Apple vs Obama

A few people who read my letter to Apple assumed for some reason that I’m an Apple hater – or indeed that I had foresworn Apple products entirely.

They couldn’t be more wrong. I love Apple – always have and probably always will (though the affair is distinctly less romantic these days). As I made perfectly clear in my letter, I have had Apple products for years – since before it was particularly fashionable and people looked at you like you were a weirdo when you asked whether there was a Mac OS version of their software.

But the past few years have been disappointing, to say the least, and for the first time its rivals are able to offer products that are just as compelling, so it felt appropriate to have a separation – which is why I’ve ditched the iPhone in favour of a Samsung. Other parts of my technological life – perhaps even the Macbook I’m writing this on – could well follow suit.

Some have written in to thank me, to tell me that my letter has convinced them to make the move as well – as if they were trapped in a loveless marriage.

Others have abused me for, variously, my ignorance, self-obsession, poor writing, poor spelling and downright lunacy at abandoning Apple. Which is fine, though it might be worth clarifying that this is my personal blog (which I started up mainly to house my music mixes, which in the interest of politeness you should really check out), I don’t benefit from it monetarily at all, am not receiving any kind of kicks from any company, and am not in pursuit of web traffic (particularly since my ISP is threatening to charge me more because of the extra traffic recently).

On the basis of all the emails, tweets and comments, some people seem to have a tribal, almost binary approach to Apple – you’re in or you’re out. You love them or you hate them.

This is, to put it lightly, a bit odd.

It’s an attitude you frequently encounter when it comes to football teams or religion, but rarely to brands. People don’t curse, scream and abuse each other online because they like Pepsi rather than Coke. They might be a Mercedes or BMW fan but even when it comes to cars, all but a fringe element can take ‘em or leave ‘em.

This clearly isn’t the case with Apple: I’m willing to bet there are more people in the UK who categorise themselves as an Apple or Android person than who declare a confirmed political allegiance, be it Conservative, Labour or LibDem.

So why does writing anything about Apple seem to provoke such a furore?

I suspect there’s probably a whole combination of factors – although most of them probably come down to the fact that it is now one of the world’s biggest companies. Moreover, while part of its dominance undoubtedly derives from the fact that it makes better products than the majority of the competition, it also owes a significant amount to its mastery of marketing.

Like politicians, Apple has been selling us a dream for many years: that it can help enhance our lives, and make us cooler, through its products. And with some reason: many of its products have indeed been revolutionary. This has reinforced the cycle, and Apple has encouraged us, subtly, to consider it as something more than a mere computer company – Think Different, the keynotes and so on.

Apple Exceptionalism worked when the company was a phenomenon, but it’s far more difficult to pull off that kind of marketing when you’re the establishment incumbent. Ask Barack Obama. He was once a phenomenon: he promised America so much, he came to office on a wave of approval and then…

Like Apple, Obama campaigned for years as the alternative option, the plucky underdog, the slick, inspiring option towards whom we should make a leap of faith.

In both cases, the dream soured somewhat thereafter. Even the most passionate fans of both will, if they are being truly honest with themselves, admit that things haven’t gone all that swimmingly recently – whether you’re referring to Obama and the economy or Apple and the iOS6 fiasco.

Like Obama, Apple’s future depends to a large extent on how it reacts to this wave of disappointment. Does the company dust itself down, dive back onto the campaign trail and try to inspire us once again? Or does it continue to disappoint us?

Obama has shown it is possible to reignite that enthusiasm, even after past disappointments. I hope Apple follows the same path as I’d dearly love to stick with its products. But, for the time being at least, I’d rather be with someone else.


Incidentally, the Samsung is a pleasant change, but is far from perfect. I’ll blog a little bit about the transition soon.

Mario Draghi’s misleading fact about the euro crisis

When asked about the health of the euro area at his press conference earlier today, Mario Draghi trotted out an old canard often used by his predecessor as European Central Bank President, Jean-Claude Trichet. He said that while it was easy to talk down the euro’s prospects, the fact remains that unlike the UK, US or many other economies around the world, the euro area doesn’t have that much of a current account imbalance at all.

Technically speaking, this is quite right. Here is the euro area’s current account over recent years:

Current account balance across the euro area as a percentage of GDP

Of course Britain and America would kill for a current account as balanced as this – it would mean we would no longer be as reliant on other countries to buy our debt and sell us their goods as we are at the moment.

But the problem with Draghi’s claim is that it misses the point. The euro crisis has not been about the relationship between the euro area and the rest of the world – it’s been about the relationship between those euro member states themselves. It’s been about the current account deficits and surpluses between different euro members and the consequent build-up of debts and credits which have left some countries (Greece, Spain etc) without access to capital markets and other countries (eg Germany) with a bill.

So how does the euro area’s current account balance look if one does it at a country-by-country layer? Here’s how:

Yep. Rather less balanced, and considerably more chaotic. When investors from around the world look at the euro and consider it’s in crisis it’s this second graph they occupy themselves with – since the euro area is not, at the moment at least, a single economic and fiscal union: it still consists of individual countries with their own treasuries. And as long as that is the case, the disparity between those wildly oscillating lines in the second chart will be what matters – not the serene, flat chart you get when you step back and look at the euro area as a whole.

