Kathleen Brooks http://blogs.reuters.com/kathleen-brooks Wed, 03 Dec 2014 00:21:57 +0000 en-US hourly 1 http://wordpress.org/?v=4.2.5 Why the end of the oil boom is problematic for us all http://blogs.reuters.com/great-debate-uk/2014/12/02/why-the-end-of-the-oil-boom-is-problematic-for-us-all/ http://blogs.reuters.com/kathleen-brooks/2014/12/02/why-the-end-of-the-oil-boom-is-problematic-for-us-all/#comments Tue, 02 Dec 2014 18:27:50 +0000 http://blogs.reuters.com/kathleen-brooks/?p=133 Since OPEC decided not to cut production at its meeting last week the tumble in the oil price has generally been considered a good thing for the consumer. What no-one has concentrated on is the fact that declining oil wealth, particularly in the cash-rich Middle East, could make banks in the UK more vulnerable should we get hit with another financial crisis.

Remember 2008? Back then the world’s major banks faced collapse and rushed to find deep-pocketed investors to bolster their balance sheets. This was partly financed by the likes of the Qatari Investment Authority, which is designed to manage the funds from Qatar’s oil and gas reserves. The biggest recipient of the Qataris’ generosity was Barclays, and at one stage the Qatari Investment Authority owned more than 12 percent of the British bank.

The Barclays deal was clouded in secrecy, which probably suited Barclays top brass along with the British government, as both the industry and the UK Treasury tried to stem the panic that was gripping the markets. If Barclays had not managed to find an investor rich enough as the Qatari Investment Authority then the bank faced harsh choices – either it failed to survive, or it was bailed out by British taxpayers, with all of the conditions that come with a publically-funded bailout, a la RBS.

It would appear that the Middle East’s oil wealth has helped get the UK, particularly its banks, out of a few tight spots in recent years. Now that sovereign wealth funds are taking a hit from the sharp decline in the oil price, is there an argument to say that the UK’s banks are less creditworthy than they were when oil was trading above $100 a barrel?

To answer this we need to look at two things, firstly, can, in the event of another financial crisis, the UK manage to bail out its banks, and secondly how long will the oil price remain subdued?

To answer the first point, overseas holders of UK debt own approximately 30 percent of all outstanding gilts. This has been roughly stable since 2006; however, overseas ownership of UK debt peaked at 35 percent in the third quarter of 2008, just as disaster struck the global economy. Overseas investors are the second largest owners of UK gilts after pension funds and insurers.

The Office for National Statistics does not publish the countries that own UK debt, but one can assume that the Middle East may own a large portion of this debt, due to the UK’s historical business links in the region and the willingness with which the Middle East has helped out the UK’s financial sector. Thus, if oil wealth continues to decline, will overseas investors continue to invest in a country like the UK which already has a massive debt problem?

Considering the Bank of England will need to think about selling its not insignificant holdings of gilts – it is the third largest holder of UK debt – the Treasury could find it harder to sell debt in future if oil producers start scaling back their purchases around the same time as the Bank of England thinks about divesting its stake of UK debt accumulated during its quantitative easing programme.

The second point is the oil price. Some analysts argue that we have reached a peak for the oil price and we could be in for a decade or more of subdued prices for the crude market. Right now oil-rich countries like Qatar and Saudi Arabia have shrugged off the oil price decline, and Qatar‘s sovereign wealth fund has said that the drop in the price of oil will not derail its investment plans. But, if the price of oil falls to say $50 or $40 per barrel in the coming years, will it still be so happy to splurge on a British bank that desperately needs re-financing?

Some may say that this is an extreme view, and I take on board that oil falling to $40 per barrel is a tail risk event. However, black swans do exist, as we found out in 2008, and without the oil wealth of some of the Middle East’s most powerful oil producers the global financial system could lose one of its major financial backstops.

