Great books to read

Know Me, Like Me, Follow Me: What Online Social Networking Means for You and Your Business by Penny Power 

If you think simply having a presence in social media will help you grow your business, you are wrong. Online networks are the new model for creating connections, so you’d better start by ditching your old ways of thinking. Being online is not about the technology – it is about the people. Technology is just the enabler. Forming deep relationships and being part of a community where you get out what you put in, lies at the heart of understanding this developing medium.

Know Me, Like Me, Follow Me takes you on a journey into the online business world. In 1998, Penny Power founded the online business network Ecademy, which has today grown to a membership of more than a quarter of a million, spanning over 200 countries. 1998 was the year Amazon.co.uk started and five years before Facebook existed. There was no route-map for Ecademy to follow and no knowing how the online world would develop. Penny was simply driven by a belief that there must be a better way for business people to meet, connect and help one another solve problems and expand their businesses.

Know Me, Like Me, Follow Me will refresh your thinking and help you truly understand the business opportunities that exist within social media, and how best to exploit them. Whether you are a multinational or an owner-manager, developing your online brand in the right way is key to making the most of the new business environment.

The Snowball: Warren Buffett and the Business of Life by Alice Schroeder

Here is THE book recounting the life and times of one of the most respected men in the world, Warren Buffett. The legendary Omaha investor has never written a memoir, but now he has allowed one writer, Alice Schroeder, unprecedented access to explore directly with him and with those closest to him his work, opinions, struggles, triumphs, follies, and wisdom. The result is the personally revealing and complete biography of the man known everywhere as The Oracle of Omaha. Although the media track him constantly, Buffett himself has never told his full life story. His reality is private, especially by celebrity standards. Indeed, while the homespun persona that the public sees is true as far as it goes, it goes only so far. Warren Buffett is an array of paradoxes. He set out to prove that nice guys can finish first. Over the years he treated his investors as partners, acted as their steward, and championed honesty as an investor, CEO, board member, essayist, and speaker. At the same time he became the worlds richest man, all from the modest Omaha headquarters of his company Berkshire Hathaway. None of this fits the term simple. When Alice Schroeder met Warren Buffett she was an insurance industry analyst and a gifted writer known for her keen perception and business acumen. Her writings on finance impressed him, and as she came to know him she realized that while much had been written on the subject of his investing style, no one had moved beyond that to explore his larger philosophy, which is bound up in a complex personality and the details of his life. Out of this came his decision to cooperate with her on the book about himself that he would never write.

The Age of Turbulence by Alan Greenspan

Alan Greenspan shares the story of his life first simply with an eye toward doing justice to the extraordinary amount of history he has experienced and shaped. But his other goal is to draw readers along the same learning curve he followed, so they accrue a grasp of his own understanding of the underlying dynamics that drive world events. In the second half of the book, having brought us to the present and armed us with the conceptual tools to follow him forward, Dr. Greenspan embarks on a magnificent tour de horizon of the global economy. He reveals the universals of economic growth, delves into the specific facts on the ground in each of the major countries and regions of the world, and explains what the trend-lines of globalization are from here. The distillation of a life’s worth of wisdom and insight into an elegant expression of a coherent worldview, The Age of Turbulence will stand as Alan Greenspan’s personal and intellectual legacy.

Deep Survival: Who Lives, Who Dies and Why: True Stories of Miraculous Endurance and Sudden Death by L Gonzales

The author delves into the science, psychology, and art of wilderness survival. His analysis is riveting, his conclusions startling.

After her plane crashes, a seventeen-year-old girl spends eleven days walking through the Peruvian jungle. Against all odds, with no food, shelter, or equipment, she gets out. A better-equipped group of adult survivors of the same crash sits down and dies. What makes the difference?

Examining such stories of miraculous endurance and tragic death, how people get into trouble and how they get out again (or not). Deep Survival takes us from the tops of snowy mountains and the depths of oceans to the workings of the brain that control our behaviour. Through close analysis of case studies, Laurence Gonzales describes the essence of a survivor and offers twelve “Rules of Survival.” In the end, he finds, it’s what’s in your heart, not what’s in your pack, that separates the living from the dead. Fascinating for any reader, and absolutely essential for anyone who takes a hike in the woods, this book will change the way we understand ourselves and the great outdoors.

Good to Great by Jim Collins

Five years ago Jim Collins asked the question, “Can a good company become a great company, and if so, how?”

In Good to Great Collins, the author of Built to Last concludes that it is possible, but finds that there are no silver bullets to greatness. Collins and his team of researchers began their quest by sorting through a list of 1,435 companies, looking for those that made substantial improvements in their performance over time. They finally settled on 11–including Gillette, Walgreens and Wells Fargo–and discovered common traits that challenged many of the conventional notions of corporate success. Making the transition from good to great doesn’t require a high-profile CEO, the latest technology, innovative change management or even a fine-tuned business strategy. At the heart of those rare and truly great companies was a corporate culture that rigorously found and promoted disciplined people to think and act in a disciplined manner. Peppered with dozens of stories and examples from the great and not-so-great, Collins lays a well-reasoned roadmap to excellence that any organisation would do well to consider.

Like Built to Last, Good to Great is one of those books that managers and CEOs will be reading and rereading for years to come.

Outliers: The Story of Success by Malcolm Gladwell

Now that he’s gotten us talking about the viral life of ideas and the power of gut reactions, Malcolm Gladwell poses a more provocative question in Outliers: why do some people succeed, living remarkably productive and impactful lives, while so many more never reach their potential? Challenging our cherished belief of the “self-made man,” he makes the democratic assertion that superstars don’t arise out of nowhere, propelled by genius and talent: “they are invariably the beneficiaries of hidden advantages and extraordinary opportunities and cultural legacies that allow them to learn and work hard and make sense of the world in ways others cannot.” Examining the lives of outliers from Mozart to Bill Gates, he builds a convincing case for how successful people rise on a tide of advantages, “some deserved, some not, some earned, some just plain lucky.”

Outliers can be enjoyed for its bits of trivia, like why most pro hockey players were born in January, how many hours of practice it takes to master a skill, why the descendents of Jewish immigrant garment workers became the most powerful lawyers in New York, how a pilots’ culture impacts their crash record, how a centuries-old culture of rice farming helps Asian kids master math. But there’s more to it than that. Throughout all of these examples–and in more that delve into the social benefits of lighter skin color, and the reasons for school achievement gaps–Gladwell invites conversations about the complex ways privilege manifests in our culture. He leaves us pondering the gifts of our own history, and how the world could benefit if more of our kids were granted the opportunities to fulfill their remarkable potential.

