Wednesday, 9 May 2012

Why Hollande's victory could be bad news for President Obama

Francois Hollande's victory has given hope to many of us on the left that the European public  are deeply unhappy with the policies of austerity that many of our governments have chosen to pursue. 

Yet in order for this to be the year that austerity is assigned to history in most major economies apart from our own (I don't think the Liberal Democrats have the chutzpah to withdraw from the coalition), it is essential that Barack Obama defeats Mitt Romney in the 2012 Presidential election.

While there are many aspects of President Obama's tenure that sit uncomfortably with those on the left, particularly in relation to foreign policy and his close ties with Wall Street, he has been the only leader of a major Western economy to take the right measures to prevent a recession from becoming a depression. History has vindicated his decision to bail out the American auto mobile industry, and the only question marks that hover over his stimulus package are that it may have not gone far enough. 

Paul Ryan's budget for 2013, which Mitt Romney has endorsed, would see the poorest suffer a broad range of cuts in public services to fund another round of tax cuts on the rich. You would think that the Republicans had learnt from Dubya's tenure that you cannot cut taxes while waging two expensive wars, but it appears they are set on invading Iran and cutting taxes on the 1%. 

Here are some examples of the programs that would be cut if Romney became President:

That is one of many reasons why it is hard to overstate the importance of President Obama defeating Mitt Romney this November.

So, how should we interpret the results of the French election, within the context of the 2012 U.S. Presidential election?

Either the result means:

(a) Electing Hollande is an indicator that the French public are now anti-austerity. The election results in Greece would appear to confirm this being the case and would be very good news for President Obama. 

It means that the electorate see austerity measures as self-defeating and he can use them as an example of what will happen to the American economy if Mitt Romney comes to power and implements a plan of severe deficit reduction.


(b) Electing Hollande and getting rid of Sarkozy was an anti-incumbency vote. Whoever is in power during these difficult economic times, regardless of political ideology, is going to be voted out of government because they are having to take unpopular measures and are failing to kick start their economy. 

Which means that unless unemployment dips at least another 2% over the next six months, President Obama could be in real trouble because the anti-incumbent mood means he has a far greater chance of losing the 2012 election, regardless of how effective a campaign Mitt Romney runs.

Time will tell which of the two theories turns out to be right, but if it turns out to be the latter, President Obama could be in danger of becoming a one-term President. 

Thursday, 3 May 2012

It's the austerity, stupid!

There will be thousands of words dedicated to why the Conservative Party's policy of austerity has failed so severely on this blog in the run up to the next General Election. But as today is election day, I would like to use 3 charts to demonstrate just how disastrous their policies have been on our economy:

Worse than the Great Depression

Source: Business Insider

America's stimulus package grew GDP, whereas austerity has failed the U.K. and Europe

(Note that we are growing even slower than the Euro zone)

Source: Business Insider

Austerity has led to the creation of a lost generation of long-term unemployed young people 

Source: Not The Treasury View

Debunking the myth that low interest rates is a sign of economic recovery

Your economy is going into a double dip recession! That's why your government borrowing rates are plunging. It's got nothing to do with "credibility." It's the fact that when your economy is going down the tubes, there's nothing appealing to invest in, and so they just park their cash in risk-free government debt. 
Low rates in the U.S., U.K., Germany, and Japan, are the surest signals of long-term decline. What on earth are you bragging about?
Austerity has failed. The Tories have failed. Use your vote today to demonstrate your discontent with the government's appalling economic policies.

Wednesday, 25 April 2012

The Curious Case of Jeremy Hunt

In the space of a fortnight, Jeremy Hunt has gone from being a candidate for the next Conservative Party leader to a politician fighting for his political career. Now that his regular correspondence with Frederic Michel, head of public affairs at News Corp has been revealed, it is clear that the Secretary of State for Culture, Olympics, Media and Sport was keen to help News Corp see through their potential takeover bid for BSkyB.

Whether it is the revelation from the emails released to the Leveson Report yesterday that Hunt, in the words of Michel, 'shared our objectives' or that Michel admitted to getting key information relating to the prospective takeover of BSkyB from Hunt's office a day before it was released to the public (Michel admits that gaining such information was 'absolutely illegal'), it further demonstrates that the Murdoch empire's tentacles extended as far as cabinet ministers. What remains to be seen is whether they could rely on the Prime Minister as well.

Labour have quite rightly called for Jeremy Hunt's resignation. Not only has Hunt failed to fulfil his quasi-judicial role in regards to the BSkyB bid, the correspondence between himself and Michel suggests he may been actively colluding with News Corp to help along their bid. Worse still, there are suggestions that there is far more explicit evidence of Hunt's support for News Corp to be found in text messages sent between the two parties.

