Rethinking expectations

Published by Anonymous (not verified) on Thu, 14/09/2017 - 4:53pm in



The tiny little problem that there is no hard empirical evidence that verifies rational expectations models doesn’t usually bother its protagonists too much. Rational expectations überpriest Thomas Sargent has defended the epistemological status of the rational expectations hypothesis arguing that since it “focuses on outcomes and does not pretend to have behavioral content,” it has proved to be […]

Northern Rock: ten years on

Published by Anonymous (not verified) on Thu, 14/09/2017 - 4:35pm in


Banking, Economics

It is ten years ago today that Northern Rock failed. I will be speaking at a Tax Justice Network organised event at the Royal Society of Arts this evening to mark the occasion.

I have particular association with what happened at the time. I reproduce below what was the first of many blogs that I wrote on the subject. This one was just three days later, making me one of the first people, if not the first person, to ask the questions which eventually were seen as core to this issue on matters such as securitisation, a shadow bank, the use of orphan entities, the abuse of offshore and structuring via special purpose vehicles. Back then most people had never heard of many of these things. Little did they know the price they were to pay for their existence.


Northern Rock is in trouble because it has financed its mortgage book by borrowing commercial money rather than taking deposits from customers. To do that it has issued ‘commercial paper’. And now no one wants it.

I’ve looked at that ‘paper’. I’m not surprised no one wants it. Most of this ‘paper’ is issued through a long series of special purpose vehicles which re named in its accounts. To get some idea look at this list:

That’s near enough £40 billion of notes in issue.

Then look at how just one of these is structured through Granite Master Issuer PLC. The deal structure diagram looks like this:

It gets more complicated though. The securitisation structure looks like this:

All of which is a completely prefabricated farce. How can I say that? Take these facts:

1) Note who the share trustee who owns Granite is – it’s a Law Debenture Company. This group exists to provide services to special purpose vehicles. No surprise it has offices in London, New York, Delaware, Hong Kong, the Channel Islands and the Cayman Islands.

2) Granite is actually owned by a Law Debenture subsidiary, not by Northern Rock. I’ve checked.

3) However it does so as trustee – the beneficial ownership is supposedly explained here (it’s in the first diagram above as well):

The entire issued share capital of Holdings is held on trust by a professional trust company under the terms of a discretionary trust for the benefit of one or more charities. The professional trust company is not affiliated with the seller.

Any profits received by Holdings, after payment of the costs and expenses of Holdings, will be paid for the benefit of the Down’s Syndrome North East Association (UK) and for other charitable purposes selected at the discretion of the professional trust company. The payments on your notes will not be affected by this arrangement.

4) I have a word for this. It is a sham. I can say that because the Northern Rock accounts say:

Basis of consolidation
The financial information of the Group incorporates the assets, liabilities, and results of Northern Rock plc and its subsidiary undertakings (including Special Purpose Entities). Entities are regarded as subsidiaries where the Group has the power to govern financial and operating policies so as to obtain benefits from their activities. Inter-company transactions and balances are eliminated upon consolidation.

In other words that trust is not real. Northern Rock controls Holdings, but pretends not to via complex legal structures for certain purposes to try to avoid some of the risk of ownership arising from doing so, no doubt. Why else do this?

I call this three things:

a) An abuse of the charity involved, who (I stress) need not even have given their assent to be used in this way;

b) A contempt for those who take the real risk on financial markets, which is at the end of the day as this fiasco is showing, you and me and the government;

c) The construction of an arrival device to ensure that as few people as possible, almost certainly the Northern Rock directors included, know just how this deal works. I guarantee you it’s a tiny number that do.

And it’s this wholly artificial construction, seeking to shift liability and to avoid responsibility and abusing common sense decency with regard to the abuse of charity to achieve commercial aims that is pulling Northern Rock down.

Of course it’s not alone. This type of deal is constructed every day off shore. It’s the bread and butter of international finance.

It’s why we can’t trust markets. It’s why regulation is needed. It’s why ownership has to be revealed. It’s why declaring where you’re working is so important. It’s why accountants have once more to put substance over form.

Now I know that for a change these Northern Rock entities were on balance sheet but most aren’t. And can you see as a result why no one will lend inter-bank now? They’ve all been so busy creating these sorts of artifice that no one dare do so – because they all know the warts in their own system, so presume there must be as many in everyone else’s.

