25 june 2013, the dragon of debt

Amidst calls across the western world to let loose the genie of growth through the tamed beast of borrowing (look how cheap it is !), I remain fixated about the dragon of debt. Our concept of spend comes from an utterly unsustainable pattern established as the norm during the working lifetime of most of today's policymakers. Like geese stuffed for foie gras (I'll credit that to john lancaster) consumers, companies and sovereigns gorged on cheap credit. I recall the ecb vice-president telling how he was alerted to the coming crash while having his haircut in new york and being regaled about how his stylist had just bought a third house. Most of us have simply got used to buying everything we want, an extreme and gross consumerism that enabled the "great moderation" of the period, when cheap credit-fuelled growth kept inflation low, employment high and pumped up asset prices. Companies took on vast new levels of debt too, oiled by the high-yield (junk) bond revolution, that made capital cheaper and penalised companies for keeping cash. This was a happy world, and low interest rates, implicit guarantees and the government's balance sheet kept it that way. No-one dared remove the punchbowl from the party. Borrowing though needs lending, and hence now we are all in hock to china and the oil exporters, whose reserves have grown to the dizzying heights of today's global imbalances. Whether the cause of this is their savings glut or our generational binge is irrelevant; the fact is it's here, and probably has a way to run, as many of its constraining factors - irrational confidence in the american economy, investors' difficulties in emerging markets, and their dwarfish levels of domestic demand - are now slipping away. That epochal perspective is the unavoidable backdrop of any decision today. We are not in control. The "debt supercycle" is finally at an end, and the great deleveraging is upon us, like it or not.

18 june 2013, mind the gap

This is the longest I've gone without writing up a paragraph on these pages since I started many years ago. The basic reason is that we have been in a highly internet-challenged exile for a couple of months while we had work done on the house, and that chaos and living from suitcases added too many extra layers to a too busy life. Once in that rut though, the reflex rather dulled and the creative muscles used in these lucid windows did somewhat dry up, as the steamroller of everything else in life just squeezed them out. We have been back more than a week now, but it is still hard to carve out the moment and settle again into the space: temporal, mental and indeed physical, as I have now moved into a new study, painted by my own fair hand. Here I am then, and here it is, a rather stolid rebirth, but at least its out and now I will try and get it to quickly regrow. Yes, this is a green shoot.

25 may 2013, in train

My elder son, 11, is a bit of a train enthusiast; we were in desolate crewe a few weeks ago, at a cobbled-together museum next to a tesco that used to be factories employing tens of thousands. He has been closely monitoring the growth of manchester's metrolink tram network as it doubles in size; likening it to the growth of london underground, 150 years ago. He has been particularly watching east didsbury get built over the last year, our closest stop; and over recent weeks we have cycled by to see test trains arrive at the terminus which stops about an inch before you enter stockport. Trying as ever to please and encourage my offspring in whatever their interests, I did forward on (yes, he has active email) the startling news that the line will start running 3 months earlier than expected, and then in a weak moment offered to go with him on the first train ever ("ever !!!") to leave east didsbury, which he was looking forward to for a week. I might sensibly have researched the actual times of these things before commiting, but as it was we got up at 4.50am on thursday to be nicely in time for the 5.49 to rochdale. We were not alone, as a buoyant crowd was there on a crisp, calm morning to welcome the latest addition to the line, as was radio manchester - so you can hear the whole thing live (listen at 46:35) and then afterwards on the news bulletin (listen at 2:23:45 and then 2:26:20), which I very highly recommend (go on, listen) as they interviewed a certain 11 year old. We then went for a walk and a slap-up breakfast in town. A grand start to a day !

