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Friday, 26 September 2008

26 September 2008

I wonder what you’ve made of the political shenanigans in Washington over the past week.

There are two ways of looking at it, aren’t there? You might take the view that members of Congress have been fulfilling their duties as elected representatives and carrying out the wishes of their constituents in trying to amend the proposed bank bail-out deal on offer from the US Treasury.

Or you might see it all as sordid electioneering, with each side seeking maximum party advantage in the closing stages of a close-fought Presidential campaign, even as the financial markets teeter on the brink of melt-down in the continuing uncertainty.

If you take the first view, you will find supporting evidence in the New York Times, which reports: “It has become abundantly clear that members of Congress are hearing from their constituents, many of whom are furious about the proposed rescue.”

If you take the second view, you’ll find support from Senate Majority Leader Harry Reid, who told reporters that John McCain's suspension of his campaign was unnecessary and he was "standing in the way" by returning to Washington from the campaign trail. “If we lose progress, it's only because of one man, and that's John McCain."

The focus for much of the public anger seems to be the income levels of some of the biggest banks’ bosses. (And of course it hasn’t exactly gone unnoticed that the US Treasury secretary Henry Poulson, in his previous life as head of Goldman Sachs, managed to squirrel away something in the region of $65 million in bonuses alone over a seven-year period.)

If I were a US tax-payer, I suspect I may wonder why my contribution to the Treasury might be used to keep some of these chaps in the manner to which they have plainly become happily accustomed. Especially as it would appear to be their mistakes, misjudgments and bad calls that got us into this mess in the first place.

So why not let them all go the way of Lehman Brothers? Well, like ‘em or not, we need the banks. They provide our mortgages, they invest our pension plans, and they offer credit to the companies on whom we rely for goods and services. And there seems to be general agreement that however unpalatable the deal currently under discussion, doing nothing would almost certainly be a lot worse.

(Incidentally, one small anecdote: a local shopkeeper of my acquaintance was telling me recently that he had just acquired two more properties as his business expanded. The bank had approved his business plan, but at the last moment, withdrew its offer of a loan. That’s the credit crunch in action.)

And there’s still the thorny issue of how much the US Treasury’s “septic bank” might be prepared to pay for the toxic debt currently poisoning the system. As my colleague, the BBC’s superb business editor Robert Peston, points out: “If the bail-out is used to punish the banks, it probably won't save the global financial system; but if the banks aren't punished, then US tax-payers may well feel that their pockets have been picked.”

Friday, 19 September 2008

19 September 2008

I might as well start with an admission: I wouldn’t recognise a collateralised debt obligation if it came up to me in the street and shook me by the hand.

So if you were to doubt my expertise when I start pontificating about financial matters, well, I’d concede that you just may have a point.

But I hope I’m not being a total simpleton if I suggest that some of the coverage of recent events risks losing a sense of proportion. Yes, I know that Alistair Darling said that current economic conditions "are arguably the worst they've been in 60 years”. And I have no doubt that’s how it feels if you’re trying to keep the ship afloat in these storm-tossed seas.

Leave aside for a moment the hysteria on the stock markets. Consider the UK unemployment rate, up sharply to 5.5 per cent, and rising more quickly than at any time since 1992. But consider also: at 1.7 million out of work, the figure is still only just over half what it was 25 years ago.

All right, what about inflation, also up sharply? True, and it’s rising at its fastest rate for 11 years – but at 4.7 per cent, it’s still far lower than in 1975, when it reached 24 per cent, or 1980, when it was at 18 per cent.

Those of you of a certain age will recall a character called Corporal Jones in the TV comedy series Dad’s Army. His catch-phrase “Don’t panic!” was guaranteed to spark exactly the opposite reaction. So I won’t do a Corporal Jones.

Nor will I pretend that the events of the past two weeks haven’t been dramatic or serious. When a major UK mortgage lender is taken over; when one of the world’s biggest insurance companies is nationalised in the US; when iconic names in the financial world like Lehman Brothers, Merrill Lynch and Morgan Stanley are bandied about like so many dodgy second-hand car dealers, even I can recognise that something is up.

But my experience of previous crises – and I don’t think anyone who lived through the recession of the early 1980s is likely to forget it – leads me to conclude that what goes down must, sooner or later, come back up again. The whole point of economic cycles, I would have thought, is that they are cyclical.

Yes, if you have a mortgage, you’ll be worried about interest rates. But doesn’t any prudent borrower factor in possible rate changes over a 25-year period? If you’re saving for a pension, you’ll be worried about the value of your pension pot. But unless you’re planning to cash it in now, there’s a fair chance it’ll claw back its previous value within the next couple of years. (After all, the stock market now, even after all the falls of recent days, is about where it was three years ago.)

Of course, jobs are being lost, businesses are suffering, and homes are being repossessed. Not for a moment am I suggesting that the current crisis doesn’t involve real hardship. And with the financial services industry playing such a significant role in the national economy, clearly a crisis in the City has important knock-on effects.

All I’m saying is that I doubt the world is about to end just yet.

Oh, and by the way, remember how oil prices were close to $150 dollars a barrel a couple of months ago? You may not have noticed, but yesterday, they were below $100. That’s a drop of one-third in eight weeks. Just thought I’d mention it.

Friday, 12 September 2008

12 September 2008

PHOENIX, ARIZONA -- A couple of nights ago, I was at a party of highly motivated political women here in Phoenix, Arizona. This is the state which John McCain represents in the US Senate, so perhaps you’d expect these female Arizona politicos to be thrilled by his decision to appoint a woman, Governor Sarah Palin of Alaska, as his vice-presidential running mate.