It makes me believe, more than ever that the City is rotten to the core. Prove otherwise is my challenge.

Energy chaos in Australia: closing the Liddell Power Station

Published by Anonymous (not verified) on Thu, 14/09/2017 - 7:43am in



A country with such abundant resources is incapable it seems, of handling matters of reliable supply, either in terms of affordability, or in terms of delivery.

Crisis and Closures in the Academy Schools

Published by Anonymous (not verified) on Thu, 14/09/2017 - 4:02am in

One of the major issues is the Tories’ continuing attempts to destroy whatever remains of value in the British education system, all for the profit of big business. Last week, one of the academies closed only a week after it had opened. I did wonder what would happen to its pupils. Would they be thrown out and denied an education, as they had enrolled in the wrong school and there may not be places available in the other local schools.

Fortunately, that’s not going to happen. From what I understand the school will be kept open until someone else is found to take it over.

But it is still absolutely scandalous that British schools are now run by private companies, who can announce at any time that they are no longer interested in running them. Especially as tens of millions of taxpayers’ money is given to individual academies, far beyond the budget for the local LEA. In some cases, the amount spent on an academy can reach £40 million, while the budget for the LEA is under a million.

As for replacing LEA’s, from what I understand from talking to friends about them, the authorities dictate that schools can only join certain academy chains. This makes a mockery of the claim that they are outside LEAs, as these chains in effect act as them. But I suppose as the academy chains are all privately run, the government thinks this is just as well then.

I also understand that one of the academies in Radstock in Somerset doesn’t even belong to a chain based in the UK. The chain’s based in Eire, and all its directors live across the Irish Sea. I can’t say I’m surprised. Eire attempted to encourage investment by massively cutting corporate taxes, in the same way that the Tories are doing for Britain. Thus you find many businesses, that actually do their work in Britain, have their headquarters over there, using the country as a tax haven. And the ordinary people of Ireland have paid for this, just as we Brits are paying for the Tories’ self-same policy over here. One of the books I found rooting through one of the bargain bookshops in Park Street was by an Irish writer describing the way his country’s corporate elite had looted the country and caused its recession. Like the banksters in Britain and America.

The academies are a massive scam. They were launched under Maggie Thatcher, and then quietly wound up as they didn’t work. Blair and New Labour took over the idea, as they did so much else of the Tories’ squalid free market economics, and relaunched them as ‘city academies’. And then, under Dave Cameron, they became just ‘academies’.

They were never about improving education. They were about handing over a lucrative part of the state sector to private industry. They aren’t any better at educating children than state schools. Indeed, many can only maintain in the league tables by excluding poorer students, and those with special needs or learning difficulties. And if state schools had the same amount spent on them as those few, which are more successful than those left in the LEAs, they too would see improved standards.

In fact, academies offer worse teaching, because as private firms in order to make a profit they have to cut wages and conditions for the workforce to a minimum. And with the Tories freezing public sector workers’ wages, it’s no wonder that tens of thousands of teachers are leaving the profession.

And those companies interested in getting a piece of this cool, educational action are hardly those, whose reputation inspires confidence. One of them, apparently, belongs to Rupert Murdoch, at least according to Private Eye again. Yes, the man, who has almost single-handedly aimed at the lowest common denominator in print journalism, lowering the tone and content of whatever newspaper he touches and whose main newspaper, the Sun, is a byword for monosyllabic stupidity and racism, now wants to run schools. Or at least, publish the textbooks for those who do.

Academy schools are a massive failure. They’re another corporate scam in which the public pays well over the odds for a massively inferior service from the private sector, all so that Blair and May’s mates in the private sector could reap the profits.

It’s time they were wound up. Get the Tories out, and private industry out of state education.

RT Parliamentary Coverage: Nurse and Labour MP Karen Lee on NHS Crisis

Published by Anonymous (not verified) on Thu, 14/09/2017 - 3:25am in

In this very short clip from RT, Unison nurse and Labour MP for Lincoln, Karen Lee, describes the chronic lack of nursing in the NHS, and the threatened closure of walk-in centres in her constituency.

Hunt stands up, thanks her for her work in the NHS, and then admits that there is a shortage of nurses in the NHS, there was when he began as health secretary, and then declares he will go on to tell her how he means to solve it. This is where the clip ends.