Jeremy Hunt is surely entering the final throes of his ministerial career. There are suggestions that he will stay on for a brief while to act as a firewall to stop the controversy spreading to David Cameron, but many are already questioning his judgement in regards to News Corp.

The Telegraph go as far as to blame Hunt's behaviour on the Prime Minister's cosy relationship with many of the key figures at News Corp:

The reason for that is straightforward enough. He was simply following the lead of his boss. Mr Cameron has been the real cheerleader for the Murdoch empire in this administration. Since becoming leader of the Conservative Party, he has taken as many pains to cultivate his relationship with the Murdochs and their acolytes as he has to conceal just how close it is. For example, when he has been asked about the notorious Christmas dinner at the Chipping Norton home of his friend and neighbour Rebekah Brooks, the former News Corp executive, the Prime Minister has insisted that there was nothing “inappropriate” about any conversation he had with James Murdoch, who was also present. Yet James confirmed to the Leveson Inquiry yesterday that he had discussed the takeover bid with Mr Cameron at the dinner. How appropriate was that?
 Such lack of candour by the Prime Minister is disappointing. Mr Cameron’s pro-Murdoch sympathies were also on display in his decision to employ as his director of communications Andy Coulson, the disgraced former News of the World editor; and in his refusal to condemn Mrs Brooks when she fell victim to the Metropolitan Police investigation into phone hacking and corruption. Mr Cameron even tried to hide the fact that he had ridden a horse that had been unofficially lent to Mrs Brooks by the Metropolitan Police. With this kind of example being set at the highest level, is it not entirely predictable that while Mr Hunt was considering the BSkyB takeover, back channels were running between his office and News Corp? It is unsurprising that Labour has called for the Culture Secretary’s resignation: he has a lot of explaining to do. By the time Rupert Murdoch finishes his own testimony to Leveson, which will be heard today and tomorrow, so may the Prime Minister.

When you read this catalogue of events, it is surprising that the Prime Minister hasn't been held to greater account for his unforgivably close ties with an organisation that has been proven to engage in systemic criminality of the highest order.

But there is a lesson to the curious case of Jeremy Hunt that goes beyond even the office of the Prime Minister. When the Conservative Party comes to power, Ministers are more interested in engineering their decision making process to suited the vested interests of their corporate friends than the concerns of the British people.  

Thursday, 19 April 2012

A brilliant solution to global mortgage debt

One of the main advantages of the interconnectivity that companies like Twitter and Facebook provides is that marginal news stories which would never have made a national newspaper or 24 news station can spread like wildfire and receive unexpected recognition. This is allowing for a democratisation of the reporting of the news, whereas for the previous century the decision-making process behind deciding what news is relevant has laid in the hands of media moguls and their editors.

So when a Spanish news channel reported that the Icelandic government was forgiving the mortgage debt of many of its citizens, the video was retweeted by many on the Left:

I automatically assumed that such a story would be discussed at length in the British press and media, but when I tried to Google the story there was very little information to be found, apart from a few blogs commenting on the above video.

Unfortunately, my suspicion that the story was projecting its own political views on to the story turned out to be true. Quite how the forgiving of mortgage debt of Icelandic citizens correlates with putting politicians and bankers on 'the bench of the accused' is beyond me, but it is the idea itself which is of central importance.

So, did Iceland forgive the mortgage debt of Icelandic citizens? The IMF had the following to say about the issue:

The IMF has said that targeted household debt reduction policies - including mortgage write-downs - can deliver significant economic benefits.
The International Monetary Fund made the comments in its latest World Economic Outlook.
The IMF said such policies can substantially mitigate the negative effect of household deleveraging on economic activity.
The report noted the well established link between high levels of household debt run up during a housing boom, and the effect of a high debt overhang on economic recovery...

In the case of Iceland the situation was more difficult, due in part to the much bigger proportion of the population that was affected, and to the wide presence of foreign currency mortgages.
The government and the newly constructed Icelandic banks developed a template to be used in case by case restructuring discussions between borrowers and lenders. The templates facilitated substantial debt write-downs designed to align secured debt with the supporting collateral (i.e bring the loan into line with the value of the house) and align debt service with the ability to repay.
The IMF found that such case by case negotiations safeguard property rights and reduce moral hazard, but they take time. As of January of this year, only 35% of the case by case restructuring applications had been processed. To speed things up, Iceland has introduced a debt forgiveness plan which writes down deeply underwater mortgages to 110% of the households' pledgeable assets.
It noted that only when a comprehensive framework was put in place and a clear expiration date for relief measures announced that debt write-downs finally took off. As of January 2012, 15 to 20% of all Icelandic mortgages have been or are in the process of being written down.
However, it said the jury is still out on Iceland's plans, and said the extent to which Iceland can put its citizens back on their feet and minimise moral hazard remains to be seen.

So the above video report's claim that the Icelandic government has chosen to forgive the debt of the 'majority' of Icelandic citizens is an exaggeration. Still, 15-20% is a considerable number and it will be fascinating to observe what effect the ongoing policy has over in Iceland. One can only hope that the story is more widely reported in the British and American press as it destroys the notion that the only way to get out of this crisis is through austerity.

It is heartening to see that one of the country's worst affected by the crisis has chosen to pursue such an innovative measure to try and improve their economy. That the thinking behind the policy has been endorsed by the IMF surely gives it more credence. There will be those who will rightfully point out that the jury is still out on the Icelandic plans, but one could say the exact same thing about George Osborne's economic policies.

Monday, 16 April 2012

President Obama takes on the 'radical' Tory party

It is election year in America and the battle lines have been drawn with both the Republicans and Democrats unveiling significantly different budget plans in recent months.

One of the most significant differences between President Obama and Mitt Romney's plans are how they would tax the wealthy:

Source: The Atlantic 

There are striking similarities between Labour & the Democrats and the Tory Party & the Republicans' positions in regards to the amount of tax that the most wealthy should pay. Strangely, despite the fact that the Democrats are very much a centre-right party while Labour are supposed to be centre-left, it is the former who have embraced a Keynesian stimulus and ensured that their economy's growth did not flat-line.

While Ed Miliband's interview on The Andrew Marr Show this Sunday was mostly impressive, it was disappointing to see Ed shirk away from embracing the idea of a Keynesian stimulus and instead positioning the Labour Party as the party who would embrace a less drastic version of a deficit reduction plan. What he fails to recognise is that if his party do not offer a significantly different platform to the Conservatives they are not only in danger of losing another election, but they could see a repeat of George Galloway's victory in Bradford, which saw a remarkable swing of 36.59% from Labour to the Respect party.

Quite why Labour HQ thinks that the Tory party have any economic credibility when George Osborne's economic policies have seen growth flat-line and unemployment soar is beyond me.

One can only hope they are watching the U.S. election season as closely as the rest of us are and listened to President Obama criticise Paul Ryan's proposal for the Republican Budget. The President described Ryan's proposal as:

“Disguised as deficit reduction plans, it is really an attempt to impose a radical vision on our country.”
Could President Obama's words not apply equally to the Coalition's agenda since they took office? Surely this is the line of attack that Labour should be taking instead of merely describing the Tories as 'out of touch' and then stating that Labour represents 'fairness'.

The Tory Party have exploited the financial crisis to impose a radical agenda on our country which has trebled tuition fees, put the NHS on the path towards privatisation, closed crucial public facilities while cutting the income tax of the wealthiest as well as significantly increasing the chances of Britain experiencing a lost decade similar to the one Japan experienced in the Nineties.

The Coalition and the Tory Party have experienced their worst few weeks of coverage since they came to power. Ed Miliband, whose post-Budget speech was a career highlight that signalled Labour would be unafraid of both taking the initiative and ruthlessly calling out the Tories on their many hypocrisies, should be emboldened by the growing unpopularity of the Tory party and embrace an economic plan that would bring real prosperity to Britain while increasing his party's chances of returning to power.

He should take heed of the aforementioned words of President Obama and call out the Tory Party's policies for what they are: an attempt to dismantle the welfare state in order to line the pockets of their party's wealthiest donors.

Sunday, 15 April 2012

The Ten Commandments - A Global Manifesto

I was recently asked the following question:

If you had the power to "edit" the Ten Commandments, what changes might you make?

While it may seem like a relatively pointless hypothetical question, I think it allows me to address some of the concerns I have that relate to issues on a global scale.

It is written from the perspective of God, which I hope doesn't offend too many readers.

1. Thou shalt respect all other religions and belief systems. No 'holy war' should be declared in my name as all of mankind are my children, regardless of colour, creed or faith.
2. Thou shalt respect the rights of women and not use my name in vain to continually repress their rights. 
3. Respect thine natural environment and do everything in your power to protect endangered species and preserve natural habitats that are being ruined for human consumption.
4. Ensure that all men and women on my planet have economic rights as well as political rights. The latter has little meaning without the former. I therefore entrust man with creating a global economic system that ensures every man and women has access to sufficient food and clean water.
5. Do onto others as you would have done onto you.
6. Thou shalt not kill.
7. Provide all children on my planet with an education. How can'st thou knowest if thine next Einstein or Gandhi livest in sub-Sahara Africa or Palestine? Ensure thou givest my children this greatest gift of all.
8. Banish all those who abuse my name to preserve dated conservative traditions. Homosexuality is no more a sin than eating too much chocolate cake. Thou must banish those who manipulate and distort dated scripture.
9. Perform at least one kind gesture for a stranger each and every day. This shalt create a virtuous circle which would immeasurably improve life upon thine blighted planet. 
10. Honour thy mother and father. But if they ever abused thee, treat them with the scorn they deserve.

