Sajid Javid Deliberately Collapsed British Steel 130


The Conservative show of dashing home to look after the British steel industry is just smoke and mirrors. Savid Javid was fully aware it was being collapsed by subsidised and dumped Chinese imports, but argued that this cheap Chinese steel was beneficial to the UK economy more generally. Arguing against higher EU tariffs on Chinese steel dumping, Javid stated to MPs only six weeks ago

“The responsibility of government is to look at the overall impact on British industry and jobs,” the Business Secretary said.

“If duties get disproportionate it would have an impact in Britain and elsewhere on consumers of steel. Those businesses tell us it will cost jobs and exports if duties got out of control…

“To go further might in the short term look the right way to go to protect industry but you have to remember in Britain there are also companies that consume steel as part of the production process.”

This is pure Thatcherism. On Javid’s instruction, last year the British diplomatic mission to the EU (UKREP Brussels) was lobbying the EU commission against higher punitive tariffs on Chinese steel than the 13% the UK supported – even though the Commission found that dumped Chinese steel had an effective state subsidy of up to 72%. I have this from a British diplomatic source.

So the apparent flurry of activity now is a blind. This is a situation the government was quite happy to see develop. Of course, the effects are in Wales, Scotland and Northern England. There are no steel mills in Tory constituencies.

The banks received state subsidies to the value of £35,000 from every man, woman and child in the UK. Yet it is unquestionable dogma that not even 0.1% of that can be given to aid manufacturing industry. I can think of no legitimate explanation of this duality.


130 thoughts on “Sajid Javid Deliberately Collapsed British Steel

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  • RobG

    Well, Craig, you did say: “I can think of no legitimate explanation of this duality”.

    Ever the diplomat! Why not just say that the Tories are stealing/flogging-off everything that’s not nailed down…

    http://truepublica.org.uk/united-kingdom/mass-privatisation-masks-britains-failed-economic-policies/

    … and they are running British society into the ground, and they are doing it on purely ideological grounds (the modern-day Nazis), and there’s lots of mutterings that the Tories cheated in the 2015 general election, and despite this, and with the entire mainstream media behind them, they only managed to get 25% of the vote…

    http://www.thecanary.co/2016/03/29/conservative-mps-broke-law-win-2015-general-election/

    … or maybe I’m just paranoid?

    • Pan

      Just because you’re paranoid doesn’t mean the Tories AREN’T “stealing/flogging-off everything that’s not nailed down…” AND “running British society into the ground”.
      ___________________________

      BTW, Rob – Your previous comment (Dictator Bling post) “Hinkley C is an object lesson in the sheer corruption and stupidity that plagues western society at the moment.” was spot on.

      And yet even here we have ‘loonies’ saying things like “the failure to proceed with nuclear [power]” is a risk to the “security of power supply”, while remaining seemingly oblivious to the unimaginable scale of the Fukushima ‘accident’ disaster, and the sheer inevitability of it happening again, somewhere else.

      The fact that still in so many people’s minds, transparently bogus economics trump the necessity to sustain a planet capable of supporting life, leaves me in no doubt as to the madness of men.

  • John Goss

    Sheffield Steel was once world renowned. Pioneers like Harry Brearley are of the old school. Those days are gone forever. The day will come again when an uncountable number of sleepers will wake from their slumber and take control of the means of production. Till then the lazy fat-cats who have never rolled up their sleeves will continue to exploit manual and slave labour.

    Historians seem to have forgotten how ill-prepared we were to defend ourselves at the start of the Second World War. Relying on Chinese steel imports is risky economics. Being born in Sheffield I have an affinity with the steelworkers as much as the miners. As children we used to watch the huge electronic magnets at Park Gate Steel Works do their magic lifting and moving. Sheffield United football team was called the ‘Blades’ after the industry. There could be a management-led buy-out, or workers’ coop but without a huge injection of cash the industry is doomed. As you say it is not part of the banking system so the government is not interested in saving the industry. Sad.

    • fwl

      Country needs People’s QE.

      It would not have to be old school nationalisation. As a country we are a dab hand at bucaneering and have great skills and experience in commodities and energy. Leaving aside any EU legal constraints if government can overcome fear of failure and act against the trend and make long term investments in unattractive currently unprofitable sectors it might pay off in the long term.

      This could appeal to tories eg if Gov set up uts own Sovereign Wealth fund and it bought up key national infrastructure and cheap commodities and stockpiled for the national interest. Gov likes secrecy laws so it could pass some to allow for this sort of activity on the quiet.

      Just a thought.

    • Techno

      “Sheffield Steel was once world renowned. Pioneers like Harry Brearley are of the old school. Those days are gone forever.”

      I live in the north of England and I have been advised that the remaining Sheffield forges produce more steel annually today than ever before, but they use machines rather than people.

  • fedup

    Don’t know Craig, I am not too certain about the facts that you have set out. Tata have not modernised or invested in expanding the steel mills, and effectively carried on the tradition of running their equipment to destruction and then asset strip and move on.

    Chinese have huge investments in the steel industry with modern mills. This is affording the low prices they can profit with. I don’t disagree with you on the issue of the run away costs of energy in this country that have made doing business even more difficult with a greater burden of higher tariffs for businesses, that is despite the massive profitability of the energy supplier that is evidently not an oligopoly but the fault of the consumers for not “switching” suppliers.

    Thus regardless of the subsidies the energy costs alone combined with lack of investment (no one is crazy enough to spend good money after bad) would have scuppered any advantage on the oversees competitors. As you have mentioned the dogma of privatisation has brought about the succession of market failures that are not even acknowledged!

  • Hieroglyph

    I think he’s arguing that increasing duties on Chinese steel may have knock-on effects on UK steel exports – in that there may be a tit for tat tariff war. This all sound like bollocks to me, the US apparently has 250% tariff on Chinese steel, and anyway, I’m sure the UK doesn’t sell all its steel to China. But, as ever, I suspect that the details elude your average neoliberal, and they can’t see beyond their narrow, ideological window.