19 may 2013, the mend of the project

When the french president even dares to talk about possibility of the end of the european project, you know it's in a hole. About time, most people would say, with half the population of what is often called the european demos confidently predicting the end of the eu for many years now. A far cry from five years ago, when I left the project in its strongest state ever, with consensus building around the appointment of a proper european president and the euro lining up the dollar in its sights. Looking forward to the last european elections (the quiet road to 2009) I broadly saw a lull after the last wave of constitutional change and stability underpinning faster progress in rather mundane areas like the energy market and the eu making mobile phone companies slash the costs of cross-border calls. This meat-and-potatoes stuff did actually happen, but in the economic tumult since 2008, no-one noticed. Instead the crash was accompanied by a wave of hostility to the eu being crystallised and driven forward, by scapegoating, by poor and disparate leadership and by a counter-productive retreat to national markets and politics that has both fed and fed by the bolstering of a series of anti-eu parties (26 march 2011), most recently joined by ukip in britain. This has merely made bolder the real choice europe has always faced, between retreating towards a trade-based association of countries (the model the uk has always favoured) and the ever closer union that, rather remarkably, is what hollande's speech was actually about. However you translate the "eurozone government" he called for as a solution to the recession and crisis of european identity, it is pretty clear which way he's pointing. The french eventually browbeating germany into greater european unity is exactly how we got to maastricht, and as its probably going to get worse (or at least the same) before it gets better, the urgency of "something must be done" does have some form for taking wings.

4 may 2013, on being defensive

At every board meeting of the healthcare trust I am a (non executive) director of, we drag in a patient to come and talk to us about the care and service they received. The idea is for someone to tell us something that has gone wrong in a way that would never quite percolate upwards from staff, who at every level, very naturally paint the worst in the best light. The totemic "vasegate" incident, which is at the centre of a convulsive questioning of how good care really is in the nhs, shows how hard it is at the top to know what's going on at the bottom. It also shows the true value, however hard it is, of seeking and examining criticism. I am quite sceptical about how self-critical people can really be, and have seen any number of situations where people of all types fall so easily into a defensive posture when challenged about something they have done or that happened on their watch. We are currently doing appraisals (at my other job), and I have gone out of my way to urge colleagues to get critical feedback to play in, as everyone (especially me) makes mistakes. There is an incredible amount to be learnt from those mistakes, but only if we are able to admit them and set ourselves to putting right whatever was the thought or process that led to them. The challenge of others is crucial to this, and such challenge is quite hard to create and to sustain, not least because whoever is giving it is likely to be seen as tiresome and probably unhelpful. They are not, but are a crucial, strengthening part of any system; what doesn't kill us makes us stronger. Mid staffs (where patients drank water from a vase in thirsty desperation) shows the corollary, that if we're not made stronger, it might just kill us.

27 april 2013, china in my pocket

Quite a major event, as finally launched the manchester-china forum yesterday, with no less than the british finance minister, george osborne, who endorsed it enthusiastically and will now be a helpful contact government-side, even though the construction is to sit alongside rather than within the main uk efforts to improve economic links with china; oh, and the consul-general. Generated a fair amount of publicity too. I've been banging on about the crucial nature of this for literally years, so it was great to take a big step in the right direction, and to see strong evidence (of what economic growth needs) leading policy and politics rather than, as often, the other way around. China is neither an easy nor a comfortable place to do business, but it is an absolutely essential one, and I have to admit to feeling good to have orchestrated something that really ought to help make it somewhat easier, and done so in a way that means we are in it for the long term; as the chinese are on all fronts.

20 april 2013, upside down

Whilst preaching that english people need to look again at whether home ownership for everyone is the right model, we are nevertheless forging ahead with improving our own little castle, and have moved out for a few weeks while the builders moved in. Things then are rather upside down, as we split ourselves between two places and try to carry on life as usual, even though everything we want is always in the wrong place. There's suddenly a whole new set of big decisions to make too, all rather rapidly and all on things we are not terribly familiar with - what size radiator, a door where, put how many on the window ? I'm learning a lot about water pressure and the differences a millimetre can make. It's all very exciting though, as we see a big thing unfolding before us and coming together, so far at least, pretty well. Whilst have hardly at all missed having a television, no internet is a real bind and a reason to sneak back to the house sometimes, and of course for a peek at the latest hour's progress, as we see how our romantic vision is actually looking in the real world we'll soon be back living in.

