Compulsory gambling

Some people like to gamble. That's fair enough, as long as they're in control of their spending, not depriving family members of food money, not going into impossible debt, not having to turn to crime to support their habit. Actually, maybe I should go back on my assertion that it's fair enough.

However, many people don't like to gamble. They simply want to earn money and buy stuff for a fair price. But society doesn't seem to respect those people very much at the moment.

Energy prices, pension payments, mortgages -- they're all a bit of a gamble right now. You put in your stake and hope for the best. That woman over there got a great deal, that man waited another day and ended up paying twice as much for the same thing! Sucker!

Gambling is fine (within the limits badly explored in the first paragraph) as long as it's for fun (!) or fripperies or a new pair of shoes. But when it's for something that's vital -- like electricity or retirement income -- is it really something whose value should depend on the roll of the dice? A situation over which you have no control will have a potentially catastrophic life-changing impact -- does that sound like a sensible way to run anything at all?

Take pensions (as many scam artists are now doing). You pay money into the scheme every month and, when you retire, depending on how the stock market has been feeling recently, you may be either comfortable or a bit scared. (Never mind that the person managing the fund has done very nicely regardless of performance -- that's a complaint for another day.)

Pensions used to be a promise to continue paying a percentage of your final salary -- the risk was on the company, not on the individual. But we're all free marketeers now -- so we have to have the risk, not the company. (Was anyone consulted on this one?)

In France (apparently -- I've done minimal research), everyone's pensions are paid by the government (yes, out of taxation!), based on their earnings over their working life. Higher taxes, I hear you say. How awful, I hear you say. Yes -- but the British version is that what we don't pay in taxes, we instead pay to financial institutions in the hope of getting a decent pension out of them, but with no assurance of that. How does the extra tax compare to the pension contributions? Would you rather pay a bank a chunk of money in order to receive a pension of some (unknown) value? Or pay a bit more tax in return for confidence that your pension will be life-supporting?

Not that you have the choice. In Britain, you must gamble. (And the house always wins, as the cliche goes. No, not your house.)

Speaking of houses... Mortgage payments are linked to what the 'markets' think of the government, via 'confidence', inflation and whatever the Bank of England decides to set as the interest rate. In other words, it's a crap shoot. There is absolutely no link between the percentage cost of your loan and anything you have any control over whatsoever. Phyllis might buy a house this week and get a mortgage rate of 4.5% while Stanley might buy a house next week and get a mortgage rate of 6.3%. Why? Who does this serve?

In olden days, building societies would take deposits from some people, pay them interest on lending the money to the building society, then lend it out to others at a higher rate. And in that margin was their profit. If they didn't pay enough to investors, they wouldn't have the money to lend out. If they charged too much to borrowers, they wouldn't sell very many loans so their profit would drop. Simple but effective.

And what do we have now? Banks make money out of thin air when it's borrowed, pay a pittance to savers because they don't need their money and hike the interest rates on loans when the Bank of England tells them to jump. Because someone's shorted the pound or some other thing that has absolutely nothing whatsoever to do with your house, life or mortgage.

I realise that an economist with a good understanding of modern monetary theory could explain why the state of the gilt markets has a direct effect on the required interest rate on domestic mortgages.

Clearly, if you stand far enough away from the misery, you can say that the damage to individuals is irrelevant compared to the 'greater good' of the country, economy, party donors, whatever.

But it's very hard to stomach that some people must pay their banks more money for no reason other than that the Chancellor of the Exchequer made a series of very bad mistakes and some traders decided to enrich themselves as a result.

Reduce your electricity bill -- in three easy steps!

Follow this easy guide!

1. Find someone, preferably local, who fixed their electricity rate a while ago and who still has plenty of time left on their fixed-price contract.
   
   
2. Run an extension lead to their house, pop an electricity meter on the lead and connect that to your house's main circuit. (You may prefer to ask an electrician to do this.)
   
   
3. Tell your current supplier that you'll be getting your electricity elsewhere and ask them to disconnect you from the grid. (Otherwise you'll be paying the daily standing charge.)

Congratulations -- you just cut your electricity bill!

Now pay for the electricity that you use, direct to your neighbour, at the fixed-rate on their account. Also, pay half of their daily standing charge -- it's only fair.

The fact that this would theoretically work tells you all you need to know about how ridiculous the electricity supply game is in Britain.

The same electricity, travelling down the same cable from the same sub-station, fed from the same power line -- and yet charged at a dramatically different rate purely based on the random chance of whether and when the customer took out a fixed-price contract.

Alternatively...

If you don't like this approach, your best bet is to wait until the system is changed to one in which the country's electricity requirements are estimated, the electricity is bought and/or generated at a sensible price, the unit cost is calculated by dividing one by the other, and everyone is charged at that rate.

You'll probably be waiting a long time for that.

Because, while economy of scale is absolutely taken for granted in the corporate world, if you try doing that as a community of people, you'll be laughed out of town as a communist.

Irritate The Innocent, Ignore The Guilty

The Before Times

A few years ago, people using contactless cards at my local railway station could tap their card on a card-tapping machine. There were several of them, on many different walls. It was quick and easy.

Going in? Tap and beep. Person staring uncomprehendingly at one machine? Use the other one across the corridor, or a bit further up, or just over there. Tap and beep.

Going out? Tap and beep. Any machine. Doesn't matter. Just make sure you do the tap and hear the beep and it'll be all good.

Using a paper ticket? How very retro of you. On your way. Nothing to do except leave. Or enter. Depending on whether... well, you can work out the rest.

Then The Gates Came

The old tap and beep machines are still there but they are decommissioned and sad and turned off. They do not glow or beep, no matter how much you may tap them.

Instead, you must now use the gates, with a tapping pad on them and some of the slowest response of any machine in the twenty-first century. (There may be slight exaggeration in that sentence.)

The queues, or scrums, or disorderly gaggle fills the corridor and clogs the stairs as each person taps, waits for a beep, waits for the gates to heave themselves open.

Anyone rushing to get onto a train can forget about it. There are people waiting to tap and beep and they ain't clearing the corridor or stairs for anyone.

This does not seem like an improvement.

But The Revenue Is Protected (Oh No It Isn't)

No it really isn't. On any given day, you can watch a person or two or twelve tail-gate someone else through the gate, or just do a little hip-swivelling shimmy to nudge the gates apart enough to allow them to leave.

The dour-faced under-trained, high-vis-jacketed man stands and observes. No doubt intervention is above his pay grade.

The honest, upstanding, ticket buying member of society is delayed in a scrum of despond while the scallywagg fare evader is untroubled.

So the installation of gates has inconvenienced the innocent while making no difference to the guilty. I wonder how much they cost to bolt onto the floor, how much they cost to maintain, how much they cost to run (electricity is quite expensive right now, don't you know) and how much fare evasion they have prevented...

Other Gates

Last month, an Avanti train arrived at Oxenholme station (in the beautiful lake district) so late that the staff had locked the station and gone home. You can read the shocking story here. 

Some passengers climbed over the two-metre (spiked) gates in order to leave. The rest had to wait for the police to find a maintenance worker who had a key.

Given that the gates could be climbed by some (several? loads?) of passengers, and assuming that they weren't competitors returning from a parkour convention, I think it's reasonable to assume that the gates aren't that great at stopping able-bodied people from getting into or out of the station.

So anyone wishing to get up to mischief at that station could probably just climb in, using the assumption that railway mischief-makers are generally going to be able to climb. (You've only got to look at some of the astonishing places that railway graffiti ends up to realise that railway ruffians are good at scaling heights.)

Which means that these gates are also fairly pointless since all we're certain they've done is to imprison passengers for the 'crime' of travelling on a late train.

Money

Yes, it all comes back to money in the end.

Anti-money-laundering approaches are like railway gates. How many times must we jump through bankers' hoops to prove our identity so that they can know their customers?

