Crisis in the hospitality business

Crisis in the hospitality business

While it seems people are desperate to get back to the pub, the staff don’t seem so keen. Across the country, pubs and restaurants are having difficulty in recruiting staff. Here’s the BBC, here’s the FT and again, here’s the Manchester Evening News. Even Tim Martin, the arch Brexiteer Weatherspoons boss is complaining. This is another lesson to us about how our economy is out of kilter, essential work is not well paid!

While much of the reporting suggests a desire for a better life work balance, I wonder how much Brexit and the end of Freedom of Movement has to do with this.  …

More nonsense on Bitcoin

The Indy reports on Bailey of the Bank on Bitcoin, who warns, “Cryptocurrency has ‘no intrinsic value’ and investors will ‘lose all your money’, says Bank of England chief” I add, “Bitcoin only works because the ‘proof of work’ is so expensive and time consuming; and its also destructive of the environment due to its useless power consumption. (It’s also very slow, doing 700 TPS, that’s not enough for a business, let alone an economy.) …

It’s demand stupid

It’s demand stupid

Simon Wren Lewis tweets on the Budget, the full thread talks of macro-economic illiteracy, the need to stimulate demand and the fact that this is a budget for austerity. He writes more on his blog, mainly macro where he talks about the need to spend more on those with less savings i.e. the poorer 20% of our society because their multiplier is higher as is their need. He also repeats the Economics 101, that fiscal policy is about growth and monetary policy about inflation. I also link to Paul Mason's comment which reinforces the need to concentrate on demand.

Is there a storm coming?

Is there a storm coming?

In an article on CNBC, with an article entitled, Bank of England's Haldane warns on inflation; bond yields move higher (cnbc.com), they summarise the article, "In a recorded lecture, Haldane noted that there were both upside and downside risks to the inflation outlook, but cautioned that an inflationary “tiger” had awoken. ... Global markets have been jittery over the past week due to a spike in the U.S. 10-year Treasury yield, driven in part by rising expectations for inflation and economic growth. I review the comments and look at the basics, present some charts on employment, inflation, growth and investment and ask if this is just fear mongering by monetarists ....

Brexit, the next trade deadlines

Brexit, the next trade deadlines

Brexit is not yet done, this, from the Institute of Govt., shows the upcoming deadlines for further agreement. most importantly in the short term, financial services equivalence and data adequacy. Slightly later in the year, is the new definition for food safety documentation required to export British food to the EU and Northern Ireland.

I might say more when I have studied it, but I have written recently about financial services, and extensively on the need for & likelihood of a data adequacy agreement. …

Thinking about macroeconomics with Anneliese Dodds

Thinking about macroeconomics with Anneliese Dodds

While writing, Responsible Opposition, about Sir Kier Starmer’s 1st speech of the year, I pointed out that Anneliese Dodds would be giving the Mais Lecture, which had been previewed in the Financial Times (paywall). They said that she will,

 …  call for a ‘responsible fiscal framework’ based on ‘pragmatism, not dogmatism’  … [and] … signal … that the Labour party is backing away from the hard-left economic policies of former leader Jeremy Corbyn, seeking instead to fight the Conservatives on economic competence and protecting the UK’s recovery from the damage caused by the Covid-19 pandemic.

Chris Giles – Financial Times

The speech has now been delivered and I heard/watched it live. The first thing to say is that I do not consider this to be a repudiation of late stage Corbynomics.

I needed help to work out what was said, it was a very low key speech, certainly not in the style of a UCATT shop steward, more in the style of one of the academics from the cast of Inspector Morse. There was no emphasis and so we need to work out what’s important and what is just said in passing. Stephen Bush points out the unusual nexus of welcome from James Meadway & Chris Giles, he writes,

… [ the speech] attracted a glowing write-up from the FT’s influential economics editor Chris Giles and an approving tweet from James Meadway, the adviser who more than anyone bar John McDonnell himself shaped the Labour Party’s economic strategy under Corbyn

Stephen bush – New Statesman

Meadway’s tweet was trolled by Richard Murphy, who was one of the authors of Corbyn’s original Corbynomics manifesto and is a supporter of modern monetary theory (MMT), but Labour stepped away from these monetary & fiscal policy  ideas after 2016.