Lee is absolutely right, just as she is right to remind him that the NHS is seriously underfunded while at the same time, the government is cutting corporation tax and has given £1 billion to the DUP. The government cannot rightly talk about austerity when this goes on.

There’s a piece in today’s I by Yasmin Alibhai-Browne, whose headline states that austerity was never about reducing the deficit. It was all about a Tory class war on the poor. Which is what Owen Jones, and very many other bloggers, including Mike over at Vox Political, have been saying for years.

As for Hunt’s plans to get more nurses into the NHS, I am extremely skeptical about this. All the evidence I’ve seen shows doctors and other medical professionals leaving the NHS. As for those nurses that remain in it, they are to be applauded as they’re increasingly treated extremely shabbily. Such as those, who are forced to use food banks, for example.

The threatened closure of the walk-in centre also shows the massive dangers of the Blairite/Tory NHS privatization. The walk-in centres, otherwise known as polyclinics, were part of New Labour’s big idea for NHS restructuring, which including dismantling the NHS and opening it up further to private investment. Again, not a new idea. Like most of Blair’s economic thinking, it was taken over and developed from the Tories, like the Private Finance Initiative generally. These polyclinics were intended to be privately run, hence the interest in them from the usual private healthcare firms, including ‘Beardie’ Branson’s Virgin Health.

Since private companies have taken over hospitals and GPs’ surgeries, we’ve seen one hospital after another go into the red, while Private Eye reported in their ‘In The Back’ column how several surgeries in London were closed down, and their patients thrown out without medical care, by the private firm running them. Private enterprise in the health service doesn’t work, and leads to gross inequalities in healthcare provision and massive profiteering by the companies.

But Hunt, for all his weasel words about getting more nurses into the NHS, doesn’t care about any of that. Indeed, he actually advocates the NHS’ privatization, though he is very loud in denying it in public. As is his mistress, Theresa May. And it’s been the same all the way back to Margaret Thatcher, who really wanted to privatize the NHS under there was a massive cabinet revolt, as well as evidence from her personal private secretary, Patrick Jenkin, who came back from a fact-finding mission to America and informed her how wretched American private healthcare was.

Don’t be taken in by Hunt’s lies. Believe Karen Lee, and kick out the Tories.

On Freedom with constraints

Published by Anonymous (not verified) on Thu, 14/09/2017 - 1:49am in

Disabled people are constrained and limited by their bodies....The simple act is that, disabled or non-disabled, we are all limited and constrained by our bodies. To have a body that is any particular way is to have a body that is limited and constrained in some respects an in comparison to other kinds of bodies. That's just part of what it is  to have a body. Some of us are male, some of us are female. Some of us are tall, some of us are short. Some of us are flexible, some of us are stiff. Some of us are stocky, some of us are willowy. There are all sorts of ways that bodies can be. And each way a body can be comes with some limitations and constraints.

We all adapt our preferences due in part to the limitations of our bodies---that's an utterly ordinary thing to do. Elizabeth Barnes (2016) The Minority Body: A Theory of Disability, 132 (emphasis in original).

Recall that at the core of Barnes's book is the idea that all human bodies face constraints. In particular, it is part of the nature of what it is to be a human body that all human bodies are in a position of not being able to do some X; with X being something other human bodies can do (or could be/have or can instantiate), and X being really important to some humans. It is a fairly common conceptual and maybe even phenomenological mistake to think of disability in terms of constraint, but to ignore simultaneously the existence of constraints in the context of (complex) experiences that arise from having other types of bodies (even though those bodies by necessity include all kinds of constraints).

Now one way to understand Barnes's contribution, is that constraints -- or to put it Spinozistically, limitations -- are constitutive of our embodied existence. When states as such it may seem an obvious point, but (i) I doubt it is really properly represented in much philosophical theorizing (despite the growth of embodied cognition), especially in political philosophy (outside some areas of feminism); in particular, (ii) to overlook Barnes's insight (on the constrained nature of human existence) is, when one is discussing, say, human freedom, to contribute to possibility that one may tacitly assume away a whole bunch of constraints because one (tacitly) brackets those as belonging to some image of our biological or (proper) natural functioning.

