Monday 25 April 2011

HOW ON EARTH did the Tories win OXWAB 2010? (Research extract from an analysis of safe seats and voter turnout... coming soon)

An example of such a seat is Oxford West and Abingdon (OXWAB), with a student population of around 8,000. In the 2005 general election, the incumbent, Dr Evan Harris (Lib Dem) retained the seat comfortably, with 24,336 votes compared to his closest rival Amanda McLean (Con) who polled 16,653. In the 2010 election, the Conservatives captured the seat narrowly, even though the final result does not fit perfectly with the changes in national support for the respective parties. In 2010 Evan Harris gained 23,730 votes- just 606 votes less than 5 years previously, but still despite the fact that nationally the Liberal Democrats polled 2% higher than in 2005. He was narrowly edged out by Nicola Blackwood (Con) who gained 23,906 votes. The Conservatives had gained an impressive 7,253 in OXWAB since 2005, despite the fact that nationally they only improved their share of the vote narrowly, up from 32.4% in 05, to 36.1%. It has to be asked where did the extra 7,253 votes come from? Given that UKIP gained 723 extra votes in 2010, many of which would come from traditional conservatives disgruntled with the Tory party’s move to the left, we could argue that the Conservatives needed to gain more like 7,750 votes.

In OXWAB in 2010, the Liberal Democrats ran a fierce campaign to encourage “progressives” – specifically supporters of the Labour Party and the Green Party (which has a potentially very high but largely unrealised level of local support given their 1st position polling at the – proportionally elected - European elections in Oxford in the year before). Despite this, the Labour Party’s only lost 2,726 votes in the constituency compared to 2005, whilst the Greens lost 907 votes. However, the Liberal Democrat’s courting of tactical “Green” votes in OXWAB could be seen as something of a mistake. Based on my experience of the Green Party in this constituency, it is certainly not the case that all of those people who backed the Greens in 2005 but did not in 2010 would have backed the Lib Dems. The Green Party has a very diverse support base, and although it is true that some of the 907 votes the Greens lost in 2010 would have gone to the Lib Dems, it is equally possible that some would have gone to the Tories, many of the Green’s supporters in this constituency being of a socially conservative background. Controversy surrounding Chris Goodall’s support of Nuclear Power may have lost him some “deep green” votes, but it is equally likely that he would have gained votes for the same reason. It would probably be safe to assume that the Conservatives would have gained between 200-300 of the lost Green votes in OXWAB, but this certainly leaves them with around 7,500 missing votes. Many of the 2,726 Labour voters would have backed the Lib Dem’s tactically, but a fair number would have simply abstained (a tradition of old Labour supporters who prefer not to betray their party). It is unreasonable to argue that more than 1,500 of the Labour votes would have backed the Tories, leaving them with another 6,000 votes or so to be found. It is possible that the Tories gained many of the 606 votes that Dr Harris lost, especially given the fact that many Lib Dem’s in the constituency voted Tory prior to 1997- as can be induced from analysis of prior results- or just generally knowing the area. Possibly 500 of these would have voted Tory- leaving them with 5,500 to find.

The turnout did increase by 3,880, but it would be very wrong to assume that all of these “new” voters voted Conservative. Indeed many would have voted because of the close nature of the campaign, whereas in 2005 the result seemed all but guaranteed for Evan Harris. However, the fact that a greater number of votes cast seems to indicate higher overall turnout is in fact an illusion, since turnout as a percentage of the electorate (which clearly grew substantially) actually fell between 2005 and 2010, down from 65.6% to 65.3%- which is very odd considering that nationally the turnout was up from 61.3% in 2005, to 65.1%- a trend which can be explained both by the close nature of the national campaign, raising the prospect of a hung parliament; and by the televised leaders debates which commentators thought significantly boosted public interest in the election.

The election of a Conservative Candidate in OXWAB (2010) is and will remain a mystery for many years to come. In the election campaign (as private sources in senior positions within all the campaigns have told me) all “progressive parties”- the Liberal Democrats, Greens, and Labour, were absolutely confident that Dr Evan Harris’ enormous majority could not possibly be fully eroded and his vote share would hold up very strongly given the inherently social-democratic nature of the Oxford electorate and the strong student population (who had until recently strongly tended to support the Liberal Democrats). Dr Harris was subject to a smear campaign by the Christian right, on his support for euthanasia and abortion, and by an Animal Rights campaigner for his support for medical research using Animals, yet these did not seem to be major factors- indeed the “Animal Protection” candidate- Keith Mann, received a paltry 143 votes, and Dr Harris vote did indeed hold up, as all the progressives had privately know it would.