And how many times does that stop people's accounts being drained by scammers? One approach, apparently, is to fool someone into moving funds into another (innocent but stupid) person's account, who is then instructed to move the money again, thereby fooling banks by the amazing process of moving money twice.

Don't the banks know the person in the middle? Because they know their customer, don't they? And wouldn't they know where the money was going to? Because they would know that customer as well, wouldn't they?

What's that you say? The money goes to a foreign account? Oh, that explains it then. Because all financial services outside the UK are completely unregulated and therefore it's impossible to ever, ever, ever track any money that's gone into that lawless realm. (I'm being sarcastic.)

So we, the innocent and the honest, wave our photocopied passports and paper utility bills (who has paper utility bills?) and receive one-time passcodes on our phones and are sent passwords in the mail and wait and wait and wait and wait.

While the dodgy dealers simply push through the bankers' useless gates or vault the financials' fence. While the data-protecting high-vis jacketed bank staff look on and say there's nothing they can do.

Call this a right-wing government?

 (For the avoidance of doubt, this is SATIRE. It does not reflect my actual views.)

Why won't the British government properly protect the interests of sensible, self-sufficient citizens?

Last year, having correctly predicted that energy prices were about to rise dramatically, I took the sensible precaution of arranging a fixed-price deal with my supplier that will protect me from price rises until September 2023.

This option was open to anyone in the UK but a startling number of people did not take it. Instead, they decided to chance their luck. And, boy, did their luck not hold out.

Still, that's what happens when important financial decisions have to made in the free market economy. Some people win and some people lose.

And we can't have the alternative. You know what that would mean:

• bulk buying for the whole nation to get economy of scale and equal pricing for all
• some people would be paying a tiny bit more and some people would be paying an awful lot less

Someone has to stand up for those who would be paying a tiny bit less. Like me. Because I'm smart and have a fixed-price deal.

But now the government is going to stab me in the back.

How dare they charge me to bail out the mistakes of others?

The government has introduced a price cap to protect people from ludicrously high bills. They are restricting the utility company's abilities to charge whatever they like for energy.

I don't need that. I protected myself.

This is going to be paid for through taxation and a levy on energy bills for many years to come. So I'm going to be forced to pay to bail out utility companies and people who didn't have the foresight to fix their energy prices.

The money to pay for this bailout is going to be borrowed from banks. Not the Bank of England (which the government owns), but other banks (which they don't). So interest charges will accrue.

The government is forcing me, through taxes and levies on my bills, to bail out utility companies, people who didn't think to fix their utility prices and, additionally, to pay interest to banks for a loan I neither want nor need.

I'm being ripped off

Imagine things the other way around. Imagine if I had fixed my energy prices at a high rate and then the cost of energy fell.

• Would the utility company help me with my bill?
• Would the government give me money towards my costs?
• Would other people be taxed to help me pay my bill?
• Would the government borrow from banks to help me pay my bill then pass on the interest charges to other member of the public?

I think we can agree the answer would be 'NO' to all of those questions. (Except, perhaps, the last because there's nothing governments like more than giving money to banks for almost no reason -- here's an example. Or if you prefer it phrased less respectfully, here's another.)

In this case, the utility company has made the mistake of agreeing to supply energy to me at a price that means they will make a loss. Well boo hoo. That's the free market for you.

They've also failed to arrange long-term sensible prices for buying the energy in for resale. That means they can only buy it at a price most of their customers can't afford. Which isn't going to be great for sales.

So they either have to expect to sell much less of it (and ride out the hideous consequences, both for their financial position and the cold population) or they sell at a loss and either have to dig into their reserves or declare bankruptcy.

How dare the government charge me to prop up the finances of a failing company? Let them go bankrupt so a proper capitalist can take them over and run them properly.

But if I'm expected to help them through these dark times, I want something more than just a bill for supporting them. I want shares in the company. Because otherwise I'm paying money into large corporations and getting nothing at all back for it.

And that is a rip off. Another example of large companies as benefit scroungers.

Emperor's New Elephant In Your Blindspot

( I couldn't pick a single cliché for my title.)

The world price of gas.

Let's just think about that for a moment. Wherever you are in the world, there is a price for gas. It's the world price. It's the price you must pay to buy gas.

(Yes, I know there are contracts and futures and spot prices and blah blah blah... but behind all that complication is the simple fact that it doesn't matter who you are or where you are, the price is the price is the price.)

And yet, the price of anything is only known when there is a sale. Until that point, all we have are bids and offers. Everyone knows this.

That house isn't 'worth' £1m because it's for sale and that's what the advertisement says. That's simply an indication of what the seller is hoping to get for the house. Similarly, if the buyer offers £900k, that doesn't mean the house is worth £100k less than the seller thought. When it sells at £925k, that doesn't mean the correct price was £925k and thank goodness we discovered it, phew, etc. It just means that the seller and buyer reached an agreement that they could accept that monetary value for that house between them on that day.

So what's the world price of gas? And why is it currently so high?

It's only high because buyers are buying it at a high price. If they weren't, that wouldn't be the price, no matter what the sellers might want, any more than the price of that house was £1m when no one was buying it for that.

So why aren't the buyers offering less?

Free markets

As touched on previously on this blog, free market ideology has a tendency to favour the freedom of rich people to get richer. By doing things like accepting very high prices when buying gas.

How about the freedom of the buyers to get together and agree that they won't bid each other up to crazy rates? Are they not free to do that? Why not?

The sellers are all operating through the 'world price of gas' which serves to inflate the price. How would it be wrong for the buyers to operate through the 'world buyers of gas' (which sadly doesn't exist) which considers the costs of exploration, extraction, transportation and dividends to shareholders and then offers a fair price?

The fossil fuel companies are smaller than the world

As ridiculous a heading as that clearly was, it seems that some people don't realise it.

The fossil fuel companies consist of a tiny number of people who are very good at obtaining a substance and selling it. But if their mechanism for selling it will lead to their amassing vast wealth while impoverishing huge number of others, it might be worth considering that they are dependent on the rest of the planet's people. And that they should be happy with lots of wealth rather than aiming for vast wealth.

Because, let's face it, the fossil fuel companies weren't exactly destitute last year (or the year before for that matter). Last year's profits were pretty good.

And this year's are going to be stratospheric -- but only because we are paying their crazy rates.

All it needs is for enough of the gas buyers in the world to say the prices are ridiculous and to offer less. And to stop bidding against each other. And to deal with any shortage themselves rather than letting the market decide by selling everything at such a high rate that demand drops to meet supply.

There's another way for demand to drop to meet supply -- international agreements. And that route doesn't lead to economic collapse. Sure, a few countries will break ranks and offer more money and get more gas. But so what? As long as enough big customers can stand firm, the price will drop.

And the fossil fuel companies will still do very nicely. And economies won't collapse. And everything will certainly be a lot better than keeping the current arrangement.

Alternatively...

Carry on. But what happens next year when the price is even higher? After all, they know we'll roll over and pay this year's crazy prices.

So why not try for even more next year? Why wouldn't they?

Face down the bullies now. It'll only get harder the longer you leave it.

Economics for rich people - a brief guide (part one)

If in doubt, ignore rich people. Don't try to placate them, control them or even offer the gentlest of nudge. They'll circumvent, waste your time and tie you up in knots. So just ignore them and decide what's best for the majority.

But, on the odd occasion when that doesn't work, here are some helpful pointers.

Inflation or recession?

Easy -- rich people prefer recessions.

Inflation erodes the values of savings (which rich people have, do try to keep up).

Recession makes poor people unemployed and destroys a few businesses that rich people probably don't use.

Government spending

Just roads, thanks. (Maybe a few police but not too many.)

Rich people have got health-care, education and security. They're not top users of public transport. Libraries -- don't be silly.

But they do have to drive on the same roads as everyone else.

Benefits

Rich people, of course, are frequently utterly dependent on benefits.

Because many businesses pay their employees too little to live on. The state has to step in with benefits so that these employees can actually afford to take those jobs.

