pro manchester CEO

Why more QE is the wrong policy option..

The UK is in a liquidity trap, a situation where monetary policy is unable to stimulate the economy either through lowering of interest rates or increasing money supply.  Liquidity traps occur when rates are reduced to the zero bound or thereabouts and cannot be reduced further. In real terms UK rates (base rate minus inflation) are negative 4%.

The liquidity trap is compounded when expectations of adverse events, either deflation or in the current situation, a lack of aggregate demand, are manifest. Firms are loathe to invest, households are constrained to spend, government spending is limited by a desire to resolve the debt crisis.

The first round of Quantatitive Easing was essential to improve liquidity in the banking system at a time of crisis. Inter bank lending was dessicated, LIBOR spreads were extending. The central bank was becoming not just the last lendor of resort but the only lender of resort. Action had to be taken to inject cash into the economy by undertaking a series of asset purchases predominantly gilts. The programme of some £200 billion almost 14% of GDP had to be done.

This is not an argument for more asset purchases, for the exercise came at a price. QE forces up bond prices, pushes yields lower, punishes savers, places more pressure on sterling, increases import prices, leads to higher inflation, greater pressure on real incomes, a reduction in household spending, reduces demand and leads to lower growth.

Ten year gilt yields have fallen to 2.4% and thirty year gilt yields have fallen to 3.5%. Policy makers assume that lower interest rates at the longer end of the curve will lead to a higher level of investment. This is not the case. Any return on investment or payback calculation is a function of cash flows from a determined demand horizon. Cost of capital does not feature in the basic model. Until the uncertainty about the forward level of demand and growth is cleared, investment plans will remain on the shelf.

In 2008, I wrote :  Welcome to planet ZIRP. Unfortunately, we do not have a handbook, or fully understand the terrain. Our process of quantative easing, the plan to helicopter money may work but as a fire fighting option, it may be like dropping water into a desert, such are the fissures in the financial system."

In 2004 a Bernanke paper  “Monetary Policy Alternatives at the zero bound” concluded :
“Despite our evidence that alternative policy measures [QE} have some effect, we remain cautious about relying on such approaches. We believe that our findings go some way to refuting the strong hypothesis that nonstandard policy actions, including quantitative easing and targeted asset purchases, cannot be successful in a modern industrial economy.  The effects of such policies remain quantitatively quite uncertain”.

The Bank of England suggests that QE increased GDP by between 1.5% - 2.0% but also led to an increase in inflation of between 0.75% and 1.5%. [Joyce M et al in the September Bank of England Quarterly Bulletin.]

At best, QE2 round of £50 billion would kick growth by just 0.4% and inflation by over 1% on a pro rata basis according to the banks own figures.

One cannot be entirely confident in the bank’s hypothesis. QE led to a fall in gilt yields as a first round effect but thereafter the relationship betwen QE and the effect on growth and inflation is tenuous. The argument for further QE is intellectually weak and at best the potential economic impact minimal. The risks outweigh the return.

In fact we would argue that a further round of asset purchases would merely oil the liquidity trap, digging a deeper hole, increasing the inflationary impact and reducing growth as investment plans are reigned back and household incomes are placed under greater strain. Sometimes the correct action is to do nothing, especially when it is more of the same toxic solution.

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The views expressed are my own and in no way reflect pro.manchester policy. In no way should the comments be considered as investment advice or guidelines or reflect political bias. UK Economics news and analysis : no politics, no dogma, no polemics, just facts. JKA is a visiting professor at MMU Business School, an economist and specialist in Corporate Strategy, educated at LSE, London Business School with a PhD from Manchester Metropolitan University.

Sunday Times and Croissants - CEO's update 14th August

There is something special about Sunday Morning, The Sunday Times, hot croissants, with honey and butter, excellent. The headlines from today’s Sunday Times suggest the PM is to make life hell for gangs. Great - but is this really the way to deal with the Metropolitan police?

According to a recent paper from the Centre for Economic Policy Research, periods of austerity and budget cuts go hand in hand with social instability and violence. Thatcher knew this. One of the first acts of the Conservative administration was to increase the resources and pay of senior officers in the police force and the army. Ominous but at least there appeared to be a plan.