The Tipping Point: How Little Things Can Make a Big Difference by Malcolm Gladwell

“The best way to understand the dramatic transformation of unknown books into bestsellers, or the rise of teenage smoking, or the phenomena of word of mouth or any number of the other mysterious changes that mark everyday life,” writes Malcolm Gladwell, “is to think of them as epidemics. Ideas and products and messages and behaviours spread just like viruses do.”

Although anyone familiar with the theory of mimetics will recognise this concept, Gladwell’s The Tipping Point has quite a few interesting twists on the subject. For example, Paul Revere was able to galvanise the forces of resistance so effectively in part because he was what Gladwell calls a “Connector”: he knew just about everybody, particularly the revolutionary leaders in each of the towns that he rode through. But Revere “wasn’t just the man with the biggest Rolodex in colonial Boston”, he was also a “Maven” who gathered extensive information about the British. He knew what was going on and he knew exactly whom to tell. The phenomenon continues to this day–think of how often you’ve received information in an e-mail message that had been forwarded at least half a dozen times before reaching you.

Gladwell develops these and other concepts (such as the “stickiness” of ideas or the effect of population size on information dispersal) through simple, clear explanations and entertainingly illustrative anecdotes, such as comparing the pedagogical methods of Sesame Street and Blue’s Clues, or explaining why it would be even easier to play Six Degrees of Kevin Bacon with the actor Rod Steiger. Although some readers may find the transitional passages between chapters hold their hands a little too tightly, and Gladwell’s closing invocation of the possibilities of social engineering sketchy, even chilling, The Tipping Point is one of the most effective books on science for a general audience in ages. It seems inevitable that “tipping point”, like “future shock” or “chaos theory,” will soon become one of those ideas that everybody knows–or at least knows by name.

Blink: The Power of Thinking Without Thinking by Malcolm Gladwell

Intuition is not some magical property that arises unbidden from the depths of our mind. It is a product of long hours and intelligent design, of meaningful work environments and particular rules and principles. This book shows us how we can hone our instinctive ability to know in an instant, helping us to bring out the best in our thinking and become better decision-makers in our homes, offices and in everyday life.

Just as he did with his revolutionary theory of the tipping point, Gladwell reveals how the power of blink’ could fundamentally transform our relationships, the way we consume, create and communicate, how we run our businesses and even our societies.You’ll never think about thinking in the same way again.

The 25 Sales Habits of Highly Successful Salespeople by Stephan Schiffman

“Steve Schiffman is a great source of practical, real-life, results-oriented insights. You can read his books again and again.”

-Patricia C. Simpson, Vice President, Chemical Bank

 

“Steve’s techniques are practical, relevant, and easy to apply. Read this book and put his ideas to use.”

-Andrea Becker-Arnold, Director, Corporate Sales Training, U.S. Healthcare

 

Now you can join the hundreds of thousands of salespeople who have followed Stephen Schiffman’s advice and watch your performance soar. Schiffman lets you in on the industry’s best-kept secrets.

 

Learn how to:

  • Convert leads to sales
  • Motivate yourself and motivate others
  • Give killer presentations
  • Keep your sense of humor
  • This new edition includes:
  • New examples using the latest advances in sales presentation technology
  • Up-to-date cases of these successful habits in action
  • Five bonus habits showing readers how to overcome mistakes, set sales timetables, and reexamine processes to shore up weaknesses

If you’re a salesperson looking to succeed, this is the book for you!

How Come That Idiot’s Rich and I’m Not? by Robert Shemin

In this provocative and entertaining book, Robert Shemin, a multimillionaire and successful entrepreneur and motivational speaker, has a secret for you: rich people are not that smart. In fact, they’re Idiots, and if you want the wealth and fulfilment you’ve always desired, you need to be an Idiot, too.

In How Come That Idiot’s Rich and I’m Not?, Shemin shows how the average ‘smart’ person’s tendency to over-think can be financially crippling, and reveals simple principles for getting and keeping spectacular wealth. Follow the ‘Path of the Idiot’ with Shemin and realize the mistakes that smart people invariably make: they take small steps, effectively paralyzed by fear of failure, instead of acting decisively; their vanity prevents them from admitting ignorance, instead of finding the right person to help them achieve their dreams. By following Shemin’s step-by-step programme, you’ll be setting big goals, leaving your comfort zone, embracing the knowledge learned from failure – and reaping big rewards.

Rich Dad, Poor Dad by Robert Kiyosaki

Personal finance author and lecturer Robert Kiyosaki developed his unique economic perspective through exposure to a pair of disparate influences: his own highly educated, but fiscally unstable father, and the multimillionaire eighth-grade dropout father of his closest friend.

The lifelong monetary problems experienced by his “poor dad” (whose weekly paychecks, while respectable, were never quite sufficient to meet family needs) pounded home the counterpoint communicated by his “rich dad” (that “the poor and the middle class work for money,” but “the rich have money work for them”). Taking that message to heart, Kiyosaki was able to retire at 47.

Rich Dad Poor Dad, written with consultant and CPA Sharon L. Lechter, lays out his the philosophy behind his relationship with money. Although Kiyosaki can take a frustratingly long time to make his points, his book is nonetheless a compelling advocate for the type of “financial literacy” that’s never taught in schools. Based on the principle that income-generating assets always provide healthier bottom-line results than even the best of traditional jobs, it explains how the former might be acquired so that the latter eventually can be shed.

Rich Dad, Poor Dad 2: Cash Flow Quadrant by Robert Kiyosaki

Personal finance author and lecturer This text reveals why some people work less, earn more, pay less in taxes, and feel more financially secure than others. It is simply a matter of knowing which “quadrant” to work from and when.

Have you ever wondered:

  • What the difference is between an employee and a business owner?
  • Why some investors make money with little risk while most other investors just break even
  • Why in the Industrial Age most parents wanted their children to become medical doctors, accountants or attorneys
  • Why in the Information Age those professions are under financial attack?