Are the employees really the recipients of the benefits? Or is it the company (and its owners) that stand to gain as a result?

Without companies having ready access to this state support, there might be proper competition in the job market. Companies that actually were economically viable would pay decent wages and employees would gravitate there. Companies that didn't pay enough wouldn't have staff and so would have to offer a better deal.

This will be a sticky one to unpick.

How did we get here, where deadbeat employers don't pay their staff enough to live on so that state has to make up the difference?

Could it be that (whisper it) the minimum wage is actually too low if it isn't enough to live on?

Isn't it extraordinary that the question even needs to be asked?

But it really needs reframing. The government is paying benefits to enable economically unviable companies to make a profit. The companies are benefit scroungers.

How about starting with a little shaming -- companies list number of employees and number dependent on in-work benefits.

Any company with more than, say, 10% of their employees requiring benefits is classified as a scrounger and gets to pay more business rates.

(Never going to happen.)

You're welcome

Further installments of this series will be along from time to time.

Guaranteed effective -- or your money back!

Economics -- what actually is it?

An attempt to model the big, hairy world of finance and business using a mixture of gross simplifications and guesswork?

As useful to the way the world works as astrology is to astronomy?

Regardless of the situation, there's normally an economist to argue convincingly for one solution, another to argue for the opposite and a third to explain why they're both wrong.

And yet here we are. The Bank of England's economists have told us that we must all pay more money to the banks in order to prevent inflation. (See previous post.)

Error 1 -- inflation follows wage increases

This is the reason given by Andrew Bailey at the Bank of England (salary estimated to be somewhere over £500,000) why wages must not go up because otherwise there will be inflation.

This seems plausible. After all, if businesses think you've got some extra money they're going to try to grab it by hiking their prices. And what does a price hike mean? Yes, it's inflation if it happens in too many places at the same time.

But there's a flaw in the reasoning, Andrew, isn't there? We currently have inflation and the vast majority of people in the UK have had no (meaningful) pay rise in a very long time.

So what you're saying is that we shouldn't have the bad inflation where people can continue to afford to buy stuff. Instead we should have the good inflation in which people go hungry. Thanks, Andrew!

Error 2 -- interest rate rises are necessary to tackle inflation

The argument that people need to be poorer, by being ordered to give more of their money to banks, in order to reduce demand in the market in order to force prices down in order to reduce inflation doesn't stand up to the slightest breeze.

Even if you accept the idea that demand must drop to beat inflation and so people need to have less money for discretionary spending, interest rate rises are the actions of a sadist on a suffering population.

Because people are already poorer. The cost of living has already risen catastrophically.

The ludicrous rise in energy prices (in which we are forced to give vast profits to fossil fuel companies for no reason), coupled with rampant profiteering from other companies using the energy crisis as a smokescreen, means that people have less money to spend. Demand will drop anyway.

The rise in energy prices was like being mugged by the fossil fuel companies. But the interest rate rise is being kicked by your own government when you're lying on the ground after the mugging, then them stealing your shoes.

Error 3 -- interest rate rises are necessary to preserve the value of the pound

Interest rates have just gone up.

The pound has just fallen to its lowest level against the dollar since March 2020.

I don't think we need to go any further with this one.

It's all gambling anyway

The Bank of England is gambling that the economy can be saved by pouring money from the population into the banks. To match the money being poured into the fossil fuel companies.

With the political will, we can fix the fossil fuel problem. (Obviously we'd need a functioning government that actually wanted to help, but that's a different problem.)

But the interest rate rise requires a different approach. How about the Bank of England actually cuts us in on their wager?

Rather than forcing the population to give the banks bigger profits, how about putting the extra money they're draining from people into special ring-fenced accounts?

If inflation then goes down, and the Bank of England can prove that interest rate rises helped, that money can go on its merry way to whichever bankers' yacht it would have gone to anyway.

And if it doesn't, then the banks can give it all back. With interest (preferably at the new higher rate, just before it's scrapped).

But how can they prove it?

Yes -- my suggestion is based on the idea that the Bank of England might be able to prove that the rise in interest rates reduced inflation.

How can they prove it? Good question -- I don't know.

But if they can't come up with decent proof, then what on earth makes them think there's any link between the two things? Surely they wouldn't inflict economic catastrophe on so many people without a good body of evidence? In which case, they can show it off and the money can be kept in the banking sector.

By the way, 'proof' does not mean that they put up interest rates and inflation then fell. That's just two things happening. We need proof that one caused the other.

If you're happy with the idea that one thing happened after another means that the first thing caused the second, then I'm going to tell you that the sun only rose this morning because I did a little dance in the garden just before sunrise. And unless you pay me a squillion pounds, I won't do the dance tomorrow and the sun won't rise. Are you prepared to take that risk?

Is the Bank of England prepared to take the risk that people might get a refund of their extra interest charges? If not, it means they're not confident it will work -- in which case how about not doing it at all?

If so, bring it on! Come on Andrew -- roll the dice and see if you get lucky.

Clarkson's Hammer

Many years ago, the popular BBC television show Top Gear used to feature a trio of loveable rogues -- Jeremy Clarkson, Richard Hammond and James May (listed in alphabetical order because, of course, in any sensible list, James May should be first).

A long-running joke was that Clarkson would attempt to fix any fault, whether mechanical, electronic, gaseous, philosophical or entomological, with a very large hammer.

Laugh at the silly man, viewers! He thinks he can hit a delicate mechanical part with a hammer to get it working! Go on! Laugh!

Except --- thanks to the magic of television, in the next scene, he is back on the road! It worked! (But don't try it at home.)

Behind The Curtain

We all knew, of course, that a proper team of mechanics, lurking behind the camera (or behind the curtain if you prefer Wizard of Oz analogies), was actually fixing the car. That's not the point. It's not an Open University course in car maintenance, it's an entertainment programme. And goodness me, wasn't it entertaining? (I say again, don't try this at home.)

Except someone is trying this at home, aren't they? They're trying it in your home. And yours. And that guy over there. Etc.

Bank Of England

Step forward and take a bow, Andrew Bailey. The governor of the Bank of England has got out his big hammer and is going to fix the economy! Thanks Andrew!

Except there is no team of mechanics out of sight. He's really going to do this because he really does only have a big hammer and he thinks he's right. Is there anything more dangerous than someone with a large hammer who thinks he's right?

Because Andrew is going to put up interest rates to fix inflation. And we know what that means, don't we?

Give The Banks More Money

Putting up interests means that the Bank of England is ordering people to give more money to banks. 

The cost of your loan will go up, the cost of your mortgage will go up, the cost of that business's loans will go up, the cost of your landlord's mortgage will go up, so rents will go up and prices in shops will go up and everything will get much more expensive.

And where does this extra money go? This extra money that we're all being ordered to pay by Andrew Bailey?

Yes, it's going to the banks. They are going to collect more money in interest payments -- that's where all the increases lead if you just follow the money.

How much extra work are the banks doing to justify being handed a vast extra slab of income from across the population? I'm going to call it zero extra work (okay, maybe a bit of typing to change the interest rates on their leaflets and website).

Follow More Money

So Andrew Bailey is going to save the economy by driving people and businesses into bankrupcty and handing vast amounts of unearned money to banks.

You can see the banks rubbing their hands in glee right now. (With banks, that presents itself as the share prices going up.)

But wait! That's not all!

Because of the magic way the economy works, the Bank of England has given vast amounts of money to the banks, which they hold as a credit balance at (you guessed it) the Bank of England. And for the tremendous inconvenience of holding onto this money for the Bank of England (at the Bank of England), the banks get paid interest.

Can you see where this is going? The interest the banks are paid for holding on to a credit balance (which isn't theirs) will similarly go up -- because Andrew Bailey has put up interest rates.

So even more money will be paid to these banks as interest on money which isn't really theirs because the interest rate has gone up in order to save the economy.