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Why we should listen to David Cameron’s warning on the economy http://blogs.reuters.com/great-debate-uk/2014/11/19/why-we-should-listen-to-david-camerons-warning-on-the-economy/ http://blogs.reuters.com/kathleen-brooks/2014/11/19/why-we-should-listen-to-david-camerons-warning-on-the-economy/#comments Wed, 19 Nov 2014 11:48:10 +0000 http://blogs.reuters.com/kathleen-brooks/?p=131 With six months to go until the next general election and a few days from an all-important by-election, Prime Minister David Cameron has said that the global economy is at risk from another recession. This came less than a week after the Bank of England said that the UK economy is likely to grow at a healthy 3.5 percent this year and it could even weather the storm from weak growth across the Channel.

So who are we to believe: Cameron or the Bank of England, and should we be afraid? In terms of trust, you are brave to trust a politician, regardless of what they say. Regarding the Bank of England, they are renowned for changing their economic forecasts, so it’s always best to take their views on the future of the economy with caution.

The sub-text of Cameron’s message is clear: it’s six months before election day in the UK and the Conservative message seems to be “vote for us, we have more work to do”, thus having a recession bobbing on the horizon could be advantageous for Cameron and co. The timing of his comments is also worth noting since they come straight after the G20 leaders meeting in Australia; so this could be the equivalent of a kick in the butt to Cameron’s fellow G20 members to take a bigger stand against Ebola and Russian aggression in Ukraine.

But does Cameron have a point? Some politicians think that everything is fine and dandy in the world as long as stock markets are going up. The major U.S. stock indices, including the S&P 500, have made record highs this year. The UK’s FTSE 100 is a mere 250 points away from its highest ever level reached in 1999. This could lull some world leaders into thinking that everything is fine and they can take their eye off the ball, spending with abandon like the good old days before 2007.

Let’s forget Cameron’s political motivation for one moment – his warning is useful for world leaders and the man on the street for a couple of reasons. Firstly, it brings some reality back to the markets that risks exist – Ebola, Russia, Middle East tension, a stagnant euro zone and a recession in Japan should be sending shivers down the market’s spine. However, markets find it remarkably easy to look the other way as risks start to build up. Instead, things can get to boiling point and then explode, causing market carnage. Thus, just because the FTSE 100 is creeping closer to record highs does not mean that all is well in the world.  Secondly, the next couple of years could see even more risks accumulate, so we shouldn’t take 2014’s performance for granted.

As we near the end of 2014 clouds are gathering on the horizon. The Federal Reserve is planning on hiking interest rates for the first time since the financial crisis, if oil prices continue to fall then we could see oil producers start to halt production, which could cause a price shock when we least expect it. Even if oil producers don’t try t0 engineer an oil price rise there are risks to the economy since disinflation is rife in the western world. Prices have been falling in Europe and the U.S. and if this leads to deflation it could trigger economic meltdown and the next global crisis.

While disinflation in the UK is unlikely to be keeping the prime minister up at night, his comments should not be discarded as merely electioneering. Any world class analyst or economist would be justified to say the same thing as Cameron at this stage of the economic cycle, which is why we should listen to his message, even if it does play into his pre-election campaign.

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The benefits of a Scottish Yes vote http://blogs.reuters.com/great-debate-uk/2014/09/18/the-benefits-of-a-scottish-yes-vote/ http://blogs.reuters.com/kathleen-brooks/2014/09/18/the-benefits-of-a-scottish-yes-vote/#comments Thu, 18 Sep 2014 11:22:37 +0000 http://blogs.reuters.com/kathleen-brooks/?p=129 'Yes' campaigners holding Scottish Saltire flags gather for a rally in George Square, GlasgowThe list of catastrophes that would befall Britain in the event of Scottish independence continues to grow. If you believe the latest reports then money is being withdrawn from cash points around Scotland at a rapid clip – the next thing will be a plague of locusts.

Of course a vote for independence is not going to be a walk in the park. The issue of what currency Scotland is going to use remains a mystery, the market is still pondering the possibility of global investors ditching the rest of the UK on the back of such political uncertainty, which could cause a financial crisis akin to the bankruptcy of Lehman Brothers. Aside from economic questions, the UK’s standing in the world could be damaged if there is a win for the Yes camp.

However, once the country gets over its existential shock, could a Yes vote later this week actually be a good thing for Scotland and elsewhere?