I think something like (ii) (because of (i)) occurs in political philosophy. (This is also an important place to call attention to Elizabeth Anderson's (1999) important point that much of the literature in luck egalitarianism treats disability as something pitiful and somehow fails to represent what the political aims of minority bodies might be.) Let me give an example from the literature on social freedom; in this scholarship, the Hobbesian conception of freedom (to speak anachronistically) as preference satisfaction is replaced by all kinds of conceptions in which absence of constraints (or counterfactual constraints) are treated as intrinsic to social freedom. Here's an illustration from (2016) Christian List & Laura Valentini:

Freedom as independence: An agent is (socially) free to do X if and only if, robustly, there are no constraints on her doing X. (1067)

I use List & Valentini because they write clearly and offer a nice survey of alternative views (and how to classify them). All these views have absence from constraints (in some sense or another) built into their conception. As they point out, "Liberals, following Isaiah Berlin, define freedom as the absence of constraints on action, where the constraints that matter can be spelled out in various ways. Republicans, especially in Philip Pettit’s influential interpretation, instead argue that freedom requires nondomination: the guaranteed or robust absence of arbitrary constraints." (1044)*

As they unpack freedom as independence, they add the following remark on the nature of constraints:

We have already commented on the availability of different notions of possibility in defining freedom as independence, based on the intended application. The possible freedom-undermining constraints may be social (e.g., legal, political, customary) or purely “natural” (concerning what is possible given the laws of physics and biology), for example. From a social perspective, it makes little sense to describe an agent as “unfree” to jump 1,000 meters in the air, yet from a physical one it does. Once we become aware of these different notions of possibility, we need not accuse those who describe physical inabilities as “unfreedoms” of conceptual confusion. We can more charitably point out that the freedom they are talking about is not “social” freedom—the kind of freedom in which social and political philosophers are interested. (1070)

Now, I have no desire to describe physical inabilities as “unfreedoms,” but I do think that reflection on the existence of minority bodies and the constitutive role of constraints in our existence show that: (a) both the opposition between the social and natural that List/Valentini rely on can't really be sustained [that is, the realm of the 'natural' needs to be drawn much narrower] and (b) that embodied "inabilities" are central to social and political philosophy, even if (c) too many political philosophers have failed to be "interested." I recognize that some readers may wish for a detailed argument here (and it may not be trivial to supply it), but I hope that the point is clear with some reflection.

Before I am misunderstood: I am not denying that 'liberals' and republicans' in the sense used here can talk about the ways in which we organize society inhibits minority bodies and can even be made to reflect that these ways are deplorable and need to be addressed. But I am suggesting that they tend to presuppose an image of normal functioning -- and the Republican version is traditionally gendered in masculine and virile ways -- that does not quite due justice to important features of human existence and treats minority bodies de facto as less free or less capable of being free (because subject to more constraints).+

So, what is needed is, and I suspect I am not the first to notice this, is a conception of freedom with constraints that is not merely preference satisfaction, but that can do justice to the fact that all human bodies are in a position of not being able to do some X; with X being something other human bodies can do (or could be/have or can instantiate), and X being really important to some humans, and that society structures the political and social significance of both X and not X. 



 *I think there are conceptions of social freedom that are neither Hobbesian nor in the absence of constraint genre and that are properly liberal (e.g.,  Dennett's treatment in Elbow Room), but that are not properly part of the canonical present presentation of the state of play in political philosophy. But often the 'free will' literature and political philosophy literature occupy different scholarly universes.

+Some other time I'll say something about the role that the so-called "Ordinary-language plausibility: The conception displays an
adequate level of fidelity to ordinary-language use" (1051) plays in all of this.

Austerity Britain: Grenfell

Published by Anonymous (not verified) on Wed, 13/09/2017 - 5:38pm in

I contributed to the first three parts of Ryan Chapman’s ‘Austerity Britain’ series of films. I’m not in this one, which features the relationship between austerity and Grenfell Tower, but share it to recognise the worth of what Ryan has done and the cause he is promoting:

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Austerity Britain: Grenfell

Austerity Britain is a series of short films challenging the claim that "we're all in this together" and exposing the 'culture of cuts' as a counter-productive ideological obsession.Part Four explores the ways in which austerity played a part in one of the most horrific accidents in recent history, the Grenfell fire.