Going On Tour

Andrew Bailey explained in an interview that he goes around the country talking to business leaders so he can be fully informed and respond to the needs of the nation. We must avoid appearing envious of his life on the road staying, one assumes, in comfortable hotels and eating in excellent restaurants on expenses.

No! Put away your envy.

Instead, wonder about these local business leaders. Are they really telling him that they'd like their loans to be more expensive, that they'd like many of their customers to go bankrupt or cut back their spending, and that they'd like all the banks to get richer?

Because if they're not telling him that, it would seem to me that maybe he's not listening so much while going on his trips. Because that's what he's serving up for them.

If I'm So Clever, What Would I Do?

Not put interest rates up.

Since I don't believe that low interest rates have caused inflation, I also don't believe for a moment that high interest rates will solve the problem.

('What do I think caused inflation?' I hear you ask... I'd suggest looking at other factors, e.g. war in Ukraine, insane speculator-driven gas price spikes, corporate profiteering, etc, etc.)

I think high interest rates will make banks richer, will cause them to hand out bonuses to their staff (for the wonderful performance of doing absolutely nothing to cause rising profits), and that will be about it.

(Oh, and the bonuses given to bank staff will cause a bit of inflation in the luxury end of the market as they all rush out to buy watches and yachts and Bentleys, etc.)

If inflation falls over the next year or so it will have nothing whatsoever to do with interest rates, in much the same way that if I go outside and do a little dance and it rains tomorrow, my dance did not cause it.

Put your hammer away, Andrew. You're not making an entertainment programme here, you're destroying the economy of a nation and the hopes and dreams of its population.

Update, 31 August 2022

Apparently one of the big investment banks reckons that inflation could hit 22% early next year.

This must mean one of two things:

• Interest rates need to go up again in order to really show inflation who's the boss.
• The interest rate rise hasn't helped against inflation and it never will because it's the wrong approach.

Surely it's only a matter of time before Andrew Bailey announces that his intervention has stopped inflation going up to 23%. But 22% is still too high and so interest rates must now rise to (checks notes -- see below) 153%.

Yep, that'll definitely do it.

(As any maths student knows, you should always show your working:

• Number of weeks in year = 52. Subtract 1 for no reason gives 51.
• Target inflation rate = 2%. Add 1 (to balance out subtracting one above) gives 3
• 51 x 3 = 153
• You're welcome.

And that's how you get to be the governor of the Bank of England.)

Bow Down To The Market (But Do It The Right Way)

Markets must be free of all interference to make sure that the correct price is always agreed between seller and buyer.

That definitely always happens -- as long as the profits flow rapidly to the rich.

Gas Prices

The price of something can only be known when someone buys it. Until the purchase has happened, the price is just a suggestion, a hope, an offer.

If the market rate for gas has gone up catastrophically, that can only mean that it is being purchased at that terrible rate.

Well, terrible for the purchaser, not for the seller.

But as the seller in this case is a wealthy multinational corporation, this extreme situation is not questioned.

It is the will of the market, or some such claptrap.

This is disaster capitalism at its most savage, pouring money at an astonishing rate from nations into the accounts of fossil fuel companies.

It is a product of group-think, it is delusional, the financial emperor showing off his new clothes.

Because it is avoidable. The purchasers could simply get together and offer a lower price, reject the 'market' rate, and stand firm. Then the price will drop.

And if there is a shortage -- would it not be better for the purchasers to divide up the available gas for themselves? Rather than bidding up the price in a frenzy so that only the rich can afford it and distribution is decided by which nation wishes to impoverish itself most?

Just say no. Nearly everyone on earth would benefit.

Nurses

There is a national shortage of nurses and a desperate difficulty in recruiting them. They are essential. It would be dangerous to allow the shortage to continue.

Wouldn't free market theory insist that employers should offer higher rates in order to attract more 'providers' to enter the 'market'? Isn't this the correct way for the market to fix the problem?

If the 'price' were to triple, as with gas prices, that would be fine, wouldn't it?

No, obviously not. Because this situation would not result in large sums of money going to rich people. So, for some unclear reason, free market economics is not used and, instead, hospitals are short-staffed.

Explanations welcome...

Money -- it's a gas. And vice versa.

Why is the price of gas so high? Where is the money going? And how can it be brought back down, preferably permanently.

What follows is simplistic -- deliberately so. But any and all complexities that I have ignored -- they are artificial constructs which exist mainly to prop up the current system. They can and should be changed.

Follow The Money

The price of gas has risen, apparently, because supply can't match demand. This is because of the difficulties in bringing Russian gas to market. The result is that, globally, more gas is wanted than can be supplied.

So it becomes a bidding war. Those who can pay more will be sold the gas and those who can't will have to go without. Or buy less of it because they can't afford as much as they want.

But where does the money go?

The cost of extraction and distribution of gas has not changed. The wages paid to those drilling and transporting gas have not changed.

Once the gas is available on the 'market', the speculators and traders will attempt to maximise their own profits, and those of the fossil fuel companies, by suggesting that a bidding process is the best way to handle the thorny issue of who gets what.

Which means that the richer customers can afford it.

Which means the price goes up.

Which means that the speculators and traders, and the gas extracting companies make far higher profits than last year, despite the fact that their work has not changed in the slightest. And the real 'raw' cost of obtaining gas has not changed.

Also bear in mind that the (non-Russian) fossil fuel companies are still extracting and selling as much gas as they possibly can. The amount they themselves are selling has not been affected. No wonder their profits are suddenly huge. And unearned. As close to 'ill-gotten gains' as you can get without being illegal.

The whole process is geared towards maximising the profits of the fossil fuel corporations and the market traders. It is sucking huge sums of money out of other companies, nations and the public. And no one is asking why it has to be this way.

The way in which gas is extracted, marketed, traded and sold is not unchangeable, like the law of gravity. It is a man-made system which is now working to rapidly shift vast amounts of wealth from a wide variety of people, companies and nations into the hands of a very small number of people.

Why are we tolerating this?

Just Say No

The UK government is attempting to find intricate ways to help people with the cost of energy. For example:

• Handouts of money to help (i.e. transferring public funds to fossil fuel companies via people's energy bills).
• State-backed loans (i.e. forcing people to take a loan to help with their payments which will lead to the population paying interest charges to banks).

But no one has suggested simply refusing to buy gas at this price.

The retort to that suggestion would be: "But then others will buy it instead of us. Won't they?"

Will they? Why should they?

What is stopping an international consortium calculating a fair price, probably not that far off what gas cost last year, and simply refusing to pay any more than that?

It would be unrealistic to expect a global agreement. But if enough large nations gathered together to stop this rampant profiteering, what would happen?

Would the 'rest of the world' simply buy all the gas at the inflated price? Or would significantly less be sold?

And, unless the fossil fuel companies can store whatever is left, what would they do next? Turn off the taps? Or accept that the profits they made last year weren't actually that bad and maybe there is a deal to be made?

It would be in the interests of nearly everyone on the planet to do this. Even richer countries, who could afford the 'new' prices, would presumably prefer to pay lower prices.

But Free Markets!

As things stand, the gas providers are ensuring that prices are always pegged at the highest rate possible. By operating through a trading system, they are not literally a cartel, but might as well be.

The supply/demand free market theory runs that, at times of shortage, the price will go up in order to encourage more providers to come to the market. How is that working out at the moment? Where are these new providers? Will they be along soon? How long are we supposed to wait?

Some might deride the idea of massive international cooperation as inappropriate, too much state control, too much interference in the rights of corporations to trade freely. But if the fossil fuel companies can gather together behind a system that inflates their profits, how is it wrong for their customers to similarly gather together and state the price they are prepared to pay?

A bit of robust negotiation will be required to determine how the shortage is spread around -- probably not as simple as every customer getting a fixed percentage of their normal requirement, but probably not far off either.

And, with the excess money that will no longer be paid to fossil fuel companies, everyone can buy warmer clothes, insulate their homes, put up wind turbines, cook themselves a hot meal -- the possibilities are endless.

