economics

This speaks for itself.  My only comment is that often civil servants, government and people who are removed from business, get screwed over because they fail to realise that business is amoral, and functions for profit.  I don’t mean that in a “business is bad” way.  I think business is good.  I mean that in a “people removed from business often get walked all over by business because they are naive in the extreme” way.  If business can exploit government for a profit it will, even if government ends up with a very bad deal, and the public ends up underwriting  any losses the business invokes.  Giving said businesses no insentive at all to do a good job.  Removing any sense of pride or social status that comes with working for the government (why?  because people are employed by businesses rather than the government, and businesses are run for profit, not for “the country”).

And a cashcow called Blairism came along - employing market fundamentalism.  Here’s a scenario - you’re a business - your company provides consulting services - it currently has six major contracts - two of which are with government and are underwritten in the case of failure - so, for perfectly sane reasons, you care more about the other four projects…  They are the priority.  The two government contract can overrun a bit, or fail, because it could be that you end up with more money that way anyway.  During the initial negotiations you told the goverment that nobody would take on that risk in the private sector without being underwritten.  Which is bullshit, of the semi-deniable form, but your job is to make a profit.

In the event of failure it will  be renegotiated through a long winded and exploitable goverment procurement process, run by people who have worked in the civil service since graduating, and are more than a bit green when it comes to what business tells them.

Cashcows.  Blairite/Brownite market fundamentalism is exploitable and will be exploited.   The old Tories, for their sins, at least understood that business was amoral and operated in its own interests.  Don’t trust government market fundamentalists, Tory, Labour, whatever.  They get fucked over by business.

The English countryside has not been in full-on production mode for decades. Farmers have been bummed by supermarkets and international competition is intense. Wholesale prices had gotten so cheap. However, if I had a spare couple of hundred grand, I would be speculatively buying arable farming land. I strongly suspect farming is going to become profitable again. In line with world consumption of meat and livestock products. There are less barriers to buying farming land than many other land types provided the intended usage of the land is made explicit. There’s likely people who want to sell too. Do you know what percentage of grain in, for instance, the United States, goes to feed livestock? It’s more than half. Way more than half. Animals require a fuck-load of feeding. In the next decade more people than ever are going to be able to buy meat.

So, blah blah, meat - value of arable land already bottomed - hard up farmers: buy-outs, mega farms, profit, blah blah blah, mega profit during droughts elsewhere, England uniquely exploitable for profit. Etc.

• Oil prices are rising because of speculation. The current supply, believe it or not (I don’t care), exceeds demand, even taking into account China. The speculation is a result of uncertainty and people moving into commodities (rather than equities).
• The rise in wheat prices are partially the result of increased demand for meat in China. Not a ‘western style diet’. More meat requires more food for livestock. But it’s not the principle factor. Last year there were several droughts. Not least in Australia. Similar things happened to major rice producing countries last year. Blaming China is wrong and misleading.
• There is not a linear relationship between inflation in China and the prices of Chinese exports. That would be overly simplistic in the extreme. China is going to suffer from inflation, but as a side effect of increased prosperity and modernisation. Rather than a simplistic relationship between food and oil prices.
• There is a weak causal relationship between biofuels and the price of food.
• Chinese imports are one of the factors that has helped control inflation in the UK. A minor factor given the percentage of Chinese goods as proportions of inflation indices.
• The Government measures of inflation are reliant on indices. So to say prices “on average have risen 3%” is an unwarranted generalisation based on an index. Real inflation may differ. A better phrase would be that prices tracked by X index have risen. Anything else is lazy.

With that in mind please watch the following:

What keeps inflation rising?

And ask yourself whether it did a good job. I think it is misleading and does a poor job of explaining things. One gets the impression that Richard Scott thinks the increased wheat prices are because of Chinese people eating vast quantities of toast.

I think part of the problem with the media coverage of the financial world is that it is unable to see things in shades of grey. The term recession, for instance, is often used as if it’s equivocal with a depression. It’s not. It’s quite possible to be in a recession and, aside from certain parts of an economy, not have a substantial impact on the fundamental things that affect people. The current situation in the US is bad, but nothing on the recessions of the 1980s or 1990s. It’s going to be bad for upwards of six months, particularly in the financial sector (I reckon there’s a great deal of bending the truth regarding liquidity, to keep baying morons from panic selling), but everything else will recover quickly, which will, in turn help the financial sector. And I hate to agree with George W Bush, the fundamentals of the US economy, even in its current state, are better than people think and shouldn’t be underestimated.

Consumer spending has not been affected terribly by the problems of last year. There is a lag, but it could be that many people who are now in trouble with their mortgages were not big consumers because the percentage of their income was eaten by their mortgage was already high. So the knock-on effect to the economy of defaults and loans may have been severely over estimated. And, I suspect, this is reflected in today’s US inflation data. Prices were kept low because people weren’t prepared, or able, to pay more. Oil and grain prices are to be watched as components of the CPI, and the wider international situation. There’s a fuck load of people in West China who have yet to start consuming with the rest of us. I done-gone-think there’s going to be linear growth in world consumers over the next decade as the 700 million odd people in rural China increase demand.

I think the major problem with the last four years of US economic policy is that the fed severely underestimated the stupidity of the market and how it’s often led by mood rather than rationality. If people panic it will get much worse, if people listen to Bush, and they should, because he’s right in this instance, the recession will be a bit of a pain but nothing like being kicked in the balls. Bloomberg’s coverages has been better than the competition in terms of neutrality and the rationality of its correspondents. As an armchair economist I hope to get my hands on some raw data in the next few weeks and see if I’m talking bollocks.