Firstly, Sir Harry Burns, who stepped down as chief medical officer for Scotland, has said that a Yes vote could be good for the Scottish public’s health.  He said that engaging more with local government, and making choices more easily for themselves could have a knock on impact on the health of the nation. Although Burns argues that a Yes vote could protect Scotland from Westminster’s growing calls to privatize some medical services on the NHS, it appears that Scotland’s top medical minds believe that feeling empowered actually has a health benefit.

To be a successful nation, one needs to be a healthy nation, so this could be one benefit of Scotland voting for independence.

The Thomas Piketty effect

The notion of fairness has come up time and time again during the referendum campaign. The Yes campaign have talked about an independent Scotland becoming a more equal Scotland, also pointing out the growing wage gap between Scotland and the South-East of England, with Scottish wages significantly below those in and around London.

Inequality has become a bit of a hot topic lately, after rock star Economist Thomas Piketty, in his bestseller Capital in the Twenty-First Century, said that the developed world is returning to wealth disparities at Regency levels, which he says can stop mobility and damage growth. Thus, if Scotland does vote for independence, and the politicians stick to their promise to make Scotland a more equitable country then it could protect Scotland in the long-run as the rest of the UK struggles with weak growth and higher levels of social strife on the back of the growing gap between rich and poor.

Could an independent Scotland help the rest of the UK?

An independent Scotland could also have benefits for the other regions of the UK as it could propel a move towards a federal-type of government in the UK, akin to Germany and the United States. Currently power is mostly located in Westminster; however, a push for de-centralisation on the back of a Scottish Yes vote could give the regions in the rest of the UK greater powers including tax raising capabilities and even the ability to raise money in the capital markets. This could cut out levels of centralised bureaucracy, and if your local politicians are the ones who set, collect and spend taxes it could make them more directly accountable to the electorate.

De-centralised power could also make England more competitive, and it could re-generate some of the most sluggish areas of Britain, such as the North East. If Newcastle, for example, could set its own corporate tax rate below that of London, it could stand a chance at luring big business and talent away from the capital, which could bring some much-needed investment and regeneration to the area. If Scotland votes No and the status quo continues, then London is likely to remain the beating heart of Britain, with some areas continuing to fade away.

This leads me on to the final point. If Scotland votes to break away on Thursday then many companies headquartered in Scotland have threatened to move south, such as Lloyds, Standard Life and Royal Bank of Scotland. This could be good news for the British economy – more corporate tax take – and it could also boost border towns and cities, especially if these Scottish companies locate fairly close to their original homes, rather than making the move all the way down to London.

When it comes to referendums of this nature, the status quo bias tends to have the more compelling argument. However, some elements of the Yes campaign could have benefits not just for Scotland, but for the rest of the UK. If inequality continues to grow in the UK, then at some stage it will reach a tipping point that could be bad for society and for our economy. Scotland has recognised this, the rest of the UK would be wise to follow suit.

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Why Scottish independence matters for Europe http://blogs.reuters.com/great-debate-uk/2014/09/09/why-scottish-independence-matters-for-europe/ http://blogs.reuters.com/kathleen-brooks/2014/09/09/why-scottish-independence-matters-for-europe/#comments Tue, 09 Sep 2014 07:46:22 +0000 http://blogs.reuters.com/kathleen-brooks/?p=127 Should the EU head honchos in Brussels be quaking in their boots at the prospect of a less United Kingdom come September 18? The repercussions of a yes vote could cause a domino effect that may eventually lead to the break-up of the European Union.

This may seem dramatic, but how someone decides to vote in Glasgow could alter the course of modern history. The prospect of a not-so Great Britain could make it easier for the Conservatives to get re-elected at next year’s General Election. One of the Tories’ pledges, if they do get re-elected, is to hold a referendum on UK membership to the EU in 2017. Without a pro-EU Scottish voter base, there is a real chance that the UK could vote to leave the EU.

If the UK leaves the EU then this could make it hard for the Union to continue in its current form. It may seem that the UK and the EU are like an old married couple, continually picking at each other, but the UK holds an important position that is vital for keeping the Union alive.   It is a powerful counterbalance to Germany – the other powerhouse in the Union. France, the second largest economy in the EU, has proven itself unable to stand up to Germany. It is going through a duel political and economic crisis of its own, and harsh economic reforms could leave the government of France impotent for some time.