Cameron’s policy to cut back amongst the met is contra cyclical at a time of augmented social disorder. Bringing in a super cop from the US merely adds insult to redundancy. The use of casual statistics is misleading. To discover that less than a third of the police are on the front line at any one time, is to discover the metrics of a three shift system. We are also told we export more to Ireland than we do to China. So what? We didn’t go to war (twice) with Ireland for the right to export narcotics. This is no time to bash the met or the makers.

This week the ONS delivered more bad news for manufacturing and the trade sector. The march of the makers, rebuilding the workshop of the world, rebalancing the economy had a further set back as manufacturing and export growth slows. The external deficit was worse than anticipated in the Quarterly Economics Review. Keynes would say, when the facts change, I change my opinion. The Bank of England takes a different line. Mystified as to why the trade deficit has not reacted to Sterling’s depreciation, for the old lady, when the facts change, it is time to challenge the facts. Both export numbers and the GDP data, must be wrong, they appear not to fit the model. A great box in the inflation report explains.

Yes it’s the inflation report again. I love the one hour web cast of the Governor and the Bank of England team as they hold a press conference before the top economics journalists. The Governor appears like a disgruntled grandfather, dealing with irritating juvenile questions from young family members across the Sunday dinner table. It can be quite amusing, top names tremble as the Governor demonstrates disdain. Inflation will hit 5%, rates may stay on hold for as much as two years, the letter to the Chancellor explaining the overshoot will be sent by e-mail auto responder and the MPC is to meet quarterly. Excellent.

Back to the day job, Monday and a meeting with Nigel Collier from SkyLab about the e team. Tuesday and a brand meeting to discuss alternate names for the SME club, my thanks to Lee Herbert from Blue Monkey and Simon Calderbank (Studio North) for their help and persistence.

Tuesday evening and news of the disturbances in Manchester filters through. We watch the helicopter hover over the city and read the Twitter feeds. Structured criminality behind a feral facade, the evident explanation of events in the centre. Zero tolerance the only response. Respect to all in the front line and the clean up. Inadequate condolences to all those affected by the violence.

The Manchester spirit demonstrated by one of our directors, SKIP, (Steve K, the big name in IP), nothing would menace his pilgrimage to the Mark Addy for the Tuesday night gastro pub evening.

Wednesday morning, a finance committee meeting followed by a meeting with Chris Froggatt at Ford Campbell. Great corporate finance company with a focussed business plan. Thursday a meeting with the Steering Group at Shoosmiths. It’s alway good to present to so many seniors in any of the member companies.
 
Friday and a day off to meet up with the grandchildren. Lots of photos up on Facebook. Strange to be called a grandfather but really stunned when my youngest son is referred to as Dad. Spooky.

Hope all is well with all, more news next week,
John
John Ashcroft CEO pro.manchester.
Follow on Twitter @jkaonline, or join me on LinkedIn and Google+ @John Ashcroft.

* CEPR Austerity and Anarchy: Budget Cuts and Social Unrest in Europe, 1919-2009 Jacopo Ponticelli , Hans-Joachim Voth

My top ten Twitter Apps including the @GMTweetmap here

Just posted my slideshare presentation on my top ten Twitter Apps. This includes Tweetdeck and the released today GMTweetmap. This is the list which ranks the most influential twitterers in the Manchester. Not without some flaws since I appear to be ranked at #160. The list is changing all the time thanks to a real time scrape from Nick the geek alias Nick McCloud from Descartes and a nice design from Richard Hudson at Vanilla Storm.

What that guy Nick cannot do with a database defies belief. Meeting of the e-team tomorrow as SME club takes shape. SME club, it will be huge. At the tip of the e-team vanguard is the ISM squad. More on this to follow. JKA

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The views expressed are my own and in no way reflect pro.manchester policy. In no way should the comments be considered as investment advice or guidelines or reflect political bias. UK Economics news and analysis : no politics, no dogma, no polemics, just facts. JKA is a visiting professor at MMU Business School, an economist and specialist in Corporate Strategy, educated at LSE, London Business School with a PhD from Manchester Metropolitan University.

So you think you are hot in social media marketing, this is twirlr - gotta share!

 

Sunday Times and Croissants - CEO's weekly update 10th July

There is something special about Sunday Morning, The Sunday Times, hot croissants, with honey and butter rather special. I also bought a copy of the News of the World, mainly to examine the content of the first edition in October 1843. It is written in strange vernacular with words long lost to contemporary vocabulary. Priced at threepence, advertising retail premises in London returning annual revenues of 1,000 pounds, reporting the theft of gates in Gower Street, a riveting read it is not.