    Or, perhaps, it’s all much simpler: the bribes weren’t high enough to make it worth keeping the steel industry. Or, rather, the bribes were high enough, but came from the Chinese. In Australia, corruption is, as they say, rife, and it’s getting to the stage where your ordinary voter has noticed, and isn’t pleased. Perhaps it’s the same in the UK? The Tories are all bent, of that I have no doubt.

    I personally think of neoliberal economics as a madness that one day too will pass. It’s taking a long time though.

    • Martinned

      they can’t see beyond their narrow, ideological window

      Good thing you’re here exploring all the options without any bias whatsoever!

  • Tony_0pmoc

    Its not just British Steel

    The Americans Crucified All Of Us British..and now They Think They Own Us…

    They basically robbed us blind with their smarm and their charm and not just Great Britain – but All of Europe Too…

    and you blame Indians in India?

    India is lovely – you should spend some time there…

    We are going back to India

    Let us All Shit on America (mainly Washington DC)

    Americans are not very nice.

    Tony

    • lysias

      American steelworkers and steel towns are also victims of globalization and the world financial elite.

  • Loony

    There is an old saying “oh what a tangled web we weave when at first we practice to deceive” Closing down the steel industry is the last best hope of avoiding material and persistent power shortages. The risk to security of power supply has been created by a variety of government policy failures – the failure to proceed with nuclear, the failure in the roll out of smart meters, the failure to incentivise new thermal generation, and the failure of the capacity auctions,

    Someone has to pay for this litany of failure and steelworkers have been especially selected to meet this bill.

    It is not Thatcherism – it is crass incompetence and idiocy.

    • fedup

      avoiding material and persistent power shortages

      You cite Enron way and then absolve the ultimate market failure in the guise of Thatcherism?

      How do oligopolies maintain their advantages?

      • Loony

        fedup – You have lost me, where have I cited Enron?

        I am not too sure what this has to do with oligopolies. In France EdF is basically a monopoly – take a look at its balance sheet, it is not pretty.

        Take a look at RWE and Eon corporate representatives of the oh so efficient Germans. Look at their balance sheets – do they look efficient to you?

        Take a look at how many thermal power plants have been closed – SSE even decided to pay NGC a financial penalty for the early closure of Fiddlers Ferry. Ask why this might be. It is nothing to do with Enron or the theory of oligopoly.

        • fedup

          Are you a youngsters Loony?

          Enron used to create electricity outages and proceed to charge double and triple for the supply of electricity due to the “shortages” of supply.

          you are mixing the state owned companies and passing them as monopolies, state owned companies don’t hand over the profits to the few shareholders and instead they provide the relevant treasury that means the state dose not have to kick the sick and rob the poor and call it austerity!

          you then proceed reiterate the same Enron methods over; close down viable plants, and create artificial shortages and triple charge for the supplied electricity.

          Do you see my point now?

          • fwl

            Fwd Up: Where do you get that info about Enron said to have caused shortages and then hiking costs of supply? Interesting, but I have not heard that before.

            Are you talking about playing with derivatives, or the actual curtailment of physical supply / outages?

          • Loony

            Fedup. Enron exploited the inefficiencies of the Californian power market. They did this by creating artificial shortages through complex bidding strategies and by forward buying capacity at connection points. They did not create physical generation shortages.

            What is happening in the UK is that physical generation shortages are being created. The plants that are being closed are technically viable, but they are not economically viable. It is government policy that results in these plants not being economically viable. Eon for example is seeking to exit the generation business. Why would they conspire to create shortages in an industry in which they do not wish to participate?

          • fedup

            Are you talking about playing with derivatives, or the actual curtailment of physical supply / outages?

            Yes! Circa 1990 the electricity outages in California etc. Those Enron crooks were crating artificial shortages and classing it as “supply shortages” hence the prices were being tripled for satisfying the greater demand. Gaming the system the best way possible.

            =============

            They did not create physical generation shortages.

            But they did, the inefficiencies of the markets is fancy talk for crooks arranging their own little shut-down of the various plants for various excuses.

            The same method is going to be used in this country too, mind I must thank you for the heads up, bet time to buy my own generator, and set up my own auxiliary power supply.

            Why should Eon want to vacate a great money earner? The unusual returns have turned not so unusual, hence the need to spike up the phony supply and demand curves.

            That is the trouble is that your market inefficiencies, are more like the libor fixing and the debt bubble and the housing bubble that is currently beginning to even worry Mark Carney.

            The efficient markets are based on clean and honest participants whom do not steal, launder, and use dishonest means, and are in competition (ie not monopolise and oligopolies) Checkout the car insurance market as a prime example of the humongous market failure, that is not even hinted at.

          • Loony

            fedup – Enron gamed the system for their own benefit. They were not alone in this – just the most infamous.

            I expressed myself incorrectly; There were generation shortages and hence power cuts. This was a consequence of gaming. There was not a capacity shortage. The UK government has actively and knowingly created a capacity shortage.

            Generation shortages can be remedied very quickly (for example by changing maintenance cycles). Capacity shortages cannot be remedied so quickly – they especially cannot be remedied if government policy is to prevent any remedy being implemented.

            Thermal generation in the UK does not make money – it loses money and lots of it. What is happening in the UK is irreversible – look at Didcot it is being demolished. No diktat or policy decision can return it to service.

            The government is expert at dissembling and obfuscating, and the general population is expert at not challenging the illogicality of government policy. Despite enacting policy that is guaranteed to lead to power shortages no politician wants this to happen on their watch – shutting down the steel industry will buy them some time.

            Next up will be a policy to effectively get people to cut themselves off through demand management – something that will be marketed as having all the right green credentials, but will in effect be another assault on the poor,

    • RobG

      Loony, Thatcher and Reagan are revered in religious terms by the neo-cons.

      These people are total psychos.

  • fred

    “The banks received state subsidies to the value of £35,000 from every man, woman and child in the UK.”

