A Much Bigger Issue

So a city trader who lost £1.4billion of Swiss bank UBS's money has been jailed for 7 years after being found guilty of two counts of fraud. It is the biggest case of fraud in history in the UK.

How did he do it? There was no sophisticated plan or financial magic…… he simply bypassed the rules that were put in place but not policed effectively. Kweku Adoboli was literally just a couple of trades away from losing the bank £7.5 billion.

But there is a much bigger issue......some alarming points for you:

1.     This occurred in London under the scope of our own regulatory regime (or lack of).

2.     This occurred 3 years AFTER the banking sector issues had been publicised and greater banking sector policing was promised.

3.     The fraud was only unearthed by accident.

Dare I suggest the current Government’s regulatory policy for the banking sector might not be up to scratch still?

I rest my case your honour.

Shameful

Treble Dip Anyone?

Interesting times ahead……

The UK’s biggest buyers of our goods / services are the Eurozone and US. Like it or not, they are a big deal to our economy. We are heavily reliant on them and this is the key reason that our Government spends far too much time schmoozing with them…..

Big news this week then……

Eurozone

The Eurozone has returned to recession. There is no other way to dress this up other than to say that there will be less money to buy our goods / services.   

US

The figures on which parties will make up the US Government have been finalised this week. We already know that the US will reduce total spending next year by 4% and this will cause shockwaves around the world and lead many economies into recession that are reliant on the US buying their goods / services. That’s us……bugger. The reduction will happen unless the Senate passes a bill to reduce this reduction (I think that works stick with me!) in spending by a lower amount……i.e. 2 - 3%.  The problem though is that Obama’s party occupy 53 seats in the Senate, leaving them unable to pass their own ideas due to the 45 Republican seats. Unless a cross party agreement takes place, a Mexican stand-off will see the 4% reduction become live on 1 January 2013.

 

Not looking good for our two biggest customers then.

So, despite all the spin and chest thumping from Westminster that our economy was in great shape when we limped out of recession a few weeks ago, there is a pretty realistic chance we will head back into recession quicker than you can say treble dip.

Not really the sort of hat trick anyone wants on their CV.

Obama Re-Elected President of the UK!

So there you have it......we now know who our President is for the next 4 years! 

'We'?

Damn right. Ask yourself why TV / Radio / Newspapers ran with the story 24 hours a day? Because the US Presidential Election is more important than our own Prime Minister election process. The UK is nothing more than another US state with a different currency in real terms and the Prime Minster is a State Governor. 

Scary but true. 

How did it get to this stage? A couple of things for you to consider.

1. The US is the biggest economy in the world.

2. The US is the biggest buyer of goods / services in the world.

3. The US is the biggest buyer of exported UK goods / services in the world.

4. US economic policy impacts the UK in a bigger way than any decision made at Westminster.

So in short, the US is a big deal. Their politics are our politics. Their decisions are our decisions.

 

Don't be fooled by Cameron stating that we have a 'special relationship' with the US. The relationship is very much one sided. We need them......they don't need us as we bring very little to the table. 

I wonder how long it is before we in the UK get to vote in the US Presidential Election? Could be sooner than you think!

4 more years! 

Taxing Treatment

Scratching my head at this one……quite a contradiction.

An investigation into Starbucks in the UK has shown that despite £3 billion in UK sales since 1998, only £8.6 million has been paid in tax. That’s a tax rate of less than 1%.

So that suggests……

(1)   They are hugely unprofitable and have had many years of losses.

Or

(2)   They are hugely profitable but have found a loop hole (or two) in the UK tax system.

Or

(3)   HMRC are useless at upholding tax rules.

I’ll let you make your own mind up on this one. But does a company that plans to create 5,000 new jobs over the next 5 years and shareholders were recently told by company executives that the UK business was "successful", "profitable" and they were "very pleased with their performance" sound like a company making losses?

Regrettably, my money is on a mixture of (2) and (3).

One day we will have a fair and just tax system that is policed efficiently.

One day.  

The US Elephant

White Elephant: A Possession Unwanted By The Owner But Difficult To Dispose

With less than a month to go to the US Presidential Election, you can expect our media to really ramp up the coverage of all things Obama and Romney over the next few weeks.

The big issue though is the US Government debt that is the elephant in the room of the US economy and will form the backdrop to the election campaigns. Both parties need a strategy to tackle this……according to the Congressional Budget Office, $655 billion of spending cuts are required. That’s 4.7% of US national income. Or to put that another way……the largest economy in the world will be spending less on our goods and services. The US sneezes……the rest of the world catches a cold.

Tightening of that magnitude could cause the US to fall into recession and this will have a ripple effect.  

So forget the Eurozone problems, Greek demonstrations, 1 in 10 Spanish loans being in arrears, a clueless Government in the UK and X Factor……the real stories to shape the next few weeks are in the US.

Hold tight……it’s a huge few weeks for us.

Good luck everybody.

There’s Gonna Be A Revolution……Apparently!

Revolution: A Radical and Pervasive Change In Society

I started last week to believe every newspaper, radio station, TV programme and politician telling me that it was a momentous day for the UK and pensions. Probably best summarised by the merchants of doom’s (AKA Daily Mail) headline:

The Pension Revolution: Shake-up For 11m Workers As Every Employer Is Forced To Provide Staff Retirement Schemes

But here is the thing……when you ask people from non-profit making organisations (AKA The Government) to make decisions for profit making organisations where 3 out of 4 people work (AKA The Private Sector), mistakes will be made.

Look back at the headline……Every employer is forced to provide a retirement scheme for employees. The key mistake……employees are not forced to join. And therein lies the issue.

With incomes already stretched due to spiralling costs of food, petrol, electric, gas, etc……does a deluded Government expect 11 million workers to pile into something they don’t understand, trust and can’t afford?

Let me be the first to tell you that this is nothing more than a paper chasing exercise for employers. And in 15 years time when the Government realises it has failed due to a low take up rate, they might actually insert the line ‘and employees forced to join’.  

This is scarily and head shakingly obvious for anyone outside of Westminster.

Come on……a little bit of joined up thinking please Downing Street.

West Coast Woe

Everything you need to know about the people at the very top who run this country on our behalf is summed up in the bidding competition to run the West Coast main line train route.

Put simply, the process to bid for the 13 year franchise (worth around £5 billion) was fatally flawed and the winner (First Group) bid on different terms to its competitors.

The Outcome......

Firstly, the decision to award First Group the franchise has been overturned whilst the process is reviewed and likely to be repeated on a level playing field. 21% of the company value has been wiped off via the stock market share price and thousands of jobs are now at risk.

Secondly, £40 million of taxpayer money must be paid out to the 4 companies to reimburse the costs of their bids. That's £40 million......of our money.

If Westminster cannot get the process right to award a £5 billion contract, is it any wonder I have constant concerns at their ability to manage a far bigger economy.

We are one of the most significant players in world economics but this is amateurish.

The most shocking thing is that this isn't shocking.