In fact, not so. Because these women were Democrats, and as one of them told me: “It’s not just about biology; it’s also about ideology.” To them, Sarah Palin is anathema, because she is pro-life, and they are pro-choice. (Or if you prefer, she is anti-abortion, and they believe in a woman’s right to choose.)

These are strange days in the Presidential election campaign. There’s been more talk this week about lipstick than about the economy or Iraq; more coverage of a vice-presidential candidate who has remained unavailable to reporters than to the other half of her party’s ticket, the man who would be President.

(Just to put the record straight about what Barack Obama meant when he spoke of “putting lipstick on a pig”: Sarah Palin is the lipstick, he insists, the pig is John McCain’s policies. He didn’t mean Mrs Palin is a pig.)

I’ve spent the past two weeks first in Missouri, then in Illinois, and now here in Arizona. And I have a few conclusions to report to you, admittedly wholly unscientific and totally impressionistic.

First, this election really is engaging people: everyone I’ve had contact with -- in shops, hotels, on the streets – has wanted to talk about it. (One exception: a young man here in Phoenix who within the last few months has lost his job, been left by his wife, and is now having his home repossessed by the bank … he told me he had other things on his mind more important than the election.)

Second, the people who support John McCain cite his political experience and his military background as the main reasons: his specific policies seem to have made little impact. And those who prefer Barack Obama say it’s because he inspires them as a new face and a new voice: they speak of him with the same reverence that McCain supporters adopt when they speak of their candidate.

Third, the Iraq war is just not an issue. Over the past week, I have had several hours of in- depth conversations with voters on both sides of the debate; not one of them has mentioned Iraq. (And if you heard our programme from Rolla, Missouri, last Friday, you may remember that no one in the audience there raised it either.)

Fear of terrorism is an issue, the economy is an issue, and for some, abortion is an issue. Both John McCain and Sarah Palin are vehemently anti-abortion (that’s why the pregnancy of Mrs Palin’s 17-year-old daughter made such an impact). Some women who desperately wanted a chance to vote for Hillary Clinton will never be able to vote for Sarah Palin – but the opinion polls suggest that many white working class women in particular are being won over.

A word of warning about those polls: many of them are showing relatively small shifts, often within the margin of error, and there is some evidence to suggest that the mood, when it is shifting, is being heavily influenced by daily media coverage.

So my advice is: don’t jump to any conclusions just yet. Yes, John McCain is doing better in the polls than he was three months ago – but if you look at the state-by-state breakdown of how he and Senator Obama stand, it still looks extraordinarily tight.

The first of my documentaries for the BBC World Service – “My Senator, My Vote” – will be broadcast next Wednesday. The second will be on air the following week.

Sunday, 7 September 2008

5 September 2008

ROLLA, MISSOURI -- I’ve been exploring parts of Missouri this week, in preparation for tonight’s live programme featuring an audience of local voters here in the small town of Rolla (population: 16,000).

Why Rolla? Because it’s simply the closest you can get to the perfect middle American town. Missouri is in the middle of America, culturally and politically if not geographically, and Rolla is in the middle of Missouri. The same number of people live between here and Canada as between here and Mexico; and the same number between here and the Pacific as between here and the Atlantic. So it truly is the middle of middle America.

A few hours ago I was watching John McCain’s speech on the closing night of the Republican party convention. Two things struck me about it: first, it’s obvious that his speech-writers are not close followers of British politics (I don’t think they would have used the phrase “Back to basics” if they’d known how much trouble it got John Major into); and second, voters who want change are now spoilt for choice. Both McCain and Obama are promising bucketloads of it.

Here’s the key passage from McCain’s speech last night. “We were elected to change Washington, and we let Washington change us. We lost the trust of the American people when some Republicans gave in to the temptations of corruption … We're going to change that. We're going to recover the people's trust by standing up again for the values Americans admire. The party of Lincoln, Roosevelt and Reagan is going to get back to basics.”

To which the Obama campaign replied: “Tonight, John McCain said that his party was elected to change Washington, but that they let Washington change them. He’s right. He admonished the ‘old, do-nothing crowd’ in Washington, but ignored the fact that he’s been part of that crowd for twenty-six years …”

So you pays your money, and you takes your choice. The reason I’m in Missouri is that voters here have a unique record in choosing winning candidates in Presidential elections. With only one exception, they’ve backed the winner in every election since 1904. So if our audience tonight is a typical cross-section (which, of course, it may not be, since the programme is open to all comers), it should give you a pretty good idea how things stand, now that both parties’ conventions are over.

I don’t want to pre-empt tonight’s programme (we’ll have two local members of Congress on our panel, by the way, and voters will be asking them questions directly – it’s the kind of direct voter interaction you very rarely get a chance to hear), but I can say that over the past few days I’ve met pretty much an equal number of Republicans and Democrats who are convinced they’re going to win here in Missouri in eight weeks’ time.

Local Republicans are genuinely excited by Sarah Palin, the previously unknown Governor of Alaska whom John McCain has chosen as his vice-presidential candidate – and Democrats, especially black Democrats, are every bit as excited about Barack Obama.

So I do hope you’ll be able to tune in to tonight’s programme – and don’t forget that if for any reason you can’t listen at 10 o’clock tonight, you can always catch up via the Listen Again button on our website. It’ll be there for at least the next seven days.

Next week, I’m staying on in the US to make a couple of documentaries for the BBC World Service, but I’ll try to stay in touch anyway.