September 16 2008


False prophets

Events have done little to enhance the reputation of the economic experts who composed the Western Telegraph' s editorial in late June (WT editorial) in which we were told that predictions of an economic recession were well wide of the mark..
According to the WT, while there might be a bit of a slowdown in the rate of economic growth, a contraction in GDP was not on the cards.
Since then of course, we have seen the virtual nationalisation of Freddie and Fannie, who between them hold more than half the US mortgage portfolio; the collapse of Lehman Bros; the near collapse of Merrill Lynch, and big problems at the world's biggest insurers AIG.
Even the CBI, whose members have an interest in talking up the economy, and their company's share prices, and the bonuses that depend on them, is now predicting a "mild recession".
The pundits' most frequently asked question when the sub-prime mortgage business and the inevitable credit crunch first hove into view was whether this financial turmoil was likely have any impact on the real economy.
This was always a silly question because the financial markets and the real economy are inextricably entwined.
A bit like asking if running your car without oil and water is likely to have any effect on the engine.
Meanwhile, I notice that those who bought shares in the WT's American parent company, Gannet Corp, are taking a bath because they are currently trading at $16.32 compared to a 52-week high of $46.18.

Competing evils

The chaos in the world's financial system and the attendant problems in the wider economy can all be laid at the door of the creation of money through what is known as the fractional reserve banking system.
Although it probably wasn't the impression you came away with the last time you went to see your bank manager, banks are keen to lend you money because that is how they generate their profits.
Thay play hard to get because they want you to put up the maximum security to ensure they get their money back.
Briefly, the way the system works is that banks have to keep only a fraction of depositors' money in reserve - say 10% for easy reckoning.
So, if someone deposits £100,000, the bank can lend £90,000 to another customer.
But that £90,000 doesn't just vanish into thin air, it more than likely ends up being deposited in a bank whereupon the bank can lend another £81,000, and, when that in turn is paid into the bank, another £79,200 and so on down the chain until the arithmetic tends to zero when the bank has lent up to its limit
The upshot is that the original £100,000 deposit has generated close to £1 million in "new money".
Unfortunately, the banks were not satisfied with that and clever people were paid large salaries and bonuses to increase the banks leverage.
One way of doing this was to bundle all the loans (usually mortgages) together into financial instruments (collateralised debt obligations (CROs) and the like) which could be sold to investors thereby generating cash that enabled the banks to restart the carousel.
Armed with all this extra money, banks abandoned their traditional caution and introduced the 120% mortgage and other excesses..
Eventually, when it became clear that many of these mortgages (sub-prime) would never be repaid, the market for CRO's collapsed resulting in the so-called credit crunch.
The big issue now is to what extent governments i.e taxpayers, should bale out financial institutions whose own greed has brought them to the brink of collapse.
The moral hazard question.
This is tough problem for governments because, although moral hazard has to be a serious consideration, in certain circumstances allowing a bank to fail can have catastrophic consequences for innocent bystanders.
As someone once said: politics is a matter of choosing between competing evils and the balancing of the risks of moral hazard against the meltdown of the financial system involves fine judgments.
Hardly the time, I would have thought, for self-indulgent Labour MPs to be adding political instability to the mix by calling for the overthrow of Gordon Brown.

Pot and kettle

My remarks about Mr Andrew Lye in last week's column have brought a rather tetchy response on his Western Telegraph blog.
Mr Lye is peeved that I described his e-mail, in which he asked why I hadn't reported on the recent court case involving Cllr Malcolm Calver, as a criticism.
"When is a question a criticism?" he asks.
Well, it depends on the terms in which the question is couched.
Which were in Mr Lye's case:

As the fountain of all knowledge and opinion within Pembrokeshire County Council, I look forward to reading in the near future, your slant on the court case, as this happened a month ago and it seems to have failed to reach the last 4 weekly editions.

Possibly it slipped your mind or you were putting your thoughts together to include it in one of your epistles, soon, as I cannot imagine it could slip past your hawk like eyes.
Now, I've nothing against a bit of sarcasm, but it shouldn't be confused with wit.
As I told Mr Lye at the time, as a general rule what people choose to put on their blogs should be their own business.
But, as he had raised the subject, I wondered why there was no explanation on his own blog for the gap between 27 March and 19 April this year.
[The WT had banned it for being too political}
Or why he hadn't dealt with the apparent inconsistencies between the stories of Mrs Newman, who claims that Cllr Ken Rowlands told her before the election of his intention to join the IPG, and that of Cllr Rowlands, who claims his decision to sign up was taken post-election.
I would have thought this was of particular interest to him as Cllr Rowlands is his representative on the council.
And, if Mrs Newman is right (July 8), it would seem from the evidence of his own blog that he may have voted for Cllr Rowlands while under a misconception ("no party affiliation" - April 19 and "no party tag" April 29).
In any case, by the time he wrote his posting on 17 May, in which he criticised the IPG and all its works, he already knew that KR has signed up to the non-political, political party.
Funny he didn't get round to mentioning the fact!