Without a counterbalance to Germany, will the other countries in the EU want to be ruled by Berlin? It seems highly unlikely. Considering a Greek threat to abandon the EU in 2012 as a result of German calls for austerity nearly caused the whole institution to collapse, Germany may not be the most popular leader of the whole project.

Aside from the German question, Scottish independence could add fuel to the Catalan independence movement in Spain. The Spanish government has resisted calls from the Catalan region to hold a nationally recognised referendum on independence, however, later this week supporters of independence will hold another street protest known as Catalan Way 2014, which is expected to occupy two main streets in Barcelona. This campaign started in 2013, with a 300-mile human chain, which moved throughout the Catalan region from Vallespir in France to Montsia in Spain. If Scotland succeeds in gaining independence, then it could add fuel to the Catalan’s fire calling for an independence vote, potentially leading to a damaging tussle with Madrid. If Spain can’t keep Catalonia, then why should Greece and Portugal endure EU-inspired austerity measures?

A break-up of any union is full of uncertainties and unknowns. If Scotland decides to go it alone, it could rip the very fabric that holds the European Union together. This is why the upper echelons in Brussels will be watching the outcome of the Scottish independence vote very carefully.

 

 

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Could Mark Carney learn a thing or two from Luis Suarez? http://blogs.reuters.com/great-debate-uk/2014/06/26/could-mark-carney-learn-a-thing-or-two-from-luis-suarez/ http://blogs.reuters.com/kathleen-brooks/2014/06/26/could-mark-carney-learn-a-thing-or-two-from-luis-suarez/#comments Thu, 26 Jun 2014 14:43:09 +0000 http://blogs.reuters.com/kathleen-brooks/?p=125 Bank of England Governor Mark Carney smiles as he waits deliver a public speech "One Mission. One Bank. Promoting the good of the people of the United Kingdom" at the Cass Business School in London, March 18, 2014. REUTERS/Sang Tan/Pool

Uruguay's Luis Suarez (R) reacts after clashing with Italy's Giorgio Chiellini during their 2014 World Cup Group D soccer match at the Dunas arena in Natal June 24, 2014.  REUTERS/Tony Gentile

 

 

 

 

 

 

 

In the aftermath of Liverpool and Uruguay footballer Luis Suarez biting an opponent yet again, and with such aggression that he scarred the player’s arm and hurt his own teeth, FIFA has banned him for nine games, and psychologists are trying to justify his behaviour by saying that Suarez must have been humiliated and frustrated in his youth. I, in contrast, am asking whether Mark Carney and co. should learn to be a little more like Suarez?

Let me make this clear, I am not advocating that members of the Bank of England’s Monetary Policy Committee give each other a good bite if they disagree on policy (imagine the bite marks at the ECB if that was socially acceptable), but they should metaphorically pull a few Suarez’s from time to time.

Earlier this week was a classic example. Mark Carney was testifying to parliament on the May Inflation Report. A mere two weeks before, Carney had been rather candid at the annual Mansion House dinner, and stated that the markets were mis-pricing the potential for a rate hike. This triggered a huge market reaction, pushing GBP-USD to its highest level for 5 years. Interest rate traders wasted no time shifting their expectations for a rate rise from Q2 2015 to January 2015.

Carney would have known that his Mansion House comments would be widely reported in the press, yet, he changed his tune when he was speaking to the politicians. Rather than play up the prospect of a rate hike, as he had done a couple of weeks’ before, he talked down the chance of one, saying that his comments at Mansion House were his own personal views, and that wages were too low to hike rates.

Ok, so it should be no surprise that an ex-Goldman Sachs banker who studied economics flips his view every 5 minutes. However, when you are head of the one of the world’s most important central banks you need to keep your message clear. The markets are so large, they move so quickly, that if you change your tone as often as you change your shirt you risk losing your credibility.

The BOE Governor needs to start thinking about this. Less than a year ago he advocated dovish forward guidance, hinting that a rate rise would not be in store until late 2016. However, he had to ditch that view after the economy picked up strongly in the second half of 2013. Fair enough, but now that the economy has beaten BoE forecasts and he seemed to do the sensible thing and suggest that rates should rise reasonably soon, he can’t start to back-track the minute a politician questions his judgement.