Have you noticed that many of the brightest graduates from our universities want to work for college drop-outs? Drop-outs such as Bill Gates of Microsoft, Richard Branson of Virgin Industries, Michael Dell of Dell Computers and Ted Turner of CNN? Drop-outs who today are the mega-rich of society.

This book aims to answer some of these questions and also assist in guiding you in finding your own path to financial freedom in a world of ever-increasing financial change.

Millionaire Upgrade by Richard Parkes Cordock

Do you ever wonder if you have what it takes to become a millionaire?

Imagine finding yourself sitting next to a self-made millionaire for eight hours on a long-haul international flight. Imagine that person was prepared to share with you the secrets of their success. For one lucky person this actually happened. Inspired by a 1 story, Millionaire Upgrade is the tale of one very experienced entrepreneur and one very lucky passenger.

The story unfolds mid-air at 35,000 feet as Michael, the savvy self-made millionaire, shares his wisdom, eight-step approach, and magic ingredients for success with Tom, the aspiring entrepreneur. Their mid-air conversation contains all the secrets and practical insight you need to help you make your first million. It shows how you can turn your strengths and passions into an exciting, rewarding, and challenging enterprise.

Better than any in-flight movie, Millionaire Upgrade gets you inside the minds of successful entrepreneurs and self-made millionaires giving you the inside track on how they think and act.

Losing My Virginity by Richard Branson

Love him or loathe him, you’ve got to admit it, Richard Branson has drive. And guts. And enough ambition to sink a battleship–or perhaps that should be a jumbo jet–or even a whole company of jumbos if the Virgin Atlantic/British Airways debacle (which takes up a huge chunk of this already huge tome) is anything to go by.

Branson’s autobiography makes immensely fascinating reading. Whatever you think of Britain’s most famous entrepreneur, the odds are that you will enjoy reading his autobiography. You may snort at descriptions of his “poor” childhood–spent eating bread and dripping while living in a house the majority of us visit on Bank Holidays and attending a “minor” public school. You may groan at memories of early initiative tests: how about being ejected from the family car and told by his mother to find his way home–at the age of four? You may flinch at accounts of his early business days as an unwashed, unshod, hippy magazine publisher living en famille with his staff in the crypt of a West London church. But, all in all, you’ll get to understand where the guy’s coming from–man.

And, like the man himself, there’s no holds barred here. Richard bares his soul, from childhood, school days (cheating at exams), loves and losses (lost one wife when a spot of wife-swapping went drastically wrong–for him), death-defying adventures (yes, the balloons are all there), to the rise and rise of the Virgin empire. His interviews for Student magazine and the early days of Virgin Music read like a chronicle of popular music and culture in the late 20th century. Famous names bounce off every page. Prepare to be enthralled by the life and times of a walking publicity machine.

Screw It, Let’s Do It by Richard Branson

Throughout my life I have achieved many remarkable things. Now, I will share with you my ideas and the secrets of my success, but not simply because I hope they’ll help you achieve your individual goals. Today, we are increasingly aware of the effects of our actions on the environment, and I strongly believe that we each have a responsibility, as individuals and organisations, to do no harm. I will draw on Gaia Capitalism to explain why we need to take stock of how we may be damaging the environment, and why it is up to big companies like Virgin to lead the way in a more holistic approach to business. In “Screw It, Let’s Do It”, I’ll be looking forwards to the future.

A lot has changed since I founded Virgin in 1968, and I’ll explain how I intend to take my business and my ideas to the next level and the new and exciting areas – such as launching Virgin Fuels – into which Virgin is currently moving. But I have also brought together all the important lessons, good advice and inspirational adages that have helped me along the road to success. Ironically, I have never been one to do things by the book, but I have been inspired and influenced by many remarkable people. I hope that you too might find a little inspiration between these pages.

Funky Business by Jonas Ridderstrale & Kjell Nordstrom

Oh dear–a book called Funky Business by two Swedish academics. At first glance it has all the allure of Benny and Bjorn’s (from Abba) sadly never released concept album about life as a middle manger in a multinational conglomerate. There is something very earnestly hip about the way that Kjell Nordstrom and Jonas Ridderstrale of the Stockholm School Of Economics present themselves. “They do gigs not seminars. These gigs sell out. They have shaved heads and wear black”, says the blurb.

But that’s what makes Funky Business worth reading. It’s not so much the novelty of its argument–which boils down to the idea that in an oversupplied world, ideas are what separate successful companies and successful individuals from the failures. It is the vitality of the argument and, dare I say it, the rhythm of the language that make it so compelling. “Traditional roles, jobs, skills, ways of doing things, insights, strategies, aspirations, fears and expectations no longer count. In this environment we cannot have business as usual. We need business as unusual. We need different business. We need innovative business. We need unpredictable business. We need surprising business. We need funky business.”

The book, which is almost a virtuoso display of rhetoric and intellectual power, bursts at the seams with the exuberant force of its argument and the weight of its highly colourful supporting evidence. Sources quoted range from the Pope to the Prodigy. Funky Inc, they say, “isn’t like any other company. It is not a dull, old conglomerate. It is not a rigid bureaucracy. It is an organisation that actually thrives on the changing circumstances and unpredictability of our times.”

This is great entertainment. But the slick veneer does not invalidate the way that the book pulls together many existing strands of thought about how business is developing and evokes a coherent and intriguing vision of a future whose main feature will be incoherence.

This really is one for all the family. Or at least all those old enough to have a job.

The Second Bounce of the Ball (Turning Risk Into Opportunity) by Ronald Cohen

In business, everyone can see the first bounce of the ball. It is the second bounce that is uncertain. Ronald Cohen, one of the world’s leading private-equity investors, argues that the entrepreneur’s aim is to take advantage of that uncertainty: for it is only in situations of uncertainty that significant gains can be made. Putting it another way, successful entrepreneurs know how to turn risk into opportunity.

The Second Bounce of the Ball is the distillation of Cohen’s 33-year career building Apax Partners into a firm employing more than 300 people, with offices in eight countries and billions under management. He draws upon Apax’s experience of backing entrepreneurial businesses in many countries, among them AOL, Apple, Computacenter, Tommy Hilfiger, Immarsat, Kabel Deutschland, Calvin Klein, Molnlyke, Panrico, Q-Cell, Travelex, Waterstone’s, Virgin Radio, Vueling and Yell.