I found the speech underwhelming, almost academic in its tone, which given the host may have been appropriate. I am certainly of the view that it is not a step away from or a rejection of McDonnel’s policies. If anything, the call for a ‘responsible fiscal framework’ based on ‘pragmatism, not dogmatism’ is an attack on Osborne and the politics of austerity and his remaining fans in the Tory party. She praised the independence of the Bank of England, but this has had its problems; it failed in 2008 and it was politicians that rescued the economy and the argument for its independence is based on the argument that politicians and their electors can’t be trusted to make the right decisions. If those decisions are painful, why should they? Independence is a way of baking in neo-liberalism. She was clear however that monetary policy is not enough to build a successful macroeconomy.

Over-relying on monetary policy levers for economic growth – as the UK has arguably done for the past decade – can lead to undesirable outcomes. Without accompanying fiscal action, low interest rates and gargantuan quantitative easing programmes can exacerbate inequality and concentrate economic gains in the hands of those who were already asset-rich, at the expense of those who rely on income from their labour. Risky indebtedness, especially combined with a highly unequal distribution of assets, can exacerbate inequality.

Anneliese Dodds

She spoke on fiscal policy; did she repeat McDonnel’s Golden rule? If she did, she qualified it by saying that borrowing to invest is only available because of the low interest rates. I have two things to say, firstly, I thought interest rates are a policy instrument, so if a government which is a currency sovereign wants them low, then low they are! Secondly, defining what is current account expenditure is not simple. Why is the education budget not considered an investment in human capital?

Is this as good as it gets? We are to be grateful that a Labour Shadow Chancellor still intends to borrow to invest and that monetarism is no longer part of Labour’s macro-economic tool kit.

On the upside she mentioned wealth inequality and aggregate low wages as constraints to growth but no mention of remediation which would be an effective wealth tax, a better minimum wage, reformed procurement policies and labour law reform. She also mentioned critically the growth in value of unproductive assets, such as art and wine; but surely this is the result of quantitative easing and a side effect of the increasing marginal propensity to save by the rich, again addressable by a wealth tax.

She announced a series of technical changes to the budget management process, all of which are good, but not particularly left wing and so likely to be nicked by the Tories. These consist of ensuring equality & carbon impact analyses on the budget and spending plans and placing a longer term time frame on the budget together with using more very long term bonds.

I also noted that while it seems that Labour is committed to a high wage, high skill economy, our reticence to talk about the means by which we select the short and medium term winners is not talked about; under Corbyn’s leadership, the new National Investment Bank was to be the instrument for seeding innovation and new jobs, but the means of funding it, and the way in which loans and grant were to be allocated remains unclear.

I submitted a question on this i.e. selecting industrial and innovation winners, which the moderator, Prof. Barbara Casu put as her first question; if Anneliese Dodds had wanted to talk in detail, this would have been in the speech, it wasn’t and her answer to Professor Casu’s question added no clarity.

It was a very technocratic speech, delivered in a technocratic style, presumably designed not to frighten the horses. It was a rejection of both modern monetary theory (MMT) and fiscal consolidation but not a manifesto for socialism.

ooOOOoo

The speech was introduced by the Dean of Faculty at CASS, Paulo Volpin, and the questions moderated by the Professor of Banking, Barbara Casu. Both would seem have been initially educated in Italy, I hope that the new immigration rules post Brexit will allow others to follow their route and come to the UK to teach.

