil-based reserve currency.
  
• New energy world order, with big fresh competitive demand from the East, in which state owned big players marginalize the cosy old “Seven Sisters”
  
• Debt crisis — stoking trillions of housing loss into mushrooming US public debt, the eventual burden supercharged by desperately socializing AIG insurance losses as well as FM/FM bad debt.
• Climate Change adjustments about which it becomes increasingly difficult to pretend
  

Big lumbering monsters, all these, and peak oil? Is this just me, or is it all beginning to look slightly precarious, à la Ezekiel 28, out there?

PS (h/t Kendall Harmon) the NYT reports that the US treasury is likely to pick up the tab on foreign banks’ US debts... Richard Lindsay of HSBC says “this is a positive step forward but it won’t solve the problems of an overleveraged industry...” Hmmm.

Mortgages — forever blowing bubbles?

Talking to a surveyor about the near collapse of trade, I wonder about the impact of the current housing bubbleburst on people’s lives. And about debt and oppression — a classic Old Testament theme.

Even non subprime backloaded US mortgages are funny old things:

The UK government has announced some desperate measures this week to try and ease things, including a stamp duty holiday for houses under £175,000 and 100% loans. It’s hard to see what they could have done, but:

1. When you look at the trillions involved in the bubble, how could any realistic fiscal measure make much of a dent in the real problem? Will four times as many people now rush out and buy houses, given all the other pressures on them from accumulated personal debt, rising energy prices, 2% pay settlements, etc? I think not, Holmes.
   
2. Stand by for one unintended consequence — all low end asking prices (say up to £300,000) now nosedive to £175,000. Shome mishtake? If there were a miraculous mass recovery in low-end house prices, guess where it will be pegged? £175,000?
3. Just as all sensible financial institutions decide subprime 100% lending is a mug’s game, part of the problem, not the soluton, jolly UK taxpayers (= us) dive in headfirst bigtime... I feel a Homer Simpson “D’uh?” moment coming on.

Or have I missed something, here?

Telemarketers meet their match

Whether it’s Fawlty Towers or the Blitz, true Brits know how to grin and bear it. They dislike their banks intensely but haven’t the gumption to change. After 35 miserable years of Barclays Bank, I was phoned this week by their telemarketers. Last March an undercover BBC Whistleblower programme pictured lies, security abuse, mis-selling and cynicism about customers that seem to be rife there. When the notoriety spread, yea even to Dave Walker's Cartoon Blog, I had to sit up and take notice:

This is the company who made 7 billion pounds profit last year and yet charge people £30 to go overdrawn when the cost to them is about £1.50. The programme showed telephone operatives engaging in all sorts of dubious behaviour, such as pretending they are calling as an ‘advisor’ when in fact it is purely a sales call. Then an advisor in a local branch attempting to sell home insurance to a man who can’t afford a bed in an attempt to meet a target. And many other such horrors.

Of course at the end of the programme there is a management-type person saying that what the programme reveals is not typical and that actually Barclays are respectable and lovely. But the fact is that we know (from experience) that Barclays hassle their customers with sales calls, so I know which side of the story I’m believing.

Here’s one radical solution to the telemarketer problem. If I had the gumption for it, of course, I'd have changed banks years ago. Just let me know how you get on...

Sharia — Chameleons on the carpet?

Yesterday I slunk away from the kiddies’ sleepover for Jon Moulton’s Dispatches programme on Banks and the Credit Crunch. Mr Moulton is a high powered Private Equity specialist, founder of Alchemy Partnership. He knows a lot about dodgy finance, and he thinks the whole silly thing is a self-inflicted wound, born of greed. Banks bought shedloads of dodgy debt on the back of Collateralized Loan Obligations — World of Warcraft style “alchemy” that transforms dross debt into a golden opportunity for six figure bonuses. Turns out it was fool’s gold, but the suits picked up their bonuses anyway. Make no mistake who’s paying for this lot long term — it isn’t the suits. On the day they nationalised Northern Rock, John McFall (Chair of the UK Treasury Select Committee) reminds us

banks are the only institutions that socialise the losses and privatise the profits

“all because those men in expensive suits got too greedy,’’ concludes Mr Moulton. The FSA is enquiring into its own handling of the Northern Rock Fiasco and will surely conclude (Mystic Meg Voice, please) “It was just One of Those Things.” Meanwhile the UK banks are, I think, £31Bn down the Swanee, and new Fantastickal Alchemy models are lining up on the runway to ensure next year’s bonuses.

One interesting study option in a debt driven crisis is Sharia Finance. Like Traditional (=pre-Capitalist) Christianity, this forbids the Scriptural Sin of Usury. It’s particularly interesting at a time the British government has been making the City of London what it calls “the Key Western Centre for Muslim Finance.” But you can only mention this in company if you play the Sharia Card (below).
You play this to people and see if they explosively fill their pants and start screaming at you. If they don’t, you can have a rational discussion. As a lad I wondered whether chameleons really exploded on Tartan Carpets. Now I can find out, by playing the Sharia Card with the editor of the Daily Mail. The worst Bad Thing in the DM world is being Foreign and Muslim. The highest Good is a prosperous housing market. So Sharia finance must be good. No it’s not, it’s bad. No it’s not, it’s good. No, it’s bad. No, Good. Bad. Good. Bad. Good. Bad. Boooooom!

No Daily Mail. Clean Air at last.