I cannot believe it is just seven days since my last weekly update. Highlight of the week was undoubtedly the Ed Pysden retirement dinner at the Midland Hotel. Sir Howard was bouncing as he recounted the many tales of his time with Ed. Ed was senior partner at Eversheds, has been chairman of pro.manchester, on the board of Marketing Manchester, Chairman of the Halle, Chairman of Manchester Airport. It is clear that Sir Howard placed great reliance on Ed parachuting him into many difficult situations. A sale and leaseback of a Halle violin the financial highlight. The dinner was a great chance to spend time with friends and to hear both Sir Howard and Ed talk of a great life and career was a privilege.  It was nice to hear the City Chief Exec talk so well of Ed, pro.manchester and Marketing Manchester as part of the fabric of business in the city. Ed and I, first met in 1980 when I created a JV with the then family owners to put Unibond into retail.

Wednesday evening was the JMW summer barbecue in Spinningfields. It is only in recent months that Bill Jones and the JMW team joined pro.manchester. Nice event, despite the challenge of a July summer in the city.

Thursday the Marketing Manchester Board meeting, at the museum in Oxford Road. Andrew Stokes CEO and the team have such a heavy agenda in promoting the city and do a great job. We met at 9:45 and were allowed out three hours later. Good meeting chaired by Nick Johnson from Urban Splash. Councillor Pat Karney described me as the man who asks the difficult questions. Result.

Walked back from the board meeting with Clive Memmott also a director of MM and Chief Exec of the GM Chamber of Commerce. As Thatcher said of Gorbachev, I like Mr Memmott, we can do business together. Will meet shortly to hammer out the SME club agreement. 

Left Clive, then straight into a meeting with Sir Richard, leader of the Manchester City Council. A good chance to brief the leader on the pro.manchester work with CENBAR, SME club, the e-team and the Business Conference in March 2012. Looking forward to the Sir Richard engagement with the Newstyle show with Kirsty Wark and Gavin Esler once again as anchors. Date for the diary on the 1st March 2012.

Great finish to the week with a lunch for 90 people at the Hilton. Warwick Ley gave an excellent presentation on the Endless Crown Paints acquisition, turn round and disposal. It is a great story
which we hope to turn into a case study and book as part of my work in Corporate Finance and Strategy. Warwick cautioned that for every Crown success, there are many more nightmares which just do not work. More failures than fanfares over the medium term. If we can get this message out as part of the pro.manchester programme, we will have achieved something.

Work continues in my endeavours to become a social media guru. Thirty minutes with Chris Cardell on Seventeen ways to improve conversion on a landing page yesterday and a three hour study session on Twitter and LinkedIn following conversations with Ian Brodie and Will Kintish. Getting there, final touches to the e-team in the week ahead.

Blogged on inflation and manufacturing yesterday. This talk of rebalancing the economy, a resurgence of manufacturing and export led growth just is more and more absurd. As for inflation, The MPC are
beginning to look like a bunch of economists huddled in a storm shelter in Kansas hoping the tornado will pass by. It really is time to face the storm, was the message. We really do have a good relationship with the BOE.

Really pleased to be joining the Business Leadership Council, the business advisory group to AGMA. Very good group of business leaders with a good agenda to push progress in the city. It is both an honour and privilege to join this group. 

Have just started to read Afghantsy, the story of the Russians in Afghanistan. Apparently Cameron blamed many of the problems in Kabul on the British Empire, not sure why he started with the Ks, or left out the Ottoman, Persian and Russian empires in the blame process. Lessons from history, stay out of Afghanistan, don’t march on Moscow.

That is all from me this week, will play tennis this afternoon, then out for a light meal in the evening. Waiting for news from Pete and Kate on their imminent arrival. Hope all goes well for them and hope all is well with all,

John

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Facebook and MySpace - News corp quits the one horse race

MySpace sold last week for just $35 million dollars, just four years ago, speculation was the site could be worth as much as $12 billion. This is a fair warning to Groupon and Facebook investors and a salutary lesson for Newscorp who paid $580 million in 2005 for one of the leading social media sites of the day. 