    That works out at £2.45 trillion. The greatest risk the tax payer has been exposed to has been less than half that and the vast majority of that has been in the form of loan guarantees, no money has been parted with and the banks pay fees for them. The rest is in the form of loans which the banks pay interest on and the purchase of shares which will eventually be sold.

    We could have got a better rate of interest lending the money elsewhere and the shares will likely be sold at a loss, at the end of the day the bank bailout will probably cost the tax payer billions but to say the banks have been subsidised to the tune of £35,000 for every man, woman and child is a gross exaggeration.

    • Loony

      fred – The fat lady has not yet sung in relation to banks and their cost to society, so it is a bit early to draw any conclusions. However the maintenance of zero % interest rates, QE, and the blowing of various asset bubbles suggests that the ultimate price may be higher than you appear to think.

      Oh and there is the small matter of a global derivatives book of around $550 trillion – I do so wonder how that will work out.

    • fwl

      Its not easy to calculate. £350B in QE and also direct subsidies and other disguised benefits. One think tank put it at £1.2 T back in 2011. How do we measure the effect of QE? If I own £1,000 of a £100,000 company and it issues another £100,000 my shareholding is devalued, but I may become better or worse off depending on the use made of the new share capital. I am a shareholder in the UK and my pounds are constantly devalued by rapid expansion of some obscure forms of money. Do I benefit or lose? Could better use be made of this new money?

      Why is there no real debate on this.

      There is a lovely obituary today in the Times of Professor SFC Milsom, who argued that much of what we now think of Property was once less property and better understood as contractual relationships. Well, why don’t we think about ourselves as shareholders in this land and become a bit more active and less passive about our collective community economic interests ie work out what has the banking crisis cost us and is there a better way to make use of the new money.

      It would be ironic if our feudal ancestors were more clued up than we are today.

      • Martinned

        What does QE have to do with anything? That’s the Bank of England, not the government. Unlike the government the Bank can’t run out of money, and any losses it makes on its asset holdings are irrelevant.

        • fwl

          QE is what keeps us afloat and at the same weakens the hull of our vessel (Britain). With QE our stake in Britain is devalued unless the QE is used smartly in which case we could benefit.

          Has it benefited us? To a limited extent in that it saw off 2007 and financial disaster, but was the price too high – oh yes.

          • Martinned

            Take it up with Osborne and the other opponents of fiscal stimulus. Up against the zero lower bound, with contractionary fiscal policy, QE is all we’ve got, even today.

  • Pan

    @fwl – “Where do you get that info about Enron said to have caused shortages and then hiking costs of supply?”

    Watch the documentary film “Enron – The Smartest Guys In The Room” (2005). It’s all there, and more.

  • fwl

    Great voices from Port Talbot. I see Michael Sheen has been speaking out. Hopefully Anthony Hopkins and Rob Brydon will pitch in and be joined with an echo from Richard Burton in the ether.

  • Ba'al Zevul

    I wondered what the Chinese state subsidy was. I knew they were selling steel at a huge loss. Thanks for supplying the figure. There will now be a statutory period of crocodile tears from Cameron, the furnaces will go out, and it will be uneconomical to light them again if market conditions improve, whoever notionally owns the plant (insert asset-stripper here). See also, Redcar:

    http://www.bbc.co.uk/news/business-34847164

    Never mind. The next financial crash will be along any time now, and lacking the positive will to concentrate on anything but magicking funny money into more funny money, it should be pretty well termiinal for the UK. Maybe we can hang the bankers and start again this time.

    • Pan

      “The next financial crash will be along any time now”

      Bet your life on it – and it’ll make the last one look like a picnic in the park.

  • Walter Cairns

    All this is true – but it in no way refutes the left-wing case against the EU.

  • Pan

    “What went wrong?”

    Thatcher happened. Everything was downhill from there.

    Ah, Stonehenge Festival. Happy, happy days…

    • Techno

      Nothing to do with the vandalism and other damage then? No. it’s all Fatcher’s fault.

      I saw a documentary about Stonehenge recently, and nobody gave two hoots about it until the 1970s, that’s why a busy road was built next to it.

  • punklin

    Contrast how Scottish Govt dealt with Lanarkshire steel mills tho’ of course the intervention of Fergus Ewing working with community unions and Liberty (=new purchaser) gets no mention in any of mainstream coverage.

    Of course it’s not perfect – it’s a far-from-perfect situation – but the hard work and different approach in Scotland is significant.

  • deepgreenpuddock

    Your comment is most apt. It is, of course, pure (malicious) ideology that has led to position.It is also a good indicator of the limits of globalisation. An interesting perspective is given in the Guardian of the use of loans from Indian banks to these large Indian conglomerates.
    Tata tried to turn the tables on Britain. It failed Jayati Ghosh
    On my visits to India I have always been shocked by the rampant and corrosive nature of the commercial environment i.e. unregulated (or easily subverted regulation) capitalism there.
    Corruption is endemic and pervades all layers of the society.

    Back of fag packet estimates of costs and benefits of closure and maintenance suggest a huge advantage to keeping the plants going under the current conditions , even without cost and business rationalisation, and adjustments of the tariffs to make trading conditions more even.

    While there may not be many Tory seats directly at risk, in the various affected locations I have a strong feeling that this will be seen widely as a great failure, and a clear demonstration of feckless incompetence and negligence of this government, especially if the intellectual and ideological deficiencies and the simple limited capacity for concerted action of the Tory party are laid bare by a solid analysis of the issue.

  • Andrew

    Britain (George Osborne) has been vetoeing efforts by Brussels to defend European industry against Chinese dumping for the past three years, according to an informative article in the Telegraph. It blames Osborne’s “love affair” with China and ultra-free trade ideology.

    And it’s not just steel (although some people think China may be heading for a financial crash).

    “This is the moment we have long feared. China’s investment-led growth model has created a monster that is now too big for the international system. Last year Chinese fixed capital formation was over $5 trillion, as much as in Europe and North America combined.

