Archive for the ‘prediction’ Category

So that Michael Lewis – you know, the one who writes articles about how stupid Icelanders were. Via The Oil and the Glory, here’s what he was saying in January, 2007, just as the last bulls in the US housing market’s dizziest bubbles finally cracked and the big plummet began. Here it is.

But the most striking thing about the growing derivatives markets is the stability that has come with them. More than eight years ago, after Long-Term Capital Management blew up and lost a few billion dollars, the Federal Reserve had to be wheeled in to save capitalism as we know it.

Last year Amaranth Advisors blew up, lost more than LTCM, and the financial markets hardly batted an eyelash. “The financial markets in 2007,” some member of the global economic elite might have said but didn’t, “are astonishingly robust. They seem to be working out how to absorb and distribute risk more intelligently than any member of the global economic elite could on his own.” Once the laughter subsided — and someone took down his name to make sure he didn’t make next year’s guest list — he might go on to point out that in spite of a great deal of political turmoil the markets have remained calm.

The Sarbanes-Oxley Act sticks a wrench in the American market for initial public offerings, and the capital-raising business simply removes itself to London and Hong Kong. Thailand installs capital controls and the markets force it to reverse its policy, virtually overnight — again with nary a ripple. The Brazilian real is now less volatile than the Swiss franc; Botswana’s debt is now more highly rated than Italy’s. Oil prices double, the U.S. housing market tanks — no matter what happens, financial markets adjust quickly and without hysteria.

This is a case in point of Daniel Davies‘s contention that while forecasting the future is great, forecasting the recent past is almost as good and much more likely to be successful. That is to say, it’s not just enough to have the information, it’s also important to draw consequences from it and react to them. This is why John Boyd held that the most important element of his Observation-Orientation-Decision-Action loop was the Orientation.

In this case, Lewis was well aware that a massive housing market bust was actually in progress, that the oil price was very high, and that a range of generally weird things had happened. But he didn’t integrate this information into his broader situational awareness – he noted that nothing had exploded yet and reached for a variety of rationalisations, notably confirmation-bias, to explain why nothing would happen.

However, for his own part, he actually responded more effectively. He spent quite a lot of this article whining about people who weren’t taking risks and wondering why nobody was going short if things were so bad. Well, in fact somebody was going short the US housing market. (Logically, somebody had to be short if so many people were so long – someone had to be taking the other end of those trades, as in fact he said in as many words.) And Michael Lewis later wrote a book about him, making a considerable profit.

Obviously, he was in a position to wait and see what happened, and then write the book either about the Great Bull Run of 2008 or the Great Crash. That helps. From a Boydian point of view, it is critical to all strategy that you keep your options open as far as possible and avoid being forced into reacting on the other side’s time-table. It’s also true, though, that the precondition of not being bankrupt in 2008 and therefore being able to take opportunities as they came was not taking risks in 2007, perhaps by doing a well-paying writing gig at Bloomberg in which you moan endlessly about people who aren’t taking enough risks.

In fact, anyone looking for economic advice from Lewis in 2007 would have been well advised to ignore everything he said and instead study what he was actually doing.

Is it meaningful to say that the Egyptian revolution is calming down, or petering out? I ask because a common flaw of the reporting on it has been to treat the basic dynamics of mobilisation as if they were signs of huge political shifts behind the curtain. It’s obviously true that both revolutionaries and reactionaries need to sleep and eat. When the revolutionaries want to, they have no great difficulty in putting over a million people on the streets in Cairo and probably a bit more again elsewhere in Egypt. These are peak efforts. Idiot management-speakers like to talk about maintaining peak performance, but they are idiots: the word peak implies a supreme effort that cannot be maintained continuously. People have to eat and sleep, they have families, they have jobs, although many millions of Egyptians have been taking part in the revolution silently by essentially going on strike. Even revolutionaries have to maintain their barricades, update their blogs, and hold meetings to decide what to do next.