This is a great “Chart of the Day” from the US Business Insider demonstrating the life cycle of MySpace and the growth of Facebook. 

Specific Media, a digital media company, announced last week, it had acquired Myspace from News Corporation. Specific Media “is a digital media company driving viewership for content owners, engagement for brands and relevance for consumers. With capabilities spanning original programming, cross-channel distribution and addressable advertising, the company connects audiences, content and brands, adding meaning to each touch-point.” Sounds great but is $35 milllion such a good price. 

According to Ars Technica, MySpace enjoyed revenues of $1.1 billion in 2010 and managed to burn $431 million.  The total cost to the Murdoch empire is something like $1.3 billion over six years. 

It’s a sector for great vision and deep pockets. 

TechCrunch - Is MySpace worth $12 billion.

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The views expressed are my own and in no way reflect pro.manchester policy. In no way should the comments be considered as investment advice or guidelines or reflect political bias. UK Economics news and analysis : no politics, no dogma, no polemics, just facts. JKA is a visiting professor at MMU Business School, an economist and specialist in Corporate Strategy, educated at LSE, London Business School with a PhD from Manchester Metropolitan University.

#GMTweetmap. How big is the Greater Manchester Twitter population? GM is the Twitter Capital outside of London.

It is estimated there are some five million users of Twitter in the UK but this figure has never been fully accredited as far as I can determine. It is also estimated the fall off rate, or lapsed rate, is quite high, as much as 40% in the first three months. Many register and fail to follow through with a good Twitter programme for tweets, friends and followers. So how big is the GM twitter population? 

To estimate the Manchester population, we can get some assistance from ranking sites such as http://twitaholic.com. Globally, we discover that Lady Gaga has over eleven million followers and is following 143,000 people. That must keep her social media team pretty occupied. More so Barack Obama having to track 700,000 people tweeting and being followed by 8.7 million people. That must be quite the challenge for the SM team, the FBI and the CIA. 

The http://twitaholic.com. search for Manchester produces a top one hundred list which is neither clean or up to date. It also includes media and sports stars which we would wish to eradicate from the pro.manchester #GMTweetmap. It provides some useful guidelines and names for inclusion but suggests only seven hundred followers are needed to get into the top one hundred.

A better site for purpose is http://followerwonk.com. A search for Manchester produces a return of over 60,000 twitter users (60,609). This compares well with Liverpool (28,978), Glasgow, (27,808), Leeds (23,457), Bristol (22,636) and Edinburgh (19,241). Manchester is clearly the Twitter capital outside of London. [London has 369,033 users].

If the UK gross Twitter population is five million, the Greater Manchester estimate would be around 200,000 maximum. Allowing for Home Counties bias, and a high wastage rate, the http://followerwonk.com figure is a great start point and represents a fantastic sample for analysis. 

Analysing the data, 80% of twitter users in Manchester have less than 150 followers. To be in the top 20% you would need an average of 685 followers and over eleven hundred to be in the top 10%. Yes it is true, I have undertaken that analysis. The results make a great long tail profile. (It's just pareto after all).

As for the @pro.manchester #GMTweetmap, the results can be downloaded Download @promanchester #GmTweetmap Individuals. We rank the top 250 key Social Media gurus in the city. There appears to be a near 60:40 male:female ratio. To get on the map follow @jkaonline. The automated web site will follow in due course. Check it out. Are you on the map?

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The views expressed are my own and in no way reflect pro.manchester policy. In no way should the comments be considered as investment advice or guidelines or reflect political bias. UK Economics news and analysis : no politics, no dogma, no polemics, just facts. JKA is a visiting professor at MMU Business School, an economist and specialist in Corporate Strategy, educated at LSE, London Business School with a PhD from Manchester Metropolitan University.

#GMTweetmap : @promanchester trails behind @PiccPigeon in latest shock update.

The Greater Manchester Tweetmap of organisations and institutions in the city has been updated over the week-end and the results are available as a down load spreadsheet. The web site to automate the process will be up on line soon.

Manchester airport remains in top slot with nineteen thousand followers but Mancunians obviously love a gossip and @McrGossip is in second place with over fourteen thousand followers. Visit Manchester, Manchester Biz and the Cornerhouse push into the top five.

