Thursday, 30 July 2009

Cash & Burn: a skeptics' guide to finance

The millennium's first decade saw the largest boom in credit ever known. Throughout these years I was a baffled and frequently bemused specialist journalist, learning my trade and finding out about the looking glass world of debt finance.

I started in Eurobonds, moved into bank loans, then ratings and structured finance. After that, I set up an information service covering lending to Central and Eastern Europe. I now work for one of the world's largest media organisations, still writing about debt.

Sometime during my career I realised how fortunate I was to be writing about this world. Others might wonder why. Sticking to a largely desk-bound job in the town where I was born hardly sounds glamorous, or exciting.

Many financial journalists spend much of their time plotting to escape this world and land up in the heady territory of political reporting, or highly paid public relations work. I've never been tempted. Well, never seriously.

The reason why I stay is because of the stories. There are always great stories. I sit down at my desk in the morning and my trouble is always one of having too many things to write; my list of story ideas is never short.

So what are these stories? And why haven't you heard about them before?

That's what I aim to explain here. And if these words go on, and people like them, I'll try to turn it into something else. A book maybe. Or a website. We'll see (let's not get ahead of ourselves).

In the meantime, if there's anything you want to know about this weird world, please ask and see if I can find out about it for you.

Monday, 27 July 2009

Debtors prisons

Junaid Malik thought that it happened only to those who had lost their jobs and could no longer afford to pay off debt.

But earlier this month, after missing his monthly credit card payment, he received the call – a collections agent from his bank threatening him with jail if he did not immediately pay what he owed.


While customers condemn such tactics, the banks say they are necessary because the Emirates has no institutional framework, such as a credit bureau or a bankruptcy court, for dealing with bad debts


Debt is to borrow money that one doesn't have with the intention of paying it back later.

In the financial world, it is a rule that you borrow now because having money now rather than later gives a particular advantage, especially if it is costly to borrow the money. If the price of borrowing money goes down, the more incentives the borrower has to borrow.

Justify yourself

The need to prove a story by market movements leads to farcicial statements such as this:

"But as deadlines keep passing by -- the bond was meant to be repaid in May -- investors are getting increasingly uneasy.

Shares in Independent, which is sagging under the weight of a 1.4 billion debt pile and a collapse in advertising, were down nearly 1 percent in late trade."

Nearly 1%? Does that really show anything?

Tuesday, 21 July 2009


Not wishing to sound like a cracked record, but this is very strong evidence of what I've been arguing for some time: the Guardian is more "talk" than "walk".

Here's a (long) list of Oxbridge attendees at the ever-so-equal Guardian. It's not comprehensive, unfortunately.