The result of this is that there’s been a sort of media cycle – one day the papers are full of pictures from the latest day of rage, the next it’s all about people grandly speculating on what happens next, and the regime’s spokesmen explaining how they intend to preserve the substance of the regime. Perhaps they talk about that on the other days, but nobody is listening. Or perhaps they believe it, when they wake up and hear that there are only tens of thousands of rebels in Tahrir Square rather than hundreds of thousands. Then, the next callout of the demonstrators resets the clock again.

Today, we seem to be in one of the ebb-tide phases. So it’s a good moment for a bit of speculating. What is important, in these terms, is that the government doesn’t seem to be regaining much ground in between waves of protest. Instead, there seems to be a ratchet in operation – each wave extracts a new concession. Mubarak sacked his government. And appointed a vice president. Then he promised not to stand again. Then talks were opened with the opposition. Then the military accepted to talk directly with the opposition, independently. Then the NDP hierarchy was purged. Then Suleiman renounced becoming president himself. And the regime’s own peak effort – Wednesday’s thug raid – was dramatic and violent at the time, but with hindsight was nowhere near enough in terms of numbers to change anything. Arguably, it wrecked the government’s remaining legitimacy and only demonstrated its lack of mass support.

The fear is that this is no ratchet, but a sort of retreat into the Russian hinterland, a trap. On the other hand, it’s a common pattern in the end of dictatorship, a sort of political Cheyne-Stokes breathing. You may think you are saving the structural realities of power and giving away the forms, but how will those realities stand up without the Emergency Law and the special constitutional amendments and the practice of having political prisoners and the ban on opposition parties and the censorship of the press? After all, there must be a reason, rooted in the structural realities of power, why you wanted them in the first place. If owning hotels was enough to sustain a tyranny, there’d be no need for Central Security or private thugs on camels or sententious TV broadcasts or bulk SMS messages with faked originating numbers.

Revolutions come with years, like New Order remixes used to. Prague ’89. Paris ’68. Probably the most relevant ones now are the Polish ones – Solidarity feat. Jaruzelski ’81 and ’89. The first one was a lot like what everyone fears for Egypt and also quite a lot like the official preferences of our governments. There was violence, but not as much as there could have been, and a safe military dictator won. He, in turn, turned to a religious and conservative pseudo-opposition to give his rule some foundation. The second was more optimistic but less spectacular. In 1989, the end of communism in Poland involved far more negotiating than it did street-fighting, and it involved putting up with Jaruzelski sticking around for the rest of his term as a sop to the powers that be, or rather the powers that were.

Egypt is already some way beyond 1981 – there is something like a round table, and the officially designated military strongman is getting very close to the exit, having disclaimed supreme power for himself. Probably the communists of 1989 thought they were cunningly playing for time. Suleiman has a far more ruthless reputation, though; the big issue is whether he can be trusted or better, constrained from trying to either crush the opposition between here and whenever the election date is set or else to start a civil war like the Algerian generals of 1991.

One argument has been that there would be a fake revolution, leaving the security state in charge, as Jamie Kenny put it. I think this is now out of date. Similarly, although they are now talking to the Muslim Brotherhood, I think my own prediction is also out of date. We’re past the point where a few Brothers in the government would convince anyone. In fact, Jamie and I saw our predictions first validated and then rendered irrelevant within a week.

Looking ahead, it’s worth remembering that 1989 took time to deliver. After the original moment of success, there was a long and uncertain haul of getting rid of specific individual bastards, changing laws, moving editors around the State TV and inspectors around the police force. I think we’re now into this phase. Some people seem to agree, from very different points on the spectrum. Changing the union confederation and the university professors’ club is very much to the point, whether you’re thinking 1989 and maintaining enough forward momentum to protect the revolution or 1917 and the second wave.

Take it easy ya Ahmad. Every revolution in history always has this carnival-like side. The insurrection will come later. #Jan25

I think I’d rather have that man on my side.

Our former prime minister supported Hosni Mubarak this morning in the name of stability.

Blair said that meant there should not be a rush to elections in Egypt.

“I don’t think there’s a majority for the Muslim Brotherhood in Egypt. On the other hand, what you’ve got to watch is that they are extremely well-organised and well-funded whereas those people who are out on the street at the moment, many of them will be extremely well-intentioned people but they’re not organised in political parties yet. So one of the issues in the transition is to give time for those political parties to get themselves properly organised,” he said.