The first question is where UKIP’s 723 votes came from. Oxford West and Abingdon is probably one of the most “intelligent” constituencies in the country, if not the most. It has a high population of academics, business people, professional public sector workers, and so on. What I am saying is that it is implausible to argue that UKIP’s 723 votes came from, for instance, the Greens- (UKIP deny climate change), or from Labour, or from the Lib Dems. At least 500 or these would have come from one of two sources- either the Tories, or form the 3,880 “new” voters who did not vote in 2005. Either way, less votes are available to explain where Nicola Blackwood got the extra 7,253 votes from. Less assume, just for the point of argument, no matter how ridiculous it may sound, that all of UKIP’s extra 723 votes came from the 907 votes the Green Party lost. Now obviously this assumption carries not even the shred of possibility, but I am just trying to demonstrate how odd Blackwood’s victory was. Now let’s assume that the other 184 votes the Greens lost went to the Conservatives- alternatively we would assume that the Conservatives got all of the 907 votes the Greens lost, but then we have to explain the 723 votes that UKIP gained, which would mostly come from disgruntled 2005 Tory voters, or from the 3,880 new voters, so we would be back to square one. Either way, the Conservatives would end up with 184 votes from the Greens towards there target of 7,253. Whoopee! Only 7,069 to go. It seems within the realms of possibility that the Conservatives might have gained many of the 606 votes the Liberal Democrat Dr Evan Harris lost- let’s say they got every single one. Still, 6,463 to go!








Until we proceed, let’s just take a look at the actual votes in 2005 and 2010.

2010:

Conservative – Nicola Blackwood – 23,906
Liberal Democrat – Evan Harris – 23,730
Labour – Richard Stevens – 5,999
UKIP – Paul Williams – 1,518
Green – Chris Goodall – 1,184
Animal Protection – Keith Mann – 143

(Turnout – 56,480)

2005:

Liberal Democrat – Evan Harris – 24,336
Conservative – Amanda McLean – 16,653
Labour – Antonia Bance – 8,725
Green – Tom Lines – 2,091
UKIP – Marcus Watney – 795

(Turnout – 52,600)

We can summarise the problem like this:
 The Conservatives won 7,253 more votes. Where did they come from?
 How many more votes were available?
1. 3,880 “new/extra” votes not cast in 2005.
2. 606 lost Liberal Democrat votes.
3. 2,726 lost Labour votes.
4. 907 lost Green votes.
5. -723 gained UKIP votes.
6. -143 gained Animal Protection votes.
7. That’s a total “pool” of extra potential Tory votes of 7,253. That’s not to say that all of the lost votes went directly to the Tories, for instance, the Greens might have gained 200 of the lost Lib Dem votes, but lost an extra 200 to the Tories. Another likely scenario is that many of the lost 2,726 Labour votes would have gone to the Lib Dems, but there would have been another 2,726 lost Lib Dem votes concealed by the tactical voting of the Labour voters for Dr Harris.
Unfortunately, the problem does not stop here. Let’s make some reasonable assumptions about how the votes might have changed hands. Assume the lost 907 Green votes went to the Lib Dems as a tactical vote to “keep the Tories out”; again, the same explanation could be applied to the 2,726 lost Labour votes, giving the Liberals an even bigger majority at the start – up from 24,336 to 27,969. As for the Animal Protection votes, I will make no assumption since it is a very specific issue, and Keith Mann only received 143 votes so I will assume these are from various sources. Now let’s assume that UKIP’s extra 723 votes came from the Tories, now all parties are dealt with and only the Liberal Democrats and the Tories are left in the race with 27,969 and 15,930 respectively. This does not seem altogether unreasonable. Sure, some Labour would have voted Tory, and some UKIP for Lib Dem, but these may cancel out. Just to be cautious, let’s say I got it wrong, and after you take out the votes transferred away from smaller parties (Labour, Green, UKIP) the Liberals have 1,969 less than expected (26,000) and the Tories have 17,899 as a result. Then you factor in the changes in the national popularity of both parties between 2005 and 2010. With the Lib Dems, they are up from 22% to 23%. The Lib Dems might be expected to get around 27,000 on a uniform swing, and the Tories are up from 32.4% to 36.1% they might be expected to win 20,000. The fact that we didn’t have the expected 7,000 majority is down to local issues (national issues being reflected in the headline national swing which I have already included). In other words around 3,500 Liberal Democrat votes must have swung to the Tories for local reasons – almost certainly as a result of the smear campaign against Dr Harris over Christian moral issues by an Anglican Bishop and Keith Mann’s leaflet brandishing him as “Dr Death” for his support of Animal research. That would pretty much fit with the end result. (Conservative – Nicola Blackwood – 23,906; Liberal Democrat – Evan Harris – 23,730)