    The excess capacity is staggering and is likely to flood our economies with a fresh wave of deflation in the next global downturn, perhaps next year, or in 2018 if we are lucky.”

    http://www.telegraph.co.uk/business/2016/03/30/britain-sacrifices-steel-industry-to-curry-favour-with-china/

  • Maureen Marsh

    Just so furious about what is happening and being allowed to happen. The miners, the doctors, the legal system and steel, but yet we, the tax payer, had no choice regarding ‘propping’ up the bankers and their bonuses!!!!!!!!!!!!!!!!!! Is this yet another way of undermining any sense of solidarity/union movement? How dare they plan and plot to delete a major part of our society to continue Maggie Thatcher’s ‘work’.

    • Martinned

      Feel free to go on strike to demand support for the steel workers. It wouldn’t create much sympathy among the general population, but it would certainly energise the proletariat.

  • Martinned

    The banks received state subsidies to the value of £35,000 from every man, woman and child in the UK. Yet it is unquestionable dogma that not even 0.1% of that can be given to aid manufacturing industry. I can think of no legitimate explanation of this duality.

    Leaving to one side this word “subsidy”, which is a bit of a dodgy way to describe a loan (or even an equity investment), let’s see:
    – Banks have systemic importance throughout the economy, steel mills don’t.
    – Banks could be restored to profitability relatively easily, steel mills can’t.
    – On a related note, the banks could give the government its money back within a few years, steel mills won’t.

    That isn’t to say that there isn’t politics at play here, but the comparison with banks is absurd.

    • K Crosby

      I can be restored to profitability even more easily, just pop £2,000 in the post, there’s a good chap.

    • Loony

      Economics is really not your strong point is it. Perhaps you have not noticed that the world is awash with zero and negative interest rates all maintained by endless money printing. This lunacy has all been justified on the basis of the need to protect systemically important banks.

      All this printed money has to go somewhere. In the west it has gone into inflating various asset price bubbles and in the east it has gone into epic mal-investment – of which steel is but one component. Chinese steel demand went through the roof, but quite a lot of that steel was being consumed by the construction of ever more steel production facilities. Predictably (or perhaps not to you) this all ended with a massive global over production capacity for steel.

      This is a problem caused by the chosen “solution” to the banking crisis, and a problem whose consequences have still yet to play out fully. The estimate of £35,000 per person is likely to prove a gross underestimate.

      • Martinned

        Actually, low interest rates have nothing to do with banks, systemically important or otherwise. In fact, the banks are complaining about the low interest rates on a daily basis, because they argue it cuts into their margins.

        http://www.politico.eu/article/german-savings-banks-warn-ecb-on-monetary-activism/

        Also, if you have evidence of asset price bubbles – other than London housing – I’d be happy to hear it. You’d be a smarter man that anyone I know who hunts for bubbles professionally, none of whom are particularly concerned about bubbles at the moment. The only people who scream about asset bubbles in today’s economy are Germans and banks trying to explain why the central banks need to raise interest rates asap. If it wasn’t asset bubbles, they’d have some other argument. (The arguments change, the goal never does.)

        As for overcapacity in the steel industry, you think that might have something to do with the rubbish economic growth we’ve been having for the last decade? Don’t you think that steel might be a tad cyclical? So why not, crazy idea, support the economy with fiscal and monetary stimulus?

        But no, none of this has anything to do with the banking crisis, other than that the banking crisis started the economic crisis and the sovereign debt crisis back in 2008. Banks have returned to profitability years ago, paying healthy dividends to their public and private shareholders. That doesn’t mean the banking sector is health – it isn’t – but simply that in arguing against QE you’re on the same side of the banks, not on the opposite side.

        • Loony

          You is one crazy guy.

          Vancouver, New York, San Francisco, London, and Sweden are just some examples of places experiencing housing bubbles. There are also bubbles in agricultural land, art, and substantially the entire tech industry.

          Low interest rates have a twofold purpose (i) they allow people to maintain interest payments on debt and hence avoid default (i.e they avoid the need for banks to realize losses), and; (ii) they facilitate the bidding up of asset prices which in turn boosts the value of bank collateral and has the effect of making banks look healthy. This is not hard to understand.

          Low interest rates ultimately compress bank lending margins – which probably explains why, outside of real estate, they are not lending. Low interest rates drive savers up the risk curve which also feeds into bubble creation.

          Banks have manifestly not returned to profitability as they are systemically insolvent. This is why normal accounting practices have been suspended and as such no-one is able to understand bank accounts (not even you I afraid).

          German agitation likely stems from a growing awareness as to the truly awful position of Deutsche Bank – which when it collapses will do far more than just bring down Germany.

          Yes, steel is cyclical. Do you understand what “cyclical” means? In a previous post you expressed the view that UK steel could never return to profitability. Long term prospects for steel are correlated to economic growth, which you describe as “rubbish” hence in your view the necessity for “fiscal and monetary stimulus” – When do you think we might see the results of this stimulus? Or is it possible that there has been no stimulus because all resources have been diverted into propping up the systemically insolvent financial sector

          Over capacity in the steel industry is directly related to Chinese mal-investment, and it is not just steel. Between 2011-2013 China consumed about 6.4 gigatons of cement – which is about the same as the US consumed in the entire 20th century.

          Chinese mal-investment has been driven by epic credit creation, the like of which the world has never previously experienced.

          Why pay any attention to “professional bubble hunters” – their job is never to spot bubbles. Just review the public statements of Bernanke in the period leading up to the sub prime housing crash.

          • Martinned

            Yeah, I’m going to stop talking to you now. Talking to people with a different perspective on the facts is fun. Talking to people who have their own facts, not so much.

          • Loony

            Martined – OK just this once, and just for you: If you can point to any fact that you consider to be “a personal fact” then I will provide you with multiple sources confirming the accuracy of each factual statement I have made.

          • Roderick Russell

            Loony – re your comment above: “Between 2011-2013 China consumed about 6.4 gigatons of cement – which is about the same as the US consumed in the entire 20th century”.