This is where Luis Suarez comes in: Mark Carney needs more bite. He might look good in front of the cameras (for central banker standards anyway), but it’s not his looks we care about. The UK needs a central banker who has a good reputation. If he loses his credibility then so do we. Right now Carney has more bark than bite. It’s time for him to show his teeth and stick to his convictions. If rates need to rise, then tell it straight. He could win some fans, especially among the country’s beleaguered savers.

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Italy – the new good man of Europe http://blogs.reuters.com/great-debate-uk/2014/05/28/italy-the-new-good-man-of-europe/ http://blogs.reuters.com/kathleen-brooks/2014/05/28/italy-the-new-good-man-of-europe/#comments Wed, 28 May 2014 14:10:14 +0000 http://blogs.reuters.com/kathleen-brooks/?p=123 Up until Monday, Italy used to be known as the sick man of Europe. It has huge debts, sclerotic growth and had been ruled by a billionaire prone to a bunga-bunga parties. It was at risk of becoming the laughing stock of the currency bloc. The relationship in recent years between Italy and Germany has been dreadful. But could things be about to change?

Italy could become the best man of Europe after the EU elections last weekend. Italian Prime Minister Matteo Renzi’s Democratic Party won an impressive 33% of the vote, beating off competition from the anti-establishment Five Star Movement led by Beppe Grillo. Silvio Belusconi’s Forza Italia was left straggling in Renzi’s wake with only 18% of the vote.

This contrasts sharply with France, where the anti-EU, far-right Front National beat President Francois Hollande’s Socialists, leaving the President clinging to power. The win for Marine Le Pen’s party could shift the power dynamics in the euro zone, leaving a space open for Matteo Renzi to get Italy back from the periphery and into the core of Europe.

The German-Franco alliance looks shaky following the win for Front National. Now that Italy has rejected an anti-euro political force, Angela Merkel could start to warm towards Rome. If Merkel can open her arms to Italy then the third largest economy in the currency bloc could score a PR coup, and solidify itself in the heart of the currency bloc.

In the wake of the elections, Germany and Merkel need all the pro-euro support they can get, which is good for Renzi, a rookie Prime Minister. Renzi could definitely benefit from being under Angela Merkel’s wing, but make no mistake: Merkel could also benefit from associating herself more closely with this charismatic and popular 39-year old. With the cold wind of anti-euro sentiment blowing hard across the EU, Merkel needs to find shelter wherever there is pro-EU support.

While Renzi is, deservedly, still celebrating his win, stepping into shoes vacated by the French in the heart of Europe won’t be easy, and he has a difficult path ahead. He still has to change the constitution, and he needs the support of Forza Italia to do so. He also needs to push through a package of painful economic reforms. This will stretch his charisma to the limit as he tries to go where others have failed. Austerity is never a popular choice for a politician, so it would be natural to see some of his support fall away in the coming months and years.

However, Renzi managed to pull Italy back from the brink of political Armageddon by putting the Five Star Movement to bed as a political force in Italy for now. If he can balance pleasing Angela Merkel, with making much-needed adjustments to his economy at home then Renzi could be the big winner from these EU elections.

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The Great Sleep Debate http://blogs.reuters.com/great-debate-uk/2014/05/15/the-great-sleep-debate/ http://blogs.reuters.com/kathleen-brooks/2014/05/15/the-great-sleep-debate/#comments Thu, 15 May 2014 13:04:06 +0000 http://blogs.reuters.com/kathleen-brooks/?p=121 Not that long ago everyone was lamenting the slovenliness of the British public. We didn’t work hard enough, took too many holidays and anxiety was rising about how we would ever keep up with our harder-working, more productive peers in China and the East. However, the tides is changing and, guess what, slovenliness is back.

Slovenliness is not quite accurate, but these days we can’t read a paper without being told that we need to get more sleep, be more mindful, take better care of ourselves and quit our technology addictions. Apparently, our need to tweet, check email and watch the latest Game of Thrones is literally killing us. Experts from Harvard, Cambridge and Surrey Universities have put together a report on humans and our need for sleep, and have come to the conclusion that we are arrogant to ignore our circadian rhythms.