I have written previously about Corbynomics on this blog and also on MMT on my bliog, and on my wiki, and on QMT in my obituary on David Graeber, on the blog. …

Finance in the City

Finance in the City

I made a blog on linkedin; a lot of money left the City on the 4th Jan, the first day of trading after the end of the UK’s brexit transition period. The article has a bit of explanation and a bit of prediction; more could follow and some of the market infrastructure companies and lawyers may need to do so too. While non European finance will likely remain in London, and provide both volume and gravity, the death of LIFFE showed that things can change.

Bloomberg are not so equanimous, and express their views in an article behind a “please pay us” splash screen; it’s a review of the leading merchant bank’s economists talking about the investment opportunities in the UK now that we have an idea of the new framework defining the terms of Trade. Many are neutral, the headline quotes the ‘bear’.

I am not sure, I suspect that the gravitational effect of world trade in non-Euro shares and the trade in currencies will maintain a critical mass giving the skills and infrastructure the reason to stay in London. What’s gone is gone but we need the Government to get on top of the negotiations on “equivalence”, which will determine the banks’ ability to serve both the EU market and EU citizens in the UK.  …

On macroeconomics, in memory of David Graeber

On macroeconomics, in memory of David Graeber

David Graeber died a couple of months ago on 2nd Sept. I never met him but was introduced to his work by my son who pointed me at "On Flying Cars and declining rate of profit", and he was introduced to me as one of the world’s leading anarchist thinkers; he was teaching at Goldsmiths which is close to where I live. I didn't feel it appropriate to write anything at the time, however I was clearing up my desktop and came across "Against Economics", which is a review of Robert Skidelsky's book, "Money & Government: the past and future of economics". It is through these two articles, and his tweet stream, that I came to know him; there is much wisdom in these articles. In this blog post, I comment on three things which I think especially important. Firstly, the nature of capitalism has changed. Capitalism is no longer progressive, and its defenders are moving towards arguing there is no alternative. The problems that the economic system needs to solve are no longer growth and the resource allocation required to deliver it, but, in his words, "how to deal with increasing technological productivity, decreasing real demand for labor, and the effective management of care work, without also destroying the Earth". This would also require an equitable distribution of wealth and income, the lack which is one of the chief criticisms of capitalism. Secondly that amongst the fatal flaws in economics as a science is the truth that systems that promise a benevolent equilibrium cannot rely on expectations of exogenous rewards to act as stabilisers. Thirdly, I look at his critique of the quantitative theory of money, and his positioning of credit and debt as an exclusively social construct. For more, see below/overleaf ...

Technical debt, depreciation and risk

Technical debt, depreciation and risk

I wrote and posted a piece on Technical Debt on my linkedin blog. Its post comment, based on the concluding paragraph says, “I look at “Technical Debt” in the context of IT budget planning and suggest that it is not such a useful concept. Using standard risk management analysis is a more effective means of planning a maintenance budget which should consist of funding for both error & risk remediation. Depreciation is a better financial model for the problem.”

There must be much written about the nature of depreciation from physical wear and tear, to the need and cost to replace due to increasing failure; perhaps I should look for some reading on how this applies to information systems. I question if software is an asset in terms of accounting theory, I suppose so because it has value in more than one accounting period, but can it be realised? I also question the value of placing a cash value on software in use, identifying its cost to acquire is potentially simple, its residual value is much harder and synchronising this change to a single corporate depreciation rule can be difficult.

Some things I considered writing about include the number of times while trying to clean up or rationalise corporate IT estates to be told that, “you’re not touching that!”. We used to joke that they’d lost the system which pays the board’s bonuses, but these systems were almost always obsolete and acted as a technology sink keep product in the portfolio that should have been abandoned. Recently I came across the phrase, fictional capital, these systems had an unknown value and the decision to leave them alone seemed based on a pessimistic and fictional view of their value. I sometimes suggested turning them off to see who squealed but this advice was never accepted.

Also it needs to be considered that the maintenance budget is a function of the size of the information systems portfolio and much of it is a fixed cost. If you don’t spend the money the systems stop and they do not vary with output.  …