What we have concluded is that a seemingly ultra safe seat was captured in an unexpected fashion by Nicola Blackwood (an evangelical Conservative Christian candidate), on a swing of 3,500 “moral majority” type votes. That’s truly shocking – and slightly unbelievable.

Monday 11 April 2011

IMF cuts UK growth forecast to 1.75%, but...

Why do we need "growth" anyway?

Growth in the current economic climate will inevitably be counter productive.

Soaring commodity prices show excess demand, and growth is only going to drive that up and bring the economy down with it just like 2008 only worse.

In order to get jobs, we need to redistribute wealth through progressive tax and welfare policy.

The current "recovery" is both jobless and unsustainable. Supply of core materials- oil, metals, food, is inadequate to satisfy future growth for the time being.

We need investment in renewable energy and Green jobs, not manufacturing intensive, commodity intensive GDP growth, which at the moment is weighed down by the inflation it itself is causing.

Don't you think oil prices are high for a reason? Arab revolts.

Don't you think Arab revolts happened for a reason? High food prices.

Don't you think high food prices happened for a reason? High oil prices (lots of oil used in the production / distribution / packaging of food).

It's time to join up the dots and change track.

EXCLUSIVE: UK COALITION GOVT ON BRINK OF BREAKDOWN

Tensions within the Liberal Democratic party are beginning to emerge - first with news that Nick Clegg's senior health advisor's insistence on changes to Conservative minister Andrew Landsley's controversial health bill were met with flat refusal, and now grass-roots members are informing me that the party has obsessed itself with winning the AV referendum because the party's actions in government are "too awful to bear". Now a senior Liberal Democrat councillor has asked Clegg to abandon the coalition as soon as possible to save the party from collapse at future elections.

The damp squib of a compromise regarding AV (a barely rehashed version of the current First Past The Post system that eliminates some wasted votes but is still disproportional on a nationwide basis) was one of the few redeeming qualities of the coalition agreement from the perspective of the Liberals. The Tories pointed out that since they had 5 times more seats, they deserved the bulk of "power", but this ignores the fact that in terms of actual votes, the ratio was more like 3:2 than 5:1. Now canvassing data suggests that the Liberals will loose the AV referendum, and the party is failing to get to grips with the idea that it wasn't much of a compromise after all. The Liberals risk being electorally disintegrated in May when voters select representatives in the Welsh Assembly and Scottish Parliament. Polls suggest that the Greens, historically much smaller, will comfortably beat the Liberals in both elections.

Reliable sources have informed me that the Liberals are on the brink of internal meltdown if the coalition is not abandoned very soon. The next few weeks should be politically exciting, with the prospect of another election in the summer or autumn certainly on the cards. If the national electorate witnesses the Liberals slump behind the Greens in May's regional elections, they may abandon the Liberals rank and file and recourse to a new protest vote option in the next general election.

Sunday 10 April 2011

Introduction

Draft Introduction to "The End of Greed"...

When it came to it, I realised that it had taken me an embarrassingly long time to realise what had really happened. I remember the news in 2008 about the mortgage meltdown and how the banking system had suddenly become overwhelmed by "toxic assets". In shock, I failed to join together the dots. The mainstream media told everyone that the whole economy had nearly collapsed, and had only been saved by massive government funded bailouts of the biggest global corporations in Banking and the Automotive industry- which is tightly linked to banking given that most Auto sales are financed by in house loans and the Auto companies make more money on the loans than on selling the vehicles themselves.