The book is essential reading for entrepreneurs, wannabe entrepreneurs and all those who want to apply entrepreneurial approaches in all walks of life. It provides relevant background on the development of entrepreneurship and of the venture-capital and private-equity industry through the prism of Cohen’s experience at Apax.

It provides guidance about how to take advantage of business opportunity: the right people and the right money and the roles played by personality and luck and underlines the importance of ethics.

The Second Bounce of the Ball’s insights on entrepreneurial strategy provide a unique insider’s guide to turning risk into opportunity.

The Undercover Economist by Tim Harford

Who makes most money from the demand for cappuccinos early in the morning at Waterloo Station? Why is it impossible to get a foot on the property ladder? How does the Mafia make money from laundries when street gangs pushing drugs don’t? Who really benefits from immigration? How can China, in just fifty years, go from the world’s worst famine to one of the greatest economic revolutions of all time, lifting a million people out of poverty a month?

Looking at familiar situations in unfamiliar ways, THE UNDERCOVER ECONOMIST is a fresh explanation of the fundamental principles of the modern economy, illuminated by examples from the streets of London to the booming skyscrapers of Shanghai to the sleepy canals of Bruges.

Leaving behind textbook jargon and equations, Tim Harford will reveal the games of signals and negotiations, contests of strength and battles of wit that drive not only the economy at large but the everyday choices we make.

Downvaluing: say a little prayer

What do you do if a lender downvalues your home, ask Lucy Denyer and Emma Wells

When Sam Rous, 23, spotted a two-bedroom new-build house in the village of Fulbourn, Cambridgeshire, on sale for £215,000 this summer, he knew it was perfect. With 900 sq ft of space and a small garden, it was a great first-time buy for him and his girlfriend, Lucy Fox, also 23, who works for an exam body — and, unusually for first-time buyers, they had a 25% deposit. So when he was told by RBS, his mortgage lender, that its surveyor had valued the property at only £185,000 — leaving the couple to come up with another £23,000 for their deposit — he was not best pleased.

“We approached the surveyor directly to ask how he came to that conclusion,” says Rous, himself a graduate surveyor. “After all, other houses on the development, of exactly the same size and specification, were under offer at the same price. But we didn’t want to risk losing the house.”

Rous asked the selling agent to find comparable sales prices to back up their position, as requested by RBS. The process took too long, however, so Rous and Fox approached Abbey, which readily provided them with a mortgage based on the asking price. The couple hope to be settling into their new home this week.

Their experience is all too common. Last week, The Sunday Times’s Money section cited the case of one couple who had their home underpriced by Halifax by 35% — effectively denying them access to the best available remortgage deal. That might have been a one-off, but the practice of downvaluing appears to be far more widespread, and is having an even more damaging effect on those trying to buy.

Research conducted by the National Association of Estate Agents (NAEA) suggests some lenders are undervaluing properties by as much as 10% — meaning deals are falling through at the last moment because of lack of funds.

As Rous discovered, the problem is particularly severe when it comes to new-build properties: a reaction, perhaps, to overvaluation during the boom years, especially of off-plan flats in northern towns — some cases of which are under investigation by the Serious Fraud Office. “The problem with surveyors acting on behalf of the lenders is that they’re incredibly cautious,” says Mark Harris, a broker at Savills Private Finance. “They’ve been bitten hard over the past few years, when they’ve been too optimistic about pricing, so the reaction is to overcorrect.”

How, then, can buyers — and sellers — avoid the pitfalls of the valuation system and make it work to their advantage? After all, determining the “value” of anything, let alone a house, is an inexact science, especially in the current market. It helps to understand how the process works.

The surveyor called in by a bank or building society to value a property will be in search of “comparables” — that is, the prices at which similar properties in the area have recently sold. Both buyers and sellers can do their homework here — making sure the estate agent has a comprehensive list of sales in the area, and ringing around local agents to do as much research as they can. “Mortgage valuers will normally talk to local agents anyway — but they may not talk to all of them, so that’s a good starting point,” says Ray Boulger, senior technical manager at the mortgage broker John Charcol.

It is not foolproof, however, as surveyors are often basing their values on deals that have already gone through. “Completing on a property can take 12 weeks, and if you’ve got to ignore those properties that have been sold subject to contract, then you’re not being accurate,” says Peter Bolton King, chief executive of the NAEA. This, he says, means there is no excuse for downvaluing when the market is rising, as is the case now in much of the country.

What about the condition of the property? For those remortgaging or buying with large deposits, lenders may not bother to go at all — relying instead on “drive-bys” or “desk valuations”. In most cases, though, the surveyor will want to visit and look out for defects — some of which are easier to remedy than others.

“Having the hanging gardens of Babylon coming out of your gutter isn’t good, because it will cause blockage and leakage,” says Barry Hall, chairman of the survey and valuation group at the Royal Institution of Chartered Surveyors. So make sure your roof is in good repair and looks tidy. A lick of paint won’t go amiss, either — but don’t expect them to be swayed by the old trick of coffee brewing and bread baking in the oven.

The valuer will then assess how much the property is worth — at which point either a mortgage is agreed, and a sale goes through, or the value comes back too low.

At this stage, either buyer or seller can appeal and request a second valuation — although, even if this comes in higher, lenders may ask both valuers to justify their figure, then take a view — which might mean going with the first sum anyway.

Not that being downvalued is always bad news for buyers. “A lot depends on the state of the market, but if there are no other buyers in sight, you can use it as a good reason to renegotiate the property price lower,” Boulger says. If, as now, however, stock is in short supply, the seller may refuse to cut the price — leaving the buyer with the option of making up the shortfall or walking away.

Avoid that sinking feeling

There’s not a lot you can do about living next to a nightclub or a noisy road, but there are still ways, as a seller, to boost your valuation:

– Big jobs, such as roof repair, should be taken care of if you are trying to sell — you don’t want to give a prospective purchaser any bargaining power

– All repairs should be done thoroughly — simply patching up persistent problems, such as rising damp, will devalue your home

– Make sure your improvements are in keeping with the character of the home — especially if it has period features such as fireplaces

– Fit a good kitchen and bathroom, but don’t “over-spec” — high-end kit won’t suit a bog-standard semi

– Co-operation between buyers and sellers faced with a lower valuation can prevent deals falling through
(Lucy Denyer and Emma Wells) http://property.timesonline.co.uk/tol/life_and_style/property/buying_and_selling/article6850340.ece

Vince’s mansion tax fails to convince

The party conference season is in full swing, tax is on the agenda, and Vince Cable, the Liberal Democrat shadow chancellor, has lobbed a hand grenade at the top of the housing market.  He wants to levy an annual 0.5% tax on properties worth more than £1m.  It would raise an average of £4,000 per affected household (the first £1m on a property’s value would be exempt), or £1.1 billion a year, which he would direct towards the lower-paid.