Posted by Sub on Dienstag, 12. September 2017


Who is aiding and abetting and what might be done about it?

Published by Anonymous (not verified) on Wed, 13/09/2017 - 4:23pm in



This comment was made on the blog yesterday in the context of Companies House only employing six staff to check the filings of nearly four million UK companies:

If what is described here as the modus operandi and staffing levels, Companies House is by default, at least, aiding and abetting fraudulent activities many of which may well be criminal?

Alongside the destaffing of HMRC it’s a wonder ‘we’ have any tax income at all.

I think the point is an interesting one. And it is true. I think Companies House is aiding and abetting criminal activity by failing to ensure company law is adhered to by failing to provide the resources required to undertake proper company regualation.

But let me be clear, it’shardly alone in being an organisation that aids and abets crime and money laundering. To take another example, every time a telephone company provides services to someone making bulk calls that seek to exploit the vulnerable in a fraudulent fashion it too aids and abets crime by failing to put the systems in place to prevent this happening. And the reason why they fail? Profit, of course, derived from the crime.

It’s the same with those delivering bulk mail that is fraudulent.

And the ISPs who deliver emails claiming to be from HMRC.

All these agencies claim to be bystanders whilst a crime goes on and that it is not their job to stop the abuse. I do not see why not. Prosecute just one director in a large company for aiding and abetting crime in this way and see what happens then. Alternatively, make them liable for the losses as banks are for insurance misselling. The acivities would stop overnight, just as a charge against the director of a public agency that failed to stop crime would overnight change the attitude of those who have willingly imposed cuts without considering they are responsible for the consequences.

Will it happen? I doubt it. The elite don’t criminalise the elite because they think the elite couldn’t possibly do something as tawdry as assist crime when pursuing profit or imposing public sector cuts. But to expose the fact that this is exactly what they do is now necessary. Use the laws that are available, in the case of the companies I note by simply alleging that they have profited by faciliating money laundering, and then see everything change. Just one prosecution would do.

I’ll live in hope.

Who has got an upside from Brexit?

Published by Anonymous (not verified) on Wed, 13/09/2017 - 4:15pm in



This comment was posted on the blog yesterday:

Dear Richard,

I have read a certain amount of your articles and you seem to speak with a certain amount of knowledge and authority, and therefore I wish to pose a direct question to you. Who does benefit from Brexit?, it seems clear who the losers will be but who are the likely winners?

I thought that a fascinating question, so I am offering a blog post response.

First, let’s be clear that most elites very clearly did not want Brexit. Don’t be confused by those business people who backed it. Wetherspoons, Timpsons and others owned by those supporting Brexit are not multinationals and nor are they at the centre of the economy. Nor are their owners part of the normal business elites. So right now it cannot be said that the elite (however they are defined) planned a Brexit win.

Nor did most unions.

Or a majority in most political parties, whatever is happening now.

And let’s be quite clear that just about no one in the EU, whoever they might be, wanted it.

So who did, and why? I think it safe to say three groups wanted it. The first were dogmatic nationalists. These have always been found in the Conservarive Party, but did of course provide the foundations for UKIP. Nationalism is not rational. It is not dogmatic. The gain they secure will not be economic. Whether in that case the national pride they think has been wounded by EU membership will be healed is open to doubt.

Second there are those quite obviously left behind by society in the last thirty or so years. These are people whose skills, and the whole sectors they worked in, have been made redundant in that time. In many cases their whole communities have suffered with them. Tending to be older and more male than female on average, many have not adapted well to their loss of the status they once had. This has fuelled resentment, not least of those in any employment. They think, or at least hope, that Brexit might restore their fortunes or that of their communities. It is not clear how this might happen.

And then, thirdly there were those who more generally felt that this was an opprtunity to reject what most establishment politicians wanted on the grounds that neoliberal politicians have chosen to represent themselves and the whole political process as incompetent in the face of market forces. Many sent a rejection message as a result. I find this group, if anything, the most baffling. What gain they thought they would make from Brexit I do not know, but feel sure they will be disappointed.

So who will gain? Only the ideologues as far as I can see.

Plus those who are mobile, who always tend to be those with wealth, because they can quit and move elsewhere.

For everyone else the only tally will be of the losses. Try as I might I can’t yet see an upside.