All posts by John Band

Back, and an apology of sorts

Right. I’ve sorted out a bizarre WordPress permissions issue, and now have full control over this blog again. Hurrah. In other news, apologies for not posting anything for a while. I’ve been in Canada and San Francisco not working, and therefore my blogging threshold/time has been limited.

In particular, apologies for not posting anything much here or elsewhere on the financial crisis / teacup / disaster that’s going to kill us all / etc. I’d like to claim this was based on the same worthy principles as Dsquared’s lack of comment, but actually it’s more that a) I’ve been on holiday, and mountains are more fun than Congressional bills and b) it’s getting towards the ‘complexity beyond my experience or understanding’ end of the spectrum, so I’m reluctant to say anything which isn’t either very flippant or very data-driven.

Luis Enrique has some interesting thoughts at the other place, which are probably as close to my views right now as anything I’ve seen. Oh, and Alex’s piece on how anyone who thinks the Tories would be less inept at handling the current mess than Labour is certifiably mad is probably worth a read.

I’m starting an exciting period of gardening leave now-ish, so may have more time to comment shortly. Anything I’m particularly proud of will go on LibCon; anything I’m not totally ashamed of will go up here. In the meantime, I’d be delighted to hear your views and/or pointers towards interesting people on the crisis.

One thing that I will say here, though, is that the US government is not planning to give $700bn to the banks, and that the UK government has not spent £50bn on bailing out Bradford & Bingley. In both cases, they’re taking on assets that more or less everyone who isn’t mad agrees are generally worth something approximating their book value, which is perfectly reasonable.

The reason intervention is required is that if (e.g.) B&B went bust, then without state intervention it would have to liquidate its mortgage portfolio at fire-sale prices. Now, this would be an absolutely excellent deal for anyone with cash to spare – the problem is, there aren’t any non-state actors with £50bn in cash to spare right now.

The underlying house mortgages aren’t going to decline significantly in value (even if house prices fall 25-35% in the medium term, that’ll be mostly equity lost by homeowners rather than negative equity), but once a bank is perceived as weak, its asset value is the fire-sale price of its assets rather than their underlying value. Governments are among the few institutions with the cash and the long-term focus to go beyond the market’s sillyness on this (although Lloyds TSB is also getting itself a very good deal, and if I were HSBC or StanChar right now then I’d be seriously considering purchasing some distressed Western assets with the backing of my Asian savers’ deposits…)

Another get-rich-quick scheme thwarted

I’m deeply annoyed that I work for a company that places onerous restrictions on my ability to trade shares, even on my personal account – if I didn’t, then I’d pile some serious money into HBOS stock right now…

September 17 update:

Fuckery. That’s £3,000 I would have made, buying at 150 yesterday and selling at 190 today. Lloyds TSB are wiseas, semirelatedly, are Barclays. Also, can the gibbering clowns who think this is the End Of The World / the Collapse Of The Global Financial System / etc please go away? Finally, this.

Unrelated October 1 update:

OK, so WordPress is doing some deeply weird things which stop me from, among other things, writing new posts and editing or approving comments. I’ll let you know when this is fixed…

Second Unrelated October 1 update:


In praise of loan securitisation

US house prices have collapsed, making mortgage loan portfolios somewhere between impossible to value and valueless. As a result, the investment banks have been devastated. Lehman Brothers has just gone bust, and Merrill Lynch has just been sold at a knockdown price. Bear Stearns went under, and UBS took a massive write-down on its investment banking business.

Meanwhile, the number of failed US local banks, wiping out small savers and shareholders, has remained low. While this might partly be tip-of-iceberg effects, it’d be frankly bizarre if part of the reason wasn’t that many of the riskiest loans ended up owned by Wall Street.

In other words, the system transferred risk from people who weren’t well placed to bear it, to Big Swinging Dicks and Masters Of The Universe, who duly lost their jobs, second Jaguars, third homes, etc, when things went horribly wrong.


Sir Ben of Goldacre

Buy this book. If you understand why you need to buy this book, then buy this book. If you don’t understand why you need to buy this book then – for the love of all that’s worth a damn – buy this book.