The Lib Dems will not form the next government, but opposition ideas are there to be stolen.  What’s the betting somebody stands up at Labour’s conference in Brighton this week to say that it makes sense (although I’m not sure it will fly at next week’s Tory conference)?

Plenty of countries have property taxes, but so do we.  The Lib Dems also want to reform council tax, turning it into a local income tax, but acknowledge that this would take a long time if they got into power.  The proposed property tax is a super council tax, except that it is, in the jargon, hypothecated.  Local authorities would not receive the revenues, which would be used for raising the income-tax threshold to £10,000.

Is it a good idea?  No taxes are without difficulty, but this one has more than most.  If no two estate agents can agree on the precise value of a property, think of the rows over official valuations, particularly those taking properties into the £1m-plus bracket.

Then there are regional variations.  Liam Bailey, head of residential research at Knight Frank, points out that a £1m house may be a mansion in some parts of the country, but relatively modest in London and the southeast.

The mega-rich did not get where they are without serious tax planning.  Mike Warburton, of the accountants Grant Thornton, says many superexpensive homes are owned by “non-doms” and held offshore.  Although he applauds the aim of taking the low-paid out of tax, he doesn’t think much of the property tax.  “This idea doesn’t stack up,” he says.

Last, there are the perverse incentives.  Just as the windows tax, introduced in the 17th century, had the unintended consequence of encouraging householders to brick up windows, so this would discourage people from enhancing properties.  A few cards on bricks in the drive should be enough to keep a property below £1m.  Back to the drawing board on this one, I think.

Go figure
 – The property market in prime central London is continuing its recovery, with prices up by 4% from June to September, according to Savills.  The price of top-end properties in south west London rose by 8.4% during the same period – the fastest such increase since the boom time of the first half of 2007.  Yolande Barnes, head of the agency’s research department, says that the rises are due largely to a combination of low supply and high pent-up demand.  The market for “ultra-prime” (£15m-plus) properties, however, remains largely flat.
 – There are signs that the neww-build sector is coming back to life.  The National House-Building Council says that in the period from June to August, it received 24,246 applications to build new homes – an increase of 2.5% on the previous quarter.  Half of the regions across the UK showed an improvement; the northeast reported a rise of 16%. (David Smith, The Sunday Times)

The governor, the markets and the tumbling pound

Sterling’s sudden plunge is a reflection of greater concerns about the UK economy

It started with an innocuous-sounding article in the Bank of England’s quarterly bulletin, published last Monday. Called Interpreting Recent Movements in Sterling, it looked at why the pound had fallen so much in the past two years.

One reason, it suggested, was the perception in the markets that Britain’s economy would be more seriously affected by the global financial crisis than those of other countries.

The more the markets became concerned about risk, the deeper their concern about sterling; the pound to an extent became a proxy for the state of nervousness in the markets.

It was another reason the Bank advanced for the pound’s weakness, however, that grabbed the attention of the markets. Britain had, since the 1990s, run a deficit on its balance of payments’ current account averaging 2% of gross domestic product.

This was fine as long as capital flowed into Britain from other countries, which it did. Britain’s banks borrowed from the international markets and lent into the UK economy. The end of that process, however, could mean a fall in “the long-run sustainable real exchange rate” for the pound.

Sterling fell on reports of the article, dropping below 1.10 against the euro. It staged a small recovery in the middle of the week, when minutes of the Bank’s monetary policy committee meeting earlier this month showed, contrary to speculation, that there had been no discussion of a cut in the interest rate on commercial bank reserves.

An interview on Thursday with Mervyn King then sent it down again. The governor, interviewed by The Journal, a Newcastle newspaper that is running a campaign to boost exports, said rebalancing the British economy was “very necessary” and that “the fall in the exchange rate that we have seen will be helpful to that process”.

The effect was to give currency traders another excuse to sell, pushing the pound below 1.09 against the euro and under $1.60 on Friday. Sterling’s all-time low against the euro was 1.02, at the end of last year but in June it climbed above 1.18.

“If you look at when sterling has made its big moves over the past couple of months, and ask ‘who has been saying what to whom?’, most of these moves are linked to the Bank,” said Simon Derrick, senior currency strategist at Bank of New York Mellon.

The markets were spooked by news that King and two colleagues had pushed to increase the amount of so-called quantitative easing to £200 billion, and by hints from him of a cut in the interest rate on some commercial bank reserves.

But Derrick and other analysts cautioned against concluding that King was trying to talk the pound down.

Peter Dixon, an economist with Commerzbank, said: “It is evident that he was referring to the fall in the exchange rate which has already occurred and merely repeating the message which the Bank has been giving through much of this year, that a weaker currency can only be of benefit to an economy which is in dire need of a boost.

“His comments could be interpreted as a policy of benign neglect towards the currency — one could almost call it indifference — but that is very different from actively talking down the pound, particularly since the Bank showed similar indifference when sterling was rising.”

Whether the Bank is to blame or not, the effects of the pound’s sharp moves have already been significant for business. Last summer, Jonathan Bellwood took a big gamble. The sudden fall in the value of the pound was making business much more expensive for PeopleVox, the stock-control technology company he had started just three months earlier in High Wycombe.

Prices of the components PeopleVox was importing from America had shot up by 26% in just a few months so Bellwood decided that the company would make the equipment in the Midlands.

“You naturally look to eastern Europe or the Far East but we found a big pool of talent in central England,” Bellwood said. “Their proximity was key because it meant it was quicker to bring products to market.”

Not only that, but the strengthening of the euro against the pound suddenly presented an opportunity to export to the larger European market. Instead of focusing on a UK customer base, the company switched focus almost overnight and the gamble paid off.

“There we were worrying about the recession when actually there was this great opportunity on our doorstep,” said Bellwood. Turnover will have reached almost £1m by the end of the year and 80% of customers will be international. Bellwood says being a small company has been a great advantage because it was much easier to adapt to the swings in the exchange rate. “The big beasts wouldn’t be able to do that,” he said.While the pound’s fall is providing a boost for exporters like Bellwood — though most overseas markets remain weak — it is bad news for importers.