How’s that working out for you, Tony? Here’s a taste of the “no elections, leave Mubarak and Suleiman in power” plan in action:

7:41pm Al Jazeera web producer at Tahrir Square says that a crowd of about 500 pro-Mubarak people started throwing rocks over tanks near Qasr al-Nil bridge.

Yes, today has been so chaotic and unstable that not only are Mubarak’s loyalist paramilitaries fighting the revolutionaries, they’re also sometimes fighting the Egyptian Army as well, or at least doing something that could be mistaken for that. Meanwhile, the revolutionaries now no longer trust the army, as they did when it seemed to be passively enabling their protests over the weekend and yesterday. Thank God we didn’t do anything rash and picked the stable option. Meanwhile, people who really are organised – like the spooks – are attacking the people he wants to give more time to get organised, before they can get organised.

And of course, people do get organised. There’s a new trade union movement. Tahrir Square has grown a press bureau, a documentation team recording details of Central Security’s crimes, support networks of all kinds. The police withdrawal on Friday may have been an enormous blunder precisely because it shifted the revolution from just mass demonstrations to block-level organising. If people survive tonight, I wouldn’t bet against a major political organisation (call it the Civic Forum) emerging from the local committees. Look out for this this bloke.

Actually, it’s possible that today’s news explains the military’s anomalous position over the last few days – it may be that they feared that fighting for the government, against the people, would simply destroy the social contract and bring about something indistinguishable from civil war. In the light of their special political role since the Free Officers’ Movement. As Fake Hosni Mubarak says:

Whoever said “A captain must go down with his ship” is wrong. The ship must go down with its captain

The genuinely depressing thing about Blair’s remarks is the degree to which he’s internalised the regime’s public arguments, and the degree to which he may still have real influence.

First, the real influence. It seems certain that the Americans only see this whole issue as part of that horrible grab-bag of cynicism known as the Middle East. Blair’s role as envoy means he’s still plugged into this. He has certainly had extensive contact with Suleiman and friends. Given the importance of all this, he can probably contact the State Department as easily as David Cameron can.

Moving beyond him, Mubarak has traditionally defended his role by claiming that he is a defensive bulwark against extremist Islam, incarnated for these purposes by the Muslim Brotherhood. It has been in his interests to talk up both this movement’s popularity and its extremism, and also to talk down the role of all his other enemies. The Brothers and the state have what could be called a special relationship – the Brothers guarantee the special, pseudo-cold war status of the regime, and the regime guarantees their role as a monopoly of opposition. Being the one true opposition has obvious attractions to their leaders; it’s also necessary that they be portrayed as extreme enough to warrant the deliveries of M1A1 tanks and prisoners in unmarked business jets. The Guardian‘s Jack Shenker, who has been doing a heroic job reporting the revolution, has an excellent article on this issue here. You would think that if they could shut down one opposition, they could also shut down one they supposedly consider much more of a threat…

Blair, of course, pretends to be utterly unaware of the clammy snog between the regime and its opposition franchise. But he can’t be blamed for not realising that, if anyone’s going to bring religious or anti-semitic violence to the streets, it might be the other side. After all, when he spoke, he probably didn’t know that Mubarak’s goon squad are in the habit of screaming “Jews!” as they assault journalists.

This does, by the way, make you – or me, at least – wonder exactly which organisation was able to put a significant mob on the streets at the drop of a hat, when the NDP had spectacularly failed to mobilise any sign of mass support for days on end. Military dictatorships with religious stylings are far from unknown – that was, after all, the fix Jaruzelski tried to impose on Poland after 1981, mixing more Catholicism and nationalism in with his communism but keeping the security state more in place than ever. And I can well imagine someone – someone, quintessentially, like Tony Blair – hailing cooperation between an Islamist movement and Central Security as being just the kind of faith-based initiative that contributes, helpfully, to shared norms for the new reality. As usual with Blair, it’s the secular left that is his real enemy.

