July 15, 2013

Slow down the money

Posted in Behavioural Economics · 100 comments ·
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In glorious sunshine, sitting on the banks of the river Thames beside the bridge at Henley, you could scarcely be in a more quintessentially English place. The muscular rowers haul svelte canoes through still waters, while traditional Venetian-style, polished wooden boats, ‘put-put’ gracefully.

The Union flag flutters astern. Everything is calm; all is quietly efficient and in order. There is neither a fender nor rope out of place. It’s beautiful, if a bit dull – but, then again, dull is often underestimated.

I’ve just had the pleasure of listening to one of Britain’s best and most consistent investors, Neil Woodford of Invesco. Woodford has been doing the same job brilliantly since the late 1980s. He has mastered his craft. He is the UK’s number one fund manager and so it was strange hearing him say that he doesn’t really care about stock market gyrations – the helter skelter that is the diet of umpteen business shows and which keep most moneymen awake at night.

For him, the most important thing is to invest other people’s money in very strong companies. He does this after a long period of reflection and analysis, and he invests for the very long-term. When he deploys his capital, he has quite a lot to use: close to €40 billion.

He takes positions in companies for decades, not just months or years. This steady – some might say dull – approach has paid remarkable dividends over the years.

So, this week, let’s sit back and praise the dull, as opposed to the exciteable. Let’s praise the slow and methodical over the fast and furious. Let’s salute the accumulated return over the fast buck.

One of the companies Woodford has backed is Drax, a large British power plant that provides about 7 per cent of all the UK’s energy. Like Irish power stations, the business is trying to make the essential change from fossil fuels to biomass.

This is an expensive, capital-intensive endeavour that demands lots and lots of money and investors who will be around for the long haul. It is also an absolutely strategic business as, without it, the lights don’t go on.

What is fascinating about the relationship between the investor and the company is the fact that, every time the company has needed to raise large amounts of money, Invesco has taken up 30 per cent of the allocation.

Not just this, but the fund manager has been at the table with the government when plans for the industry were being discussed, making it clear to the government that investors need to make a certain profit to be incentivised to put lots of cash into a business. Otherwise, the state would have to foot this huge bill from the taxpayer, who is already paying for electricity at the far end of the generating process.

This is a slow, thoughtful process involving long discussions with all sorts of people to plan the development of the British energy market over the next two generations. It is an example of using British pension resources to invest in British projects, which should help power our nearest neighbour’s economy into the future. It would seem to be a sensible way of allocating capital, which saves the state money, but uses the citizen’s savings to finance essential strategic projects that benefit many people.

Listening to the power company and the long-term investor talk about making things together, it struck me that this is a remarkably sensible way for a fund manager to manage the fund’s money, and it stands in direct contrast to the histrionics and macho posturing of many in the financial markets, who seem to have scant regard for the actual economy beyond the hourly ups and downs of their share prices.

One of the interesting points that Woodford made wasn’t about appropriate management of companies, but appropriate owners. When asked about the lack of funding for UK start up companies, he made the fascinating and sometimes overlooked point that most venture capital funds have only a three-year investment cycle.

This implies that almost as soon as they invest in a start up, they are looking for an exit. This, according to Woodford, is the worst thing that the management of a small company needs when trying to get a technology from the lab in a university to the point where it is a commercial product that can be put on sale.

The major point he is making here is that, for a country to foster its talent (and that includes a country like Ireland), it needs to have what I might term ‘slow money’ as opposed to ‘fast money’. Like the difference between slow and fast food, slow and fast money offer entirely different experiences.

Fast money, like fast food, is all about the instant hit, the instant sugar-rush that satisfies a short-term need with a short-term fix. In the same way that fast food is filled with all sorts of addictive substances that hook the eater, fast money is also full of all sorts of gimmicks – such as interest-only balloon payments linked to all sorts of targets that suck the desperate company in – so much so that, like the fast-food junkie, the fast money junkie ends up working for the investor rather than with the investor.

Slow money, on the other hand, understands deeply the industry it is investing in. It works in partnership with its company and crucially it hold the asset for years, prepared to understand the ups and downs of the business cycle as long as the company’s management knows what it is doing and have legitimate and achievable ambitions. Slow money, like slow food, involves lots of preparation and lots of deliberation. It is patient but, ultimately, far most satisfying for investor and recipient.

As the global economy takes on more and more risk because cheap central bank money is driving a wedge between rising asset prices and poor economic performance, we would be wise to change our financial diet from fast to slow money. This can be done by the state incentivising long-term investment through taxation policy. But, ultimately, tax can only take you so far.

In truth, the change has to come in the heads of fund managers and financial market players so they see that with money comes great responsibility, and that the best decisions are often arrived at slowly.

As I watch the slow boats meander gently, peacefully and – yes, predictably – up the river, the beauty of the dull and repetitive is there for all to see.

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  1. Adam Byrne

    Good morning.

  2. Morning all.
    After reading this article, anyone now has an excellent pointer as to how to build a nest egg in the long term. Thank you David.

    • Adam Byrne

      In the long run we are all dead.

    • Eireannach

      Yes Furrlugs, I have a slow money opportunity for you.

      Each year, 100,000s of retired people travel around Ireland on coach tours.