“In the short-run the fall in the pound boosts exports but it also puts upward pressure on the prices of the many things, such as electrical and electronic goods, that Britain imports,” said the British Retail Consortium. “Together with the coming increase in Vat back to 17.5%, this will increase shop price inflation.”

The BRC also pointed out that the weak pound will increase food price inflation, both through the direct effect on the price of imports but also by increasing the incentive for farmers to sell abroad rather than in the UK, thereby creating potential supply shortages.

Jonathan Pincas started his business, The Tapas Lunch Company, four years ago. The idea was simple. He would buy Spanish food — chorizo, Spanish ham, manchego cheese and anchovies — direct from Spain and sell to specialist restaurants in the UK.

When he started, the exchange rate was between €1.40 and €1.50 to the pound. As the pound weakened, Pincas began to realise that this could be a big problem for his small company. When sterling fell to just above parity with the euro last Christmas, his fear became a reality. “It has been awful for us,” he said. “We sell direct to restaurants, pubs and caterers and they are extremely price-sensitive. They couldn’t care less about currency exchange. All they care about is the price and if we increase it, they’ll go elsewhere so the burden stays with us.” Pincas is unsure whether his fledgling business will survive. “The margins are pressed so tight that we have questioned whether we should continue,” he said. “If the pound strengthened it would give us a new lease of life. No other factor could make such a dramatic difference.”

Nick James would also love a rise in the pound. As managing director of Pol Roger in the UK, his role involves importing the eponymous champagne and the Joseph Drouhin burgundy. In the boom, champagne consumption soared and the pound went from strength to strength.

The good times ended last year. “It was extremely difficult,” he said.

“Obviously we were hedged on currency fluctuations but you can only buy that in tranches of three to four months so we were caught short when it fell to parity at the end of last year,” he said. The most painful aspect of this was not being able to offer his customers any stability on prices.

“Normally we hold our prices for a year but that was impossible in 2008. This spring we put prices up and we have held them there until now but it looks as if we might have to re-address pricing again.”

Though business may have to get used to some further turbulence, not everybody is gloomy about the pound’s prospects. Barclays Capital, in a new set of currency forecasts published on Friday, predicted a rise for sterling against the euro to €1.18 in three months’ time and 1.25 this time next year. Against the dollar it expects a rise to $1.80.

Paul Robinson, Barclays Capital’s sterling strategist, said the bank’s optimism was based on its belief that the global economy would recover more strongly than the markets expect, reducing the need for a lower pound to rebalance the economy. It also believes that many currency traders have misunderstood the Bank’s stance.

A big reason behind its view of sterling strength, however, is that it thinks the Bank could begin to raise interest rates as early as next February. Robinson said: “We believe the threat of losing credibility means that the Bank cannot appear to allow inflation to remain persistently high and we think it is the central bank most likely to surprise the markets.” (David Smith, The Sunday Times) http://business.timesonline.co.uk/tol/business/economics/article6850768.ece

What makes Twitter worth a billion dollars?

The Silicon Valley start-up has a huge following but its huge valuation prompts parallels with the dotcom bubble

TWITTER can be a tough crowd. When news broke last week that the profit-free internet phenomenon had attracted a $100m (£62m) investment and was now “worth” $1 billion, the reaction was almost as swift and harsh as that handed out to Kanye West after his unsolicited intervention at the MTV Music Awards.

“Twitter valued at $100 billion? (SIC) I heard $1 trillion and gets their own representatives at the UN,” Twittered milepetrone. “If twitter is worth a $ billion I must be worth twice that. I have a job and incoming revenues,” wrote gopevangelist. “Nutty,” was among the kinder comments.

In these straitened times the reaction was perhaps no surprise. Even Silicon Valley hasn’t seen anything like this since Google bought YouTube in 2006, and certainly not since the credit crunch knocked the froth off the world’s economy.

In just three-and-a-half years, San Francisco-based Twitter has achieved the Silicon Valley dream, going from an obscure start-up to global sensation. Everyone from Barack Obama to MC Hammer is Twittering, sending out messages of 140 characters or fewer to friends and followers.

The site has made history as a forum for protesters in Iran and is increasingly attracting the interest of big business. Facebook, Google, Microsoft and others have all reportedly been on the phone to Twitter’s founders hoping to buy the business. Now they have a price.

On Friday, Twitter confirmed it had received “significant” financing from firms including T Rowe Price, Insight Venture Partners, Institutional Venture Partners, Spark Capital and Benchmark Capital. The investment is believed to be about $100m. It follows previous investments totalling about $50m and leaves Twitter with a nominal $1 billion value — not bad for a firm that has yet to make a penny and has shown little appetite to do so.

At $1 billion, Twitter is worth as much as General Motors before it went bust, or twice the value of Domino’s Pizza — a company with 10,500 employees and actual sales of $1.4 billion last year.

For some analysts, the idea of a $1 billion company with no revenues is spookily familiar. Jeffrey Lindsay, analyst at Sanford C Bernstein in New York, said the fuss was “a throwback to the 1990s fantasy era of internet start-ups”. He said the investment represented smart money waiting for dumb money to come in and bail it out.

For others, though, Twitter is something far more exciting. The valuation is not out of line with its peers. Facebook, the online social-networking service that claims 300m active users, announced in May it had received another $100m investment from Russia’s Digital Sky Technologies, valuing it at $6.5 billion. Twitter attracts 54m visitors a month, said comScore, the web tracking firm.

For their fans, Twitter and Facebook are redefining the way people communicate. Charlene Li, founder of Altimeter, a tech consultancy, said it was important to focus not just on the technology Twitter had developed but its relationship with the customer.

Li noted that people all around the world are now addicted to sharing their thoughts on Twitter, even their negative thoughts about Twitter itself — that’s a relationship that could be worth a billion, she said. “It took Google four years to make any money,” said Li. “Look at it now.”

Beyond a brief statement, Twitter’s founders have yet to talk about the investment, but their ambitions are nothing if not grand. The firm’s aim is to reach a billion users and become “the pulse of the planet”, according to internal documents published on the blog TechCrunch earlier this year. Another $100m might get them closer to that goal. How much is the planet’s pulse worth?

