Tuesday 3 August 2010

Introduction to Socialist Business Methods, Part 1

Call me callous, but I find this just hilarious:
Northern Rock Asset Management (NRAM), the so-called "bad bank" part of the old Northern Rock business, has reported a return to profit.

NRAM holds most of the rescued bank's old mortgages and unsecured loans.

Pre-tax profit came in at £349.7m for the first six months of the year, compared with a loss of £724.2m in the same period last year.

However, Northern Rock PLC, the "good bank" holding savers' deposits and new loans, made a pre-tax loss of £142.6m.
Right, let's get this clear. New Labour split the Rock into a good bit and a bad bit. The good bit is the viable part of the business, which can operate safely and will be attractive to investors. The bad bit is full of all those dodgy loans, and would stay with the Government who would bravely shoulder the burden for all of us and do other good things that only The State can do because The State is a wonderful and bountiful thing that will save us all from ever having to make a decision or take a risk. Or something.

So now, the bad bit is making thumping great profits and the good bit is making a whopping loss. It strikes me that there are two possible explanations.

The first explanation is that New Labour really do have no idea whatsoever as to what makes a good business. They seem to have decided that a business which holds lots of depositor's money on which it has to pay interest, but has very few loans on which it can earn interest, is a viable and tempting investment and will make a profit. Robert Peston calls this a "paradox", which tells us all we need to know about at least one of his economic skills and his political leanings. This leads us to the conclusion that New Labour believe that economic safety lies in having lots of spending liabilities and no clear & sufficient source of income. This is, it has to be admitted, rather in line with other evidence.

However, there is another explanation. This one is simpler, and Occam's Razor suggests that we should therefore prefer it. It is that New Labour are a bunch of incompetent idiots who couldn't organise an (ahem) party in a brewery.

Chose whichever one you like. Or both. I don't mind.

11 comments:

  1. http://cityunslicker.blogspot.com/2010/08/northern-wreck-still-in-noose.html

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  2. I question your use of Ockham's Razor, because it seems to me that the alternatives are really just the same thing.

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  3. Bill - so at least I'm still right about Peston, though.

    Albert - I think there is a difference between competently executing a misguided policy, and incompetently trying to do the right policy. The results are often similar, I'll grant you that.

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  4. P,

    I think there is a difference between competently executing a misguided policy, and incompetently trying to do the right policy.

    Yes, but which is simpler?

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  5. Well, Albert, it seems to me that you are shifting your position as the argument progresses. We start with an assertion that the two alternatives are, in essence, the same thing, thus seeking to raise reasonable doubt as to the validity of my invocation of Occam's Razor (of which, I see, you deliberately use the alternative spelling in order, no doubt, to try and create an illusion of intellectual superiority). When that approach is defended, your argument switches to one that inherently accepts that the two alternatives are indeed different but (instead) seeks to undermine the correctness of my categorisation of the possible alternatives. Whilst your style of argument is, on each separate occasion, competent, the divergence of approach as between the two instances reveals a fundamental lack of rigour in your approach which entitles us to dismiss both responses.

    vs

    Duh! U R so stoopid.

    So ... which do you think is simpler? ;-)

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  6. Patently,

    Fierce! Did you prang your car on the way to work this morning?!

    1. I always spell "Ockham" thus - I have no desire to create an illusion of intellectual superiority. ;-) I do it because it seems more Medievally English, but your Latinised version is at least as current among scholars.

    2. Certainly my position has developed to take account of your response (it would be an odd discussion if it didn't). However, I don't think that means my position has "shifted" in any way which is inconsistent.

    At first I asked how the two positions were different, then after you (neatly) clarified matters, I asked how that distinction enabled you to say one was simpler than the other, in such a way as to allow the law of parimony (to save argument about spellings!) to have any purchase.

    My position is entirely consistent throughout. Either the positions are indistiguishable or they are distinguished in a way that does not clarify which is simpler.

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  7. That should have read "parsimony".

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  8. Albert,

    Or "parcimony" to be consistent,

    But in my experience there is no need to be consistent. You just have to find an argument that wins. Patently is unusually rankled, but you have to admire his parody of the propositions.

    Let the one upmanship recommence.

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  9. Not intending to be fierce, Albert ... am just joking about the relative degree of simplicity of the two possibilities.

    M spotted the parody, I see; perhaps I could have made it more obvious ;-)

    (Oh - and an illusion is as close as you will ever get! ::[sticks tongue out to show still joking]:: )

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  10. P, I see now how this works. So following the principle of parcimony, I assume that this post too was a jokey parody, rather than an expression of anger at pranging this car.

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  11. Haven't pranged that one yet, for which both I and my insurer are equally grateful.

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