Well, ha ha. But I do think we should note that David Cameron’s appointment as Prime Minister was greeted by the markets with a dramatic spike in the price of gold, not usually seen as a vote of confidence. Here’s the data, at Felix Salmon’s; as he points out, trying to map events in consensus reality to market charts is a sucker’s game (although I did once have to explain that the giant V-shaped downspike in MTN stock on the chart was the day when half the management team died in a plane crash).

In other post-election cleanup, YouGov did some polling about the public’s preferences. The only group of people not to be consulted about the coalition – that’s us! – broke 20% Tory, 33% Unholy Alliance, 39% Lib-Lab. Anthony Wells, like a good Tory, points out that this means 53% of the public wanted Tories in government, but doesn’t mention that by the same token, 72% wanted Liberals in government. Ah, the times when we were the nation’s least despised option. Also, how many people would have wanted a Labour minority government?

Hopi points out that the key lubricant in the coalition is money, and that both parties have agreed to give money to each other’s pet clients. Interesting contributions in comments from Alan Beattie and Dan Paskins, babbling idiocy from others.

Computer Weekly is interesting on the future of the NPfIT debacle. Also here.

Healthcare volunteers in Kenya: it doesn’t work. Turns out you need to “pay” people to “work” in “jobs” if you want to achieve anything lasting.

Whatever the coalition does, I’ve a feeling this story will determine how it ends up – on China’s property bubble, banks, and the coming blowout of the government deficit as it inevitably bursts and lands on the government’s books. As Doug “always up to no gooood” Henwooood would say, he believed in the collapse of capitalism until he realised the power of a good bailout. When the Chinese banks blow up and get bailed out, will American right-wing nuts blame that on black people?

The Institute for Public Policy Research has issued a report on the correlates of BNP membership and support (pdf).

Fascinatingly, they reckon that there is very little or no correlation between BNP support and key socio-economic indicators like GVA per capita, growth, unemployment, immigration, etc. It’s as if a typical BNP supporter was, well, a case of free-floating extremism. (A dedicated swallower of fascism; an accident waiting to happen.)

Oddly enough, this replicates an earlier result.

The Nottingham University Politics blog has a more nuanced response, but I’m quite impressed by the fact that two analyses based on two different metrics of BNP support – votes in the IPPR study, membership in mine – converged on the same result.

Ill-coordinated links. Great news in RepRapping – South Korean scientists have succeeded in getting bacteria to make polylactic acid. PLA is the RepRap project’s favourite feedstock because it’s a reasonably tractable, general purpose plastic that can be synthesised from starch. The synthesis is not exactly simple, which is why outsourcing the job to germs is interesting. As the kit of parts now costs about £395, I really ought to get started with one of these. Now there’s a Christmas present for you. “Engineered bacteria not included.” MUM! YOU FORGOT THE GERMS!

The uranium-enrichment deal with Iran is still on, but they are looking for stronger guarantees of getting the promised fuel for their research reactor. I reckon this is going to come down to the exact number of kilos that leave at a time, and therefore to a fine judgment about the efficiency of their centrifuges.

Spencer Ackerman mourns a great Mod shop. I remember that Klass Clothing in Leeds was about the first business of any kind in town to have a Web site, apart from these guys for obvious reasons. That’s gone, as is Sam Walker in Covent Garden…and possibly even the SL1200!

What is the legacy of the so-called “loony left”? The conventional wisdom is clear; it was all their fault, for panicking the swing voters and preventing a sensible, Newish Labour solution emerging earlier. Well, how did that work out?

And it has always seemed disingenuous for the Labour Party establishment to blame local councillors for a period when the party’s central institutions were regularly totally out of contact with the public mood and spectacularly incompetent; it certainly serves the interests of the top officials and MPs to push responsibility onto an amorphous and vague stereotype essentially based on hostile newspapers’ take on the 1980s. Arguably, believing hostile newspapers’ take on itself has been the fundamental mistake of the Left since about 1987; the entire Decent Left phenomenon, after all, was all about demonising anyone who was right about Iraq in identical terms. Does anyone imagine that the Sun in the Kelvin McFuck era wouldn’t have savaged and libelled any non-Tory power holders?

