Tuesday, December 29, 2009

Shopping

As I've been basically confined to indoors for the last 3 days due to a worsening bout of a chest cold, my siblings tell me they've never seen the local shops so desperately jammed with happy shoppers buying away to their hearts content. Is there a war on? Or a nuclear winter? The papers and radio keep telling me that things are terrible outside but after being surprised by a snowfall on top of the airport hill in Cork last Wednesday I am a little cynical about the roads - to be sure they could be either much worse or much better than I am being told by the media.

Of course, in the US, if a road becomes severely hazardous, never mind impassable, its closed immediately. While I can already hear echoes of "nanny state" you do have to wonder is this a good idea. In parts where roads are liable to snow, such as national parks on a high terrain, its actually illegal to travel without snow chains in the trunk. Although if you've got a 4x4 with tyres marked M+S they kind of leave you alone. In a sense, its not a bad idea.

Meanwhile banks are now likely to find themselves in a situation of real regulation. Its rather hard to stomach this one. There is a belief which I think is incorrect that assumes that there was massive amounts of irresponsible lending carried out on the basis on improbable property values. Lets be honest here. Lots of people couldn't get mortgages big enough to buy the homes they'd like. Some of them got smaller mortgages for smaller or more remote homes. And although over 100,000 have lost jobs, there are many who've held on to their jobs, been pleased to see interest rates fall enough to give them some relief, and who manage.

I recall a friend going for a mortgage right at the peak of the boom in 06. Did she walk in and walk out with a mortgage? Certainly not. She was put through a myriad of stress tests, many of them off paper and unfair. And guess what, she also managed to get onto a variable rate deal after the initial fixed rate ran out, and while she's not a millionaire, she's working in a job that is ok for now, is able to make ends meet and loves her little house, although its in an area that I'd consider far from civillization. There must be thousands out there like that, people who will happily go out and vote for FF again, who really do believe the propoganda that Jimmy the councillor whose the brother in law of Kathleen pulled strings to get the lone parent daughter a house after 10 years on the waiting list (no doubt being bypassed by all the other people Jimmy beag was pulling strings for!)

The girls are seeing bags and bags of sale items, and not just Pennys or Lidl, but jewellers, designer labels, etc. And young people too, people who for now have been lucky. Lucky rather than clever. I know brilliant managers who are suddenly vulnerable after doing well for years because their contracts are at an end, and ultimately, everybody is dispensible. One manufacturing agent in one factory with identifical skills and qualifications to another might be dropped because of company policy, the other might continue with excellent prospects because they are in a slightly different sector. Likewise, some retail outlets are doing well - business has gone up in anything that sells itself as discounted, literally anything.

I think we've hit a real credibility issue with the current government: people who work in the public sector, who first saw effective flat rate tax increases through "levies" of 1% and then doubled to 2%, then another effective tax increase vie a 7% pension levy, and finally pay cuts of 5% upwards, are not going to run out and spend like wildfire. They will save their money, and also spend it carefully. This is hitting companies who depend on the domestic economy for survial at exactly the same time as high street banks are removing credit facilities from small businesses, crippling them with high surcharges in the process. There is no obligation anywhere in the NAMA legislation for the best interests of the economy to be taken into account. The bankers can do anything they like with the subsidies they receive, and they will most likely use it to buy their own equities back.

In reality, the entire monatrist system lies in tatters. Its being contained rather than resolved. The resistance to real resolution lies at the heart of the problem, and the real problem is not only the valuation of tangible assets, but intangilble ones also. Until both are tackled, there will be no real resolution to the problem, and the western world will hurtle towards massive impoverishment of minority groups and anarchy as doubt builds in the political system that artificially props up that financial empire.

No comments: