Print Story Goodnight hoppers, goodnight hustlers
By R Mutt (Tue Feb 19, 2008 at 09:29:18 PM EST) MLP (all tags)
Articles. Richard Tarlton: Elizabeth's jester, Shakespeare's clown. Texas beyond history. [:(]

Pics. Junkie pancakes. I love my appliance. Mummy makeup [MC :o]

Software. Joel: Why are the Microsoft Office file formats so complicated? [:(]

Socioeconomics. Why do we have fewer friends? Flat tax reduces evasion in Russia. Kaletsky on Northern Rock [:(]

Worst of all, the provision of £100 billion of state guarantees to a grossly mismanaged and insolvent mortgage bank would be a gross insult to the hundreds of thousands of workers in businesses from coal, steel and textiles to performance cars and advanced electronics whose jobs could have been saved with Government guarantees or “temporary” nationalisations costing one-tenth or even one-hundredth of the £100 billion that the Government is now devoting to just 6,000 jobs at Northern Rock.
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Goodnight hoppers, goodnight hustlers | 41 comments (41 topical, 0 hidden) | Trackback
Other things that bother me about Northern Rock by R Mutt (3.33 / 3) #1 Wed Feb 20, 2008 at 12:03:24 AM EST
1. Paraphrasing Anatole Kaletsky, it bothers me the same way as the proposed Rover bailout. Either Northern Rock is a viable business (with a bit of cash injected), or it isn't. If it's viable, then the private sector ought to take it over: the government shouldn't be running private businesses. If it's not viable, then it ought to be wound down protecting the savers.

The way it looks now is that all the actual bankers think it's not a viable business so no-one will buy it. The government seems to be saying, "Hey, we know more about running a bank than the bankers do. So, we can run it at a profit even if they can't". Seems to me that it could mean pouring billions into a leaky bucket over the next few years.

2. It smells too much like classic Brownite dithering. Deciding whether it's viable or not would mean making a decision. Trying to run it as a viable bank in the public sector seems like a way to avoid a tough decision where you have to choose between 6000 jobs lost or a billions of pounds lost. Only this way is likely to end up with both pissing away billions of pounds, then sacking 6,000 people in a couple of years when the losses become unacceptable.

3. Having the government in the banking business seems to set up a conflict of interest. The Bank of England and the government have to do a delicate balancing act with the money supply: too much money around and there's inflation, too little money and you hurt businesses. Especially fragile businesses like Northern Rock.

So now, it seems to me it's going to be tempting for the government to tolerate high inflation in order to keep their toy bank from hemorrhaging cash.

In 1971 by jump the ladder (4.00 / 4) #2 Wed Feb 20, 2008 at 12:43:00 AM EST
No bankers would lend Rolls-Royce aero engines the money to continue developing the RB211 jet engine after development problems so it was forced into bankruptcy and nationalised by the govt.

30 years after this it is one of the most successful British companies in the world and is number two in the world after GE in the jet engine business. Was trhe govt right to rescue this company despite the private sector viewing it as too risky atbthe time? 

[ Parent ]
I see that as being part of the arms industry by R Mutt (4.00 / 3) #3 Wed Feb 20, 2008 at 01:19:17 AM EST
Which is basically supported by massive hidden subsidies and outright bribery. See As Used on the Famous Nelson Mandela by Mark Thomas for instance, or the BAE/Saudi scandal.

I'm not convinced Rolls-Royce is actually independently viable, rather than supported by giant subsidy schemes like the Eurofighter consortium and the Airbus subsidies. Would Rolls-Royce still make a profit if UK and EU governments weren't funnelling tax money into it that way?

So yes, I'd say let the whole thing die.

Now I think it's true that some jobs are preserved by subsidies like that. But I'm not sure it's a particularly cost-effective way of doing it. Why not pump money into the NHS or education or scientific research or the welfare system instead. That way you also create jobs and you get to build houses, advance science, and make sick people better at the same time.

[ Parent ]
Perhaps defence subsidies it by jump the ladder (4.00 / 2) #4 Wed Feb 20, 2008 at 01:35:53 AM EST
But Rolls-Royce doesn't have monopoly on Airbus planes. It sometimes is the lead engine maker on Airbus but sometimes the launch engine is GE one.

[ Parent ]
I'm pretty suspicious of it though by R Mutt (4.00 / 1) #5 Wed Feb 20, 2008 at 01:55:27 AM EST
Airbus is heavily subsidized at an EU level. I suspect that the UK puts quite a lot of hidden pressure on the EU to make sure that money goes back to Rolls-Royce and other UK industries.

