29 June 2015

The benefits of bankruptcy……….

I'm not a financial expert but I have always understood that declaring 'bankruptcy' was a mechanism which allowed a failed mercantile entity (let's call it Widgets Plc) to negotiate its way out of insurmountable debt. I believe that it works something like this: Widgets Plc trades in its marketplace and either takes on too much borrowing or trading conditions change - either way, Widgets finds itself unable to pay its bills. At that point one, some or all of the creditors (people or businesses who have traded with or lent money to Widgets Plc) move in and force Widgets into bankruptcy in order to realise  some asset value in order to settle debt. Alternatively, the bankruptcy process can force Widgets into a restructuring which usually involves cost cutting, redundancies and refocussing of business activity. This second route is intended to allow some part of the reconstructed Widgets to continue to trade, but profitably, in order to pay off some or all of the debt at some future point.

But key to forcing bankruptcy is timing - lenders or trading partners need to act responsibly and before debt has reached a point where Widgets is guaranteed to collapse completely. In many cases, this doesn't happen and, when bankruptcy is declared, the assets realise far less than the debt meaning that, in the most extreme cases, creditors get only a fraction of what they are owed. Seen this way, bankruptcy can be seen either as a punishment for poor business methods or, on the other hand, as punishment for poor or inappropriate lending.

So, why does this subject interest me right now? The simple answer is 'Greece'.

From where I sit, Greece is a victim of both excessive lending and borrowing. Everything was fine until the global financial crisis of 2007/8 which was caused, not by the Labour Party (as David Cameron and the Tories would have you believe) but by the irresponsible lending practices of banks and banking institutions around the world. When the party stopped, everyone had a hangover and recovery has been both painful and slow. For those economies with something to sell or trade, recovery has been possible. Not so for those weaker economies, like Greece, who were lent money without thought or consideration of their ability to repay.

And now Greece wants to declare bankruptcy which, in advanced economies is a way of restructuring debt but, in this situation, bankruptcy will crystallise the level of debt and it may be that some of the lenders will not be able to survive the losses.

I don't know enough to predict an outcome but, if the Greek people are forced to endure more 'austerity' I can easily see a rise in Greek nationalism where wider European institutions and countries are blamed for the pain. And the Islamic State will look to exploit such an opportunity.

All because the banks can never be blamed for their own mistakes.

1 June 2015

Its all about the money………...

The ongoing saga of FIFA corruption has made me see Sep Blatter's position in rather a different light. FIFA's conduct has been gathering bad reviews for some years, as James Lawton's piece in the Independent from 2011 shows but I am quite sure that, if he's been smart, any investigation of Sepp will come up empty. The reason for that is that Sepp isn't in place in order to line his own pockets but in order to allow others to line theirs.

Have a look at other global sports, like cycling or motor racing or tennis, and you will quickly appreciate that the sport itself is just a front for the extraordinary amounts of money to be made in the background. And, to varying degrees, the people at the top of these sports are in place to make sure that the revenue stream isn't interrupted. That is the real story behind Sepp Blatter. Sepp is there not to put his own snout in the trough but in order that others can do so and the sport itself is just a vehicle to that end.

In motorsport, Bernie Ecclestone (not a man to be tangled with) has positioned himself rather better than Sepp in that Bernie and his close corporate associates are the gatekeepers to that particular global gravy train. They have first dibs on the money and its up to lesser mortals to grab the crumbs that fall from Bernie's table but those crumbs are pretty eye-watering and well worth grabbing. But Bernie isn't free from taint as his political donations and, more recently, trial in Germany showed.

Cycling was much the same before the Lance Armstrong catastrophe and the organising body of cycling was complicit in Armstrong's activities. The International Cycling Union, headed by Armstrong apologist Pat McQuaid, shut down its own investigation into Armstrong's activities. Why? Because no-one wanted to derail the gravy train through bad publicity. Again, its all about the money.

The problem, of course, is that greed and venality are powerful motivators, particularly when morality no longer plays any effective part in restraining the worst traits in human nature. Will Hutton writes about Blatter/FIFA in these terms and underscores the challenge that anyone or any corporation faces when attempting to address the issues.