Martin Kettle – Balliol College, Oxford

George Monbiot – Brasenose College, Oxford

Jonathan Freedland – Wadham College, Oxford

Catherine Bennett – Hertford College, Oxford

Zoe Williams – Lincoln College, Oxford

Tanya Gold – Merton College, Oxford

Marina Hyde – Christ Church, Oxford

Bidisha Bandyopadhyay – St Edmund Hall, Oxford

Melanie Phillips – St Anne's College, Oxford

Emily Bell – A. N. Other College, Oxford

Allegra Stratton – Emmanuel College, Cambridge

Peter Bradshaw – A. N. Other College, Cambridge

David Mitchell – Peterhouse, Cambridge

Riazat Butt – A. N. Other College, Oxford

David Shariatmadari – King's College, Cambridge

Timothy Garton Ash – St. Antony's College, Oxford

Simon Tisdall – Downing College, Cambridge

Andrew Osborn – Oriel College, Oxford

Jane Martinson – A. N. Other College, Cambridge

John Hooper – St Catharines College, Cambridge

Ian Black – A.N. Other College, Cambridge

Sam Leith – Magdalen College, Oxford

Peter Preston – St John's College, Oxford

Andrew Rawnsley – Sidney Sussex College, Cambridge

Simon Jenkins – St John's College, Oxford

Alexander Chancellor – Trinity Hall, Cambridge

Alan Rusbridger – Magdalene College, Cambridge

Paul Sagar – Balliol College, Oxford

Richard Norton-Taylor – Hertford College, Oxford

Clare Armitstead – St Hilda's College, Oxford

Janine Gibson – St John's College, Oxford

Martin Wainwright – Merton College, Oxford

Victoria Coren – St Johns College, Oxford

Simon Hoggart – King's College, Cambridge

Nick Cohen – Hertford College, Oxford

Ben Goldacre – Magdalen College, Oxford

Seumas Milne – Balliol College, Oxford

Rowenna Davis – Balliol College, Oxford

Hadley Freeman – St Anne's College, Oxford

Paul Lewis – King's College, Cambridge

John Harris – Queen's College, Oxford

Madeleine Bunting – Corpus Christi College, Cambridge

Jackie Ashley – St Anne's College, Oxford

Polly Toynbee – St Anne's College, Oxford

(Also Larry Elliott, Fitzwilliam College, Cambridge)

From here:

Thursday, 16 July 2009

Ignorance isn't bliss

In its modern form, the Guardian (sorry for repeating) prefers to employ shallow stylists to write for their paper rather than solid, 'hard news' reporters. These writers are encouraged to write beyond their specialisation. Sometimes this is amusing, often it is deeply annoying. If I want to hear the views of someone with no expertise but lots of opinions, I'd go down the pub.

So here is Hadley Freeman talking about the need for more finance education. Nothing wrong with that you might think. However, when the thrust of the story is incorrect (Madoff's rip-off was not about financial illiteracy) it is ironic to call for greater education. Physician, heal thyself!

Monday, 13 July 2009

Saint George and the dragon

There is a lot to admire about Guardian columnist George Monbiot. He is an active man with a vibrant intelligence and a willingness to act. In general, the world is a better place with people like him in it.

Unfortunately many of his articles are rather woeful. Trained as a zoologist, Monbiot has a willful naivity that he must regard as a strength. He is a single issue campaigner who believes he is not. A unsophisticated man who believes he has the key to understanding the entire world. (There is much in this critical review that I agree with.)

Most of the time this does not bother me. The Guardian knows its readership, and knows that it needs on its staff a saintly, curly-haired columnist who writes well-meaning books about the evils of corporations and the virtues of revolution. He is the acceptable face of the naive Left which by its own intellectual weakness is destined never to get a whiff of power.

Sometimes, however, he makes claims that need to be forcefully rejected.

Last week, he complained about "astroturfers" who come on to the Guardian's website and disagree with him about climate change.

Many of the posters [who disagree with him] appear to have fallen for the nonsense produced by professional climate change deniers, and to have adopted their rhetoric and methods. But it is implausible to suppose that this is all that's going on. As I documented extensively in my book Heat, and as sites like DeSmogBlog and Exxonsecrets show, there is a large and well-funded campaign by oil, coal and electricity companies to insert their views into the media.

Monbiot is not alone in having such theories. I used to know someone on Urban75 that spent a considerable amount of time trying to work out how those that argued against climate change theories were paid. And I have often been in discussions with left-wing campaigners simply unable to believe that those with right-wing views can honestly believe the things they do.

So Monbiot takes his argument to its logical conclusion: if those that disagree with him are either stupid, irresponsible or dishonest, then there should be much tighter controls on who can comment.

"I ... believe that everyone who comments here should be accountable: in other words that the rest of us should be able to see who they are."

On the surface this sounds reasonable but both the specific point and the general are deeply problematic.


Banning anonymous responses would severely limit those commenting, and it would restrict the nature of the comments too. People would -- and probably should -- worry about the possible long-term consequences of their posts. A quick google search by a future employer might reveal everything ever posted.

Many current employers would have issues with such open comments. I, for one, am banned from posting on message boards under my own name, as are my colleagues.

There might be positive sides to the idea but it is unarguable the idea would restrain commenting and dampen debate. The Guardian's messageboards would end up a tedious and worthy place, full of people happy to post up bland comments under Monbiot's articles.

The wider point that Monbiot's suggestion raises needs also to be challenged.