Then, 2 years later, I started to study economics, and began to realise that the simplistic story that we had been fed was certainly inadequate, and possibly even false. The idea that sub-prime mortgages had just "gone bad" and the shit hit the fan just didn't add up. Mortgages don't just "go bad", somebody has to stop paying. Sure, they might be more risky, but that wasn't the point, people had clearly been paying them for a while, the mortgage market had been growing smoothly for many years. Yes, it was a bubble. Bubbles burst, and if we are running a primary/elementary school science class it might be satisfactory to say that it just burst. But if we are running a global economy (which I'm not but other people do), then we have to ask why it burst. Why did so many working class Americans suddenly struggle to pay their mortgages?

All bubbles burst, but that's because something makes them pop. What was the pin that the housing market flew into in the year spanning 2007-2008? Why when the market started to collapse could banks not inflate a new bubble, as they had always done in the past to replace the old one? There were many unanswered questions which it seemed that absolutely nobody had addressed. I read many books in finance and economics, but it seemed as though they all gave the same monotonous commentary on what happened, not why it happened? It was as though the economists thought it was adequate to simply say that the banks hit a storm because of the mortgage meltdown, but not explain why the mortgages defaulted in the first place. Excuses such as that the mortgages were somehow exorbitant, even though they had been "exorbitant" for years and the sub-prime debtors had never had too much difficulty paying them. Nothing had changed in the market itself to explain away the crisis of 2008, so I had to start looking in other places.

In late 2010 I looked back at news stories on the internet from the time of crisis, and the years running up to it, and started to realise that the real picture was quite substantially different than the simplified story we had been told. There are no secrets in this book, although there are probably things which many people would rather you didn't know. The first thing that became clear to me was that it was not at all possible that the stock market crash and global recession that came after the mortgage meltdown were because of the mortgage issues alone. A series of other crises were going on at the same time, but the media either lost track of them or wilfully ignored them. The crisis did not result only from the stream of mortgage defaults and in any respect, if the powers that be had been paying attention to issues in the rest of the economy they would have been able to prepare in advance, and likely "smooth out" the crash by pursuing radically different policies long in advance.

In professional reports, an "executive summary", or something of that nature, to summarise the main findings, are always given at the beginning, before the evidence is given. In the case of a book, it would usually spoil things to reveal the plot in advance, but given the controversial nature of some of my evidence, it is necessary to present the findings in advance in order to justify the following chapters. Firstly, I am going to establish the view right now that we are heading right back to where we were in 2008, secondly, this has nothing to do with finance, but finance does help us to visualise the real issues which underpin today's economic predicament, and that the idea of a "financial crisis", or any kind of "debt crisis" is purely an excuse for a deeper crisis that the political elite refuse to admit.

> Current "austerity" measures have nothing to do with excessive debt, but inadequate prospects for the kind of future economic growth necessary to pay that debt.
> Growth is being threatened by a breakdown of the profit structure in our economy, resulting in low levels of investment. In a sense, this is a "crisis of capitalism".
> Cyclical commodity price "mountains" will repeatedly destroy demand in the economy, before soaring again as the economy recovers slightly.
> The most important of these commodities- oil- either cannot be produced at a faster rate (in other words it has "peaked") due to declines in old fields not being offset by new discoveries OR if it has not peaked then it has certainly peaked relative to demand.
> We are entering several years of soaring commodity prices which will lead to political unrest around the world, first in the poorest countries. NOTE: after I wrote this introduction, revolutions sparked off all across the Arab world.
> Commodity prices will eat so severely into business profits that many of the worlds biggest firms will become bankrupt, leading to a complete breakdown in the supply chains that globalization depends on.
> That in 2008 these trends occurred, with businesses posting profit warnings and in some cases declaring bankruptcy. At the same time, commodities were soaring.
> That in 2011/2012 this is repeating itself and each "repeat" will herald a more brutal crash because there will be less financial capacity to fund bailouts. Bailouts themselves are financed either directly or indirectly by borrowed money, and as inflation worsens due to the widening gap between demand and supply for crucial commodities, central banks will be forced to increase interest rates.
> That in several countries in Europe, and the US itself, the governments and central banks have run out of financial capacity to prevent another crisis at the end of this year or sometime next year.

Friday 8 April 2011

US heads towards meltdown (again).

Treasury Secretary Timothy Geithner warned it would happen. The Republicans warned it would happen. Obama warned of a shutdown, hoping that the media would just about buy it because that's what happened last time the Debt Limit expired amid the dispute between Clinton and Gingrich in 1995... but the US government could be about to default as well as shutdown.