I think if they applied the Rolls-Royce strategy to Rover, what would happen is that they'd announce every teacher and civil servant in Britain is getting a Rover 200 company car. Rover would leap into profit, and could be trumpeted as a British success story. But it would still be being subsidized indirectly: all that they'd be doing is buying British jobs in an expensive and inefficient way.

[ Parent ]
If it wasn't Rolls Royce by nebbish (4.00 / 1) #7 Wed Feb 20, 2008 at 02:10:15 AM EST
It's be another company somewhere else under exactly the same circumstances. The strangeness of the industry makes it a difficult example.

I'd say farming subsidies are a more interesting one - economic consistency and long-termism, or the short-term misery ending them would cause?

It's political correctness gone mad!

[ Parent ]
Get thee to France by Rogerborg (4.00 / 2) #8 Wed Feb 20, 2008 at 02:41:32 AM EST
And see if you can spot a gubmint-owned Automobile that isn't French Made.

I believe that Mr the Prime Minister finally deigned to be taxied around in a stretched 75 about a month before the Rover shitstorm broke.  Before that, it was just the little red faced chap in Midsomer Murders that was waving the flag for UKania.

Metus amatores matrum compescit, non clementia.

[ Parent ]
Same in USia by wiredog (4.00 / 1) #13 Wed Feb 20, 2008 at 03:47:43 AM EST
But I'll give the USG this credit: They're the cheapest US made cars that will do the job.

Earth First!
(We can strip mine the rest later.)

[ Parent ]
This is all a bit too difficult for me by nebbish (4.00 / 1) #6 Wed Feb 20, 2008 at 01:59:11 AM EST
I find it interesting and educational though, pls carry on everyone

It's political correctness gone mad!

[ Parent ]
It's number three by yicky yacky (4.00 / 1) #9 Wed Feb 20, 2008 at 02:55:51 AM EST

that's the real problem, I think. Clever business boffins are going to figure out all kinds of ways to game the existence of a state-run bank, much in a similar way that the net effect of cancelling the interest on certain countries' crippling debt payments merely allowed western speculators to buy the debts cheaply and impose their own interest. I foresee a lot of creative accounting taking advantage of taxpayer-backed banking.

Vacuity abhors a vacuum.
[ Parent ]
Also by jump the ladder (4.00 / 2) #11 Wed Feb 20, 2008 at 03:02:26 AM EST
The good quality loans of Northern Rock are owned by Granite PLC not Northern Rock as part of the securitisation process and legal agrement oblige Northern Rock to keep this vehicle topped off with top quality loans.

Having worked on a similar vehicle for securitisation of a loan book for a large UK bank, the legal and accountancy rules to entangle one of these are horrendous.

[ Parent ]
Previously in State Run Banks by Vulch (4.00 / 1) #15 Wed Feb 20, 2008 at 03:55:15 AM EST

The TSB was around for a good few years, though the assorted de-mutualisations and similar changes that muddied the financial pond have altered the environment since it was sold off.

[ Parent ]
About #3. by Christopher Robin was Murdered (4.00 / 1) #16 Wed Feb 20, 2008 at 05:16:22 AM EST
How does the Bank of England increase the money supply?

In America, the "pet bank" could be kept in the black without substantially altering the money supply. In fact, the Fed could restrict the money supply, hopefully fighting inflation, all the while delivering assets in the form of reverse repurchase orders and other financial instruments to their "pet bank."

Does the BoE not have a similar option? Is increasing the money supply really the only means they've got to help a bank out?

[ Parent ]
It looks that way by Rogerborg (4.00 / 1) #22 Wed Feb 20, 2008 at 06:46:37 AM EST
Ironically (not really, Alanis) it was Northern Rock being "supplied money" from the BoE that kicked off the run.  Doing it on the sly is definitely the way to go.

Metus amatores matrum compescit, non clementia.
[ Parent ]
Good grief, Gordie Brown. by Christopher Robin was Murdered (2.00 / 0) #33 Wed Feb 20, 2008 at 12:00:49 PM EST
You know, at first I assumed Mr. Mutt was simply toeing the free-market-von-Mises line on this. What good student of the Austrians would like nationalization even when it is a good idea?

But I think I actually agree with him here. This looks like an uncreative stop-gap measure that has the potential to turn into a financial sinkhole.

You're closer to than I. Where do you stand on this?

[ Parent ]
lolwhut? by R Mutt (2.00 / 0) #38 Thu Feb 21, 2008 at 03:46:06 AM EST
The point of the Austrian school of economics is that they reject statistical studies and empirical evidence, in favour of theoretical analyses of what supposedly rational individuals might do to maximize their self-interest.