People do not need to be misled to disagree with George, nor do they need to be stupid. Everyone has different views, and it is a matter of intellectual maturity to understand this, and to understand what this means.

And people do not need to be paid to disagree with Monbiot's sometimes odd ideas -- they usually contain enough hot debating points to irritate a large number of internet debaters.

Conspiratorial thinking such as this damages our society in other ways. For one thing, it corrupts debate by diverting attention away from critical thinking and wider engagement and towards an inward, defensive approach to intellectual debate.

Look at how Monbiot's attack on poster "scunnered52" in the comments on this thread prompts other debaters to smear other commenters as fakers.

Or look how Naomi Klein's latest book accuses an intellectual, Milton Friedman, to be guilty of genocide, to the broad welcome of the media.

This is not new. Much of Noam Chomsky's oeuvre comprises finding "structural" reasons why journalists and academics do not agree with his unusual point of view and distinctive reading of western history, ignoring their views.


A vivid illustration of Monbiot's politics can be seen in this video of him interviewing the then Labour cabinet minister Hazel Blears.

Blears might be unpopular but she has grit. Unlike Monbiot -- brought up in a large country house in a Tory family, before going to Oxford -- Blears has old fashioned working class roots. Born and brought up in Salford, Blears always says she uses the local people's views and interests to keep her straight.

As such, the pair's encounter is fascinating. Blears keeps to the party line, and tries to demonstrate that the Labour government has helped the poor. Monbiot has no comprehension of this form of politics -- of party, of tribe, of class, of Tory vs Labour -- and instead wishes only to ask Blears why she doesn't agree with the issues he believes to be most important.

There is no middle ground. There cannot be. Monbiot cannot accept the reality of Blear's political world, of cabinet collective responsibility, and the compromises inevitable when making choices in a complex environment (Blair's oft-repeated 'difficult decisions').

If that is politics, Monbiot appears to say, then we must all, everyone in the world, immediately start again, according to the rules he has made up.

But Monbiot's politics is just as tribal as Blears' world. Monbiot is in the "green-left" tribe which decided some decades ago to fight the "military industrial" tribe. All of his political views operates through this narrow prism.

To those that believe that Monbiot is an optimist, I would argue the opposite. It is Monbiot that sees the internet to be full of enemies, out to drag him down (ego?). It is Monbiot that ignores the positive developments in the world (declining infant mortality, for instance) to focus solely on the issues that we currently find difficult to solve, before moving to draw mean-spirited conclusions about those that try to fix them.

Monbiot may think he is so right as to accuse and insult those that disagree with him but to my mind his reaction shows he has already lost the debate. A good debate is open, pluralistic and accepting of the honesty of others' views, however wrong they may appear to be.

As the hour grows late, and I continue to argue, I am reminded of one of my favourite cartoons.

Friday, 10 July 2009

Monday, 6 July 2009

Thirst for justice 1; Truth 0

It started this morning listening to John Humphreys interview TUC chief Brendan Barber. Why, Barber was asked, should public sector workers be able to avoid the pay cuts and job losses seen elsewhere in the economy.

Barber's reply was that this was because many public sector workers are low paid (true) and that they were not responsible for the mess the economy is in (highly debatable). Humphreys demurred, saying that only a small number of people were responsible.

This reminds me of a piece by Zoe Williams in the Guardian last week. It is not the most coherent of articles but where it does focus, it says that people want to slake their thirst for justice more than they want to understand the issue. I couldn't agree more.

It it possible that we jump up and down at our MPs because we enjoy doing so, not because the crimes they committed are uniquely heinous. Much of the reason they claimed expenses because of an institutional cowardice to ask for higher pay. The fees office was frequently complicit in the claims made, a part of the Telegraph story that never really fitted with their sensationalist reporting.

The danger of this approach is that nothing significant changes but our world becomes less meaningful and more fearful of media attacks.

A senior civil servant I spoke with a couple of weeks ago says that a majority of her time is now occupied with trivial media requests, as is much of government, and this feeds substantially into policymaking.

Is this how it should be? Does the media use its increased power responsibly? Very few people seem to be asking this most urgent question.