Whopping pork pies.
If my Cypriot dad wanted to identify someone as “loose with the truth,” he would call him a Pattihari – Pattiha being the word for watermelon in the Greek-Cypriot dialect. The far from flattering moniker would invariably be accompanied by a gesture where my father would hold out his hands, all the further apart to show exactly how big a liar he considered the scoundrel to be. Since my dad was a great judge of character – his own being legendary amongst those who knew him – a Pattihari to him, was one to me too.
I could not help reflecting on GM sized watermelon ‘looseness with the truth’ when I recently read these words in the Telegraph: “Downing Street is drawing up plans for retailers to introduce Price Caps on basic food items such as bread and milk to help tackle the rising Cost Of Living, this paper can disclose.”
That I knew a prime minister so well in tune with commerce would never countenance such nonsense was enough for me to see a red flag. See a big pattiha and call foul on the entirely ridiculous notion. And yet the lie grew not only legs but wings, and before long was flying all over the place, even resulting in one investment bank putting out a scathing piece of research demanding “the plan” be abandoned. A plan to be clear, that had no truth to it; just a big lie.
Those who have lived through the Wage and Price Controls of the ‘70s will be perfectly aware just how woefully impractical and unworkable such Soviet-style edicts are. Now, if the Prime Minister in the least thought there was “collusion” amongst food retailers to “price fix” or “rig” the market and “starve the population of affordable food,” then surely the proper course of action would be to call in the competition and markets authority (CMA).
The simple truth is that stubborn grocery price inflation has been the result of the UK’s traditional supermarkets trying to protect their top lines under the onslaught of our having evermore prepared foods delivered into our hands; and as such, not delivering money over to them, but to the likes of Deliveroo. They have in short pushed up P, in a vain attempt to compensate for lowering V. Now, at some point very, very soon the reality will dawn on commercially minded supermarket managements that they cannot bring back the lost V, which represents the secular shift to the food we eat at home being prepared by others. The penny will drop that they have made this shift happen all the more by the very nature of their stubborn P. The natural result will be a fierce Price War – aided by the aggressive arrivistes Aldi and Lidl (market share now c18% combined) – to win back that part of reduced V they lost because of their elevated pricing. To be clear, this will come about without any need for there to be pressure from the PM.
To those then consumed by reading the Telegraph, and its likes, I say only this: treat its “stories” as you once did those from the Sunday Sport. Remember the front page spread “World War 2 Bomber found on Moon?”
Grading the MPC Easy FFS+*#.
It is 40yrs since I was introduced to the NIRU, when my first thought was to expect a lesson on a rare antipodean flightless bird or post-independence India. I would, however, be enlightened there was nothing avian or Asian involved but rather the acronym for Non-Inflationary Rate of Unemployment. Whilst coined in ‘75 by Modigliani and Papademos, I learnt it had its theoretical and empirical underpinnings laid and strengthened by the likes of Hayek, Lerner, Phillips, and Friedman. Indeed, one could draw upon Marx’s “reserve army of labour,” being “a nasty capitalist instrument” (my interpretation) to control wage demands. As we know, NIRU evolved into the NAIRU.
Escalating pricing has of course become such an issue with western Central Bankers and Finance Ministers that we have heard some openly claim they would readily accept higher unemployment if it brought inflation to heel. The idea seems simple enough; central banks monetarily induce economic coma, so as to remove malignant inflation cells. Realistic? Well, no. For survival rates in medically induced comas are not as high as we would like to hope; with far too many patients brought back failing to fully recover, or even worse, being in a more sorry state than had they been kept conscious. Remember, too, this particular monetary operation to try to remove ‘the inflation virus’ comes not long after we were put under an economically incapacitating anaesthesia to cure what, at the time, was a strain of respiratory virus whose mortal nature we greatly exaggerated and collateral damage we woefully underestimated. Indeed, this 2nd operation can be seen as an attempt to remediate the 1st botched one.
Let’s return to the NAIRU. Not only do nations not share the same figure, I would argue specific rates cannot be known until we have some clarity on where inflation in goods, services and labour steady at. This said, I am confident, from ’24, UK CPI settles within 3-4%; yes, forget 1-3%, wage inflation in a range of 4-5%, the jobless rate 4.0-4.5%; base and 10yr Gilt yield 3.5-4.5%; all without inducing recession, and no thanks to a comatose MPC.
P.S. To my mind the time to have begun lifting the base rate was as far back as ’14, even indeed ‘13. Yet, despite labour market strength, no attempt was made to raise it from its post ’08 0.5% floor. Indeed, on the referendum result being as it was, there was no need to cut or engage in more QE, given so much immediate monetary loosening was coming from a much cheaper £. Into lockdown – and the huge fiscal largess that was shown by the State – here, too, cutting the base rate to 0.1% was unwarranted. To have then delayed tightening so long after our being unlocked was yet another dereliction of monetary duty. So too was the failure to raise adequately (ideally 100bps) in advance of a mini-Budget, so well-flagged as fiscally loose. Indeed, the flash “LDI fire” which followed was in many ways fuelled by a too loose BoE; which then came to the rescue! So, if I had to grade the MPC? Easy FFS+*#.
Counterfeit signals.
Even in their English translations, Les Misérables (1862) and The Count of Monte Cristo (1844) are literally epics; novels that, in the early part of their riveting plots, share a common thread. In each, a man wrongly imprisoned manages to regain his freedom doing so thanks to benevolence (from an elderly cleric in one case, the other a long serving fellow prisoner) assume a new identity and amass a fortune. What happens next however takes each man down a very different path.
For his part after meeting a kindly forgiving Bishop, Jean Valjean embarks on a life of selfless righteousness, albeit doggedly pursued by the tireless Javert. Edmond Dantes by stark contrast single-mindedly seeks to gain revenge on those who so callously wronged him. To be clear, whilst drawn to Jean Valjean I was not unsympathetic to his policeman pursuer; a man, after all, only doing his job. To be clearer still, as someone who bears grudges, in the event that I were so wronged as either Valjean or Dantes had been, I would not behave in the kindly manner of Monsieur Madeleine (née Valjean), but opt to be a right Count and seek revenge.
Now, whilst Dantes, in his guise as the Count of Monte Cristo, used various devices to inflict a reckoning on each of the 3 men who had conspired to have him imprisoned, there is one plot I’d like to focus on: the revenge The Count served upon Danglers; once Dantes crew mate, but after his deceit, rising to be a right banker, greedily drawn to the Count’s financial genius.
For this final revenge, the Count advises Dangler – in a seemingly insider way – to consider buying Spanish bonds. Dangler does so, of course, with all his money and indeed leveraging with client capital. The Count then bribes a semaphore telegrapher to send a fake message to Paris stating Spain is about to be consumed by civil war. This information, for a time, significantly devalues Spanish bonds. The news is of course finally proved to be false, but not before Dangler has lost his and his clients fortunes, and is reduced to embezzling public funds, leaving his reputation in tatters and making him a broken man.
As with all great fiction there are fascinating kernels of fact in The Count of Monte Cristo. The character of Dantes was based on the experiences of a certain shoemaker, Pierre Picaud (c1807). As for the semaphore ruse, that was inspired by a scam performed over a number of years in the early 1830s by the Blanc brothers; the man in the middle trick.
The simple truth is that data hacking began the moment man began to transmit and receive information in search of superior capital gain. Be in no doubt; every single signal reception and action strategy has always, and will forever, be open to signalling deception, false flares, head fakes etc.
Those putting their faith and wealth into AI inspired algos, or indeed any quant system which promises to use advance signal recognition, should be conscious and recognise the real risk that man can code; some Count will plot to game.