An Aside -- Bruce Springsteen Tickets

Some tickets for Bruce Springsteen's shows are being sold using a very similar supply/demand market-based approach.

Let the fans decide how much they're prepared to pay. Put the price up further, and further. And then further. Hey, if they're still selling then why not keep going and see how high they can go? Five thousand dollars in some cases (per ticket).

The fans are annoyed.

The solution is simple -- if people stop paying these prices, these prices will drop. If people boycott the tour completely, the system would be scrapped. It's only the willingness to roll over and pay that keeps this practice alive.

Customers need to stop thinking of themselves as individuals trying to outsmart (or outbid) each other. Gather together, have strength in numbers and don't accept price gouging. Admittedly it's easier when dealing with entertainment rather than everyday essentials.

Winter Is Coming

So we'd better get on with it.

Don't enter into any long-term contracts. Get down to the United Nations and have some urgent discussions. Preferably before northern-hemisphere countries need to start heating their homes.

None of this pain is necessary.

Wealth-extracting turbo-capitalism is a man-made structure, not an unchangeable law of nature.

It is not working for us any more. Another way is possible.

Institute For Economic Common Sense - Third Lesson

When The Fun Stops, Stop – Helpful advice appended to gambling company advertisements in UK, 2022

Let’s start with an analogy. Everyone likes analogies. Imagine a farmer and family. They run a smallholding. It provides them with food and a little left over which they sell to buy fripperies like horse-shoes and beads and so on. They produce a diverse crop so, if one of their vegetables has a bad year, they’ll probably be okay because another vegetable can pick up the slack. (It’s just an analogy – don’t get too hung up on the details.)

One year, the weather is wrong in some analogy-type non-specific way. Maybe there are floods. Yeah, that’ll do. But our farmer is fine because the smallholding is at the top of the hill so the crops are looking peachy.

But overall there’s a shortage in the county. The rich folk from the city are keen to have their usual amount of potatoes/grain/wheat so they’re offering more money than the locals can afford. Our farmer looks at his crop, looks at the big number that’s on the piece of paper with the order on it and decides he’s going to go for it. He sells the lot. He is an entrepreneur.

Our farmer now has a lot of money. But he has no food. That’s okay though because (a) he’s got loads of money and (b) he has a bit of slightly stale food left over in his larder. That’ll tide him over. And maybe his family too.

Next year it all goes wrong again but this time our farmer’s crops have failed too. (Drought? Yeah, that’ll do.) The price has gone even higher so even with the profit from last year, he can’t afford to buy enough food. He has got plenty of gold pieces to look at though, so it’s not all bad.

In a desperate attempt to avoid starvation, he sells the smallholding to an investor who then employs him (at a very low wage) to work the farm. Good news is that he keeps his home and his job. Bad news is that he doesn’t own any of the food he grows and can only buy it at full market rate like everyone else. He divides the amount of money he has by the estimated annual cost of buying enough food to stay alive and decides that it won’t see him through his working life and retirement. So he turns to crime. The end.

So, yeah, that’s basically what’s happening with electricity in the UK at the moment. We’re all the farmer except that we didn’t decide to sell all our food one year or to sell the farm. No – someone else decided that for us. (We also haven’t decided to turn to crime. Yet.)

Electricity From The Before Times

Once upon a time, the UK produced its own electricity by digging up coal and burning it, or digging up oil and burning it, or digging up gas and burning it. The National Coal Board, British Petroleum and the Central Electricity Generation Board were all state-owned, operating for the good of the country and set up to ensure energy was fuelled, produced, distributed and sold.

Was it perfect? Obviously not – what is? Did it pay vast dividends to shareholders? No. Did it invest in national infrastructure? Yes. Could it have been more efficient? Probably.

Was the price of energy dependent on the whims of the international market or on the cost of fuel, generation and distribution (which were presumably relatively stable)? I’m going to go with the latter.

If the theoretical price of a therm of natural gas spiked on the international market, did it decide to charge itself a much higher rate and then have to pass that cost on to the customer?

Electricity Recently

And this is when the magic of the casino enters proceedings. And what is the one rule that always, always, ALWAYS applies when discussing casinos?

The house always wins. (No, not your house.)

Sure, there’s always a guy over there who’s sitting by the slot machine when it starts pouring out an unending (and, frankly, inconvenient) river of coins. But, overall, the people who run casinos never have to worry about paying to keep the lights on because of all the other suckers, the sad-faced ones, the desperate mugs, the tragically drunk and the heart-rendingly sober. Did their fun start? If not, how will then know when it stops?

After the dismemberment of the electricity system in the UK, the public were left with a bewildering array of options for buying electricity, all priced in subtly different ways, difficult to compare and full of financially punitive little traps. Newly privatised fragments of the companies found accountants and lawyers who could help them squirrel as much money away in hiding places as possible (because that’s always good for running an efficient utilities company) and settled in for some hard graft.

And, as with casinos, there’s always the guy in the spotlight who has found a genuinely good value tariff and is happy with his time in the casino. But he’s the exception and, all around him, are the others who don’t know how to play the game, or don’t realise it’s a game, or don’t think there’s any difference between staying put and entering the hall of mirrors in order to move their custom elsewhere. (Which, of course, means receiving a bill printed in a different colour, with a different logo on the top and a different pricing structure that may, or may not, end up cheaper than before.)

Do we fix our prices in case prices go up? Do we stay on a variable tariff in case prices go down? Do we take a slightly worse rate in order to use a company less likely to get the bill wrong, leading to overcharging and six-to-six hundred months of never-ending phone calls to try to get it corrected?

Roll up, roll up. When the fun stops… Oh? Hasn’t it started yet? But that guy over there is having fun – look, he’s just saved ten pounds per year by spending three hours arguing about standing charges.

Just imagine the national productivity figures! Here we are wasting hours of our time fiddling around with utility bills and the utility companies themselves are wasting millions of pounds paying people to create these fiddly bills, explain these fiddly bills, correct these fiddly bills, deal with angry, sad, confused or desperate people who don’t understand their fiddly bills. And so it goes. Does this help GDP?

Electricity Now

About 40% of the UK’s electricity is generated by burning gas. And gas is bought on the international market at whichever rate has been agreed by your supplier – either a bulk advance purchase at a pre-agreed price (gambling that the price will go up), or on a day-to-day basis based on current market rate (gambling that the price will go down).

But bear in mind that the price has absolutely nothing to do with extraction and distribution cost. Go back to our farmer. It didn’t cost more to grow the crops in years when the price was high – no, the scarcity meant that those with more money could outbid others, hence the sale price was elevated.

This is the world of the casino. Never mind what something costs (which is fairly predictable) – instead you must gamble on whether someone else, for a variety of reasons, might hike the price or even (surely not?) reduce it.

And the theory goes that, when extracting natural gas from our own territory, we must sell it (to ourselves?) at the international market rate because, if we don’t, like the farmer above, we’ll sell it all to a higher bidder and be left with none for ourselves.

Of course this is also complicated by the fact that the people actually extracting the gas are not working on behalf of the UK. They are employees of a few vast multinational enterprises that are most interested in profit and therefore the highest bidder. The fact that they also receive fairly hefty tax breaks from the UK in order to… (er, not sure), counts for nothing. If they can get more elsewhere, they will. So – pay up, Britain! Remind me why we don’t have a state-owned business doing this on behalf of the population?

It Gets Worse

So if the cost of a bit of gas goes up by a factor of three (for example), that should mean the market cost of a unit of electricity goes up by about 1.2 (because gas is only 40% of the fuel used when generating electricity). Right?

Wrong. It goes up by a factor of about three.

And why is that? Because if we don’t pay the maximum rate to the electricity generator who uses, say, nuclear power (whose running costs are, I suspect, more or less unchanged) – then they will simply sell their electricity to someone else who will.

Or at least that’s the theory. Can a nuclear power station in north-west England really sell electricity to a neighbouring country?