Just don’t listen to the author talk, because he’s got an unfortunately whiny voice – one of those chaps who makes those of us who’re ‘prettiest on the radio’ briefly view that as a compliment…

Tube strike conspiracy theory

[phone rings]
BJ: Wot ho, Bozza here.
BC: Hello. I’m Bob Crow, and I’m evil. I’m going to lead the Tube maintenance workers out on strike (a 5% pay rise just isn’t enough, you see) and paralyse the city.
BC: [evil laugh]
BJ: Oh. That’s dashed inconvenient. Is there, erm, anything we can do to appease you?
BC: Hmmm.
BC: [evil laugh]
BC: Well, there is one thing…
BJ: Jolly good, I always say that reasonable chaps can work things out reasonably.
BC: The guy you hired to run TfL – you know, the one with the record in taking over badly run, overmanned companies, cutting costs, improving services, breaking union strangleholds, that kind of thing?
BJ: Oh yes, Timmy. A bit of an oik – his daddy was a squaddie, what, but the only chap on my team who isn’t a completely useless buffoon.
BC: Hmmm.
BC: He goes.
BC: [evil laugh]
BJ: And that way your chaps will take the 5%?
BC: Oh yes…
BJ: Spiffing fun. Timmy goes, strike’s off, let’s all have tea and cakes.
BC: …until next time.
BC: [evil laugh]

On chain restaurants, and their opponents

Nando’s is great, in general. Fact.

Separately, I’ve been to the Vortex in Stoke Newington, and it’s one of the worst venues I’ve ever had the misfortune to frequent. Fact. It was a quality piece of British [1] service, indeed: they told our party we could eat there, then told us we couldn’t, then told us we could phone in for delivery pizza, then told us we were interrupting the jazz (dig it, man…) when the pizza arrived and so couldn’t eat it in the venue.

So the fact that some daft Stokies are opposing the conversion of said rubbish-hole into a thoroughly good chicken-eatery makes me despair for the future of humanity.

Sod it, I’ll continue living in unfashionable parts of town [2], having enjoyable dinners, and eating food that’s good. I know Maccy D’s is not only unpopular but also socially eeeevil, because it serves cheap fatty and nice-tasting food to people who don’t have much money and like cheap, fatty and nice-tasting food; but Nando’s actually serves real whole unfried chickens that taste really really fucking good. If you slate it without having been there, it’s sheer snobbery – it is genuinely better than nearly all foodservice in this country. And most other countries.

Also, a a quick bit which makes no sense to people who aren’t from north-east London, but is a massive bloody great dog-whistle to those who are: people in Church Street saying “sod off to the Stroud Green Road if you want Nando’s”. In terms of the relative areas’ demographics, that equates to “wealthy white City couples tell people who actually grew up in the area to sod off to somewhere which still has poor people in it if they don’t want to eat organic fruit smoothies” [3].

[1] i.e. “actual people from the UK work here, and resent it and wish they were investment bankers and media co-ordinators like the rest of us, and therefore treat their customers in exactly the contemptuous way they believe their customers deserve to be treated – rather than being people from elsewhere trying to make enough money to buy their entire home town and therefore being correspondingly jolly with customers in the meantime”.

[2] I actually live in one of the four most fashionable parts of town; this is deliberate irony.

[3] in the interests of social commentary, I note that the people who’re born in the area in question tend to be black or Asian, whereas the people who write wanky petitions about restaurants tend to be white. However, the latter lot are saving the former lot from their ignorant selves [4], which isn’t neo-imperialist because it’s in a good cause.

[4] I particularly hate the way I have to highlight sarcastic comments in footnotes these days in case idiots [5] try and cite me out of context.

[5] if you don’t know, you don’t need to know.

The last word on why the deficit doesn’t matter

Chris Dillow makes sense:

“If people are prepared to lend to government at less than 1% real interest, let’s bleed them dry, because cheap money won’t last forever; infrastructure spending should be undertaken now, whilst it’s cheap.”

The construction collapse will have the same effect on labour costs, which we can offset by removing the impact of crowding-out from multiple public-sector projects. So let’s go for 200,000 new council houses (£20bn); a TGV line from London to Leeds via Birmingham and Manchester (£20bn); and nuclear power stations covering 30% of UK energy requirements (£40bn); while also going ahead with Crossrail (£10bn).

These would raise the national debt by 7% of GDP to levels that are still historically fairly low, while adding £900m per year of real interest to be met by taxpayers (approximately a 0.1% increase in government spending).

If I was in a political party that looked almost certain to lose the next election, then borrowing an enormous amount of money to spend on infrastructure projects that won’t be completed for about 10 years (by which point the next government will be so tired and jaded that nobody will credit them with the achievement), would be top of my list of priorities at the best of times. The fact that it currently makes economic sense to do it is a happy coincidence, and hopefully one that’ll work in all our favour…