I'm not a fan of the Austrian school. If I was I'd hardly bother linking to statistical or empirical studies in about every other diary.

[ Parent ]
My apologies. by Christopher Robin was Murdered (2.00 / 0) #39 Thu Feb 21, 2008 at 04:25:46 AM EST
I mis-characterized you. The assumption was based on a lazy generalization on my part.

Would it be fair to say that you, like the Austrians, are no big fan of government economic intervention in general? Or is that a false impression on my part?

[ Parent ]
It depends on the circumstances by R Mutt (2.00 / 0) #40 Thu Feb 21, 2008 at 04:47:12 AM EST
I favour relatively high taxation and spending, which is why Breaker thinks I'm too left wing.

However, I think in general government action should be as simple as possible. The simpler it is, the fewer the unintended consequences, and the lower the hidden costs. So I tend to be anti-tariff and anti-subsidy, which is why other people think I'm too right wing.

I think free markets work very well when they're free, but I think it takes strong and constant government activity to keep them that way.

In general, I think business and government should be as separate as possible.

If the government wants to make people's life better, give them the money and let them distribute it to the businesses that they value. Don't give the money to a business or industry and wait for some of it to go out in wages and spending. I'm all in favour of bailing out the Northern Rock savers, but not the shareholders.

When I post on Metafilter, I'm generally regarded as a ravingly extreme right-winger. When I post on Marginal Revolution (or the old Greg Mankiw comment section) I'm regarding as a flaming red near-Communist.

[ Parent ]
Gotcha. by Christopher Robin was Murdered (2.00 / 0) #41 Thu Feb 21, 2008 at 07:09:54 AM EST
Again, sorry for the mis-characterization.

[ Parent ]
So, by Breaker (4.00 / 1) #18 Wed Feb 20, 2008 at 05:41:14 AM EST
In the face of the last 6 months, with all that's happened to this NuLabia Government, do you:
a) Still think they are fit to run the country
b) If they called an election tomorrow, would you vote for them?  What about in 2 years time when they must have an election?

[ Parent ]
At the moment by R Mutt (4.00 / 1) #19 Wed Feb 20, 2008 at 06:19:56 AM EST
Cameronite Tories look somewhat better to me than Brownite Labour. IIRC I always said Brown should have faced an election though.

However, as jump the ladder pointed out, it was the Conservatives who nationalized Rolls Royce in the last similar circumstances. So, I don't think you can say that the Conservatives are automatically better at this kind of thing.

I think I also said that Blair would start to look better quite soon after he departed. I think not only was Blair somewhat more decisive and more capable than Brown; his superior media and communication skills helped to create confidence.

However, Cameron's never really run anything, so we don't yet know whether he'll be decisive or a ditherer either.

[ Parent ]
For me by Breaker (4.00 / 1) #20 Wed Feb 20, 2008 at 06:28:03 AM EST
This is one incident in a whole string of them.

Even on the Grauniad CiF people are bitching about taxation levels - and the taxes are only going to increase by 2012.

Given the current Tory plans of not changing current spending (and hence taxation) it's going to be an interesting election next up, for sure.

[ Parent ]
There's still savings to be made by Rogerborg (2.00 / 0) #23 Wed Feb 20, 2008 at 06:49:13 AM EST
They're going to stop paying benefits to work-shy bigamist Peacelamists, I hear (on Womans' Hour, so it must be true).  That should save a few hundred quid a year, and only cost a few hundred thousand to Instrument.

Metus amatores matrum compescit, non clementia.
[ Parent ]
Excellent. by Breaker (4.00 / 1) #26 Wed Feb 20, 2008 at 07:06:55 AM EST
Another cracker of a saving measure from the Tories.

What with the £2.50 they'll claw back from the extra tax on non-doms, the gaping fissure between treasury income and government spending will be filled in no time at all.

[ Parent ]
See also: catching dole scroungers by Rogerborg (2.00 / 0) #29 Wed Feb 20, 2008 at 07:51:04 AM EST
OK, at the moment the DSS spends more on chasing them than it recoups, but that's just because they're not spending enough.

Metus amatores matrum compescit, non clementia.
[ Parent ]
Do you have a source for that? by Breaker (4.00 / 1) #31 Wed Feb 20, 2008 at 08:02:09 AM EST
An interesting tale indeed.

[ Parent ]
Always by Rogerborg (2.00 / 0) #32 Wed Feb 20, 2008 at 08:49:54 AM EST
Here, I've STFW for you.  Can I get you a beer while I'm up?

Metus amatores matrum compescit, non clementia.
[ Parent ]
Thanks hon. by Breaker (4.00 / 1) #37 Thu Feb 21, 2008 at 12:24:18 AM EST
Don't get up, but while you're down there...