TWITTER’s offices are everything you would expect from a dotcom start-up. A cavernous warehouse space in a still industrial stretch of San Francisco, the reception has the inevitable bike rack and a trestle table stacked with the tech world’s two main food groups — cereal and fizzy drinks. A huge flatscreen TV, plus video games, dominates one end of the room, and wacky sculpture in the form of two lime green plastic deer are parked in the corner.

Most dotcom companies never get beyond this stage. Nobody makes any money, the space proves too expensive, the company folds. Someone gets to keep the deer, the TV goes on eBay. Twitter has the opposite problem — its offices were too small almost as soon as it moved in and it has been searching for new digs.

Twitter founder, Jack Dorsey, started out with the simple idea of developing something that would let him know what his friends were doing.

It wasn’t a new idea — status updates were already part of instant messaging services like Yahoo’s. Anyone used to texting was used to keeping messages short. Perhaps because of its familiarity, Twitter took off at a sensational pace.

Last year, Twitter usage grew 422%. In February this year, it hit the frankly ridiculous growth rate of 1,382%, according to Nielsen Online. There is some suggestion that growth has peaked recently, but no matter which way you cut it, Twitter is huge.

However, all this buzz will be of little use if Twitter never makes a cent. The bet its new investors are making is that Twitter can turn all this chatter into a must-have marketing tool and an invaluable source of intelligence for businesses, while engaging potential consumers in a way that seems to have become increasingly tricky for traditional media.

Set against that potential is the risk that Twitter is just another fad. Not a new Google, but a new Second Life, whose 3D virtual empire rose and fell on a similar wave of buzz-fuelled hype a short cab ride from Twitter’s offices.

“If you think about what is there in terms of technology, it’s not much,” said Li. “In and of themselves each little Tweet doesn’t mean a lot.” But in aggregate, Twitter allows people — and, importantly, companies — to create and follow a dialogue in an entirely new way.

“It’s very quick, very easy, you opt in, I’m not bothering anybody with e-mails or text messages, you choose when you do it. That could be very, very valuable — especially when it comes to brands who want to develop a deeper relationship with customers.”

FOR many people, advertising has increasingly come to be seen as an irritating interruption. Consumers, once a captive audience, now fast-forward ads on their digital TVs, complain about pop-ups on the internet and treat e-mails from firms they are otherwise happy to do business with as spam.

“On Twitter you choose to hear from me and more importantly interact with me in a two-way dialogue,” said Li.

Companies, including Starbucks, already use Twitter to pump out their latest offers to those customers who sign up. Much of the mainstream media is using it to promote their content, offering links to articles in newspapers, magazines or promoting films and TV shows.

“Twitter is a great platform to push out those messages. I don’t mind Starbucks making announcements on my Twitter page but I don’t want them in my inbox,” said Li.

Twitter’s service has been the cause of much complaint. A graphic called the “fail whale” appears when the site crashes, which it often has during global news events such as the death of Michael Jackson.

Analysts expect that some of Twitter’s new cash will be used to harpoon the whale but the rest will go to Twitter’s all-important next phase. Last year, Twitter bought internet search firm Surmize, to build up its own real-time search engine. More add-on purchases are likely from marketing services and advertising software to photo sharing software and desktop applications.

The cash-rich company needs to build a more solid service as it moves toward a sale — which the founders have so far fought against — or float. Critics such as Lindsay compares the situation with YouTube, bought for $1.65 billion in 2006 and a money loser ever since, or Skype, the online telecoms firm bought by eBay for $2.6 billion in 2005. The auction giant struggled to find any use for Skype and is now being sued by its founders as it tries to spin off the business at a loss.

It’s still too early to say who is right. The Tweet looks set to stay even if Twitter fails — just as Second Life’s woes do not mean we will never have a 3D internet. Facebook, which is still growing fast, may well become the new Twitter. Or some other start-up may steal Twitter’s place as the hottest new internet firm. Alternatively, Google, Microsoft or some other group will make Twitter an offer it can’t refuse. One thing seems certain: whatever happens, Twitter’s users will have some very strong opinions about it.

Success in 140 characters

TWITTER is a free online service that enables its users to send and read messages known as Tweets. Each Tweet can be no more than 140 characters long.

Twitter attracts about 54m visitors a month. In February, Nielsen, the media consultancy, ranked it the fastest-growing of its “member communities” category, with a monthly growth of 1,382%.

The microblogging and networking site was dreamed up in 2006 by Jack Dorsey, 32, a computer programmer from St Louis, Missouri. Evan Williams, a former Google employee credited with inventing the term “blogger”, was an early investor and now runs the company with Biz Stone, a long-time colleague, and Dorsey. There are about 70 staff at the headquarters in San Francisco.

Barack Obama, Ashton Kutcher, Britney Spears and Stephen Fry are among the high-profile followers of Twitter.

Pear Analytics, the data researcher, surveyed 2,000 Tweets and described the top topics as: news, spam, self-promotion, pointless babble and conversational.

Perhaps not surprisingly, critics have condemned the site for its triviality. However, during the Iranian election Twitter became a sounding board for angry voters. It was also credited with helping to save lives during the recent Californian bushfires by spreading information about the path of the flames.

The average Twitter user is 31, according to the Pew Internet & American Life Project. Just 11% are aged 12 to 17, according to comScore, a research company.

Neilsen says Twitter has a user retention rate of 40%. Many followers drop the service after a month or so.

The privately held company received a new round of investment last week, believed to be $100m (£62.4m), valuing it at $1 billion.

Hitwise, an online research firm, believes Twitter’s growth may have hit a wall early this year. The site is often accessed via third-party applications, making it difficult to track. (Dominic Rushe, The Sunday Times) http://business.timesonline.co.uk/tol/business/industry_sectors/technology/article6850779.ece

Obama chooses his words to dodge any deeds

Veni, vidi, dixi. That about describes President Obama’s week. Five, count them, five Sunday morning talk shows, a comedy talk show on Monday, followed by talks at an international conference on climate change, at the UN General Assembly to apologise for America’s sins before he moved into the Oval Office, at a session on nuclear disarmament, at the Security Council, and at the G20 meeting in Pittsburgh. To be followed by talks with the Iranians, on their terms, later this week.