Most prolific twitterers are Inside the M60, Manchester Chimp and the MEN business magazine closely followed by Manchester Airport and espionage Manchester. @promanchester appears in the top fifty, eight places behind Piccadilly pigeon, where is a good goshawk when you need one. So far we have eighty institutions or organisations listed in the project. To get on the Map just follow @jkaonline. 

@promanchester where social media matters. Sign up today and "subscribe" for e-mail notification of updates. DOWNLOAD the spreadsheet Download @promanchester GMTweetMap Organisations.

The views expressed are my own and in no way reflect pro.manchester policy. In no way should the comments be considered as investment advice or guidelines or reflect political bias. UK Economics news and analysis : no politics, no dogma, no polemics, just facts. JKA is a visiting professor at MMU Business School, an economist and specialist in Corporate Strategy, educated at LSE, London Business School with a PhD from Manchester Metropolitan University.

@promanchester Twitter Map and Rankings today's updates. Are you on the list?

A surge of new entries through the day has seen the inclusion of nearly thirty organisations and one hundred individual entries. @MartinSFP holds on to the top spot but @paulfabretti moves into second place ahead of Simon Wharton. 

@LeanneForshaw pushes Manoj Ranaweera to 9th place and Tim Bloxham just about stays within the top ten. Hot on his heels is Steve Juice needing just fourteen points to push into the favoured decile.

 

As for me, it has been a bad day plummeting to 84th in my own top one hundred. Needs more work obviously.The spreadsheet can be downloaded Download @promanchester Twitter Map Manchester. 

Don't forget, if you are not in the list or know someone who should be, let me know @jkaonline or e2 [email protected]. We want to complete the @promanchester TwitterMap of our city.

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The views expressed are my own and in no way reflect pro.manchester policy. In no way should the comments be considered as investment advice or guidelines or reflect political bias. UK Economics news and analysis : no politics, no dogma, no polemics, just facts. JKA is a visiting professor at MMU Business School, an economist and specialist in Corporate Strategy, educated at LSE, London Business School with a PhD from Manchester Metropolitan University.

 

Facebook pushes Twitter off top spot in Social Media Market

The growth in the use of Facebook over the past twelve months, has pushed Twitter into second place as the most used social media option in 2011, according to the 2011 Social Media Marketing Industry Report by Michael Stelzner.  The top social media tools are Facebook, Twitter, Linkedin and blogs. 

90% of marketers indicate that social media is important in their business and multi media solutions are important with 77% of marketers planning to increase their use of YouTube and video marketing in 2011.

Having blogged jkaonline, blogged (pro.manchester ceo) and twittered (@jkaonline) and now fully LinkedIn, I am not sure I fully grasp FaceBook as yet but am working on it. According to Social Media Examiner the top ten Facebook pages are Red Bull, Burt’s Bees, Uno, Chicago Grill, LiveScribe, Toy Story, Coca Cola, Oreo, Jones Soda, the Twilight Saga and the Travel Channel.

In the UK I have had a look at Cuprinol but haven’t found a great sense of excitement so far.

Social media marketing takes a lot of time: The majority of marketers (58%) are using social media for 6 hours or more each week, and more than a third (34%) invest 11 or more hours weekly.

Key benefits include, greater exposure, increased traffic, improved search rankings, new business, more leads, improved sales and above all cost effectiveness.

Alternative media options include, SEO, E-mail marketing and events marketing with more limited use of on line advertising, PR, webinars, sponsorship, direct mail, display ads, radio and TV. Strangely PPC is not referenced.

Commonly asked questions include : How do I measure the effect of social media marketing on my business? How do I integrate and manage all of my social media marketing activities? How often should I update? The report outlines the top ten questions and deals with the information response.

In pro.manchester we are getting pretty excited about our SME club due to be launched later this year and the development of the e-commerce and social media response team to assist with the SME clinics and surgeries we are planning to run.

If you are a specialist in Social Media or e-commerce marketing and would like to be part of this marketing programme for Greater Manchester and the North West contact : Rachel Tetlow for more information.

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The views expressed are my own and in no way reflect pro.manchester policy. In no way should the comments be considered as investment advice or guidelines or reflect political bias. UK Economics news and analysis : no politics, no dogma, no polemics, just facts. JKA is a visiting professor at MMU Business School, an economist and specialist in Corporate Strategy, educated at LSE, London Business School with a PhD from Manchester Metropolitan University.