Mixed messages

This arrogance can’t all be blamed on the ubiquity of smartphones. For decades we have been told that really successful people don’t need much sleep. From Churchill to Margaret Thatcher, who both survived on between 4-5 hours of sleep a night, to more recently former Burberry CEO, now at Apple, Angela Ahrendts and Yahoo’s Marissa Meyer.

But now some experts claim that this is all rubbish: they must be lying about how little sleep they get as the human body just isn’t designed to work that way. While Churchill did admit to naps in the afternoon, he was also a notoriously late riser who would take early meetings in his dressing gown, you don’t hear of Ahrendts or Meyers dozing off at their desks for half an hour.

Don’t forget mindfulness

Not only is the necessity of sleep being rammed down our throats, but the concept of mindfulness is trying to influence our waking moments. Meditation is now considered the key to success.  Focusing on the moment, letting go of office stress (and those pesky smart phones) are considered the new way to climb the corporate ladder. Even banks are offering mindfulness classes to their workers, and online media mogul Arianne Huffington, has written a book entitled Thrive, that actively encourages meditation, taking breaks and banning technology in the bedroom.

The idea is simple – if we are less stressed and more relaxed, our body and mind will be more useful to the global economy, better able to innovate and less prone to make mistakes. This all makes sense, but if mindfulness and sleep are the new must-have attributes for the successful CEO, will it go the way of sleep deprivation, with executives having to lie about how good they are at meditating and locking their phones away at night?

Is this advice counter-productive?

While no one needs to tell me that sleep is one of the most delicious things in the world, do we really need academics at the world’s leading universities making us anxious about not getting enough of it? They argue that in the past our forefathers were clocking up 9 hours a night, now that has dropped to 7 hours a night, with some people getting significantly less. My answer to that is this: back then people worked in fields, or as domestic staff – they needed the sleep. With all the sitting around we do at work and home, surely a couple of hours less sleep per night may be our circadian rhythms adapting to our changing, and infinitely more comfortable, lifestyles?

If you need to pull an all-nighter, pull one, but then leave work early the next day, and don’t do more than one all-nighter per month. If businesses can’t get by with that then they need to hire more staff.

And if we need more sleep to be more successful then someone may want to think about making TV a lot more boring. Already this year there has been the fantastic second season of House of Cards and series four of Game of Thrones, along with countless others that I’m too tired to remember.

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Help, I want my email back… http://blogs.reuters.com/great-debate-uk/2014/04/15/help-i-want-my-email-back/ http://blogs.reuters.com/kathleen-brooks/2014/04/15/help-i-want-my-email-back/#comments Tue, 15 Apr 2014 11:41:57 +0000 http://blogs.reuters.com/kathleen-brooks/?p=119 The web-based Heartbleed bug has dominated discussions about online security in recent days. We’ve been told to change passwords, and if you were a regular user of Mumsnet then you’ve probably had your data stolen, the forum said in a message earlier this week. While I was reading all of these articles not once did I think to actually change any of my passwords. This is not because I think that I am immune to Heartbleed and its evil ways, but rather I don’t think the data this super bug could steal from me would be of much use to anybody.

Take my email. First it started with my personal email, an account I have had since 2001, provided by a major internet company headed by an extremely glamorous CEO. For years now it has been hijacked by marketing types. I get hundreds of emails every day, all adverts. It’s worse than watching an episode of Game of Thrones in the US. There are literally adverts coming at me every minute of the day. Some even use my name in the subject line. Just today I have had a cleaning company asking me if I am ready for Easter (who gets ready for Easter???), a website telling me the secret to perfect “standout eyes” and an Easter gift from a clothing site.

I sowed the seed for my own digital undoing as I definitely have used these services. For some ridiculous reason I was asked for my email address at the checkout. For some even more ridiculous reason I gave it to them willingly, and they now update me many times a day, far more frequently than my best friends, or even my mother.

I am now drowning, digitally speaking, in so much marketing rubbish that anyone who genuinely tries to get in touch with me may find that I don’t respond. Rather than deal with the 10,000+ adverts in my inbox I try to ignore them. Luckily, I have an account at work, which I have always tried to keep private and not share with anyone bar my husband. But recently, when organising a little party for a friend, I found it so much easier to use my work account I broke my own rule and sent the invitation from work.