(Technically it could but, given that the UK’s electricity is already expensive (compared to nations in the EU) and, given that the UK is not in the EU (which probably just makes the contracts messy and unhelpful), it’s not clear why anyone would. On top of which, the UK imports electricity from France – let’s hope that’s because the price is lower.)

But why doesn’t the free market help the customer here? Why doesn’t this nuclear power station undercut the gas power station with its super-cheap electricity units in order to deliver value to the customer and keep prices down? Could it be because the free market theory is actually bunkum and is only working to keep all prices as high as possible? Could it be that the free market here actually only serves to push the price upwards whenever possible?

It Gets Even Worse

Consider another means of electricity generation – solar (or wind, or tidal). The sun is definitely not any more expensive and the panels (turbines, etc) don’t need to be renewed more than every decade or so.

For (many) years, when solar was an expensive option, it was supported by an extra levy on everyone’s electricity bills. Some people chose to have all of their electricity nominally generated sustainably and, for them, the levy was even higher. This was supposed to be a good thing, to get a young industry on its feet so it could dodge and duck and weave with the big boys.

And, having propped up this sector for (many) years, now that its power is actually cheaper than other options, we get to reap a harvest, right?

Wrong. They’ve hiked their prices up to the maximum (i.e. to match the price of gas-sourced electricity) because, a unit of electricity is a unit of electricity is a unit of electricity (etc) and it wouldn’t be fair if the gas boys got paid more than the sun boys.

Fixing The Problem

Get a state-owned enterprise to run extraction and generation – then the prices will be based on the cost of doing business, not based on the cost of outbidding other nations.

(Imagine if the farmer had resisted selling off all his food at the top of this chapter. Because selling off a vital resource in order to obtain money that may or may not enable you to buy what you needed in the first place is not always the right answer.)

Then set consumer prices based on the actual cost of generation, i.e. let it move dynamically depending on the mix of sources on a day-by-day basis. Given that we currently only pay the highest possible rate, this can only lead to lower bills. On sunny, windy, tidey days, the price will slump and this will be a good thing.

Finally, make the purchase of oil/gas on the international market the option of last resort. And, even then, make them an offer below the so-called market rate. It hasn’t cost them any more to extract – so why are we feeding their greed? Is it because they’d sell it to someone else at the higher price if we don’t? If so, why not set up an alliance with other countries to set a price cap. Not a tightly fitting cap that gives the poor company a migraine – no, a price cap that gives them a fairly thick and tasty profit margin but not an obscenely yawningly wide profit margin that impoverishes all before it.

That international alliance could be given a catchy name. Just spitballing here but if it were, say, a group of European countries that decided to unite around some basic principle, you could call it the European Union.

Interest rate increases are as helpful to the economy as leeches were to Victorian patients

Andrew Bailey, the Governor of the Bank of England, has inflicted an awful attempted cure on the British economy which will cause death, hardship, unemployment and recession while doing nothing to help. Unless you work for a bank, in which case it’s all good.

The Bank of England makes money out of thin air – that is its most impressive conjuring trick. It then deposits that money in accounts in the names of banks. It then pays credit interest on that money to those banks.

So the first beneficiaries of interest rate rises are those banks who are receiving unearned money on cash balances they did nothing to produce. Where is this money going to go? Why is it being paid? And why is it helpful to pay more than was paid last week?

The government could state that interest will no longer be paid on these balances – and yet it hasn’t. So it has effectively chosen to pass huge amounts of money to banks for them to do with as they wish. How is this helpful to anyone other than the recipients of this year’s bonuses?

Another effect of interest rate rises is to provide cover for mortgage lenders to hike their interest rates, which will generate more revenue for banks in return for literally no extra effort or productivity on their part. It is simply a money transfer from borrowers to banks.

So far what do we have? The Bank of England is paying banks extra money for no obvious reason. And it is giving banks an excuse to charge their customers more money, similarly in return for those banks doing absolutely nothing.

The knock-on effect of this is that people will be poorer. They will simply have less money. And we haven’t even considered rising prices for energy and food yet. Why are food and energy more expensive? It’s certainly not because people have had massive pay increases because they haven’t. So it’s insulting even to suggest that wage increases are necessary for inflation – we have the inflation and we haven’t had the pay rises.

Inflation is caused by price rises, not pay rises. And price rises are, predominantly, caused by profiteering, price gouging, greed – call it what you like.

Most energy in the UK is not generated from burning Russian gas and oil. Quite a substantial proportion is generated by solar, wind, tidal and nuclear means. None of those have become more expensive. However, the price of electricity and gas is pegged to the international price of gas which has the sole purpose of inflating the price for customers while giving vast unearned profits to the energy wholesalers.

This is a regulatory choice. There is no need for solar energy to be sold at the same rate as gas. However, there is a background whinge from energy company apologists (sorry, lobbyists) who are very keen to collect this money while the going is good. Perhaps the going should stop being good.

And food prices are going up because transportation costs are going up (see energy prices) and because a handful of large multinationals produce a huge proportion of the food in this country and they have discovered that people are tolerating their inflation busting/causing price increases. Look at the profits these companies are making and then tell me that they are simply passing on their increased costs. Because, if they were, their profits would be the same as last year’s. Are they?

The overall effect will be a transfer of money from some of the poorest in society into shareholder dividends, together with some free money from the government going into that pot too. Interest rate rises suck the lifeblood out of the economy, just as leeches used to suck the blood out of afflicted patients. Painful, weakening, pointless and ugly to watch. But it is a choice. And Mr Bailey should stop choosing it.

***

An obvious rejoinder would be to ask me what I would do.

Firstly, I do not need to offer a better idea to suggest not using a bad idea. Literally doing nothing would be better than causing harm.

Secondly, how about no longer paying interest to banks for holding onto money that the Bank of England gave them?

Thirdly, how about pegging energy prices to the actual price of generating the energy rather than the theoretical price that energy could be sold at on the open market? If a household has barely enough food to eat, it would be foolhardy to sell it to the neighbours just because they could get a good price. Similarly, the UK should not be selling its energy on the international market instead of using it domestically at cost, or pricing it as though it could/would/should sell it internationally. This might disadvantage the shareholders of the energy companies but, then again, given the desperately low level of investment they are making, I’m not convinced that would damage the nation.

Fourthly, an investigation into food price fixing might stir up the so-called free-market a little. Not everything that is going up in price is doing so because of raised costs.

Fifthly, the government could invest in environmentally useful enterprises, e.g. windfarms, solar farms, home insulation, etc, etc. As a nation we’re going to have to do this sooner or later so why not start it now? It will bring down energy prices and usage and will support skilled employment in growth areas that won’t destroy the planet. Where will the government get the money? They could start by using the money that the Bank of England will no longer be paying other banks for holding onto money.

Institute For Economic Common Sense - Second Lesson

Proportional Representation

Clearly an absolute necesssity. Consider the following analogy:

10 friends are going out for dinner. They decide to pick the restaurant democratically. Here's how they vote:

• 4 want restaurant A (and hate B)
• 3 want restaurant B (and hate A)
• 2 want restaurant C (and hate A and B)
• 1 wants restaurant D (and hates A and B)

Under the awful British system of first-past-the-post, the friend group ends up going to restaurant A. The majority of diners hate that restaurant.

Under proportional representation, the largest of the minorities does not get to impose its will. They get together, rule out A and B as most unpopular and probably end up eating at C or D (or even find there's a restaurant E which everyone is more or less happy with). The point being that no one ends up somewhere they hate and everyone gets something they can tolerate.

Politically, it has been argued that proportional representation leads to governmental paralysis as coalitions find it difficult to agree long enough to build a programme for stuff like govering the country.

But why govern the country in a direction that most people don't want, simply because you're the largest minority? Wouldn't it be better to wait until you can find something that the majority of people can get behind, or at least don't have a strong objection to?

And what's wrong with paralysis anyway? Are there problems so desperately urgent that you need to fix them RIGHT NOW? And even if that is the case, why should that be an opportunity for you to make changes that most people don't want? If there's something bad going on, using the opportunity to get up to shady stuff doesn't say good things about you.