Friday, 6 April 2012

What do Tory donors have to hide?

Spring of discontent

It has been a dreadful few weeks for the Conservative party. A potential fuel strike has been woefully mismanaged and exacerbated by Francis Maude, with pumps closing around the country because of his misreading of the situation. The president of the AA described it as 'totally unnecessary, totally self-inflicted and quite frankly a bit of a mess'.

But it all began with another woefully inept budget from our Chancellor, which managed to displease every major newspaper apart from The Times. The aftermath of the budget has given us the furore over the Granny tax and Pastygate, both of which further the general public's perception of the Conservative front bench, which the Tory MP David Davis conveyed so eloquently:

They think we’re better off. They think we’re toffs. The truth of the matter is they look at the front bench and they see them all very dressed, well turned out, well fed, and perhaps feel they’re in a different world to them. That’s why the phrase ‘we are all in this together’ is very important but at the moment its not working.

Only the Chancellor can know how giving a tax cut to the richest in society while covertly cutting the taxes of many pensioners in a revenue-neutral budget would lessen this perception. So there had to be a reason why he chose to prioritise society's wealthiest individuals over the squeezed middle and the poor.

Undoubtedly part of this is because of his mistaken belief that the private sector will spearhead growth during these difficult economic times. This alone though, isn't a sufficient explanation. The Chancellor can't be foolish enough to think that by cutting the top rate of income tax as well as the rate of corporation tax he will be able to return our economy to a period of consistent growth. But then The Sunday Times broke the Peter Cruddas story and it all started to make sense.

Policy for sale

Cruddas boasted to an undercover reporter that he could grant access to the Prime Minister for a fee of £250,000. The timing of The Sunday Times' investigation could not have been worse for The Conservative party, as the aforementioned description of the front bench described by David Davis has gone from being a minority viewpoint to the accepted opinion.

Unfortunately, as with the events that led to Liam Fox's resignation last year, there was a great deal of outrage when the news broke, but little evidence that it will lead to wholesale reform of how our political parties are funded.

In fairness, although the Conservative party are in the spotlight in regards to this issue, both the Labour party and Liberal Democrats have had significant problems with their donors in their past, yet none of the major three parties appear ready to do the sensible thing and enact significant party finance reform that would put an end to these scandals which gradually erode the British public's faith in our political system.

Yet there remain a number of troubling questions that have yet to be answered by the Conservative party in relation to Cruddas' behaviour and its implications:

- The Conservative party immediately rubbished Cruddas' boasting and insisted the Prime Minister knew nothing of Cruddas' scheme. Yet subsequent revelations have revealed that he had direct access to David Cameron on at least thirteen occasions. Can the Prime Minister confirm or deny whether Cruddas ever approached him about his cash for access scheme on any one of these occasions?

- An unnamed hedge fund manager told the Financial Times the following about the dynamic between the Conservative party and rich donors like himself: "They don't want to be seen with us, and we don't want to be seen at all."

Why are the Conservatives afraid of being seen with the donors who are responsible for donating a large proportion of the party's funds? What are they afraid of? Perhaps more importantly, why do these donors wish to remain invisible? Isn't their disproportionate influence over the party's policies the antithesis of how a healthy democracy should function?

- What are we to make of the Prime Minister's leadership skills? Peter Cruddas, who was the Tory co-treasurer before his resignation, is yet another person who David Cameron allowed into the party's inner circle who has turned out to be at best dishonest and at worst engaged in criminal activities. First it was Andy Coulson and Rebekah Brooks, now it is Peter Cruddas. At best the Prime Minister has been incredibly naive, at worst he has allowed his party's policies to be sold to the highest bidder. Neither quality is acceptable for any Prime Minister.

As Peter Oborne said in relation to Hackgate:
In the careers of all prime ministers there comes a turning point. He or she makes a fatal mistake from which there is no ultimate recovery...Until now it has been easy to argue that Mr Cameron was properly grounded with a decent set of values. Unfortunately, it is impossible to make that assertion any longer. He has made not one, but a long succession of chronic personal misjudgements.
These 'chronic personal misjudgements' show no sign of abating and are taking a toll on David Cameron's approval ratings, which dropped to -26 in a recent poll.

Our Chancellor has prioritised austerity over growth while our Prime Minister has prioritised the needs of his wealthy backers over the needs of the general public. Both of them are set on dismantling the welfare state in the name of deficit reduction. We must remain vigilant and investigate if any of the Tory's donors are set to benefit from any of the Coalition's 'reforms'. For if and when a smoking gun is found, they will face an uphill battle at the next General election.