In a comment at Dunc’s, Paul “Bickerstaffe Record” says:

I want to kick off a bottom up meets top down economic analysis of how Labour /Left leaning local authorities should now be challenging the Thatcherite orthodoxies of cost control/rate capping in a sort of ‘1980s no cuts militant’ meets 2000s grassroots-dictated economic policy. The institutional/legal framework has of course changed out of recognition since 1984, but heh, that’s a challenge rather than an insurmountable problem

He has a point. Consider the position; it’s still conceivable that Labour might luck into a hung parliament next year, cue Liberal and Nationalist (of various types) rejoicing, but any realistic planning has to include a high probability of a fairly rabid Tory government in the near future. Further, the financial position is not great – it’s nowhere near as bad as Gideon Osborne makes out, as a look at the gilt rates shows, but it’s very far from ideal.

So whoever is in charge will be looking for cuts, and it is a reliable principle of Whitehall politics that one of the best ways to get a policy implemented that you want for your own ideological aims is to attach it to a supposed saving. Only the special relationship and the police-media complex can beat this principle as all-purpose justifiers.

The possibility space includes a Labour government in coalition or under a toleration agreement with the Liberals, which is likely to still be strongly influenced by the Blairite stay-behind agents, a Conservative government heavily influenced by products of 80s Tory culture (the mirror image of the London Labour party in the same period), and some sort of grand-coalition slugthing. It is clear that the balance of risks is towards an effort to legitimise a lot of ugly hard-right baggage through an appeal to cuts.

The Tories are planning to make all spending departments justify their budgets at line item level to none other than William “Annington Homes” Hague; it’s certainly a first in British history that the Foreign Secretary will control the public spending settlement, if of course he finds the time to show up.

Therefore, even though there is a need to steer the public finances back towards balance once the recession is clearly looking over, there is a strategic imperative to push back and push back hard against the agendas the cross-party Right will try to smuggle through. After all, the nonsense industry is already cranking up.

Which brings me back to the importance of being loonies, and a bit of politics by walking around. One thing that strikes me about North London is how much stuff in the way of public services here was visibly built in the late 70s and the 1980s; there is a reason why Ken Livingstone hopped right back into the Mayor’s office. Despite all their best efforts, the Thatcherites were never quite able to shake the core welfare state; was it, in part, because down on the front line people were still pushing out its frontiers and changing its quality?

A lot of ideas (service-user activism, notably, environmentalism, a renewed concern for architecture and urbanism, and the whole identity-politics package) that were considered highly loony back then are now entirely orthodox and are likely to stay that way, especially given the main parties’ obsession with putting taxpayer funds into the “third sector”.

I fully expect that anyone who talks a good game about making black schoolboys click their heels in front of teacher – you know the stuff they like – will be able to secure reliable venture capital funding in the million class from a Cameron government, just as they have been able to from Boris Johnson’s City Hall, with remarkably little monitoring. William Hague will be snarky. Let him. Nobody cares what the Foreign Secretary has to say.

This creates both opportunities for action – perhaps someone should prepare a Creative Commons or GPL toolkit for citizen-initiated delivery quangos and thinktanks – and also targets for ruthless mockery, when the Tories’ preferred third sector entities fuck up. We’ve already had some very fine examples of this courtesy of Boris Johnson. Clearly, the only rational response to the times is to go mad.

The Grauniad asked 21 of its opinion writers to make predictions for 2009. As a service, and to force Daniel Davies’ hand into starting his planned Predictions-L mailing list, I’ve shorterised each one and reflected briefly on it. The full texts are here.

1) Jackie Ashley thinks the Lib Dems may be powerbrokers in a hung parliament.

Comment: not so much a prediction as a statement that the polls currently look like that. But at least it’s based on data.

2) Michael Tomasky thinks e-books will be a major hit, but nobody wants to read 80,000 words cos of wikipedia and google an stuff.

Comment: This is one of those issues that kills forecasters. The dawn of e-books has been repeatedly predicted and repredicted without happening. Tomasky makes the good point that the Amazon Kindle is selling well…but then his New Yorker/smartass kulturpessimismus conwis kicks in and he ends up predicting that e-books will sell hugely but nobody will buy them. Quack, quack, oops.

3) Gary Younge thinks industrial relations in the US will be troubled as the recession takes hold.