At time of crisis, a government of national unity is the best solution anyway, i.e. get as many differing voices as possible in the room and try to hammer out something that works for everyone. And at times not of crisis, what's the hurry to ram through legislation that most people find objectionable?

Consider the current (14 September 2020) British government.

Off they go, full of vim and bluster, ignoring conventions, threatening to break the law, ignoring dissenting voices, because they can. The majority of the population did not vote for them but they are the largest majority and they will go a-hunting wheresoever they please.

Under proportional representation, they would have been forced to find common ground if they wanted to get anything done. Yes, get all the voices in the room and try to bring the country along with them, as a whole.

With all due respect, that's not happening right now. Watch this space to find out how it ends...

Institute For Economic Common Sense - First Lesson

It is a truth universally acknowledged, that every single nation that wishes to be respected by economists, must be in want of continuous growth.

The dreaded GDP, gross demonic domestic product, must always be on the up because otherwise, ooh, there be dragons or something.

How does this work? Apparently, an ideal GDP annual growth rate is 2-3%. At 2%, over twenty years, that means the economy must become half as large again (i.e. every £1 in GDP becomes £1.49 to be exact). And over fifty years, we're looking at becoming two-and-a-half times bigger (every £1 becomes £2.69). If you think that's crazy, we need to be at £7.24 after a century.

One of the (many) problems with GDP is its horrific statistics cherry picking. Essentially, anything that is difficult to measure is ignored. Health, happiness, environment, waste - no thank you, we won't worry about any of that. And so we end up with these scenarios:

Scenario 1 (good for GDP):

• Boy visits grandmother.
• Grandmother gives him toy which she bought for him, made in a factory by badly paid people in uncomfortable conditions.
• Boy is polite and thanks grandmother effusively.
• Boy's mother collects boy, gives grandmother box of biscuits in thanks for childcare. Biscuits use cheap ingredients bad for environment (e.g. palm oil).
• Grandmother is polite and thanks daughter (boy's mother - keep up) effusively.
• Boy and daughter leave. Grandmother throws biscuits in the bin because she doesn't like them.
• Boy arrives home. Boy throws toy in the bin because it's not very nice.
• Next visit - grandmother has bought two toys because boy likes them so much.
• Next collection - daughter buys grandmother two boxes of biscuits because she likes them so much.
• Result - GROWTH! GDP is happy. More unwanted garbage in landfill, more pointless work done by workers in unpleasant conditions. More use of limited world resources - from ground to factory to shop to house to buried in the ground again - in a pointless cycle of waste.

Scenario 2 (bad for GDP):

• Boy visits grandmother.
• Boy climbs tree in grandmother's garden to pick tasty fruit that she can't reach.
• Grandmother teaches boy how to make a tasty pie from the tasty fruit.
• Daughter arrives to collect boy. They all enjoy some pie.
• No need for gifts - boy has obtained fruit for grandmother, grandmother has made pie for boy and daughter.
• Result - NO GROWTH! GDP has not increased, therefore this transaction has no merit and must be stopped. Also, no garbage in landfill, no pointless work done in unpleasant conditions. Instead - happiness and sharing has raised moods, but this cannot be measured so is worthless.

GDP was a tool to get a rough idea of how economies are getting on. It has mutated horrifically into a be-all-and-end-all (which can be abbreviated to bell-end, if you prefer) and has become a driver of what should happen instead of an approximation of what has happened. The ignored factors severely restrict its application to the real world.

And infinite growth is clearly ridiculous.

Discuss.

Sacrifices to the deities

Prehistory

A long, long time ago (or way way back, many centuries ago, depending on which songwriter you prefer), people used to kill - but not to eat the prey, nor to conquer their land, nor to exact vengeance.

This would be a sacrifice. Something has gone wrong and something needs to be killed to appease a deity. Or something hasn't gone wrong but might go wrong unless something is killed to appease a deity. (I realise I'm oversimplifying.)

Now, looking back on it, these quaint if uncomfortable practices seem ludicrous to us. Killing a sheep (or goat or great-uncle) isn't going to make a lot of difference to whether there's enough rainfall for the crops. We see that now. And we feel that we wouldn't get tangled up in that sort of practice again.

Nowadays

During these days of global financial slowdown due to global pandemic affecting, er, the globe, the British government has instigated a scheme for people to take a holiday from mortgage and loan repayments.

But holiday is a bit of a strange word. Imagine a holiday where, for every week off, you had to make up the five days over three weekends after you came back. Not really a holiday, is it? More a work-shift, except that it's grown a bit - those five days have become six and you're going to be seriously knackered when you stagger to the end of the fourth Friday since the first Monday with no weekends to break up the load.

Because the interest on the loan will continue to accrue over the payment holiday so, when you restart payments, they will be bigger. Over the lifetime of the loan, you will end up paying more interest.

Barbers have had three months of no income. Restaurants have had three months of no income. Gyms have had three months of no income. Airlines have had three months of... You get the idea.

But banks? They've just given you a bit more of a loan, at the usual rate, and they'll be wanting their money back, with interest (and interest on the interest). Why?

Short answer - because they can.

To continue my tendancy to oversimplify - when you or I successfully apply for a loan from a bank, the bank makes the money out of thin air (because the nation's central bank says they can), squirts it into your bank account and charges you interest for borrowing this newly created money, which they then get back over the loan period.

The bank has to 'borrow' this money from the nation's central bank, which it does at the so-called base-rate (in the UK today it is currently 0.1% - by contrast, the Nationwide's standard mortgage rate currently stands at 4.24%). So for every £100,000 which the Nationwide lends to a standard mortgage rate customer, every year they pay the Bank of England £100 in interest but gain £4,240. A profit of £4,140 per year.

I know they have to do so much admin to run the account, but I think they can probably use economy of scale to make sure the costs don't wipe out the profits.

Instead of a payment holiday/loan/postponement (call it what you like), there could have been a real payment holiday. The sort where your payment doesn't send you emails while you're on the beach and expect you to answer them immediately. The sort where everything just stops for three months. Nothing needs to be paid, no extra interest is charged, the end date of the loan skips three months down the road. It's as if, financially, those three months don't happen.

And if mortgages don't need to be paid, rents can be reduced accordingly. Because the barber, the restaurant owner, the gym company - they have no money coming in the door but the landlord needs to be paid. Why? Because the landlord has a mortgage/loan to worry about.

And where does it all end up? Why, the banks, of course. So how about they take a similar hit to everyone else? No repayments for three months with no interest added for them to gobble up later.

(In the same way that I'll have a haircut when the barber reopens, but I won't expect him to charge me for three haircuts to make up for the two I didn't have while he was shut.)

But the banks! How will they cope?!

Just like everyone else, I suspect. They could have furloughed some of their staff, shut down unneeded offices and, guess what, their rent bill can be cut too. Because their landlord won't owe any money to the bank for that period.

Instead, we make our sacrifice to the deity, just as we've always done. Something bad has happened but we must commit a painful act to the benefit of the god, or it won't get better. Or the god will get angry and things will get worse.

Future

Will a human of the future look back on this time with the same puzzled shrug as we look back on sacrifices in days of yore? Will they wonder why we inflicted these punishments on ourselves to placate an entity that doesn't really exist and wouldn't help us even if it did?

If you don't think Barnard Castle is a beautiful place to visit, you need your eyes tested

Welcome back, by the way. It's been two years and I've missed you. Three thought-ettes for you to consider and, if the mood takes you, to comment on.

Clap clap

People have been comparing NHS workers to superheroes. Even Banksy has got in on this game, drawing a child playing with a masked and caped nurse-doll, having thrown Batman and Spiderman in the bin.

But in what way are they comparable? And which superheroes?