      Etablished markets are North Americans and British. Rapidly growing markets are French, Germans and Scandinavians.

      One of the highlights of any coach tour is Connemara, especially for the French, due to Michel de Sardou’s classic romantic ballad ‘Les Lacs du Connemara’. So Connemara is a romantic highlight for French retirees.

      250,000 French visited Ireland in 2012. Numbers are up this year, due to instability in Tunisia, Egypt and Turkey.

      Connemara has very few restaurant capable of handling coachloads of people. The main restaurant catering to coachloads is the Leenane Hotel. It is stretched to capacity now, with 8 caochloads per day.

      Build an eco-friendly, tasteful seafood restaurant along Cois Fharraige, maybe around Ros An Mhíl, but the sea, close to a little quay. Build it from locally quarried granite and salavaged wood. Make it look 100 years old. Have a deli counter selling Connemara Smokehouse tuna pâté and Irish farmhouse cheeses.

      Tons of coaches will have lunch at your restaurant because it fulfills their dreams of Connemara, and makes for a perfect holiday. You’ll make megabucks for 6-7 months, then close up shop and go to South Africa or wherever for the winter months.

      Finally, let me say this – if you don’t do it, NOBODY WILL DO IT. Only coach drivers and guides, like myself, can see this massive white space in the market, a white space the size of hours and hours of driving across Connemara. The Connemara smokehouse has the organic food, but it’s too inaccessible in Ballyconnelly. Bring their produce to the main roads, either the Galway-Oughterard road or the Coast Road.

      It is waiting to be done. It’s a long term investment. It’ll create jobs and make Connemara even a little more beautiful than it is. It’ll make tourists and locals and yourself happy.

      Nodoby else will do it.

      • Excellent idea my friend and I know the country well. The same principle could be applied to all the Gaeltacht areas, utilising the distinct ambience of the area.

        Now take down this post quick before someone else reads it and runs away with the idea!!

        Maith a Fear.

        • Adam Byrne

          You are talking a hell of a lot of money to get a project like that off the ground.

          Anyone care to provide a rough estimate?

          • Eireannach

            Furrylugs,

            I’m thinking a tuna pâté starter, chowder in a wide dish as a main (for lunch), selection of farmhouse cheeses (3 slices) for dessert.

            Same every time, coachload after coachload, day after day. The operators in France and Ireland will know what they’re getting. Predictable, tasty, just enough, a well-oiled hospitality machine.

            Adam,

            Apparently, land in Connemara now costs rough the same (per square foot/metre) as in the Ukraine and Turkey. (source:www.globalpropertyguide.com)

          • Adam Byrne

            Yeah, that’s fair enough but I was thinking more of the building costs and business set up.

          • Eireannach

            Adam,

            Ah yes, but visualize the business plan. You’d present your statistics for coach tourists. You’d present your research of service offerings in Connemara (basically, the Leenane Hotel, with the Station House in Clifden able to cater for 2 coachloads per cover, max). Your investors will be able to visualize substantial returns.

            If it cost €1,000,000 to build, it would still attract all kinds of investors who know the tourism industry well.

            I’m simply offering this as a ‘slow money’ opportunity between investor and entrepreneur, with large returns over time, because retirees on coach tours in Connemara has a very bright future, give Europe’s demographic trends.

            Basically everyone in Europe will want to see Connemara on a coach tour in their retirement years. Every tour will pass Connemara. The most romantic seafood restaurant in Connemara will be the operator’s favourite lunch stop.

            With 500million people in Europe, and your only competition the Leenane Hotel and the Station House, this is ‘an area with fantastic tourim development potential’, to put it mildly.

          • Adam Byrne

            Yeah, it sounds like a runner alright.

          • 5Fingers

            Why have something that you have to build. Why not have a network of mobile diners based in multiple 40 ft containers. Maybe even revive a few rusty trawlers and lock them up quayside for a few weeks…and tidy away the lot or move them to another country. A sort of travelling circus that follows the tourists.

          • Colin

            The obvious question is, why haven’t the station house or the Leenane hotel spotted this gap in the market? They are the locals with their ear to the ground.

            As I pointed out here recently, Galway is the playground of the South Co Dublin set, and the locals aint too happy about it, and are now writing letters to dem up dere in Dublin.

            http://www.independent.ie/opinion/letters/seasonal-invasion-of-secondhome-owners-29402569.html

            But good luck to anyone who has a few bob spare to invest and likes to serve great grub well while spending the Summer in the West of Ireland.

            In the words of the great dragon Niall O’Farrell, ‘I’m out’.

      • Pauldiv

        It is waiting to be done and there are millions of people who would love to visit Ireland.

        They have romantic notions about Ireland and are not interested in small minded parochial stuff. Their romantic notions are justified because Ireland is that kind of place.

        Photographic tours would sell. I’ve had enquiries and know that there are people willing to come to Ireland if they know they are not being ripped off

        Some of them don’t want a touristy experience and want to slum it as long as they are well fed and their host is unique

        Just jump in a beat up land rover and off you go for the day to all the spots the tourist coached miss

        It’s best to focus on your local county and keep it simple.

        • Eireannach

          Pauldiv,

          One of the most ingenious local tour guides I know runs ‘ruralpubtours’ from Dublin. Every night, he brings tourist to three or maybe 4 pubs in the foothills of the Wicklow mountains. Pints, music, good chat with the guide and friendly locals. He always ends at the Merry Ploughboy, owned by trad musicians.