Comment: Fair enough.

4) Oh Jesus, here we go. Madeleine Bunting thinks the recession will teach us all a lesson about the Virtues of Thrift.

Comment: Mr Keynes, call your office. More specifically, this is so woolly that it’s impossible to think of criteria that would let us determine the success or failure of the prediction. In fact, she explictly backs out of it by suggesting there will be a “confusion of values”. Yellow.

5) Peter Preston thinks we will see better satire on TV, and a UK network will recruit John Oliver from the Daily Show.

Comment: Is/Ought confusion – not clear whether Preston thinks this *will* happen or whether he’s hoping to encourage it. Hard to define “better”, but if better satire on TV does happen there will probably be a degree of consensus that it has happened.

6) George Monbiot thinks some mate of his will have a big success with this fillum they made.

Comment: Well, it’ll be either a hit or a turkey. Nobody knows anything (and the kid stays in the picture). It’s a prediction, even if the film about climate change is characterised by “a Nigerian fisherwoman who has to wash her catch with Omo”; climate change does not cause oil spills, nor vice versa. Not in Nigeria, at least. I know about that pipeline in Alaska.

7) Polly Toynbee thinks environmental issues will lose salience unless there’s a major disaster.

Comment: There’s a bit of hedge in how you define “the agenda” here, but it’s fair enough. And she’s based it on data. Tim Worstall probably already has accused her of hoping for the flooding of New York City, and is now probably guiltily masturbating over her byline photo. And that’s a prediction!

8 ) Jonathan Freedland thinks there could be a hung parliament, and a Lib-Lab coalition, or maybe a Lib-Con coalition. Or it might not happen.

Comment: Coward – three mutually exclusive predictions in one.

9) Simon Jenkins thinks genetic and embryological research will conquer disease. Seriously.

Comment: I am not joking. Perhaps a drop too much of the Old Tory’s Arse 76-year old malt this Christmas. But we could treat this as a forecast that there will be at least one major medical achievement in this line in 2009, and that way it is fair enough.

10) John Harris thinks there will or should be a national debate that’s something to do with sub-post offices.

Comment: Jesus wept, what a bunch of wank. I remember when he was good; he was especially good mocking the Big Conversation, strange to relate. This sounds like his balls just dropped off. Absolutely no testable claims. FAIL.

11) Jonathan Steele thinks Russian influence will increase in Georgia and the Ukraine. And there will probably be a change of government in Thailand, but it won’t matter.

Comment: I was tempted to say Jonathan Steele thinks…whatever the Russians tell him to. Note that back in 2004 he thought the Ukrainian revolution was an evil fascist plot because Yulia Timoshenko made a pile in the gas business. Now she’s “a figure to watch in 2009, a controversial and vastly rich entrepreneur who takes a more respectful line towards Moscow”. Prediction: Steele will continue to follow the Party line and will continue to be invited on all-expenses trips to Moscow (indispensable pdf). And he’s hedging about Thailand like Capability Brown with a Black & Decker and a liberal dose of amphetamine sulphate. However, at least he made a testable prediction.

12) Jenni Russell thinks there may be something wrong with race relations in South Africa.

Comment: No shit, Sherlock.

13) Hugh Muir thinks various European politicians will do something or maybe not, and some UKIP MEPs may be re-elected. Or then again they may not. Who knows?

Comment: Hugh Muir may make a testable prediction he could be held responsible for. Or perhaps he won’t.

14) Tim Garton Ash thinks there will be a youth protest wave, driven by graduate unemployment.

Comment: A testable, nonobvious prediction based on a quantitative model. Score one for Agent Romeo.

15) Julian Glover thinks “the age of depoliticised power will come to an end”.

Comment: I think he means things like independent central banks. It’s not at all clear though. Still, chalk it up; if the ECB gives up monetarism by December, he’s right.

16) Libby Brooks thinks “the gardener who knows how to grow their own carrots” will be valued more than a hedge fund manager, and the success of Mamma Mia! is an example of a profound change in our views of status.

Comment: I think there is more than a little contradiction here, and not just because nobody ever liked hedgies anyway. Again, vague puffology about abstract nouns.