            A very interesting comment, though I don’t pretend to understand it. Are you suggesting that China has been growing that rapidly which I would think to be impossible, or that China has been overproducing cement to a gigantic level and simply physically stockpiling this overproduction, or that there is a huge reporting fraud with the money having gone elsewhere and being disguised as cement production???

            Incidentally all the Cities you listed as having huge property bubbles, with the exception of Vancouver, have one thing in common: they are major banking / financial centers. .Vancouver is unique. I used to live there. It has become the potential bolt hole of choice for wealthy Chinese businessmen who are concerned about their future.

          • Loony

            Roderick Russell – The situation in China tends to be poorly understood and poorly reported. This is in part a consequence of the PRC having a preference for masking its activities and operating in an opaque manner.

            Most people are aware of the policy of QE in the USA, Japan, the UK and the EU. Since 2008 the US Fed has added $3.9 trillion to its balance sheet, the BoJ has added $2.1 trillion, the UK $0.6 trillion and the ECB $3.2 trillion.

            China has added $15.4 trillion. Think about what that means.

            This credit creation has led to Chinese mal-investment on an epic scale. So yes they have consumed more cement in a 3 year period than the US consumed in an entire century. This blog post concerns steel and the employment prospects of around 4,000 people in Port Talbot. By way of comparison the Chinese are contemplating laying off 400,000 steel workers or 100 times as many as in the UK.

            The world has never experienced mal-investment on such a scale at any time in its economic history. Thus there is no precedent available to help us understand the probable ultimate outcome.- but it is unlikely to be good.

            The fact that people see these problems is obvious – as you point out Vancouver real estate prices are almost completely driven by Chinese buyers. There is no possible way that there is anything going on in Vancouver that supports current prices. The Chinese seemingly don’t care what they pay – the longer this persists then the more likely it is that the Chinese “in the know” are expecting an extremely painful end to current practices..

        • Martinned

          OK, I’ll give you one chance to prove you’re not permanently high. What on earth does this mean?

          normal accounting practices have been suspended

          • Loony

            Martined: Here is a 2008 SEC study on Mark to Market Accounting

            https://www.sec.gov/news/studies/2008/marktomarket123008.pdf

            It is quite long and quite complex – but this is the report that led to changes that were implemented in 2009.

            Here is the view of the World Socialist Web Site of the effect of those changes

            https://www.wsws.org/en/articles/2009/04/fasb-a03.html

            I realize that this may not qualify in your mind as a “valid source” so here is the WSJ reporting on the same event – it uses less colorful language and is more nuanced in tone but the conclusion is broadly the same

            http://www.wsj.com/articles/SB123867739560682309

            Finally, here is William Black speaking on Democracy Now.

            http://www.democracynow.org/2013/1/11/matt_taibbi_william_black_on_bailout

            Black has a great deal of expertise in the matters on which he opines. If you wish to check his credentials then perhaps his Wikipedia page may be a good starting point

            https://en.wikipedia.org/wiki/William_K._Black

            From his interview on Democracy Now perhaps his most relevant statement is:

            “They also changed the accounting rules, so the banks didn’t have to recognize their losses, so that they could hide them and pretend to be healthy. So that’s a huge part of that story.”

          • Martinned

            You do realise that mark to market accounting is the opposite of “normal accounting practices”, in that since time immemorial normal accounting involved valuing assets at their purchase price (minus depreciation)? Fair value accounting is the result of accountancy being taken over by bankers and consultants – the heroes of capitalism you so despise – making accountancy less conservative and more day-to-day, any way the wind blows. Because fair value accounting occasionally requires you to make a valuation up, because their is no publicly available market price for the asset you’re valuing, it is particularly problematic (i.e. useless) at times when markets aren’t working properly, hence the FASB’s concern. To describe that as them bending the rules for the benefit of banks, rather than for the benefit of having corporate accounts that are vaguely reliable, is preposterous.

          • John Spencer-Davis

            You gave Loony one chance to prove he or she was not making up his or her own facts, and he or she was highly successful in doing so. Mark to market accounting is different from historical cost accounting, but that does not mean that it is not normal accounting practice: it clearly is, as it is governed by regulatory accounting standards set by professional accountants. So it is not at all unreasonable to describe the change to the practices “when markets aren’t working properly”, whatever that is supposed to mean, as a suspension of normal accounting practice. Furthermore, saying that this is done for the benefit of banks may be wrong but it is hardly preposterous, as it is obvious that banks and financial institutions have been clamouring for it and it has proved thoroughly financially advantageous for them to have this change. I quote from the first link Loony provided:

            “In the months preceding passage of the Act, some asserted that fair value accounting, along with the accompanying guidance on measuring fair value under SFAS No. 157, contributed to instability in our financial markets. According to these critics, fair value accounting did so by requiring what some believed were potentially inappropriate write-downs in the value of investments held by financial institutions, most notably due to concerns that such write-downs were the result of inactive, illiquid, or irrational markets that resulted in values that did not reflect the underlying economics of the securities. These voices pointed out the correlation between U.S. GAAP reporting and the regulatory capital requirements of financial institutions, ****highlighting that this correlation could lead to the failure of long-standing financial institutions if sufficient additional capital is unavailable to offset investment write-downs.**** Further, they believed the need to raise additional capital, the effect of failures, and the reporting of large write-downs would have broader negative impact on markets and prices, leading to further write-downs and financial instability.

            Just as vocal were other market participants, particularly investors, who stated that fair value accounting serves to enhance the transparency of financial information provided to the public. These participants indicated that fair value information is vital in times of stress, and a suspension of this information would weaken investor confidence and result in further instability in the markets. These participants pointed to what they believe are the root causes of the crisis, namely poor lending decisions and inadequate risk management, combined with shortcomings in the current approach to supervision and regulation, rather than accounting. Suspending the use
            of fair value accounting, these participants warned, ****would be akin to “shooting the messenger” and hiding from capital providers the true economic condition of a financial institution.****

            My asterisks.

            Preposterous? Not at all. Loony has not made up any facts on this point at least, and you owe him or her an apology.