And, in this discussion, I shouldn't forget our politicians because, the reality is that politics, like sport, is all about the money and, whoever is 'at the top', they are only there to make sure that the gravy train doesn't stop. If anyone in sport suggested de-regulation (i.e. getting rid of the rules) there would be an outcry but in politics, deregulation (as instigated by Thatcher/Regan) has become the dominating mantra. Cameron and Farage parrot this line when they attack Brussels (always under the guise of a perverted nationalistic self-interest). But underlying this is a determination to get rid of as many rules as possible in order that as much money can be made as possible without fear of retribution.

The trick, as with all such similar situations, is too make sure that the greed and venality doesn't become too obvious or too offensive because, as with Lance Armstrong, eventually some people find the courage to stand up and object. It may be that Sepp Blatter forgot to keep a lid on things and he might pay the price but be assured that any disruption in the revenue stream will only be temporary - there's just too much money to be made…………..

30 May 2015

Another day, another charade…….

Globally, I hear people breathing a sigh of relief at the news that Ross Ulbricht has been sentenced to life in prison without parole. At last we can sleep peacefully in our beds knowing that Ross isn't going to be coming round to our place any time soon, if ever. But I also hear people asking, 'Who the hell is Ross Ulbricht?'.

Ross, if you didn't know, and I suspect that most didn't, is alleged to have run a 'dark web' (gasp!) site called 'Silk Road' where people bought and sold illegal drugs (gasp!). Not only that but he is alleged to have made £11M doing it (horror!). The authorities also claim that (shock!) six people may have died as a result of using drugs bought via 'Silk Road'.

Now I'm not defending Ross but I do find it odd that he should receive such harsh treatment when, for example, more than 6,000 people were killed in the USA in 2010 by handguns. The firearms industry in the USA suggests that they aren't responsible because they only make the guns, they don't use them and it is possible that Ross could have be protected by a similar defence.

Bringing the issue a little closer to home, I don't know anyone who bought cocaine via 'Silk Road' but I do know many, many people who were and are affected by the financial crash of 2007/8. And the story of the crash is shot through with criminality, fraud, deception, corruption and conspiracy, all laced with a good dollop of greed and venality. In comparison to the financial crash and the subsequent bailouts, Ross's wrong-doing pales into insignificance yet Ross is going to be banged up for the rest of his life and the bankers walk away with golden goodbyes.

What does this say about our society? It says, quite simply, that the wrongdoing of outsiders will always be punished where the wrongdoing of insiders will go unpunished.

28 May 2015

No surprise there………….

I'm continually amazed by the outrage and surprise expressed by commentators when yet another scandal involving highly placed and influential individuals emerges. We have witnessed a parade of the greedy, the venal, the immoral and the abusive, from churchmen to doctors, members of parliament and policemen and, common to all, has been the fact that individuals tried to bring these issues out into the open only to be suppressed by fair means and foul.

Now we have another parade of fat cats, this time senior members of FIFA, who seem to be accused (accused note, not guilty) of corruption on an industrial scale. Yet rumours of this behaviour have been common currency for years and nothing has been done until now. Most informatively, the man who has been at the top throughout the period under review, Sepp Blatter, is standing for re-election as FIFA's president and may well be re-elected tomorrow.

Democracy is all very well but it is clearly completely eviscerated if it does not deliver transparency and accountability, two things that are notably absent behind most of the scandals that have entertained us recently.

11 May 2015

Where now?

I went to see a David Hare play called 'The Absence of War', a play that I found thought provoking and remarkably relevant given the events of 7th & 8th May. The play is David Hare's imagining of the 1992 Election where, in reality, the Kinnock led Labour party went into the election expecting to gain a majority only to be beaten by John Major's conservatives.

The central theme of Hare's play was his Labour Leader's efforts to make Labour 'electable', something that, at that time, was clearly not the case and, in the light of our most recent election, Labour need to consider the same issue today.

What differentiates Labour from Conservatives today, in a world where Labour's original and traditional constituency, the 'working class', has all but disappeared? Obviously, most people still belong to the 'working class' because they still work but, in the post-Thatcher world, the idea of an oppressed 'working class' is no longer relevant. Working people have been encouraged to believe that they work not for some exploitative employer but for themselves. Their work is therefore seen as an aspirational effort on their own behalf rather than an exploited effort on behalf of others.

So Labour need to find a connection with the electorate which reflects the new realities of a post-industrial society (where consumerism is now the opium of the masses). In this new reality, if people are unhappy they are free to spend their way out of unhappiness. They don't see that their unhappiness is a function of oppression and therefore they don't have any motivation to move against their oppressors. (As opposed to the Scottish electorate who clearly decided to vote against the oppression of a Westminster administration.)