          He drives a 16 seater. €25 each.Full bus €400, 4 hours work.

          Everybody is happy :)

          • Pauldiv

            RuralPubTours. I like that.

          • Colin

            Of course you would pauldiv, there’s drink involved.

          • Pauldiv

            €100 an hour is serious money so imagine doing two or three runs per week!

            Small niches like this work and Ireland has a lot to offer – photography and fishing are two areas I can think of but there are lots of others

            If you are an expert in something then you can teach it, hold workshops etc

            Teaching what you know is another. In my case I could do half day or full day courses on computer programming or web dev

            When I was in programming school I would have paid money to sit with an experienced programmer and watch how they work

            I reckon a day spent with someone as experienced as myself would be very educational and I know there is a market for expert one top one training

            Now you have me thinking Eirannach

          • Eireannach

            PaulDiv,

            It’s all about the niches. What’s going on in your locale. The difficult thing is to see what ISN’T there, but if it were there, it would seem like it was always there.

            Charge a modest sum per hour for programming training. Consider offering programming grinds to undergrads, which could blend easily into work place career advice. You’ll help the kids get on their feet, and they and/or their parents will give you cash.

            You’ll be your own boss, you schedule the hours. These micro-initiatives is the stuff that’ll get our country back on track, not sitting around waiting for big solutions.

            Small and local and niche is beautiful, and helpful.

          • Pauldiv

            Bang on the money Eireannach and thanks for believing.

            How much is reasonable?

          • Pauldiv

            Map of South Sligo. Tiny village of Castlebaldwin is surrounded with Carrowkeel and several loughs. The potential is massive

            Things we could do with:

            Community centre
            Orchard
            Allotments
            Farm shop
            Bakery
            Brewery
            Shoe repairer
            Tour guide
            Historian
            etc

            http://maps.osi.ie/publicviewer/#V1,578879,809026,3,10

          • EMMETTOR

            One thing, when I’m abroad, I always try to encourage people I meet to visit Ireland. The most common response is “too expensive”. I never have a riposte.

      • EMMETTOR

        Merci, Eireannach, you’ve finally cleared something up for me. Namely, why every middle-aged Frenchman I’ve ever met, on hearing I’m Irish, starts singing the praises of Connemara.

  3. michaelcoughlan

    Hi,

    It seems woodford is a warren buffet type. The article is excellent however like must other excellent pieces it will fall on deaf ears in the administration. If the same modus operandi could be applied to irish small start ups we might have a fighting chance. Also we really need to look at establishing a micro exporting forum for Ireland. The enterprise Ireland criteria I think is exports in the
    millions or min 10 employees. With cloud computing there is nothing to stop a single architect or software designer for example exporting their skills on a sole trading platform if they pug their minds to it.

  4. StephenKenny

    That’s a little unfair on the worldwide venture industry – the UK venture funding industry is almost unique in having such a short time horizon, but that’s more in line with the attitude of UK fund management generally. Sand HIll Road looks out much further.

    The one thing that the UK financial services sector does better than anyone else, is PR: Making investing in power generators seem genius.

    • hibernian56

      Agreed. Drax is coal fired, but moving to biomass. While the generator tech is state of the art, carbon capture excellent, the switch to biomass is a little disturbing for 2 reasons.

      1. The price of grain is rising.
      2. Where are the bees?

      The second point may sound strange, but I have only seen 1 dead bee so far this year. I’ve been tickling my fruit / flowers etc myself in order to pollenate them. The lack of bees is very serious, not this year, but next and even worse in two years. Check up on it.

      Best kept secret of corporate pest control land, with a little help from their friends in the civil service (couldn’t resist).

      • Adam Byrne

        There’s a future employment prospect for graduates – flower tickling.

        Every cloud has a silver lining.

        • Adam Byrne

          Ireland could become the world’s leader in it – we could shoehorn it in with the so-called ‘knowledge economy’.

          • hibernian56

            I know, 5 years in college and you’d finally be qualified to use a tickler. But it would have to be an approved tickler and you would have to be on a Register for Ticklers.
            Just think of the Civil Service job opportunities.

        • ex_pat_northerner

          Thats the problem with GDP aligned economics. IF the bees pollinate, they’re not accounted for. If humans pollinate then thats an economic activity so therefore will be accounted for. Pollution pays. Same with climate change – storm wrecks NY. but its ok because it adds 2% to NY GDP to rebuild. we need to account for whole economic cycle especially with new technology products.

      • bonbon

        Best to say it with good old fashioned Irish – Biomass is attempted genocide. Of course prices rise on the energy exchanges! Poor starve – but Obama would say let them drink ethanol.

        As for bees – has anyone noticed the Irish Times article which wondrously lays out the facts. We are very likely heading into a Maunder Minimum, not the great Goebbels Warm Lie of the 21′st Century.

        So the question is what happened to bee populations during the last Maunder Minimum?

        • 5Fingers

          Oh susshh… They know nought
          http://www a new scientist com/article/dn23865. More solar cycles up there than in a bike shop.