          • Loony

            Martinned – That is fine and it may well be “preposterous,” But your argument is not with me, it is with Professor Black, Patrick Finnegan the Director of Financial Reporting for the CFA, the Wall Street Journal and Robert H Hertz the Chairman of the FASB – to name but a very few of the people and institutions that hold “preposterous views.”

            It was only days ago that Noam Chomsky, Edward Herman, Chris Hedges, Professor Stephen Cohen and Peter Oborne were all dismissed by you as having literary abilities comparable to “typing monkeys”

            Is there any source or body of information that you do not intend smearing in the event that they hold views that are not in accordance with your own?

          • Martinned

            I guess I have to eat humble pie then, Loony didn’t make up their own facts. They just echoed some echo chamber that I’m not interested in echoing, which makes up its own facts.

            BTW, for a blog that is supposed to be read by the vanguard of the revolution, it sure is common for commenters to tell me to respect the expertise of some authority figure.

          • lysias

            Meanwhile, your buddy Habba insists on criticizing me for not agreeing with Richard Evans (whom he insists on calling “Professor Richard Evans”) about who was responsible for the Reichstag Fire.

          • Loony

            Martinned – No-one is “telling you to respect the expertise of some authority figure.” What I am telling you is that it is not helpful to your own credibility to simply smear anyone or any entity that holds views that are not in accordance with your own.

            If you have alternative arguments then fine – but to dismiss Professor Black, the CFA and the FASB as “an echo chamber that makes up its own facts” is, in your own word preposterous.

            This is because preposterous means “absurd, ridiculous, foolish, stupid, ludicrous, farcical, laughable, comical, risible, hare brained, asinine, inane, nonsensical, pointless, senseless, insane. unreasonable, and irrational.”

            If these are the kind of adjectives that you are proud to have associated with your thought process then just maintain your current quality of output. Alternatively….

          • Martinned

            I’m not smearing anyone who tells a coherent story. I’m also not disagreeing with FASB. (Not sure what the CFA said about any of this, but I assume they made perfect sense too.) But I fully reserve the right to smear you for seizing on and/or misrepresenting – as the case may be – any professor that you happen to agree with.

            In this instance, for example, the issue seems to be that somewhere in the echo chamber a perfectly sensible change in policy got framed as a “suspension of normal accounting practices”. As far as I can tell, that is not a phrase used by Black or by anyone (else) respectable.

            This blog is fully of certifiably crazy commenters, up to and including that earthquake-causing space laser guy. I can’t always remember who the sane ones are, so I have to go by the level of hysteria in different people’s description of the facts. And you, my friend, are doing your handle justice.

          • Loony

            Oh dear. The phrase “a suspension of normal accounting practices” was mine. I write my own opinions in my own words.

            The quote I provided from William Black was necessarily different because I am not William Black and William Black writes his own opinions in how own words. Nonetheless I think any reasonable person would see that the two comments are wholly consistent with each other.

            I am not seizing on or misrepresenting the views of anyone I happen to agree with. Indeed if I agreed with them then where would be the motive to misrepresent them? The references I provided were purely in response to your unfounded accusation (or smear if you prefer) that I was making up my own facts. I have evidenced this not to be the case – something you agreed with only a couple of hours ago and now seemingly no longer do.

            Why would you want to smear anyone? Where is the benefit in that? However you are entitled to your own modus operandi (I know you like Latin words). Here is a tip – most people that engage in smear tactics never give forewarning that that is what they are engaged in, and when accused of smear tactics vehemently deny that are engaging in such tactics. This seems to improve the effectiveness of the smear, it does though have no effect on the puerility of the tactic.

            Happy smearing

    • Ba'al Zevul

      1) Banks which abide by certain conventions regarding the creation of wealth by typing billions into their accounts have some systemic importance. However it is possible to imagine a system in which institutional usury is not a given. In such a system, productive industry, generating tangible value, would be the most important component.

      2) And who profits when their profitability is restored? Society, or the banks? How much interest do you pay the banks for your loan? How does that compare with the best rate a bank will allow you on a deposit?

      3) The effect of a bailout on the general public is to squeeze the public purse for the period of the loan. Repayment simply means the status quo ante returns. Though we must acknowledge that it’s really good for accountants.

      An absurd comparison? Well, yes. The wellbeing of the City (and its lobbyists) is paramount. Notions of fairness and justice evaporate in the heady atmosphere of high finance. Any comparison is ipso facto odious….

      • Martinned

        I’m not sure why you are so cavalier about having a bank account that actually allows you to make payments and get money out of ATMs, but I rather like that service, thank you very much. If you’re so obsessed with waging war on billionaires that you think a working current account is a luxury you could easily do without, please feel free to move to Greece.

        • Loony

          Martined – Why dontcha tell the people how having a bank account that allows you to withdraw cash at an ATM requires the providers of those bank accounts and ATM’s to have more than $550 trillion in gross derivatives exposures.

          • Roderick Russell

            Loony – I don’t usually comment on derivatives, because I don’t understand how to properly account for their potential (risk) liabilities. I now know that nobody else does either which is very disturbing. However, though I also don’t know much about it, I am interested in your comments on China because I think it too could have a devastating effect on all of us.

            Reading the Epoch Times recently, which describes itself as having a focus on Chinese affairs, I was absolutely shocked to read that approx. 25% to 30% of all bank loans in China are believed to be bad. Apparently, the Chinese are contemplating solving this problem through changes in accounting. Bad debts will be reclassified as “Investments” thus avoiding the necessity of writing these “debts” down to market. There will then be a change in their (Chinese) bank accounting rules for investments so that investments (which the old bad debts will now miraculously metamorphose into) will always be recorded at cost and never need to be written down. Thus, in China, one can have the benefits of adopting fair value accounting without its drawbacks. Looks like desperation measures to me – problem solved with a little voodoo accounting!!!

  • glenn_uk

    Isn’t it amazing that hands are wrung, and deep concerns expressed about the poor workers at Faslane, where a couple of thousand people stand to lose their jobs, if £100 Billion is not spent on Trident.

