New carbon economy, traditional unemployment?

Green and broke!

Unemployed or queuing  
for carbon credits?Unemployed or queuing for carbon credits?
We all make mistakes. The organisers behind the Copenhagen climate jamboree made lots of them and they are playing with other people's money. Jon Moulton, often described as a venture capitalist, has made two notable mistakes, he failed to win control of the Rover Group and lost control of the private equity company, Alchemy Partners, that he founded in 1997. However, Moulton puts his own money into his work and such is his skill and success that he attracts funds from other investors, almost £150 million so far. His latest company is called Better Capital and has been running for less than a month.

It's worthwhile to go back to the collapse of the Rover Group and the closure of the old Austin works at Longbridge in the Midlands. Life not only has mistakes it has bad luck to trip us up. It was the fate of Moulton and Alchemy to get caught up in the 2005 General Election fever. Had Alchemy won the bid for Rover then it would have concentrated on MG production, closing down the Rover side would have meant job losses; this was seen as defeatist by not only the rival bidder but an ad-hoc collection of 'experts'. Thus in those feverish times common sense went out of the window, assisted by Nulabour who were living in the past. Proof of this has been shown in another post on the UK motor industry, see HERE.

Mouton returned to the public's attention as the financial crisis kicked in, he was super-critical of the banks saying in April 2008 -

"They bought all this rubbish (sub-prime debt in the form of complex financial instruments) themselves, most of which their senior managers didn't understand and they have been left holding the baby with unsaleable, overpriced, overenthusiastic debt. They are in trouble themselves. It's the same as the sub-prime salesman. They will sell anything to anyone, and they did. If you pay enough bonuses, people will do anything."

This came at a time when few people understood the nature of the crisis and even fewer were prepared to criticise the bankers. Small wonder then that Moulton will not have anything to do with financial services and this dislike was the reason his left his old company. Whilst leaving them to their fate, he intends to help manufacturers with good general prospects who are held back by a management swamped by the economic downturn. It's Moulton's opinion that this problem will increase if interest rates go up.

This may well happen. All banks are keen to attract more funds so why not offer better rates to savers? The idea that the salvation of the UK rests solely with the shopper is ridiculous; there is also the problem of soaring personal debt. John Maynard Keynes wrote of 'the paradox of thrift', the idea that in a normally functioning economy, if the desire to save becomes dominant then the economy fails. Keynes theory holds true, as a theory, but in practice offers no comfort to Gordon Brown, because in no way has the UK economy been 'normal' since Nulabour took office.

In a recent Sunday Telegraph interview, see HERE, Moulton again aired his opinions of the banks, suggesting they should aspire to become -

"building societies with accounts”.

His view of investment banks and hedge funds, Moulton has never had a lot of time for them, was trenchant, it was they -

"who can take exotic positions and occasionally go bust".

Moulton also reaffirmed his faith in markets suggesting whether or not the split is done now -

"the markets will eventually do it for you. It might, however, take too long and we might have another failure before we get there. Banks that are unstable and not supported by the state will be shunned by the capital markets and by equity markets – and will fail."

He said opposition to banks being split came from

"a huge amount of self-interest from a large number of highly paid bankers". It was inevitable that banks would eventually go bust, he added. "It will happen again. It's just a matter of when. They are too complicated, incapable of being effectively regulated – it's impossible to imagine the FSA [Financial Service Authority] can hire people capable of regulating the banks as long as they remain so complicated."

This opinion of the fragility of the UK's position comes at the same time that credit rating agencies have downgraded Greece, a fate that could happen to the UK. Peripheral data supports this idea of a “gilts strike”.This could come about because close to 30% of the UK debt is owned by investors registered abroad. They may doubt the ability of Nulabour to get to grips with the UK's problems and so sell up and take their money to another investment. This would result in, eventually, the UK's loss of the AAA credit rating.

Would this happen? It's a bit like the queues outside the Northern Rock branches as seen not so long ago. As the queues got longer, so the queues got even longer and government pronouncements made them even longer still!

The Tories claim that over 27,000 businesses have gone bust since this recession began. This is, as bankruptcy, another and non-tradable form of debt. And all those people touched by this can neither spend or save but remain in limbo.

So another General Election is just around the corner and Moulton may find his work affected by the razzmatazz of it all. He is both a canny and wealthy man, he will be OK. What a pity he did not get to take over the Rover Group, but then what a pity he cannot help more UK businesses to survive. For the problem now facing the UK is how to pay for the madness of 'climate change'. It may suit the scientists at the University of East Anglia Climate Research Unit to fiddle their figures as a way of hiding things. But so long as we have the madness of people like Gordon Brown promising a 42% reduction in 'greenhouse gases' then life for some will get worse. The unemployment will be impossible to hide.