          • bonbon

            Maunder Minimum? Dalton Minimum? Why we have had ice ages, 22 pf them since our species appeared. Anyone can check this, even the Co2 overdosed.

  5. pauloriain

    Yes, good article, but isn’t it incredible that you should have to write something like this really. It says it all. Pension reality is that pensioners are not the focus of the investment community. They don’t really care about what pensioners really get in the end.

  6. Grey Fox

    Good article David, and if I might go off topic slightly the same view should be applied to Mortgage debt, after all it is a long term commitment. Yet we are treated as a “fast food” commodity because we cannot adhere to the original repayment schedule, the term of the mortgage has not been breached, it is 20-30 years down the road, and why? well we cannot adhere because the Bank’s lost the run of themselves and acted irresponsibly, they have destroyed our economy, destroyed the jobs market and now want to take the fast food view because they have run themselves into the ground and their only recourse is to the “terms & conditions” which attack the very people the Banks need and require to save themselves, well traditionally that is, of course as long as the Banks are on artificial life support from the ECB the regular joe is simply an additional meal ticket to be beaten up and milked as an additional source of funding whether that be by way of taxes or the Cyprus route.
    I have a very serious difficulty with the widespread mainstream view that none of these banks can be allowed to fail, who made them all powerful and perched them so high on the societal food chain, they are after all simply a company supplying a service and should never have been allowed to gain such a strangle hold on the economic bloodstream of our country, so instead of eroding that stranglehold our government reinforces it and all in the name of the people they represent who happen to be the people the banks are destroying, the term crazy crazy world would be apt if the situation where not so serious, by that I mean, not costing peoples lives! I am surely losing faith in humanity.

    • Kev

      Grey Fox. You say:
      “I have a very serious difficulty with the widespread mainstream view that none of these banks can be allowed to fail, who made them all powerful and perched them so high on the societal food chain, they are after all simply a company supplying a service and should never have been allowed to gain such a strangle hold on the economic bloodstream of our country”

      The government cannot allow the banks to fail. They do not just act as intermediaries as you suggest. Banks create commercial bank money (effectively the digital numbers in your bank account), which forms 97% of the money supply.

      If the banks were to fail, this money supply would be deleted.

      To solve this problem, money creation and the business of conducting transactions between parties must be separated. Unfortunately, not many economists or politicians recognise this and its not being discussed or proposed in the mainstream.

      • Agree. This point has been offered continuously to McWilliams for 2 years without a single comment and very little discussion on the blog.
        Lack of education on the function of money or what constituters good money is abysmal.

        The Fiat bank money of debt must be replaced with free treasury bills. The legal tender laws need to be repealed and gold and silver monetized.
        People need to be allowed to used the best money available and have a free choice to do so.

        • Kev

          Tony, Im a goldbug myself but feel that Positive Money’s proposals are on the ‘money’ (pardon the pun)

          McWillams doesnt seem to know anything about the mechanics of money creation, like most economists.

          As an engineer, its like me designing the superstructure of a building, without knowing how to design the foundations. Ridiculous.

          • one does not need to be a gold bug to understand money and its functions as it serves humanity.
            We ave simply given a monopoly in money creation to a private business (a consortium of businesses, a cabal, and oligarchy)
            Banks are private businesses and the function of money creation is a private thing. allow an open market in money creation and people will choose the best money for there needs. it may or may not include the precious metals. Let the market decide . BUT the banks must be allowed to fail and the exclusive right to money creation removed from them.
            Nobody should have a monopoly on money creation and that includes government too.

      • bonbon

        To solve this problem, Glass-Steagall, seperating the banking arms, must be re-instated. The Financial Times says this right from the Thames.

        Strange DMcW gapes at boats and missed that.

        • Kev

          Dont stop there. Remove their power to create 97% pf the money supply.

          http://www.positivemoney.org/our-proposals/

          • cooldude

            Agree with your comments Kev. The foundations of our money supply are built on quicksand and it would seem that failure is inevitable with this system. A full reserve system is definitely preferable and would be much more stable. The existing system is financially very lucrative for the large commercial banks who are the shareholders of the central banks so I don’t think these guys are going to give up their franchise on the global money supply without some serious opposition.

            I also support a repeal of the legal tender laws to allow different forms of money to coexist and to let people have the freedom to decide which type of money they can use for different transactions. This would also have the benefit of stopping the government debasing their currency even in a full reserve system. If the government debased the value of their money too much through excessive issuance people could simply switch to a different type of money which would act better as a store of value. This knowledge would keep the possibility of over issuance in check and give people freedom in a very important part of their lives.

        • bonbon

          Of course we will not “stop there”, but without loosing a moment, credit the largest economic reconstruction ever seen. Glass-Steagall is just the, essential, door-opener. But firmly applied. The investment arms will quickly cease to be a problem. As regards monetarism, a very serious mental illness, rampant in Uni’s, Gov’T, and on the street, check out this :
          <a href="http://larouchepac.com/creditsystem"<For a New Credit System

  7. Adelaide

    http://doc?umentarylo?vers.com/f?our-horsem?en/

    A new economics documentary that has been hyped up. It covers nothing new but it has an impressive lineup of talking heads. It proposes that the West and its flavour of capitalism are in the ‘age of decadence’, the final stage of an empire’s demise and it points the finger of blame at FIAT currencies. ps Fast-forward past the melodramatic beginning to the first talking head. Enjoy.