After all, when you step back far enough, the entire world’s current account is completely balanced – after all, it’s not as if we do much trade with Mars*. The real issue in sovereign debt crises is the relation between different countries.

* Well, actually, the IMF’s figures suggest otherwise – that there was a current account surplus across the world of $373bn last year. Though this is generally assumed to be a statistical error.

The amazing stuff the Bank of England could have bought with its £375bn

Now that the Bank of England has called a halt on its quantitative easing programme, it might be worth stepping back for a moment and considering the momentousness of what the central bank has done over the past three years. In that period, an institution whose previous job was largely to determine the cost of borrowing through the country has carried out the most daring programme of balance sheet expansion this country has ever seen.

If you ignore the name, QE is actually pretty simple. The Bank creates cash (it is printing, but it happens electronically) and then uses that magicked-up money to buy certain assets.

The objective is two-fold: first and most importantly, get money flowing around the economy. After all, this economic crisis derives from the fact that Britain’s gross domestic product is falling (or flatlining, depending on which time horizon you’re looking at). GDP is the sum total of what we’re all spending (or earning – it should add up to the same number). So the Bank funnelling extra cash into the economy should directly boost that number – and encourage people to spend money, perhaps boosting it by a factor of more than one.

Second, the process should, theoretically, reduce the cost of borrowing for consumers and simultaneously push up prices around the country. And given the Bank’s interest rate was already down at what is from their perspective absolute zero (0.5%), and that the UK was facing the threat of deflation, those two objectives made sense.

The questions of whether the Bank’s scheme was successful, and what happens next, are ones I will return to soon. In the meantime, let’s just consider for a moment how much money the Bank has created. Earlier this year, when the total target size of QE was £325bn, I did an exercise of working out what else the Bank could have done with that cash. Today, the total amount it has spent has reached £375bn, so it’s worth an update.

If it were to spend £375bn today, the Bank of England could theoretically buy:

1.     Every single vehicle in Britain

That’s right, the Monetary Policy Committee could now be in sole possession of every single car, lorry, train, plane and, I suppose, bike, in this country. This would set it back a mere £185bn – less than half its total QE outlay. Of course, that would create a slight problem, in that, well, no-one would be able to get anywhere, so the Bank could use the remaining £190bn to buy every single household in Britain a brand spanking new Volkswagen Fox. Which, of course, would also bolster UK-German relations, so good news all round.

2.     Every single property in Scotland

The Bank of England’s Threadneedle St headquarters are a fine building, but if Sir Mervyn was feeling swish, he could rather easily bolster the Bank’s property portfolio with a few million holiday homes north of the border. According to Savills, the entire housing stock in Scotland is currently worth just over £300bn – so easily affordable. And, while we’re at it, it could use that remaining £75bn to buy up every property in Northern Ireland.

If, for understandable reasons, Sir Mervyn was rather nervous about the constitutional implications of the Bank of England owning Scotland, he could, instead, buy up every property in the North West (£372bn), the North East (£124bn) or the West Midlands (£309bn), including Wolverhampton, where he grew up. London would be a bit too expensive, at £783bn, but the Bank could easily afford a few of the smartest boroughs: Kensington & Chelsea and the City of Westminster, perhaps (£128bn all-in).

3.     Every office building in Britain

If Sir Mervyn was after more space for the Bank’s fast-expanding ranks of employees – a lot more space – he could always splash out for every non non-residential building currently owned by UK businesses. That would set the Bank back a mere £357bn, which seems pretty reasonable considering the kinds of nifty skyscrapers, warehouses and offices one could get for that.

4.     Some pennies

The Bank could, if it so chose, decide to get the money minted up into £375bn of pennies. I’m not entirely clear why they’d want to do this, but nonetheless it would be so many coins that, if piled on top of each other, they would tower 57m kilometres high, enough to reach to Mars, on one of its closer orbits to the earth.

5.     A big present

If the Bank decided that rather than spending the money itself it would simply give it out, it would be able to give every household in Britain a rather generous cheque for  £14,423. Just like that. Of course, it wouldn’t really be that simple, since the Bank doesn’t have the right to award what would effectively be a tax rebate to British households: that is fiscal rather than monetary policy. And the Chancellor might have something to say about a tactic like that – indeed Sir Mervyn himself has already ruled it out. However, one can but dream.

However, rather than spending its cash on any of the above, the Bank has chosen to spend it on government debt – gilts, as they are known. As far as economic theory goes, this should have had the same effect, getting cash into the economy and helping encourage people to spend. However, critics of QE argue that it has instead only served to distort the financial system, making pensioners poorer and benefiting investors and those who work in the financial system rather than the hard-pressed households most adversely affected by the recession. It is a debate that is likely to continue for some time – particularly since the Treasury Select Committee is carrying out an investigation into QE.

But what’s not in doubt is the sheer, staggering scale of the project the Bank of England has brought to a pause today.