Dirty tricks

Last week I promised to give further insight into the dirty tricks campaign waged against Cllr Malcolm Calver by his enemies in Manorbier.
A year or so ago, Cllr Calver found himself in front of a Complaints Panel following a complaint by a parent of a child at Manorbier school where he was a governor.
This found its way into the Western Telegraph under the headline "Complaint against councillor upheld".
The story's route onto the newspaper's pages is interesting because it followed the reading out of the parent's letter of complaint at a meeting of Manorbier Community Council (MCC).
Cllr Calver had been appointed to the board of Governors by Pembrokeshire County Council so this matter had nothing whatsoever to do with MCC.
That being the case, to allow the letter to be read out was gross abuse of power by the Chairman Cllr Tony Wales, who, it should be said, had ambitions, happily unfulfilled, to supplant Cllr Calver as County Councillor for Manorbier.
The issue having been put in the public domain via MCC, somebody then tipped off the WT and it published a story which began: "A complaint has been upheld against a school governor for inappropriate behaviour after he allegedly entered a classroom and verbally admonished a pupil."
"He then apparently spoke to the boy who has learning difficulties without being accompanied by an appropriate adult."
Pretty damning stuff - school governor barges into classroom and admonishes boy with learning difficulties.
But that is not what it says in the Complaints Panel report which reads: "After considering carefully all the evidence it was noted that there is a discrepancy between the two parties version of events. The panel has asked xxx for his account of the incident which differs from the statement of Cllr Calver. The bottom line is that in speaking to xxx Cllr Calver did act inappropriately, as the topic of conversation was not a school matter, but involved other issues Cllr Calver was investigating and that no other adult was party to the conversation. Therefore the panel find that the complaint against Cllr Calver is upheld."
No mention of admonishment, or learning difficulties, there!
I also have a copy of the statement made by the class teacher, who Cllr Calver had called to see with the purpose of arranging a later meeting and who was present throughout his visit.
Cllr Calver never denied that he spoke to the child but it must have been a fairly low key business because, in what is a fairly comprehensive account of his visit, the teacher makes no mention of any conversation between Cllr Calver and one of her pupils.
While looking through my file on this subject I came across a copy of one of those nasty anonymous Manorbier blogspot postings in which it was claimed that I was fiddling my expenses and that I was in cahoots with one of Cllr Calver's supporters, Mr Martin Davies.
I posted a comment on this blog pointing out that, as I had never claimed as much a penny in expenses, it was difficult to understand how this fiddle might work and that never having met or spoken on the telephone to Mr Davies it was hard to see how we could be in cahoots.
Unfortunately, readers of this blog had little opportunity to read my refutation of these allegations because within the hour both the blog and my comments had mysteriously disappeared.

Natural living

My daughter has just taken delivery of 20 ex-battery hens which can now enjoy the outdoor life.
They are a sorry sight with broken and missing feathers.
And having spent their lives confined in a cage they are having to learn all those things that free range chickens do naturally.
For instance, there is a six-inch step between their shed and the ground outside which they initially negotiated by falling out.
They have now mastered the art of hopping.
For the first couple of days they all huddled close to the shed door but they are now getting more adventurous and have extended their range to ten yards.
They have even started to scratch around in the grass looking for insects and worms, though the chicken's other favourite pastime: dust bathing, will have to wait for some dry weather.
But the outdoor life isn't all a bed of roses and they don't appear to enjoy the Pembrokeshire rain which has fallen constantly since they arrived.
And I should mention why my daughter needed the chickens in the first place - the previous residents had the ultimate natural experience when a fox got into the run in broad daylight and slaughtered 17 of them.

Small mercies

I hear that what I said last week about buying Grumpette a new ironing board for Christmas has led to expressions of sympathy for my "long-suffering wife".
Goodness knows what these people would have thought when we had the wood burner and my standard present was a new blade for the bow saw.

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