[ Parent ]
IANA Economist by DullTrev (2.00 / 0) #34 Wed Feb 20, 2008 at 03:36:56 PM EST

But am I the only person who thinks there isn't much difficulty in the government running this bank? The problem, as I understand it, was maintaining enough liquidity when NR could not borrow against its assets. That leaves you with two options - find a way of re-introducing liquidity, or allow the bank to fail, and the assets to be sold off (no doubt at a rather knock down price).

With the bank backed by the Bank of England and the government, liquidity was reintroduced to keep it afloat. The problem with this is that it means we, essentially, own the bank by proxy. This isn't good for us, and it isn't good for the other competing banks. Obviously the preferred option is to get some delightful private sector investors to fly in, repay the government loans, and bring NR into the glorious future. The problem is, they don't need to judge if the bank is viable - they need to judge if they can get a better rate of return for an acceptable risk in backing Northern Rock, or elsewhere. Lets face it, with the credit markets as they are at the moment, they can get a better return elsewhere in a considerably less risky manner.

So, let if fail, or have the government buy it? Letting it fail will cause massive problems for the economy, through the shattering of confidence in the system, if nothing else. That means we're left with the government buying it.

Does this have to be a bad thing? I don't think so. The bank needs to do two things - bring in more cash, and get rid of some of the liabilities. So all the new management need to do is raise the interest rates, both for loans and savings. The higher mortgage rates encourage people to go elsewhere, bringing in cash as their mortgage is repaid in full, and the savings rate just brings in more cash through the door. It'll be expensive, and it will lead to a much smaller bank, but given the whole problem was the bank was over-extended, any solution has to lead to that.

Arguably, a private sector solution, with continued support from the government, could do this. The problem is that a private sector solution would need to turn a nice profit. The only way to get them involved would have been for the taxpayer to continue to take on the risks, while allowing the profits to be taken elsewhere. It would be a pretty odd, and primarily ideologically driven, decision to allow that.

So the government can run it down - not to the ground, but to reduce the size, allow the credit markets to recover to the point where the bank is viable in the private sector, and then exit, with the new owners (able to raise capital more cheaply from the recovered markets) paying the government money back. This isn't a 'classic' nationalisation - the bank won't be run for the good of the nation, it will be run for the good of the major creditor. The creditor just happens to be the government. Or, to put it another way, given any private sector bid would require government guarantees, the government have just cut out the middleman, and gone into the hedge fund game. The difference, of course, is that the government don't need to turn a profit, they need to keep a bank collapse from taking down the economy.

Though I'm not an economist, and have no doubt made a number of basic errors which will now be pointed out to me, at great length, and in the usual kind manner of this site...

[ Parent ]
(Comment Deleted) by R Mutt (2.00 / 0) #35 Wed Feb 20, 2008 at 09:42:25 PM EST

This comment has been deleted by R Mutt

[ Parent ]
That was the initial problem by R Mutt (2.00 / 0) #36 Wed Feb 20, 2008 at 10:01:07 PM EST
But if that was the only problem, the extra loans given by the Bank of England would have sorted it out. And when extra money and guarantees from the government, the private sector would dive in with knife, fork and napkin.

The more fundamental problem is that Northern Rock has given lots of high-risk people mortgages at very low interest rates. That means if the property bubble starts to deflate, people are going to default on their mortgages and the bank is going to run out of money. (If they had charged higher interest rates, they'd be making enough money off the non-defaulters to cover their losses. ) Remember that the money coming in from mortgage payments is the money people with savings in Northern Rock were hoping to take out eventually.

That means in a falling property market, the bank could basically lose their savers' money. Though the government will pay the savers a large fraction of the money eventually, the bank itself would be bust.

I suspect the Brownite logic behind it is "If the property bubble bursts I'm going to get voted out anyway, so may as well gamble a few billion on keeping it inflated till the next election".

But at the end of the day since the government's guaranteeing the loan book anyway it's not a huge economy-destroying mistake, it's just another waste of money. And it also seems like a worrying signal that they're prepared to sacrifice an awful lot to keep property prices high.

[ Parent ]
THE JOEL UNIT WILL BE ENDED NOW by Rogerborg (4.00 / 2) #10 Wed Feb 20, 2008 at 02:58:22 AM EST
A normal programmer would conclude that Office’s binary file formats [...] are the product of a demented Borg mind

Oh, how I wish.  No, we had to work them out from the "specs".