Alas, I have started to notice that this ad-creep is now seeping into my work email. The only difference is that companies that I once did actual business with now preface the subject line with [MARKETING], as if that makes it better.

Why would a company I book taxis with to get me to and from work meetings assume it’s ok to send me adverts (junk mail) when I am a fairly good customer anyway? Even when companies try to do “nice things” like offer me money-off vouchers, I get annoyed. Sure I appreciate the 10% off, but what I don’t appreciate is the 500 emails in between sending me these vouchers.

To get around this intrusion in my digital space, I now find myself using Facebook or Twitter to send messages. These two sites have become much more valuable to me in recent months, purely because if I get a personal message, I know that it is from a friend (or sometimes a foe) – it is genuine and it is unlikely to try and sell me anything. For work, instant message is just about acceptable in some situations, for anything else I have to battle through my soupy inbox to try and pick the wheat from the chaff.

No doubt the evil marketing departments are figuring all of this out and will soon be bombarding my Twitter and Facebook accounts with messages designed just for me, alongside banner ads, to try and get some money out of me.

How long will it be before I just give up on internet messaging altogether and opt for the phone instead? Email is a valuable tool, but the incessant barrage of advert messages is putting me off. Advertising departments should learn that less is more. Maybe the rise of marketing as a force to be reckoned with in the corporate world is one of the reasons for the UK’s productivity puzzle – it actually doesn’t generate that much business because it annoys the hell out of most consumers…

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Is controlling your own pension really a good thing? http://blogs.reuters.com/great-debate-uk/2014/03/20/is-controlling-your-own-pension-really-a-good-thing/ http://blogs.reuters.com/kathleen-brooks/2014/03/20/is-controlling-your-own-pension-really-a-good-thing/#comments Thu, 20 Mar 2014 17:48:48 +0000 http://blogs.reuters.com/kathleen-brooks/?p=117 A central pillar of George Osborne’s 2014 budget was the announcement that pensioners will no longer have to buy an annuity upon retirement and that they would have more control of their pensions pots, including the freedom to withdraw cash without incurring penalty tax changes.

This is a true blue move that has Conservative values right at its heart – giving retirees the right to do what they want with their money. While in most instances being freed from the shackles of government is something to be celebrated, in this instance a little government paternalism can be a good thing.

On paper it’s easy to see why the government has stopped forcing people to buy annuities – their dismal pay-outs in an era of record low interest rates were a major bugbear for today’s retirees (and next year’s voters in the general election). Indeed, some annuities come with so many punitive conditions and get-out clauses that you would have been better burning your money rather than buying one in recent years.

However, at heart an annuity in retirement is not a bad idea, especially in an era when firms can no longer afford to fund defined benefit pension schemes. Rather than cold shoulder the annuity the way that Osborne did, he should have worked with the pensions industry to make annuities a more reliable product for the UK’s large cohort of retirees. Osborne could be accused of dealing with this problem far too late into this government; after all if interest rates start to rise from next year, as expected, then annuities could become more attractive.

But, while the pension industry will no doubt find a way to fill the hole left by annuities, perhaps Osborne’s biggest mistake at this Budget was his failure to promote saving for retirement. Instead he has made it easier for people to withdraw money from their savings pots without incurring punitative tax charges. While Osborne argues that we have to trust pensioners to do the right thing with their money, he is giving a big two finger salute to the prevailing data on the pension saving deficit in this country, which is approximated to be £9 trillion.

Longevity, wage price inflation and increasing costs of living mean that saving more for your old age and not simply relying on the state pension is imperative. As a nation we have a fairly dismal savings ratio as it is, a mere 5.4% of our income is saved. We need to save significantly more than this if we don’t want to see a dramatic downturn in our living standards when we retire, if we can afford to retire at all.

Of course there are some people who need to withdraw money from their pension pots for good reasons. Maybe to help a child buy their first home, or pay for some life-saving treatment that is not available on the NHS. These are all laudable decisions, and it makes sense not to charge high rates of tax on withdrawals for family or life and death reasons. However, with one hand Osborne has made it easier to take money out, with the other he should have made it easier to put money in.