10 april 2013, this blessed plot

I remember vividly being woken quite rudely after a late night by a boisterous flatmate, to be told that maggie was gone, and just lying there rubbing my eyes and trying to understand. Like london was its capital, so margaret thatcher was britain's prime minister. A whole generation of us, thatcher's children like it or not, had grown up knowing nothing else, and at that moment couldn't really imagine it. I vaguely remember seeing david steel on some staircase after the 1979 election and conflating the sparse crowd greeting him with his 11 mps. As we came of age, it was thatcher and only thatcher that actually won general elections, the falklands, regular fights with the trades unions and pretty much everything else eventually, until she didn't, when incredibly suddenly she was gone. There have been so many obituaries and commentaries these last days that there's little that can be added, except to marvel at her durability and the incontestable fact that whether she did right or wrong, she certainly did things, and an awful lot of them. Which is not something, to a degree as a result of the blessed margaret, that too many politicians since can say. The global economic consensus she helped create is now the populist centre that most crowd to occupy, but without the polarised opinion she also brought, the winners and losers, the reverence and the loathing. Her most lasting legacies are probably that economic consensus, and britain's attitude to europe, which since her mounting of the barricades at bruges has been a remorseless one way street, across all parties. Setting the uk, or its english rump, on the path out of the union may yet be her most lasting memorial.

29 march 2013, the garden shed

Things were hard when I was a kid. We had an old run-down garage, which had absolutely everything stuffed inside, and also housed our old car, making driving it in every day a highly-specialised manoeuvre, and getting out afterwards all but impossible without knocking down stepladders, paint pots or bamboo canes. The garden was just as unruly, although something my dad always wanted, but could never quite afford, was a garden shed. I must have been about 10 when bernard, a friend of ours who my parents helped out (there were a lot of those), moved into heathlands old age people's home, and told us we could have his. He lived just a few hundred metres away on sheepfoot lane, which was much more well-to-do. Having somehow roped in our wonderful - and very handy - neighbour, leo, up the road we marched one day, tools in hand, and started disassembling it. No sooner were a few nails out than hard on our heels came my breathless sister with an urgent message from the estate agent to say no, leave it alone. Sighs of disappointment, and back we trudged, no shed ever to grace the corner that will forever be remembered as the most fertile compost heap in the world never to be used. And today, I am trying to rope my own kids into starting the gargantuan task of tidying out my own garage. We never put the car in it, but rather use it for everything under the sun we're not brave enough to pass on or throw away. Not for much longer though, as we're having it converted into a new room. And what of the bikes and the tools I salvaged from my own dad's garage collection, and still can't pass on ? Well, tomorrow sees the arrival of a most magnificent garden shed...

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23 march 2013, what in the world is going on ?

The markets remain calm, and a million cypriots seem half a world away, but what's going on there is an absolute breakdown, with a root cause of an oversized banking sector, like iceland, ireland and, yes, the uk. Though a year in the making, and with many deadlines past, the crystalisation of the crisis this week seemed a surprise, not least to the cypriot body politic, which rejected the deal its leaders made to secure the bail-out they asked for. Russia spurned their advances, thrusting them back to their european reality, and the ecb, rather precipitously, if legally, brought about a final climax by threatening to turn the taps off on monday. They can't now back down, hence cyprus passing extraordinary laws on friday night, with a final component, of the banking levy, needed saturday. This should be enough to persuade the eurogroup on sunday to send ten billion euros down the tubes to save the island. Though an astounding shock to the system, the levy on bank accounts is just a tax, designed as everyone knows to raise some of the necessary cash from russians parking large amounts of money offshore. It was the cypriots who tried to make it all encompassing in order to not be seen to be singling out the russians and so try and keep some of those deposits that are now the anchor of their main (tax haven) industry. The cost of that has been a wider erosion, across europe, of the basic idea that banks are not just any company we lend our money ("savings") to, but are tightly-regulated so even if they go bust our money will somehow flow back to us intact. For the euro, it is yet another major hurdle suddenly to be overcome, and although it will endure, its reputation and dynamics will take yet longer to recover. In "german" voters again facing down "southern" spendthrifts, and living to tell the tale, it is another dose of reality that makes the euro less a dream and more the sort of bitter battle and roller coaster that any currency must go through as a rights of passage, and all the stronger for it on the other side. For the broader eu, those effects are trickier, as the union was always built more on the dream element than hard core everyday governance, and that is looking ever more altered, especially for the "new" member states of 2004 like cyprus, and especially for the broader group of smaller states as the bigs, albeit reluctantly, take more steely control. Europe is ever less now about dreamy ideas and statements and ever more the real business of economy and finance that needs proper management and is inevitably less flexible in a crisis to sensitivities. Whatever doesn't kill you though, makes you stronger.

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