Firstly, the reason why a shutdown is neccessary because it is the only way to service the treasuries interest burden without issuing new bonds- given that this is prohibited since their is no more headroom under the legally defined debt ceiling that Congress has failed to raise. In other words, all "deficit" spending- which accounts for about half of the US government's $4trn budget, will have to be eliminated immediately, by temporarily laying off staff and suspending less than vital services.

This will in effect remove 20% of the economy overnight. Whilst workers and benefit claimaints will still receive their checks, if the government stops spending money in the economy, the banks will run out of money to cash these with so they will in a sense become worthless. Inflation could jump significantly if workers and welfare receipients panick, especially if the shutdown is prolonged.

However, shutdown can only solve the problem temporarily. The treasury still relies on emergency financial measures, such as unsustainably raiding state pension schemes and cash reserves. They are quickly running out of emergency measures, and given the current state of Impasse in Washington they are quickly running out of schemes to prop up the debt. Up to this point Quantative Easing - financed by newly created money from the Federal Reserve bank - and organised by Goldman Sachs - has propped up the monster $2trn deficit. However, this has been done by using the new money to buy government debt. The only reason why the Fed is prepared to do this is because they receive an interest return. If the Treasury is prohibited from further borrowing then it follows that there can be no more QE, and stocks could start to plummet. The only alternative is a new type of "direct-QE" where the newly printed money is used to pay up front for government services, instead of buying long term debt. This choice would be rapidly inflationary, as the money would leak much faster into the economy. This would greatly disturb the global financial markets and herald a second coming of the Financial Crisis of 2008 that was only stopped from complete meltdownb by the intervention of government borrowing. That wont happen again in the current situation.

Sunday 3 April 2011

OBR admits government debt slowdown must be met by faster private sector debt growth.

This appeared as an extended response to the Guardian's article which can be found at http://www.guardian.co.uk/politics/2011/apr/02/family-debt-burden-government-figures?commentpage=last#end-of-comments.

What people don't realise is that the total level of debt, including state debt and private debt must always grow quick enough to pay the interest to service it.

The fractional reserve monetary system is essentially a giant-Ponzi scheme because it requires infinite growth. All money is deposited and then constantly re loaned at interest to cover the risk that it wont be repaid.

However, the charging of interest means that there is always more debt that money, because "money" comprises only of the "principle" or what is loaned, but the interest owed has to be leached off to pay the debt, this requires a constant expansion of the money system.

All money is debt, and all of the money the government has ever spent and will ever spend is borrowed, just not all of it directly by the government, most of it is borrowed by somebody else first. This ignores that fact that until they started Quantitative Easing, about 97% of all money was created as debt.

Now that the economy has faltered, the necessary expansion of the money supply to pay old debts has become unsustainable, causing inflation, and bankruptcies.

Our economic system is designed on the premise of constant monetary growth supported by constant consumption growth (to give the money value). As we saw in 2008, this can quickly stumble towards collapse if it cannot be sustained.

Every deficit reducing policy the government has concocted will only boost debt in other parts of the economy. When preaching that their debt was too high, they forgot to tell you that private debt, in the other half of the economy, was about 12 times greater!

When they cut spending on universities to slow the growth of government debt, student debt must grow quicker. When they cut spending on the NHS and outsource to private providers, the private providers take on more debt to grow their businesses. When they reduce spending on welfare, consumers must either take on more debt, or the businesses that loose their custom must borrow more to compensate for lost sales revenues. This government wont reduce debt at all (although it doesn't actually plan to- it just wants to reduce the deficit, the rate at which the debt grows). It will just widen the gap between state debt and private debt. This is so foolish because it is absolutely clear that when borrowing is organised by the government, is costs much less than when it is done by for example students, or businesses, or pretty anyone other than the government for that matter.

When you hear about the risk of sovereign debt defaults, this is not because the bond markets are running out of money. They can't, because they just create it at the point that the loan is issued. What is happening is that the whole system has become unsustainable, and the evidence cannot be clearer than rocketing commodity prices- which as it happens is exactly what happened in the run up to the 2008 crisis. Our growth dependant financial system is finally running up against the real world constraints of scarce resources. For years, economists arrogantly assumed that the basic contradiction between infinite human wants and finite resources could ingeniously be solved by financial wizardry. You can create money, but you cant create commodities.