The government’s savings incentives in this budget, such as increasing the ISA limit and scrapping the 10% tax rate on savings, are all laudable but only time will tell if they will boost our household savings ratio down the line.

If Osborne and co. win the next general election then the UK’s on-going pensions crisis could come back and bite him, especially if people clear pensions pots (for good reasons or not) and then find themselves lacking. As we are still living in austerity Britain, don’t expect Osborne to pick up the short fall. This budget’s changes to the UK pensions system should have come with a hefty safety warning.

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Keep calm – you are middle aged but could still become a genius http://blogs.reuters.com/great-debate-uk/2014/02/19/keep-calm-you-are-middle-aged-and-could-still-become-a-genius/ http://blogs.reuters.com/kathleen-brooks/2014/02/19/keep-calm-you-are-middle-aged-but-could-still-become-a-genius-2/#comments Wed, 19 Feb 2014 16:00:25 +0000 http://blogs.reuters.com/kathleen-brooks/?p=115 A fascinating study from the U.S.’s National Bureau of Economic Research (NBER) entitled “How does Age Affect Scientific Genius” was a breath of fresh air for those of us hurtling towards middle age. Images of precocious youngsters going to university at age six and making their first million in their early teens are, thankfully, few and far between. It is mid-career when your genius peaks, according to the paper written by Benjamin Jones, EJ Ready and Bruce Weinberg.

While it gave this author a boost to know that her best work may not be behind her, age, demographics and your chosen field of study can all impact when you reach your peak performance. For example, creativity peaks earlier in abstract fields, while it peaks later in fields with context, for example history. Hence why Sergey Brin and Larry Page could co-found Google when they were both PhD students at Stanford. The internet itself was a young and relatively unexplored field that lent itself to “discoveries” and breakthroughs in the garages of young geeks.

In contrast, take the field of economics. Very rarely does someone under the age of 50 get a Nobel Prize. Take Paul Krugman, when he won the Nobel Prize (surely the highlight of any career), he was 55. This paper would argue that certain fields like economics suffer from a “burden of knowledge”. Hence, by the time you have studied your way through all of the theory behind economics you could be a decade or so into your career before you even start forging ahead with your own innovations and discoveries.

The paper also noticed an interesting development in physics in the last century. In the first half of the 20th Century when the foundations of quantum mechanics were established, this revolutionary period allowed for early-career contributions – career peaks – compared to recent years. As scientific and technical knowledge expands and deepens it raises the educational burden on future generations, and pushes out their potential genius into the future. According to this report, since 1985 physics laureates have become notably older.

And it is not just psychics; the average age of Nobel Prize winners has increased by 8 years in the last century.  However, one thing hasn’t changed; the older we get the steeper the decline in our innovative abilities. But how does this help our understanding of peak achievement?

The report points out that countries with population distributions centred on middle age could become hotbeds of scientific and technological innovation. Whereas countries where the populations are aging dramatically, such as Japan, Germany, Italy and even China could be in trouble. If these countries cannot actively drive scientific and technological development forward they risk losing their clout on the global stage.

However, demographics alone cannot fully explain when or if you will ever become a genius. Since 1965, two-thirds of Nobel Prize winning research has been completed in the U.S., yet the U.S. is only 5% of the world’s population. As the report says, this points strongly to context in understanding where genius may express itself.

According to this report a middle aged American has a better chance than a middle aged Brit to win a Nobel Prize. However, Nobel prizes are not the only way to measure genius and career peaks. If there is a link between reaching your potential and middle age then the rise of Mum-trepreneurs here in the UK should not come as a surprise. With more and more women having careers and then going on to have children in their 30’s and 40’s, women who take career breaks for family reasons  are perfectly placed to launch something on their own and reach their own career peaks away from the rat race.

What if you have passed middle age – is there no hope of getting your name up in lights? Don’t give up hope altogether (according to the report). Population increases could stem the rate of innovative decline in older age groups due to more minds working towards the collective scientific enterprise. Thus, as retirement ages are raised across the developed world genius could peak even later.

Rather than bemoan the fact that we are all getting older, each new day could lead to a more fruitful prosperous future. With all of our scientific and technological advances, the age of the child genius could be behind us. Long live middle-age!

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