17) Seamus Milne thinks the “the neoliberal model is collapsing around our ears, but what is going to replace it is still up for grabs”.

Comment: Not a prediction, and unfalsifiable. If you read on, it turns out the old tankie really means “maybe this crisis is the one! world revolution is here!” but he’s wily enough to realise everyone will laugh if he says that.

18) Mark Lawson thinks William Golding’s books will come back into fashion.

Comment: God, I hope not. But at least it’s a prediction.

19) Scraping the barrel. Zoe Williams thinks that the idea of prime-time TV is obsolete, and that TV will be dominated by crowd-pleasing repeats.

Comment: Slightly contradictory. And whingeing about repeats? Radical.

20) Martin Kettle, for it is he, thinks the extreme Right in Europe will win more seats at the European Parliamentary elections. He doesn’t think this means a third world war is imminent, but he does not have “high confidence” of this.

Comment: Kettle, Kettle. The boy’s so prone, Ron. Trust him to make a fool of himself. I would think anything less than very high confidence that the radical right will not start a world war from Europe would be front-page news, but he actually buries this behind the shattering suggestion that the BNP might pick up an MEP or two.

Of course, that’s actually quite unlikely because the method of election favours parties with a small but widespread support base like the Greens, rather than ones with sporadic, concentrated support like the BNP.

21) Marina Hyde thinks the Russian state will continue to take control over more of the Russian economy, but will re-privatise in the future, only to re-expropriate a new set of temporary oligarchs when the next crisis arrives. And the Government will fail to get newly state-owned bank branches to open on Saturday mornings.

Comment: That’s actually a very good point. Two very good points, in fact. We have a winner!

I think I’ve said before that I find public sector accounts incredibly weird. Here’s a great example; it’s a very good FT story on the bank nationalisation plan and how it affects the national finances. Bizarrely, the £25-50bn of government bond issuance required to raise the money probably won’t count towards the public sector net cash requirement (what used to be the PSBR in John Major’s days of sound finance…not!); it’s a “financial transaction” and these are excluded.

Well, that makes a weird sort of sense; the liability on one side is matched by an asset (the stake in the banks) on the other, the net change in the government’s cash position is zero (at first, but even later, any dividend paid on the preferred stock would at least balance the interest payments). The next bit, however, gets really strange; although it’s not counted as new public borrowing, it is counted in the figure for the national debt. It’s debt, right? Yes, but if the government was anything else but the government, the increased debt would be matched on its balance sheet by the stash of bank shares. It being the government, however, it’s not.

Now, it gets really counterintuitive when it comes to the really big money – the £250bn guarantee for wholesale bank lending. Apparently, if the Government (as suggested) charges the banks a significant fee for the guarantee, this will force it to take the full wad on its books as a liability of the public sector. (Even though most of any transactions among the eight participating banks will add up to zero; if Lloyds lends Barclays £1bn and Barclays lends HBOS £1bn, and Barclays then goes bust, the state guarantee would only come into it if Lloyds and HBOS couldn’t agree to settle the transaction between themselves.) If the Government offers the guarantee free of charge, however, the rules on public sector contingent liabilities mean they can keep it off the books. Yes, you heard that correctly; it’s in some sense financially better for the state not to receive quite a lot of money.

Anyway, in these weird times, let me propose a weird solution. The Government has promised to put manners on the banks in return for the £50bn, pressing for executive pay restraint and measures to help small businesses. Some people are concerned that they won’t be able to make this stick because preference shares don’t come with a vote. I disagree; whatever the formal terms, anyone who fronts up as much as half of RBS’s capital base is going to have several billion votes, and indeed it looks like the CEO is going to be sacked as a condition of the deal. It’s a question of political will.

EDINBURGH, October 12th: Crowds cheered as the giant statue of Sir Fred Goodwin was torn from its perch by a Royal Engineers’ armoured tractor. As the news spread this morning, a mob gathered around the base of the monument, unavailingly beating it with sledgehammers and dragging at it with ropes. Eventually, Sergeant Mick Kelly’s Chieftain AVRE arrived. After a few minutes, its engine roaring, the huge vehicle succeeded where they had failed and the dictator’s figure crashed into the dust. In a sinister orgasm of rage and contempt, the mob beat it with their shoes, spitting and jeering as the ruin was towed through the streets….

