Saturday, October 25, 2008

Simple Economics

Been reading a lot of stuff about the financial crisis tonight. Now, I'm not an economist. Well not in any professional sense. But the blood of a Welsh hill sheep farmer runs through my veins, which makes me an economist of sorts. 'Be careful with your money' is the creed that has flowed down through the generations. Never gambled in business - except when there was no alternative (which did happen when I was 32 years old). Luckily, that gamble came off. I refused to carry a credit card for many years, believing it would encourage a spendthrift attitude. If notes have to be handed over, spending seems so much more painful. I remember going on holiday some years ago and paying with £20 notes. The lady behind the desk of the Aviemore hotel looked at me as if I was a criminal, and called the manager. This is just by way of introduction, informing you that my financial instinct is deeply conservative.

And another thing. And I don't think I'm unusual in that I've always been in some awe of the Governor of the Bank of England. Well I'm not now. While the bankers were screwing up big-time, and Gordon Brown's shiny new regulation system was fast asleep, the Governor said nought. Let's never forget that the mess we're in happened on the watch of Gordon Brown and the Governor of the Bank of England. I don't really know exactly how much of a mess we're in, but I did read what the Deputy Governor of the Bank said yesterday. His name is Charles Bean, so he must be able to count, and yesterday he said "This is a once in a lifetime crisis, and possibly the worst financial crisis of its kind in human history". If this really is what he thinks, why on earth is the Monetary Policy Committee so far behind the action. They're acting like a panel of reactive spectators. A flock of hill sheep farmers could do as well as that.

This week the Governor and the Prime Minister declared with great fanfare that the UK is likely to go into recession. They must have been the last two individuals on planet Earth to realise this. Its so obvious that interest rates are going to have to be cut. So why haven't they done it? Why have they left it until its too late? The only person disagreeing with interst rate cuts that I've read is Simon Heffer, which surely strengthens the argument in favour.

Another thing about amateur economists like me is that we like to keep our money in something solid, that we understand. You can keep your shares and bonds and pensions and such like. Probably missed loads of opportunities. I've kept my money in land. The only big business gamble I made was to buy acres with borrowed money. OK, so the return was abysmal, but it looks a lot smarter than most of the wheezes that the regulatory authorities sanctioned over the last ten years. Put sheep farmers in charge is what I say.

9 comments:

eric said...

labour may have ben asleep glyn but so much of the issues are at the conservaives door. no doubt of that. have your lot chaged enough to admit the policies of the thatcher have well and truly failed and got us to where we are today.

Pigeon Man (sort of) ... said...

Sorry, long post so flip to the next one as desired.

If you recall Glyn on your very own blog I predicted that the British economy would shrink significantly in 2008, a prediction that went against the experts who spoke of marginal growth in the economy.

More significantly, I wrote many months before that about a "mega juggernaut economic storm" cometh and warned that the "CoL" (City of London, which includes Canary Warf business buildings) will take a massive hit and I suggested that those working in the financial sector might care to switch careers ahead of the huge job losses coming their way. The prediction talked of governments being impotent, of great shedding of jobs in the financial sector.

In a letter to IcWales some months before the housing real estate crisis took hold I warned in expressly clear terms that a 'chill wind' was coming and that it was time for Welsh boyos to quit ahead of the London boyos (re: the speculative real estate market) while still ahead - now we see, for example, the buy to let market has taken a huge hit. The letter also warned that Poles would go home and impact on the rental market - again before Poles started to go home (Poles then were still flocking here).

I also wrote of the prediction on a blog but decided to delete it all some time ago (but I dare say it's in some archive somewhere). It just sounded so bad and I am no economist, just a very small businessman. I also referred to the economic juggernaut storm cometh on your blog Glyn, but I recall that some people didn't want to hear it and got upset.

Again a warning: our actions that we believe have no causal impact on events terrible-miserable are incorrect. I fear we have already moved into a time when what our governments do that diminishes human kind will/has a causal impact on our economic well-being. I have hinted at this for some time. Recent votes in Parliament will, unfortunately, translate into DREAD. As "Great Britain" we should "know better", and because we should know better there will be DREAD.

Our arrogance, disbelief, and ill placed confidence on man's ability to go against nature (specifically, our government's vote in favour of the creation of genetic human-animal hybrids) have set a "dread motor" in action. I am inclined to agree with the Catholic Bishop (I only glanced at the article, but memory says he was a Catholic Bishop, please not that I am not a Catholic so have no innate desire to promote Catholic doctrine though I must admit I am leaning towards joining the Catholic faith) who said (just a few days ago) that our government's actions are a reflection of our society's outlook (paraphrasing, I don't have the article to hand).

DREAD cometh, 'sorry and all that' – ‘think of England’ while you still can and think of me as a 'messenger that should not be shot'.

This is kind of ‘amazing’ to me as everything I am is laid atop of a hard science background.

Plaid Cymru = Wales Lost... said...

Talking about Welsh 'economics" and more particularly Plaid's voodoo version. Wales is paying the price for Cymru's Adam Price's lack of basic understanding of Welsh trade and industry. Plaid Cymru voodoo economics is typified by Leanne Wood's total grasp of how to do the Welsh economy down. If folks are looking for a free independent Wales - don't look at Plaid Cymru - they will deliver a broken independent Wales - a Wales devoid of Welsh talent which will 'be there someplace', but not in Wales.

Glyn Davies said...

Eric - Labour have been in power for 11 years and 6 months. During that period the regulation duty was removed from the Bank of England, and transferred to a new regulatory system by Gordon Brown. The levels of debt have multiplied under the stewardship of Gordon Brown. I just don't know how you can type out a comment like this and sleep at night.

pigeon man - You are a veritable soothsayer. There were indeed many who thought I should have moderated your constant references to financial meltdown. I was happy to approve your comments. You were a lot nearer the mark that Gordon Brown or Alistair Darling, that's for sure.

eric said...

sleep soundly glyn, i realie what you say and agree with it, but can also see the wider political issues are not just the last 11 years. i have a kind of apolitical stance and favour no real party over another, despite a leftist leaning. facts are a lot of conservative dogma are at the bottom of a lot of this.

Glyn Davies said...

pc=wales lost - I neverunderstand why people are so concerned about Plaid Cymru's campaign for independence. There has never been more than about 15% of Welsh people in favour, and the only way Plaid can win support is by playing down the independence issue.

eric - I'm not sure what this Conservative dogma you speak of is. I'd be genuinely interested to know what you think it is. I just think responsibility for your actions, for the financial security of your dependents and community, and the consequences for others is a fundamental Conservative creed. Even 'small state' politicians (of which I'm one) favour strong state regulation.

The Riddler said...

When is a tree
not a tree

eric said...

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/10/humbling_of_our_banks.html

glyn have a read, basics

Glyn Davies said...

Riddler - when its a shoe tree made from the wood of a Chilean Pine.