Anyway, unless you’re literally trying to create a competitor to Office that can read and write all Office files perfectly, in which case, you’ve got thousands of years of work cut out for you, chances are that reading or writing the Office binary formats is the most labor intensive way to solve whatever problem it is that you’re trying to solve.

Well, yes Joel, thanks for your insights, you potato-headed goon, but since we are working on a Office compatible editor, your pissing and moaning is about as useful as a Whitehall ethics manual.

An except from the Word 'spec':

When Word writes out an LVL structure, it first writes out the LVLF, followed by the grpprlPapx (of LVLF.cbGrpprlPapx bytes in length), followed by the grpprlChpx (of length LVLF.cbGrpprlChpx), and an XCHAR string with the number text, preceded by an XCHAR containing the string's length.

Now, a sane person might interpret that "preceded by" as meaning it precedes the thing listed before it, thus:

  1. LVLF
  2. grpprlPapx
  3. grpprlChpx
  4. string length
  5. string text

But oh, no. The actual order is this:

  1. LVLF
  2. string length
  3. grpprlPapx
  4. grpprlChpx
  5. string text

So "preceded by" just meant "Ooopshit, we forgot to mention the string length in the right place, and we can't be arsed editing the spec, so we'll just tack it on the end of the sentence."  Much like Word does with 'edited' content in the file.

Eh, at least I get paid to gripe about this.  How those OpenOffice nerds can bear to do it for nowt is a constant source of wonder.

Metus amatores matrum compescit, non clementia.

Let Office do the heavy work for you. by wiredog (4.00 / 2) #14 Wed Feb 20, 2008 at 03:52:05 AM EST
That's what I did back in 2001 when I was having to parse Office documents and save the data in an Oracle database. In a web app. We used COM. Which, while it is a horror, is better than trying to puzzle out the raw binary files.

I guess I should mention that the Defense Department pulled the plug on that particular project...

Earth First!
(We can strip mine the rest later.)

[ Parent ]
I dub thee "Joel 2" by Rogerborg (2.00 / 0) #21 Wed Feb 20, 2008 at 06:41:25 AM EST
Some of us to actually have to write honest-to-ISGness Office clones.  On mobile handsets.  No sniggering at the back.

Metus amatores matrum compescit, non clementia.
[ Parent ]
Office on Mobile? by wiredog (4.00 / 1) #25 Wed Feb 20, 2008 at 07:05:54 AM EST
Setting aside that there's already a mobile office from Microsoft... Why? Are there really people who will use a mobile for editing Excel spreadsheets? Do you regard them as lunatics, or is that just me?

Earth First!
(We can strip mine the rest later.)

[ Parent ]
On how many platforms? by ambrosen (4.00 / 1) #27 Wed Feb 20, 2008 at 07:29:24 AM EST
I have done spreadsheets on my mobile before, too.

[ Parent ]
You did lots of drugs in the 80's, didn't you. by wiredog (2.00 / 0) #30 Wed Feb 20, 2008 at 07:54:07 AM EST
Just sayin'...

Earth First!
(We can strip mine the rest later.)

[ Parent ]
I regard them as potential sources of income by Rogerborg (2.00 / 0) #28 Wed Feb 20, 2008 at 07:49:43 AM EST
We sell to our lunatics wholesale, not retail.  It's the OEM/carriers' problem to recoup the money from chaps who are doing the company accounts on the train to work, or putting the finishing sparkle on a Powerpoint presentation.  No, really, it could happen.

Windows Mobile is a pretty small subset of the global market, and Mobile Office is also largely pants, since it requires the docs to be converted lossily, e.g. throwing away inline styling in Excel cells.  Our product is actually better than Mobile Office in many ways, even though I say it myself.

Metus amatores matrum compescit, non clementia.

[ Parent ]
Bah by ucblockhead (4.00 / 2) #12 Wed Feb 20, 2008 at 03:45:11 AM EST
The "Format is complicated because back in the bad old days of slow computers you needed to do that to be fast" is a complete crock of shit. I worked with a number of text markup languages back in the day, including the old Unix nroff and Ventura, and they did just fine and dandy with (relatively) understandable formats.
[ucblockhead is] useless and subhuman
Northern Rock by Breaker (4.00 / 1) #17 Wed Feb 20, 2008 at 05:39:05 AM EST
Some interesting points on "what should Brown Like Shite have had his Darling do instead" can be found here.

Consider the source by Rogerborg (2.00 / 0) #24 Wed Feb 20, 2008 at 06:54:00 AM EST
Logic is the beginning of wisdom, not the end.

Metus amatores matrum compescit, non clementia.
[ Parent ]
Goodnight hoppers, goodnight hustlers | 41 comments (41 topical, 0 hidden) | Trackback