  8. Adelaide

    “If printing money was the answer then Zimbabwe would be the richest country on earth.”

    • bonbon

      Ridiculous. The world leader in printing is Mad Ben Bernanke, the Helicopter head, followed by daft Draghi. DMcW knows this. Since the German Hyperinflation of 1923, anyone who claims ignorance is, skewed, to say it, hrrumph, diplomatically.

      Have a look at a 100 Billion Reichsmark Note : http://de.wikipedia.org/wiki/Datei:100-Billionen-Geldschein-2.jpg

      And then let’s discuss Draghi’s insanity.

      • Kev

        the are creating central bank money, not commercial bank money (which circulates in the economy). Therefore this does not necessarily mean that hyperinflation will occur.

        • bonbon

          Already happened. Known, $85 billion per month by Mad Ben, yet to see what Daft Draghi is up to.

          Point again is look at the plunging economic curve, no credit for Reconstruction, but debt shoved onto the already collapsing economy. It’s that monetarist itch again!

      • cooldude

        Adelaide is in fact correct on which central banker could debase their money supply the quickest. Gideon Gono from Zimbabwe increased the money supply by 2000% in 2009 resulting in a horrific bout of hyperinflation which caused lots of suffering. Ben Bernanke is currently creating $85 bilion of new currency units every month to purchase bonds and buy securitized garbage off the commercial banks. This works out around a 20% per annum increase. Japan are also ahead of Bennie and the inkjets and are currently increasing their supply of newly created Yen by 50% per annum. The interesting thing is that none of this creation of new currency units at zero cost is resulting in any benefits to the real economy in any of these countries. The only people who seem to benefit are the insolvent banks and the insiders who gamble on the resulting rises in asset prices.

        • bonbon

          The hypernflation underway here has destroyed Greece, Cyprus, Spain, Ireland, in case you have’nt noticed. Now how could that be, Monetarist. Look at the Triple Curve again!

          • cooldude

            More bullshit Mr Bonbon. Hyperinflation is a very rare economic phenomenon and thats just as well because it is horrendous. There are two commonly accepted definitions one which says it is a monthly inflation rate exceeding 50% and the other which says it is an annual rate exceeding 100%. None of the countries you have mentioned have rates even approaching either of these figures. What they are experiencing is stagflation where necessary items such as food and fuel are rising and leveraged items like housing are falling. The worst of both worlds and it is prevalent almost everywhere at the moment.

            If hyperinflation ever does occur and it is a possibility even you will be able to recognize it.

            Here are the correct definitions so you know exactly what you are talking about in future

            Definitions[edit]

            In 1956, Phillip Cagan wrote The Monetary Dynamics of Hyperinflation, generally regarded as the first serious study of hyperinflation and its effects. In it, he defined hyperinflation as starting in the month that the monthly inflation rate exceeds 50%, and it ending when the monthly inflation rate drops below 50% and stays that way for at least a year.[3] Economists usually follow Cagan’s description that hyperinflation occurs when the monthly inflation rate exceeds 50%.[4]
            The International Accounting Standards Board does not establish an absolute rate at which hyperinflation is deemed to arise. Instead, it lists factors that indicate the existence of hyperinflation:[5]
            The general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency. Amounts of local currency held are immediately invested to maintain purchasing power
            The general population regards monetary amounts not in terms of the local currency but in terms of a relatively stable foreign currency. Prices may be quoted in that currency;
            Sales and purchases on credit take place at prices that compensate for the expected loss of purchasing power during the credit period, even if the period is short;
            Interest rates, wages, and prices are linked to a price index; and
            The cumulative inflation rate over three years approaches, or exceeds, 100%.

  9. Kev

    Grey Fox. You say:
    “I have a very serious difficulty with the widespread mainstream view that none of these banks can be allowed to fail, who made them all powerful and perched them so high on the societal food chain, they are after all simply a company supplying a service and should never have been allowed to gain such a strangle hold on the economic bloodstream of our country”

    The government cannot allow the banks to fail. They do not just act as intermediaries as you suggest.

    Banks also create commercial bank money (effectively the digital numbers in your bank account), which forms 97% of the money supply.

    If the banks were to fail, this money supply would be deleted.

    To solve this problem, money creation and the business of conducting transactions between parties must be separated. Unfortunately, not many economists or politicians recognise this and its not being discussed or proposed in the mainstream.

    • bonbon

      Echoes of the daft “It” from “Bit”, Economy from Digital money propounded here all the time.

      Since when did an economy ever spring from a boolean bit (digital money after all)? One has to have a very sever case of monetarist fevers to embrace such nonsense.

  10. george

    David, yours is a fine piece of thought!
    Now we have to find some ideas to match it, to make of it a reality!
    What about if Ireland decides to eliminate most of the vegetable and poultry imports, that very well could be grown organically in this Country, and even produce big surpluses that can easily be exported to big markets like Britain and Germany?
    .
    We could produce enough organic carrots, lettuces, tomatoes, zucchinis, celery, onions, spinach, parsnip, cucumber, potatoes, pumpkin, and few others, and even chickens and eggs, to feed our own population(providing we act reasonably and we don’t start to have six children each)and enough as well for to export in a big way. Something that with a bit of coordination from government agencies could attract funds to this Country, from this slow money groups, that will be necessary for the production and the purchasing of the equipment (plastic tunnels, irrigation equipment, small machinery, etc), and almost straight away would be able to produce results in ecconomic and social terms. What about even for the public having direct access to this producers, and bypassing big Supermarkets and intermediaries, if they wish to do so, in order to guarantee a fairer means of commerce?