Like I said, it’s a matter of political will.

However, it will be much easier to hold the Government’s feet to the fire about this if they do have formal rights to intervene, as well as safer, as unwinding the stakes in a hurry in order to punish a recalcitrant bank wouldn’t be easy. One option is to buy ordinary shares as well as the new preference ones, and have the Treasury Shareholder Executive manage them; the numbers involved would put the Government in a position to insist on a seat on the board and extensive influence over management. However, this would be riskier, as ordinary shares don’t have the charge over cashflow the preferred kind do, and it would also spook the market even more, as issuing the new shares would dilute the existing shareholders.

It would also be affected by weird public accounting, as this would make the banks into public-sector entities and therefore bring them on the Treasury’s books; in which case, only their liquid assets would be counted against their debts and the national debt would therefore reach unheard-of proportions.

But there’s another option. For many years after privatisation, the Government held so-called “golden shares” in a range of ex-nationalised industries considered to be strategically important. For example, that in Rolls-Royce gave the Government a veto over changes of ownership and the right to reserve the top management positions to British citizens. Some of them were abandoned in the early 2000s at the request of the European Commission; notably those in BAA plc. Now, these shares were legally structured as “special preference shares”, and the Office for National Statistics didn’t consider them to be sufficient state control to put BAE, RR, National Grid plc, BAA and the rest on the books – but they certainly granted the Government special rights over these companies. In fact, they still do at BAE Systems and Rolls.

Update: Oh well, here comes the shock and awe. Sod golden shares, preference shares, whatever – it looks like we’re in for the whole hog, 75% of RBS’s market cap, voting stock, Government directors, sack the board, don’t open the London Stock Exchange…fuck, did they just say that? Looks like the opening of the books must have been quite a dramatic event.

Pakistan Policy Blog speaks sense:

Zardari’s attempt to present himself as a savior belies the reality and the way most in Pakistan and even the United States see him. Billionaire Zardari is part of Pakistan’s feuding oligarchy, not a revolutionary against it.

The sad fact is that most Pakistanis have been hostage to this sadistic version of Bill Murray’s Groundhog’s Day for 60 years. There will be no messiahs in Pakistan. Pakistanis need the rule of law — neither Baitullah Mehsud’s law, nor Farooq Naik’s law — and a system with real checks, balances, and accountability to free them from their malaise.

Read the whole thing; I mean the whole blog, if you’ve got time. I suppose it couldn’t last; the position since the formation of the PPP-PML(N) government was just too good. The government had genuine public support, civil society had given The Tyrant a beating, both the Punjabis and Sindhis were represented, and no bugger voted for the Taliban tribute bands.

Now it’s back to normal service; a weak, unpopular, corrupt civilian president without support from half the country. I confidently predict there’ll be a coup in three or so years. What is genuinely depressing is the role of Zalmay Khalilzad – whether officially or pseudo-unofficially – in egging Mr 10 Per Cent on. The Americans seem to think that Pakistan is a 1970s rightwing military dictatorship, by nature. Says Mr. Douglas State:

Sweating with indignation, as of course they have every right to be, the great majority of the public would go communist tomorrow – and then, what? So, you see, we have to support General Caudillo. I agree he’s unattractive, but, you can’t do everything…

But they won’t – even the NWFP recorded about 15% of votes for the various Taliban tribute bands. They don’t trust the Americans. So what? I don’t. After all, they got new F-16s from the US, to replace the ones they didn’t get the parts for the time before that; they got a couple of spanking new GSM networks from dealing with Norwegian and UAE interests, respectively.

They need exactly the opposite of this kind of government, and this kind of ethic. It’s especially painful that, despite all the “freedom agenda” bollocks, the people who defied the tyrant precisely to defend the rule of law are being sold out. We’re on the wrong side of history, again.

This, meanwhile, is purely irresponsible, unless the game is to bring about a new military government. The upshot is that the Pakistanis turn off the MSR via Karachi; now, their interests and the other side are aligned.