Let's rule out Batman first. He's fabulously wealthy and has all the equipment he could possibly want or need, complete with a mask, albeit one that doesn't cover his nose or mouth. Iron Man is basically the same thing with a sense of humour - and a mask that does cover his nose and mouth. Superman is more or less indestructible and certainly wouldn't end up killed by a virus.

But the comparison to Ghostbusters is a much better fit. Ordinary people warning about a terrible threat, being ignored and undermined, building their own equipment to fight the threat, then facing the danger alone with no help from anyone else, other than a cheering crowd. (Were the crowd clapping? It's set in New York so probably more whooping and cheering than clapping.)


The twist being that the start of Ghostbusters 2 reveals that our heroes were sued by the city for not doing a better job (i.e. one involving less destruction) and had all the blame heaped on them for the considerable damage. Will that happen to health workers after the pandemic? Who can say...

Hedge

When there's a global pandemic, someone who runs a hedge fund will make a lot of money. And they appear on the news, looking just the way people expect hedge fund managers to look. And the opinion pieces imply (or state, or howl) that it's a disgrace that people are getting rich during the suffering.

But... if one fund goes up, it's only because another one went down. So who lost?

If it's another hedge fund, do you still care? I'm guessing probably not as much as you did. One hedge fund goes up by a billion, another goes down by a billion, that's just part of the game, right?

How about if it's your pension fund? (Or mine?) Bit more interesting now. And isn't the real story the one about the loser? About how that pension fund manager has managed to lose unspeakable sums. Why on earth was the pension fund on the duff side of the bet? For that matter, why were they even selling anything at a loss (or buying something at an inflated price)?

And how much management fee was collected by this hypothetical pension fund manager who has misjudged his gambling of your money (and mine?) and thereby handed part of your retirement to that smug bloke from the start of this story?

Nah - just concentrate on the guy who looks like he either just opened a bottle of champagne or is just about to.

Caps

The British government very kindly increased the benefits paid to some of the poorest in society to help them cope with the uncertainty of the global pandemic thingy.

Unfortunately, they have also instigated a 'benefit cap' - a maximum amount of money that anyone can receive. Which means some people don't, as it were, benefit from the increase because their income hits the cap. And, even worse, some of them then hypothetically go over a threshold with this money they're not receiving which means they have to start paying back a loan they got from (guess who?) the government so the increase makes them worse off.

Yes, really. The increase makes them worse off. These are some of the poorest in society.

The reporting of this state of affairs makes it sound like some terrible mistake but there appears to be no attempt to put it right. So presumably it was intentional. I mean, if it wasn't intentional, the government would fix it, right?

Maybe journalists are asking the wrong questions. Perhaps the real question is why does the government want to leave some people utterly destitute. Because they could fix it if they wanted to.

I don't have an answer to this one - except to repeat that if they didn't intend it, they would fix it.

First rule of change management is to realise that no matter how much modelling and testing you've carried out, reality will throw you a curveball that you didn't see coming. So you need a quick, simple and safe way to undo the change you just made. I don't see anyone undoing this one. Therefore it's not a mistake. Therefore it's intentional.

So why are they doing it? Answers on a postcard to Barnard Castle.

On being free and the benefits of fresh air

(For the avoidance of doubt... Nothing that follows is true. None of the characters refer to real people, e.g. 'Dad' does not represent my father, I have no 'Uncle Nigel', etc.)

Kitchen table

It had been rumbling on for ages. Uncle Nigel wouldn't stop banging on about it. So finally Dad organised a round-the-kitchen-table chat. By a show of hands, and the slenderest of majorities (six to five), we're going to go for it and get a new roof.

Of course, there were plenty of arguments against the expenditure. Dad said he quite liked the roof, that it had always done right by us and we should respect its inherent structural integrity - and maybe replace a tile or two if there was a problem.

Uncle Nigel kept saying that it was a useless roof because the rain that gets in, even though he's said for decades that he'll keep a watch on it and would definitely let us know if it ever needed fixing.

He was talking over Mum, who was trying to explain to him that this will happen sometimes because she likes to keep the window open up there - and maybe if we could just arrange a system for closing the window when it rains, we could solve the problem.

Sadly though, Mum had given the window management responsibility to some company called Idiota and they'd gone round making sure that all the other windows are securely locked shut. So we still have occasional leaks and the rest of the house is very stuffy.

No one was really paying enough attention at our kitchen-table meeting. Despite the fact that we were definitely talking about replacing the roof, it turns out that we all only voted to have the roof removed.

Of course we were also talking about getting a new roof, but we didn't actually vote for one. No need, apparently. What sort of fool would remove a perfectly good, if slightly leaky, roof without replacing it?


Demolition

Well, it's now really kicking off. Dad was so upset to lose the vote that he's gone to hide in the shed at the bottom of the garden.

So Mum has taken over and it's like she's become a new person. Instead of sticking to her guns, and saying we just need to sort out the window situation, she's told us that she has to respect our wishes to have the roof taken off. She's booked the demolition company, paid in full (non-refundable) and has made a list of a few local roofers but not bothered to call any of them.

Just a few more weeks, then apparently we'll be free of the horrific constraints of the old roof. We will get a new roof, says Mum. But if she can't find one she likes, she'll have no roof. Because better no roof than a bad roof.


Any umbrella

Cousin Liam turned up yesterday in a clapped-out old van stuffed full of parasols, garden umbrellas and awnings. It was great news that the roof was finally going, he said, as it meant we could have different rain/sun/cold protection for each room, tailored to its individual needs.

He tried to demonstrate by dragging a huge umbrella to Mum's bedroom but she told him he absolutely couldn't put it up in there as it was bad luck. He'd have to wait until the roof had gone. Step-brother George looked up from furiously scribbling in his journal to point out that it would be a bit late to test it then, especially if it was pouring with rain, but Mum put her fingers in her ears and both pretended she couldn't hear him and also said something about him not being her son and perhaps he'd like to join his father in the shed.

Speaking of Dad - no word from the shed for a long time. I saw Dad briefly last week when he stepped out and paced around grandly (head back, chest puffed out) but went back inside when no one seemed interested enough to go and talk to him. Or even lean out of the window and wave. (Actually, that was because the windows were locked shut. It's getting really stuffy in here now. The hamsters are pining.)


Clouds gathering

I was slightly nervous about the pressure washer that our neighbour has been using, in case it's strong enough to fire a wet salvo over our walls and into our rooms. But that's nothing: the people in the nearby villages are fed up with having a wash-out at their weekend farmers' markets so they're investing in cloud seeding. I think we might have picked a very bad time to be roof-less.


Everybody needs good neighbours

In all the excitement, we've forgotten something very important indeed. We live in a semi-detached house and no one's thought what will happen to the neighbours' roof when we take our roof away. It's not even really a separate roof, obviously. I can't believe no one noticed.

They're very miffed that we've booked the demolition company before even talking to them about it and they're not even slightly convinced that putting a few struts in place will work.

Mum has told them not to worry and that they will continue to enjoy all the benefits of their roof once ours has gone. Only, she hasn't told them how on earth that will work and they clearly realise that she's making it all up as she goes along.


Hopes cruelly dashed

The demolition company rang up. They asked if we're absolutely certain that we want the roof removed as they've heard we don't have a new one booked in. They're being really kind. They said that they've got plenty of work on at the moment - so they'll even give us a refund (on our non-refundable booking).

Mum was furious with them. Really!

She didn't even want to replace the roof, let alone remove it, originally. And now she's definite that it has to go, because apparently that's what we all wanted (even though nearly half of us didn't - and none of us asked to go roof-less). She started accusing the demolition people of interfering with something that was none of their business.

If she carries on like this, I don't have a good feeling that they'll leave the edges smooth when they take the roof away.

Meanwhile, Uncle Nigel has gone back to his house across the street. He hasn't been over since the kitchen-table incident and has a very nice roof on his house. But he likes to shout at us across the street to ask why it's taking so long to get that roof off the house which he loves so much that he only pops in occasionally for dinner (whether he's invited or not). He never brings a bottle.


To be continued...