    .
    We really could do it you know, if only we could break this mould by which we think we are better off putting our faith in the hands of big multinationals companies. We can create thousands of good quality jobs spread all around the Country, and also we can device some policies that will make people here to take those jobs, without having to go to Eastern Europe for cheap labourers, because it will defeat any reasonable purpose.

    • An efficient agricultural based is the foundation of all economic activity. Together with the industrial revolution of the 19th century came the agrarian revolution that freed up all the now unneeded labour to be transported to the industrial sector.

      The world cannot survive without agricultural sector. Now it has to be returned to the smaller efficient operator and wrested from the super sized agribusiness that seeks to control the world production and thus the world.

      In my limited observation the Irish farmer is among the worlds most efficient. A good base to build from.

      • george

        Hi Tony I agree with you about the good nature a predisposition of the Irish farmers. Makes me sick to see them working Saturdays and Sundays at any time of the day, sometimes in terrible weather conditions, and never complaining about the nature of their work; and in the other hand some people in the Public Sector and the Professional classes getting away with high salaries, long holidays and so many privileges! Sometimes I think the world is upside down, when whoever put food in your table has to risk a lot with no guarantees assured, and others who practically only can play with words, get away with so much. Cheers!

        • hibernian56

          Erm, I’m technically in the “Professional class”, but I’m self employed and work practically every hour I’m awake.
          If I don’t work I don’t eat.
          After years of paying tax, PAYE & PRSI, employing people and generating VAT I get nothing as a self employed person. Absolutely zip.

          • george

            I have said “some people” in the Public Sector, obviouslly I’m not referring to the nurses, nor the fire brigade crowd, or the cleaners sweeping the footpaths; rather to the ones that get salaries, pensions, lump sums, and holidays, no other sector of the population gets. And I said “some people” in the professional classes, of which some of them have links with the State. But being more specific, do you think is logical that a doctor charges fifty euro to see a person with a minor ailment, for which it gets ten minutes in a surgery, and gets out of it with a prescription? And if we talk about dentists, and solicitors, and lawyers, and others, the same happens. And the Troika keeps reminding our Government about it! We are paying here for those services more that people pays in Germany, Britain or Spain, and it is a burden to the general ecconomy of the Country. Many people unable to pay those fees had to go to North of Ireland, and onlly because some private operators from abroad started to operate here in a limited basis, is that prices in some sectors came down at least a third of what they were in the recent past. Unfortunatelly none of it, is for the benefit of the general public, because now we lost our ecconomic independence, among other things because we paid ourselves to much in comparison to other Countries, and now among other unfair measures, we’ll have to pay the most unfair tax of all… Propertty Tax!
            .
            I’m also a self employed, and I’m a professional, and whatever dificulties my job brings me, it doesn ‘t stop me admitting, that to be milking cows every Sunday at five o’cklok in the morning risking getting frost bite and neumonia, or my collar bones being crushed by a cow, it is much harder work and more important that mine, and I’m sure you think the same. But to hear “some people”, talking as if they would be the least paid and the most exploited in the Country, when in reality they have plenty of privileges the rest of the people, among them some self employed people like you, or the low paid people in the Public Sector don’t get … it is what makes me sick!

  11. 5Fingers

    Lovely article, enjoyed the way it was written. I could feel the warmth leap off the page as though I was sitting there watching the boats – and I loved the metaphor of deliberation and steadiness. Spot on.

  12. TrackerMan

    There is a lot of institutional money in both the UK regulated utility sector and the fully commercially exposed independent power generation sector. This institutional money is on both the debt and equity side, with the vast majority of the debt (on the regulated side) being of index linked format (perfect for long term UK pension funds) who have long term liabilities towards their fund members. If a period of above average inflation were to emerge from (at some stage) over the next 20-30 years, these pension funds would be very well from their exposure to this type of debt instrument. On the equity side, you have government, predominantly sovereign wealth funds (whom the UK government need to attract given the sheer volume of investment required) and private equity. The long term stability, dependable returns derived from long regulatory pricing cycles and the ability to use large amounts of leverage in highly structured finance vehicles, has allowed private equity to make internal rates of return (on their equity stakes) of 15% – 20% per annum. In summary, the UK utility sector has / is attracting a lot of interest, but customers bills as a percentage of disposable income are at an all time high and linked to future rises in UK RPI (Inflation), the real issue here will be at what point will consumer groups fight back at bills that are constantly rising. Just watch the comparison in the media here when Irish Water reveal their retail pricing structure.

    • StephenKenny

      Are you seriously suggesting that there’s no free lunch – that it’s not possible to increase returns without increasing consumer costs?

      • bonbon

        A lot of Smith’ian Sentiments around, would’nt you say?
        A symptom of the malaise. Treating the disease is quite another thing to feeding the illusion.

