Sunday, February 17, 2008

Northern Rock - A Failure of Government or a Failure of Business?

To hear some Commentators and certainly the Conservative Opposition here in the UK, you would think that the Failure of Northern Rock was a Failure of Government.

Gordon Brown is accused of 'returning to the Nationalisation of the 70's'.

It seems to me that you could just as easily view it as a 'Failure of the Capitalism of the 80's'.

After all, it was Northern Rock - a Private Company - which Failed. It could not Maintain its Liquidity and threatened to go 'Bust'. The fact that it has plenty of Assets is beside the point. Many a Business goes under due to a Lack of 'Cash Flow' regardless of a Healthy Asset Base.

An out and out 'Thatcherite' would probably argue that the Bank should have been left to do just that - Go Bust. This is a more consistent position than the one being adopted by the Conservative Opposition. They supported the 'Bail Out' using Tax Payers Money. That is not consistent with a view that the Market should prevail and take its natural course.

The Shareholders risked their money and so did the Savers. If they turn out to be wrong about the Return on their Investment, why should they be protected? Nobody forced them to invest their money in Northern Rock. This would be the consistent 'Capitalist' position.

Most people would agree that had Northern Rock been allowed to fail the consequences could have been dire for the rest of the UK Banking System. The Social Consequences and the 'Knock On' effect on the rest of the Economy could have brought about a Severe Recession or even a Slump. This is why the Conservative Opposition supported the 'Left Wing' position that Tax Payers Money should be used to Underpin the Survival of the Bank.

The 'House of cards' which is our present Debt Ridden Economy might collapse. Too many people have used Cheap Credit to Buy Properties which they cannot afford. This has Inflated the Price of Property and these Inflated Property Prices have been treated as an Asset instead of a Liability. People have used the Nominal Asset Value of their Mortgaged Property to Borrow even More Money.

Banks have taken the same Cavalier Attitude towards Debt. Instead of properly Assessing Credit Risk and Taking Responsibility for the Risks Taken, they have sought to Displace the Risk. They want the Return without the Risk. They therefore attempt to Sell the Risk on or create some 'exotic' Derivative in the attempt to Displace the Risk onto a 'Speculator'. These Derivatives have ended up Creating an Illiquid Market of Risk. The Final Consequences of this Process are still Not Clear.

Sooner or later the 'Chickens' were bound to come Home to Roost and they have. The 'Credit Squeeze' and the accompanying Downturn in Property Prices was an entirely Predictable turn of Events. The only thing which could not be predicted was when it would happen. We still cannot be sure how long this has to run and how far it may go. Only the 'Market' knows and it is not telling!

Yet this is all now being portrayed as a 'Failure' of the Present Government.

In my view any Failure of Government rests with Previous Governments. They deliberately Engineered a Credit Boom in order to Rejuvenate a Flagging Economy. They therefore created a 'Demand Led' Economy rather than a 'Supply Side' Economy. These Governments were mainly Conservative although the practice was then inherited and continued by 'New Labour'.

In fact the 'Western' Economy as a whole is far too much 'Demand Led' in my view. The 'Supply Side' has shifted mainly to China with the United States doing most of the Consuming. This has created a Massive Imbalance which threatens to Destabilise the Whole System. Some people talk about 'Decoupling' by which they mean that China, India and others might develop enough of an Alternative Export Market to mitigate the effects of this imbalance. We can only hope that this takes place.

If it does not, the Present Imbalance will 'Correct' itself sooner or later. The Social Consequences of this 'Correction' could be very severe indeed.
Government Intervention would be demanded by the Electorate. Will this then be regarded as a Failure of Government or a Failure of Capitalism?

I have always believed that Market Capitalism is the most effective way to run an Economy but only if it operates within 'Boundary Conditions'. These 'Boundary Conditions' are set by Society. This is why Capitalism only works for the Public Good within a Democratic Framework. Markets must always be regarded as a Means to an End, not an End in Themselves. Only People are an End in Themselves.

Markets, like the Climate, are subject to Periodic Bouts of Erratic Behaviour. In between times all is well and nobody notices their operation. In times of Turbulence and Irrationality it is entirely right that the Government should Intervene. It is Disingenuous to Portray this as a 'Failure'.

I am not a Socialist because I believe that Socialism is the Cure which ends up being worse than the Disease. I do not believe that an Economy can be directed by a collection of 'Peoples Committees'.

Equally, I am not a believer in Pure Market Capitalism either. Sometimes Markets Fail to Serve the Common Good and when this happens the Government has a duty to act on the Behalf of the People who Elected it. If this later turns out to be a Mistake then the Government can be Unelected at a Later Date.

This is why Democracy is Essential. Without it, either the Government or the 'Market' is Always Right. In practice both Governments and Markets make mistakes. Democracy is our only Means of ultimately Correcting these Mistakes.

Monday, February 04, 2008

Time Management Versus Time Ownership

You will find plenty of 'advice' on the market about how to manage time more efficiently. This usually comes under the general heading of 'Time Management'.

I would wager that you will not find much of this 'advice' putting the emphasis on 'Time Ownership'.

The idea that you should actually be in ownership of your time is not as popular with the 'powers that be' as the idea that you should be 'trained' to manage your time more efficiently on their behalf.

What is crucial is not what you do with your time or the relative proportions of it which you devote to various activities. No - the crucial point is WHO DECIDES.

If you decide to devote 90% of your time to helping those less fortunate than yourself, that is laudable. Provided you made the decision to so do. If, on the other hand, you are devoting 90% of your time to helping the 'poor' because some religious fanatic told you that this is the only way to save your soul - there is no merit in it. You did not make the decision, it is a form of moral blackmail.

If you decide to devote 90% of your time to the business which employs your services, that is great. Provided you made the decision to do so. If, on the other hand, you are at the 'beck and call' of your boss out of fear of losing your job - you are nothing but a slave.

It is not what you do or how much time you devote to things which really matters. It is how much control you have over deciding what you do with your life, for whom and for how long.

Of course, absolute freedom is elusive. We all have to make certain compromises when allocating time to things. However, most people exaggerate the degree of necessity involved and make out that they 'have to' do things. 'It is alright for you', they will say. 'I have to work long hours'. 'I have a house to pay for, children to feed, a car to run, a 'lifestyle' to maintain'.

Fine. Who chose that particular type of house and the area which it is in? Who chose to have children? Who chose to run that type of car or to even have a car at all? Who dictated the 'lifestyle' which you lead?

There is always a trade-off whatever decisions you make in life. That is why it is vitally important to make your own life decisions. Managing time is managing the trade-offs. Owning time is about making sure that YOU DECIDE what to devote your time to in the first place.

People confuse the two issues. They are encouraged to think that what matters is to manage their existing priorities more 'efficiently'. The truly vital thing is to review those priorities. Who decided what or whom you are devoting your life to? Was it you or was it someone else?

I decided long ago that my priorities were strictly in the following order:-
God, Family, Friends, the wider Society, the pursuit of Enlightenment and finally ... Earning a Living. As you can see, the 'boss' comes a very gallant last!

Does this mean that I do not care about my work or the company I work for? Not at all. It is just that employment, for me, is a means to other ends. It can never be an end in itself.

The above is personal to me. For you - it may be very different. You may put your Work, Employment or Vocation first in the list. 'God' may not even be listed! It is up to you.

The important thing is - MAKE SURE THAT YOU DECIDE