The Conservatives scored a surprise victory because they proposed that Labour/SNP presented a real threat to the 'haves' in society. As expressed in this election campaign, conservatism is about greed, venality and fear - fear of loss (of personal wealth), fear of change, fear of the unknown, fear of anything or anyone which can be characterised as a threat. The conservatives' hiring of Lynton Crosby, was done with the specific intention of making the 'haves' afraid, and it seems to have been hugely successful.

Quoting Lynton Crosby, "At its absolute simplest, a campaign is simply finding out who will decide the outcome……… where they are, what matters to them, and how do you reach them?" Have a look at Lynton Crosby's ideas here. Crosby (and Rove before him) ignores those sectors of the electorate who have already made up their minds and focuses instead on undecided or swing voters with the intention of energising them with fear.

Lynton Crosby took the basics of Carl Rove's playbook, recognising and exploiting 'wedge issues', and applied them to the UK Election with devastating results. In comparison, Labour floundered about trying, and failing, to differentiate themselves from the Conservatives. Labour failed to recognise that they operate in an entirely new political and social environment  where, rather than dealing with 'top-down' issues, they need to operate from the bottom, upwards. Where the Conservatives exploit fear, Labour needs to exploit decency. Where the Conservatives exploit greed, Labour needs to exploit fairness. Where Conservatism speaks to the worst in people, Labour needs to speak to the best and Ed Milliband wasn't up to the job.

The election result was a surprise because, at root, the swing voters who were influenced by Lynton Crosby's strategy are fundamentally ashamed of voting conservative and therefore don't and won't admit it, certainly not to pollsters. They know that conservatism has become synonymous with greed and self-interest and they are so ashamed that they embrace such values so easily that they can only admit it in the privacy of the voting booth.

If Labour is to find a relevance in this changed world, they need to give expression to society's need for decency and fairness and give ordinary people the chance to see that expressed in practice. 'Be Afraid' clearly trumped a 'Better Plan for a Better Future'.

8 May 2015

What happened?

I believed the polls which all suggested that we were heading for a well-hung parliament with Conservatives and Labour in some sort of rough balance but without an overall majority and with the minor parties being able to exert significant influence through deal-making. And I believed that until around 11pm last night when the first exit poll suggested that the Conservatives might gain a working majority. Not quite what I had hoped for or what I had been told to expect.

That exit poll proved to be correct and this morning see the Conservative party with a tiny majority which I suspect will be very effective given that there is no chance that the opposition parties will find enough common ground to cause the Conservatives any serious trouble. So we can look forward to another 5 years of cuts to public services, privatisation of the public sector, zero-hours contracts, promotion of the interests of the private sector over the public, and the promotion of the interests of capital over all others.

So, the beatings will continue until morale improves.


Nigel Farage passed comment on the disparity between the UKIP share of the vote (12.8%) and the seats it gained (1) compared to the SNP share of the vote (3.8%) and the number of seats gained (56).
The graph below illustrates his point.

Based upon their share of the votes cast, UKIP would have gained the frightening total of 82 seats whereas the SNP would be down to 31. Although I don't agree with much of what Farage says, he does have a point.

7 May 2015

A real threat to our democracy……..

Today's Guardian, May 7th 2015, carries a very interesting piece by Seamus Milne which suggests that the Conservatives have a rather different strategy up their sleeve should the Election not go the way they would wish.

Where I have always understood that, in the case of a hung parliament, any party which can assemble an effective coalition of 323 or more MPs can form the next Government, Milne suggests that the Tories, facing a more fragmented vote across 7 or more parties, will now suggest that it is only the individual party with the most MPs that has any legitimate right to form a coalition.

And given the remarkable media support that the Conservatives have managed to assemble, should they actually seek to deploy this strategy, we will witness an serious assault on the democratic process, led by media interests who reflect the concerns of a wealthy and tiny minority in our society.

As I have said previously, the wealthy and powerful in society have far less need of representation than do the rest of us, yet it is they who manipulate the process, through their proxies, to strengthen their grip on the levers of power.

At a time when diversity in political opinion seems to be increasing and when there could be a better chance of compromise, the Tories may well be plotting a course towards an even more extremist future.