        Some strong medicine is in order: The Triple curve

  13. This is quite the turn from ‘your spending is my income of previous articles’.

    There is no doubt long term funding is need as venture capital. The word capital is often misused as meaning money, as in debt based borrowing.

    Capital is the result of savings which is the result of spending less than is earned. Savings are in fact profit. Properly stated profits are reinvested in capital assets. Venture capital is money invested in capital assets and so rightfully deployed in the business and expecting to participate in future profits.

    That is capitalism. Capitalism is little used these days as it is replaced by debt based money looking for a leveraged ‘quick buck’ return that extracts from the business rather than contributes to it.

    We need a return to true capitalism where the successful business reinvests profits and where others can invest in plant and equipment and human capital to see a return on the investment from future profits.

    This is indeed the slower return but beats the gambling addicts approach of leveraged derivatives every time. Leveraged addicts such as our current banks need to be allowed to die. We cannot afford unlimited support of the junkie banking system currently in place.

    • bonbon

      That is what Karl Marx was deluded into thinking too.

      We of modern republics know better. Hamilton showed the fault of Smith’s propaganda (for the unwitting). I’m a bit amazed you are actually following Marx’s definition?

      For a much better point b point refutation of Adam Smith, see : The American System vs. British Geopolitics in Ireland.

      Ireland was actually founded on this refutation of Marx’s and other subjects delusion. And Germany also.

      It is a bit odd some have done no homework even outside school!

      • Typical delusional reply that bears little resemblance to the foregoing statement.
        I have not a clue what you are saying.

        All you do is quote others without any explanation of the relevance of even a mention of their name. What has Adam Smith or Marx or anyone else to do with a reasoned opinion
        offered rightly or wrongly.

        .

      • bonbon

        Your opinion did not suddenly spring froth spontaneously from you heart, sorry, gold coins, did it? If it was an isolated passionately held private belief, it would be wondrous.

        You are actually quoting Marx’s deluded reading of Adam Smith, so it may after all not be your unique possession.

        If you have no clue about this, wonder at the echo then.

        • Well I just happen to figure a few things out along the way. I do not happen to subscribe to this school or that.
          you are too fond of putting people into boxes and then pasting labels.

          As has been said by others.
          My Karma often runs over your dogma.

    • EMMETTOR

      But the vast majority of money/capital/debt IS chasing a fast buck and this dwarfs the amount that is available for long-term, real economy investment. As long as this is the case, and I’ve seen no serious efforts to change it, we’re doomed to constantly busting booms, as cheap debt chases inflating assets.

  14. Mick Regan

    Good article there David. Also reminded me that the Irish do occasionally make their presence felt at Henley as well. Had a cousin in the rowing team that beat Cambridge some years ago – http://www.independent.ie/sport/rowing-glory-at-henley-25937856.html

    The laugh was on the winners podium, when they were presented as “Skibbereen University” :)

  15. Pauldiv

    First two paras in the email summary were excellent.
    It felt like I was about to be treated to a short story and this is why I think Our David should take up creative writing. I think he would shine. Will now read rest of article.

  16. bonbon

    Ah, now the lurch to greenie “energy”, with the exhaustion of monetarism flummoxing most here. Only the flummoxed would even entertain the daft idea. Have a look at the fate of the green firms, look at Desertec before the lurch over the cliffs of Moher!

    Britain’s nuclear industry is the key. Do not believe for a moment it will follow Merkel’s hysterical Fukoshima lurch. After all, it was the Euro for the Continent was’nt it? But crafty Ireland fell for that swindle too!

    Come on DMcW, are you pushing ghost energy now for the wraith-like masters of Henley?

  17. Pauldiv

    The sentiments behind the article are the real message and it is no accident it opens and closes with vignettes from an English summer : the lapping of oars and love struck couples necking and sharing picnics by the riverside.

    A man stands and says to his lover “I’ll just fetch us a McDonalds duck”. Unimaginitive and unromantic and typical of today’s men. Not strong and not enigmatic. Not what women want in a man at all.

    If I was a women I would be hankering for the past. Where did all the real men go? Like wild Heathcliffe.

    Life goes on and it is a long steam home rather than instant gratification from a ten minute thrill on a jetski

    As I eye the fast boats stride past on their way up river I am intoxicated at her smile and happiness. It is wonderful to watch someone living in the moment and drink in the glean in their eyes before taking a swallow from the London Pride bottle. It was our day and one we will always remember. The simplicity of simple life and small pleasures.

    I have something that will appeal to people of my age. Posted it last night and have been watching re-runs. Looked it up on wikipeedia and then remembered the old days. For all you young people who ask were the old days really that good I can only say this : yes son, they really were that good!

    Highly Likely – Whatever Happened To You
    Lyrics + Video

    http://theramblingwest.blogspot.ie/2013/07/highly-likely-whatever-happened-to-you.html

  18. bonbon

    Mainstream press publishes “Congress Turns Up Heat on Too Big To Fail Banks”.

    Just in case some blogger propounds from the top of a tall bank tower.

    Glass-Steagall is what it is all about.

  19. bonbon

    Wall Street, Obama Freak Over Building Glass-Steagall Momentum

    The filing of a second Senate Glass-Steagall bill on Thursday, July 11 has generated a good deal of media attention, and the anticipated freak out from Wall Street and the Obama White House. It has also revived a factional split within the City of London and Wall Street that is reflected in the Financial Times, which ran a news analysis and another editorial endorsement of Glass-Steagall bank separation.