    Here, tens of thousands of jobs are to go in the steel industry, but – Meh! – what can be done?

  • Ba'al Zevul

    Today’s corporate mouthpiece Guardian carries an estimate of £1.5 billion as being the cost of retaining Port Talbot. It also carries the wonderful news that 3000 – that’s three thousand – UK bankers are now “earning” in excess of £1 million annually. They’d only need to give up half of their ill-gotten gains for a year to retain our strategic industry. While we’re waiting for them to do so, these words of comfort from the shade of GK Chesterton:

    When anyone asked Chesterton what they could do now in order to begin to transform the economics of he world, he said, “Do anything, however small, that will prevent the completion of the work of capitalist combination. Do anything that will even delay that completion. Save one shop out of a hundred shops. Save one croft out of a hundred crofts. Keep open one door out of a hundred doors; for so long as one door is open, we are not in prison. Ahab has not his kingdom so long as Naboth has his vineyard. Haman will not be happy in the palace while Mordecai is sitting in the gate. A hundred tales of human history are there to show that tendencies can be turned back, and that one stumbling-block can be the turning point. The sands of time are simply dotted with single stakes that have thus marked the turn of the tide.” (from The Outline of Sanity).

    http://cjd.org/2001/10/01/g-k-chesterton-and-dorothy-day-on-economicsneither-socialism-nor-capitalism-distributism/

    (you don’t have to be Catholic to buy this, IMO)

      • Ba'al Zevul

        I don’t. I want to support a management buyout with £1.5 Bn of fatcat money. Pay attention.

          • Ba'al Zevul

            I imagine that’s you simply being obstreperous, Martinned. Tata won’t be looking for that sort of money. It’s a wasting asset. And if the blast furnaces go down, useless. According to the Guardian’s Tata source (I know, but I always try to back up my observations, although it takes more work than snappy one-liners…Martinned…) the value of Port Talbot to them is nearly zero. Tata has been looking for a buyer without success for 18 months because of the investment the plant would require to make it viable. The words “give it away for nothing” appear in the report (front page, today).The £1.5 billion is the estimated annual cost of nationalising it. Most of that would be investment costs.

            Next time do your own research before getting snarky.

          • Martinned

            I wasn’t being snarky. I was trying to work out whether you were proposing to nationalise a massive steel mill without giving compensation, in violation of art. 1P1 of the ECHR, or whether you were planning to give UK taxpayer money to an Indian steel billionaire as part of a scheme to prop up an uncompetitive industry that is going to require more subsidy with every passing year.

            It’s not just “why would we want to give £1.5bn to an Indian steel billionaire?”, it’s also “Why wouldn’t we want to buy steel from China at half the price?”, which can also be phrased as “Don’t you like being able to buy a small Kia or FIAT at bargain prices?”

          • Ba'al Zevul

            First let me say that nothing would induce me to buy a Kia at any price. Second, I’d be much happier to buy a vehicle as much as possible of which had been produced in this country, and if I couldn’t afford a new one, I’d buy something secondhand. Third, you are assuming a continuation of wasteful consumerism as a means of generating private profit. Sooner or later this will have to end, either through resource constraint or waste product excess.

            Why wouldn’t I want to buy steel from China? Because about 15000 UK citizens are going to find themselves fighting for service -“industry” jobs at bottom dollar if I do. And I’ve fucking been there.

          • Martinned

            So have I, and when I was, I didn’t have the luxury of worrying where the things that I consumed were made. Worrying about animal welfare or the wellbeing of the proletariat is nice if you’re in a nice middle class home with a wife, two kids and a cat, but when you’re on minimum/living wage, not so much. If you care about low-income families/individuals, defend their ability to buy the things they need/want at the lowest possible cost, without any “buy British” taxes added on.

          • Ba'al Zevul

            It’s probably because I’m British, Martinned. But I’d like to see our agricultural capacity redesigned to favour the production of food for domestic consumption, and while we’re at it, to employ British citizens. That would help low-income families dependent on crap service-industry jobs. Though not as much as manufacturing and exporting would. See, for instance, the 1940’s, 50’s and 60’s. Housing, NHS. affordable transport, etc, etc.

            Sure, when you’re on your uppers, you don’t worry too much about where the necessities come from. I snare a mean rabbit, by the way – don’t condescend to me about the middle classes, thanks – but that’s the necessities. Who needs more? Is your life so fucking vacuous that you have to have 94-inch flat-screen, and are if you contemplate getting one are you suddenly so poor that you can’t bear the thought of your countryman making it and putting maybe a fiver on the price? Pfft. Globaliser. You’re probably Tony Blair.

  • J Galt

    Perhaps our New Chinese Masters ordered their Puppets to dissolve it.

    Not in their plans for the Great Northern Plantation.

  • Silvio

    Gail Tverberg is an insurance industry actuary from Atlanta, Georgia who has specialized in analyzing the effects of availability of resources (with a heavy emphasis on petroleum/energy) and resource pricing on economic performance.

    Her thesis, as I understand it, is that the economic paradigms that drove the apparent viability of the continuous growth economic model might have appeared to work while energy and resource extraction costs were low and resources easily extracted. However, as Tverberg explains on her blog, OurFiniteWorld, (with statistics, facts and figures from authoritative sources) she believes that we are now in an era of diminishing returns where resource availability (especially petroleum) is becoming constrained as the best quality and easily accessible reserves of oil and mineral ores are increasingly used up. This means that increasing amounts of energy and money (debt) are needed to extract and refine harder to get at and lower quality oil and mineral resources while increasing amounts of pollution are incurred as well. In this new era of diminishing returns, the continuous economic growth model that governments, businesses and banking have relied on to drive planning and policy for years starts to break down and behave in unexpected ways.

    Our economic growth system is reaching limits in a strange way
    Posted on March 17, 2016 by Gail Tverberg

    Economic growth never seems to be as high as those making forecasts would like it to be. This is a record of recent forecasts by the International Monetary Fund:

    Figure 1. World GDP Forecasts by the International Monetary Fund.