  20. 5Fingers

    The main message from the article is the need for us all to slow down. Not just the money.

    I compare it to a heavily used motorway. The faster it is, the higher the chance of sudden massive congestion due to ongoing on and off ramping that will affect the main flow. Counter intuitively, reducing the speed limit actually improves volume thro’put and well as improving safety. There is a massive difference between speed and volume.

    A lot of our American and UK in their focus on speed (low interest and high debt to stimulate) are now getting hammered in their health across all socio economic divides. http://www.newscientist.com/article/mg21929250.200

    Put another way, in a very few years none of the “elite” will be around long enough to make any difference. Nature merely rebalances.

    The weather is good. Take advantage of it and look after yourself and your friends and stop fretting. A stroke or heart attack changes the priorities PDQ. Slow down.

    • Bamboo

      +1 Exactly.

    • Colin

      80 kmph is the optimal speed for maximising throughput. You can prove it mathematically, I did in one of my exams back in the day.

      …and there are other benefits too at this speed..

      http://www.ce.nl/publicatie/why_slower_is_better/948

      • 5Fingers

        There is (if I remember rightly) a derivative maths proof which can give you the speed of ripple back along a stream of traffic as people slam on brakes to slow down. I think it happens to be 4 times the forward speed.

        I just love these counter intuitive views. And what is so interesting is the way it applies to non-synchronized systems (autonomous human drivers). Now if you were to electronically interlock using telecoms and gave control to a computer for driving you would form a train system the maths of which give you a totally different answer and a lot more speed. A lot of work going on here.

        Back to David’s article, I think the financial system is suffering from the same issue. Full speed ahead means higher shock reversals. Or…maybe in project management terms, cockups are usually 5-10 times the effort of doing the initial due diligence to mitigate the risk.

        Colin, we need engineers like you running the City of London and Wall Street. In a curious way, I think the Chinese are running the shop like this – along with a bit of military jackboot command and control to maintain focus.

      • bonbon

        The speed of sound and higher is much better for advanced craft. Requires a different exam though,

        But look at the shock wave produced by Mad Ben’s monetarism, and remember what happened to early efforts.

        Ben has learned nothing – he is destroying the economy. What is an economic shock wave? Start by looking at the Triple Curve.

        We know that massive reconstruction will proceed on a shock front, but with the monetarist interference out of the way, a very interesting and rapidly progressing world.

        • 5Fingers

          You guys make me laugh. Throw loads of money at something and everything becomes wonderful. If only that was true.

          Why stop with boring old supersonic. Why not get a move on with quantum teleportation? …. oh I forgot… quantum mechanics is something you classicists cannot handle either.

        • bonbon

          You did a quantum flip-out. A true spin-flip. Why? Because I mention sonic? Still having problems with the Triple Curve, I see.

          Look at the physical economy, not the monetarist obsession. A booming physical economy, last seen in the 60′s, is after all a boom. There should be no need to worry about “money” after the banks are split.

          Right now the economy is doing a nosedive, not pleasant for the flippant.

    • bonbon

      DMcW is appealing to Bernanke to “taper”, and you guys do not see it?

      Mad Ben cannot even whisper the word “taper”, “tighten”, but cannot continue. Extreme schizoid twitches are to be expected any moment now. Sshh!

      Monetarism is a very insidious disease.
      Global Markets Plunge as the Reality of the Trans-Atlantic Bankruptcy Overshadows Bernanke’s Antics

  21. joe sod

    What about the issue of putting thousands of turbines in the irish midlands to satisfy british renewable energy targets. Another “get rich quick” scheme to benefit landowners and the new property developers. But Neil Woodford recognises that our future energy requirements will still be met by traditional power stations. So we will blight our country with thousands of turbines but will still be using traditional power stations. I doubt neil woodford would touch this with a bargepole because the windfarm developers are spoofers just like the bankers that financed the celtic tiger

    • bonbon

      Colonial again. Same as Morrocco’s Desertec to power the former industrial nation of Germany. By the way that already has fallen apart. That would not stop FG et al from “forging ahead” though.

      A green Raj is easily looted!

  22. Pauldiv

    Proportion of people not saving at all increases to 46 per cent as austerity bites

    http://www.irishtimes.com/business/sectors/financial-services/fewer-irish-people-saving-as-austerity-erodes-disposable-income-1.1465385

    Explain yourself David. This is a bucket of cold water.

    • First I have heard of the DIRT tax. So the country is determined to fail as savings are inhibited, a form of death wish. Savings purchase capital assets and thus fund ventures and business. Lack of capital leads to a lack of business investment which leads to a stagnant economy.

      The country is forced to revert to borrowing and the attendant debt and interest slavery administered by the Rothschilds’ et al.

  23. EMMETTOR

    Our GP’s charge €50 a time, then add insult to injury by declaring €20 of this to the taxman. Ireland produces enough food to feed 34 million people, apparently. It’s all very disjointed, but interesting, because if Ireland is to be in EMU with Germany, France, etc, then agriculture and tourism will be our main industries, into the future. Unless the Euro goes wallop…we can but dream.

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