    Figure 2 shows world economic growth on a different basis–a basis that appears to me to be very close to total world GDP, as measured in US dollars, without adjustment for inflation. On this basis, world GDP (or Gross Planetary Product as the author calls it) does very poorly in 2015, nearly as bad as in 2009.

    Figure 2. Gross Planet Product at current prices (trillions of dollars) by Peter A. G. van Bergeijk in Voxeu.

    The poor 2015 performance in Figure 2 reflects a combination of falling inflation rates, as a result of falling commodity prices, and a rising relativity of the US dollar to other currencies.

    Clearly something is wrong, but virtually no one has figured out the problem.

    The World Energy System Is Reaching Limits in a Strange Double Way

    We are experiencing a world economy that seems to be reaching limits, but the symptoms are not what peak oil groups warned about. Instead of high prices and lack of supply, we are facing indirect problems brought on by our high consumption of energy products. In my view, we have a double pump problem.

    https://ourfiniteworld.com/2016/03/17/our-economic-growth-system-is-reaching-limits-in-a-strange-way/

    See also the recent article: Why Globalization Reaches Limits posted on her web site.

      • Ba'al Zevul

        And we’ve seen how well that works, haven’t we? Eight years’ stagnation, and importiing half our consumer goods from China because we no longer produce them. A low-wage menial economy, millions on zero-hours conracts. Record homeless. You name an institution, it’s fucked. The illusion of easy money from fiddling the books has evaporated. The service-“industry” Emperor’s new clothes are revealed as nonexistent; not only that, but most of his skin seems to be missing too. We flogged off our steel industry to an Indian chancer who had been bankrolled by the Indian state rather than take reponsibility for our core productive capacity. And we flogged it to one who couldn’t turn the level of profit Corus was showing before it went.

        ‘This is the UK, not China’, eh? Which has the whip hand? The one with the services or the one with the manufacture?

        • Martinned

          Think of how much worse off the UK poor would be if they had to buy motley household items at the cost it would take to produce them in the UK. No more iPhones, H&M clothes, etc.

          • Ba'al Zevul

            If you were running the economy, I’m sure that’s how it would look. For you, global homogenisation of a workforce trapped in a cycle of just-attainable artificial wants and the law of the economic jungle, is a given. There is no alternative. It’s fine, because you’re going to be top of the heap. Relevant quote from my Chesterton link:

            This Calvinistic thinking, combined with that of Adam Smith his contemporary disciples, is very Catholic* today. The teaching of all the centuries on the common good is ignored, except to endorse what has been called the superstition of the “invisible hand of the market” and how it will create good for all, raising all boats. Throughout the world in poor countries, while those who measure statistics say that economies are improving through neoliberalism, through Trade, the lives of the poor worsen and each day decisions and international agreements through the World Bank, the International Monetary Fund and the World Trade Organization favor transnational corporations over small businesses and family farms.

            The invisible hand of the market has a knife in it…

            http://cjd.org/2001/10/01/g-k-chesterton-and-dorothy-day-on-economicsneither-socialism-nor-capitalism-distributism/

            *The article is in the context of modern Catholicism, and its acquiescence in rampant materialism.

          • Martinned

            Go ahead and tell the working poor you’re not actually going to fix their poverty, you’re just going to take their iPhone away. See how they like that.

  • David Sillars

    Record trade deficit as GDP % surely requires a change of government thinking reference manufacturing. We also are seeing the export of dividends to foreign owners due to privatisation.

  • Republicofscotland

    In the week 4,000 Tata UK jobs hung in the balance, Stephen Kinnock flew to Mumbai to engage in some last-minute lobbying on behalf of steelworkers. Later, Jeremy Corbyn travelled to Port Talbot to meet the community affected. In contrast, David Cameron went on holiday to Lanzarote. And Sajid Javid jetted off to Australia.

    Rarely can an update on MPs’ travel plans have been so depressing – or so shameful.

    When Labour MPs were negotiating, suggesting ideas, campaigning for the steel industry or protesting against Tata, the Tories were not even here.

    George Osborne has been remarkably quiet and there is a grim irony in the fact his last Twitter post – about buying ice-cream in his constituency – was to champion local manufacturing.

    http://labourlist.org/2016/03/with-the-blast-furnaces-set-to-cool-at-port-talbot-the-tories-ideology-and-incompetence-shames-our-steelworkers/

  • Republicofscotland

    My thoughts are with the steel, workers of Port Talbot, the closing of the mill will devastate the community and surrounding area. It reminds me of the despair felt by the community when Ravenscraig was closed down.

  • Habbabkuk

    I come to this thread somewhat late and so some of the comments I might have made have already appeared.

    But I do have two questions of fact.

    Craig says that “the Commission found that dumped Chinese steel had an effective state subsidy of up to 72%” (the Commission finding is the first stage of an EU anti-dumping procedure) and that”(UKREP Brussels was lobbying the EU commission against higher punitive tariffs on Chinese steel than the 13% the UK supported”.

    1/. What was the countervailing duty finally imposed (translated into percentage terms)?

    2/. Which other EU steel-producing countries supported the UK govt’s stance?

  • Clydebuilt

    Craig from what I’ve heard TATA were a patient employer, German steel manufacturers get green energy obligations paid for them by their government. TATA have invested in Port Talbot, expensive air cleaning equipment at the plant. As John Goss says at some point people have to wake from their TV’s and sofas
    The disregard for the working man is not unique to the Blue Tories, Blairs Red Tories let Rover be sold off to the Chinese. What kind of leaders would stand back and let the future of their countries Steel industry depend on Market Forces…….. When there is NO Market…… Chinese Steel is STATE FUNDED
    Heard deputy ed of the Torygraph referring to Steel as a 19th century industry as if that’s an explanation for getting rid off…… Steel was used over a 100 years ago, and will (very probably) be used 100 years from today.

    What pish have defenders of the establishment swallowed to allow them to think it’s an establishment worth defending.

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