On the global warming front the president for once used his ability to disguise policy with rhetoric in a constructive way. He promised an end to American obstruction to international agreements to reduce greenhouse gas emissions, and then refused to sign on to legally binding international treaties to do just that. Instead, he laid out his plans to subsidise green energy, and encourage a shift from the oil-based internal combustion engine to electric cars.

Never mind that he failed to mention just where all that new electricity would come from, or that much of the subsidy money would be wasted. A small price to pay for avoiding the sort of binding commitments that might slow the economic recovery. This year has seen a sharp drop in CO2 emissions, largely because shuttered factories don’t produce any — or anything else, including jobs. And jobs win elections, emissions reductions do not.

On the trade front the president and his G20 partners, representing about 90% of world GDP and almost that large a portion of world trade, and set to replace the G8 as the important policy body, once again extolled the virtues of free trade before rushing home to adopt still more protectionist measures. Obama’s decision to load a 35% tariff on low-end tyres imported from China pleased the steelworkers’ union (to which tyre makers belong), to ban Mexican trucks from US roads pleased the teamsters’ union, and to allow Buy American provisions in the stimulus package pleased the construction unions. But not his G20 partners, who fear that a wave of protectionism is about to roll over US trade policy as other unions ready their pleas for protection.

Not that the other members of the group come with clean hands: China continues to undervalue its currency and make it hard for US firms to crack its markets, and the EU maintains barriers to the industries in which America has a competitive advantage — aircraft, audio-visual products and agriculture. The outlook is not bright for free trade.

Nor are the prospects for the rebalancing of the world economy looking anything other than grim. All parties to these international soirées are agreed that China and Germany, among others, must rely less on exports, and Americans must cut their consumption of imported goods to reduce the flood of dollars hitting world markets.

But China refuses to do more than talk about creating a social safety net that would persuade its citizens they need not save as much as 50% of their income, and can safely spend on their factories’ output. And it has no intention of allowing the value of the renminbi to rise. And Chancellor Angela Merkel had made it clear that she will do nothing to persuade Germany’s consumers to spend more: she plans to rely on its export industries to fuel its economic recovery.

Meanwhile, instead of applauding US consumers for finally increasing their savings rate from zero to 5% of income, the government is inducing them to spend. Cash-for-clunkers brought a spate of spending on cars; tax rebates encourage the purchase of homes; banks are pressured to increase lending; and interest rates are kept so low that a $10,000 money market account earns about 86 cents per month. Not a strong inducement to save for a rainy day.

The bright spot comes in the consensus that is forming about the future of the financial sector. Bank pay is to be restructured in a more or less sensible direction, with bonuses more in shares than in cash, and based on long-term performance rather than short-term gains. Required bank capital is to be related to the risk profile of the institution, those too big to fail will have to have proportionately more capital than their smaller competitors, and neither compensation nor dividends will be allowed to deplete needed capital.

There won’t be an all-powerful global regulator (good thing), but there will be greater co-ordination of regulations and an attempt by high-taxing countries to put what they call tax havens out of business. Every country’s economic policies will be subject to “peer review” to check its sustainability, but luckily there is no mechanism with which the inevitable attacks on the US market system can become effective. Contrary to most pundits, God, not the devil, is in the details. He is too busy to attend to international money changers, so we will see whether the finance ministers can convert these principles into workable regulatory and policy tools.

Finally, there is some good news on the exit strategy front. Politicians are naturally cautious about withdrawing the various stimulus measures when unemployment remains high. In America, without government support there would be no mortgage market, and in Britain without government support there might be no banking sector. But at least in America there is more than mere talk of exit strategies. Treasury secretary Tim Geithner is withdrawing some of the props he and his predecessor placed under money funds and banks, and Federal Reserve chairman Ben Bernanke has begun to pull back on interventions designed to keep interest rates near zero.

Banks have begun to repay their government loans, and raise capital from private investors. With banks loaded with commercial property loans that will not be repaid, and defaults on consumer credit cards and home mortgages still well above historic levels, problems remain. But the G20 members have reason to congratulate themselves that the threat of systemic failure has passed, due in part to their co-ordinated actions, and in part to natural economic forces that do, after all, end cyclical downturns. (Irwin Stelzer, The Sunday Times) http://business.timesonline.co.uk/tol/business/columnists/article6850764.ece

We are still a nation of shoppers, not squirrels

Will we be spenders or savers? It is a big question for the economy. Without a rise in consumer spending it is hard to get economic growth. It is also a big question for retailers and other businesses relying on consumer demand.

The evidence on what has been happening so far is mixed. Official figures suggest that retail spending has held up better than many other parts of the economy, with a 2.1% rise in sales volume last month compared with a year earlier.

The British Retail Consortium said sales value was down 0.1% over the year on a “like-for-like” basis, though total sales (unadjusted for new store openings) were up 2.2%. The BRC is downbeat, particularly about non-food sales.

It is outside retailing, however, that consumers have been cutting back most. Official figures for overall consumer spending show a 3.4% drop in the second quarter against the corresponding period of 2008, one of the sharpest falls on record.

Non-retail spending, such as that on cars, restaurant meals and consumer services, has clearly been very weak, though the Bank of England, in its monthly minutes last week, suggested the most recent consumer data could be revised higher.

Even so, there are hints from retailers of other potential problems. Relative to income, young people are the nation’s big spenders. One generally successful retailer, JD Sports, which owns the Bank and Scotts fashion chains, said sales in recent weeks had dipped, possibly as a result of a rise in unemployment among 18-24 year olds. The rate for that age group is now 17.5%.

Unemployment is one potential constraint on spending. The bigger question is whether the combination of tighter credit, a rise in the saving ratio, and tax hikes will strangle any consumer recovery at birth.

Let me start with household debt. This time last year it stopped rising. Outstanding lending to households, £1,457 billion at the end of July, is fractionally lower than in September last year.

Some of this is due to deliberate decisions to repay debt. Mostly it is happening because the supply of new lending is less than the flow of redemptions. The fall in house prices, before their recent small recovery, also stemmed the rise in debt.

Household debt is overwhelmingly — well over 80% — in mortgages, and Britain has high owner-occupation. There is a natural tendency for mortgage debt to rise because new entrants to the housing market have more debt than those leaving, who have usually paid off their loans years ago. That effect has been halted in the past year by limited mortgage availability.

To what extent will people be driven by a desire to pay down debt? Kate Barker, a member of the Bank of England’s monetary policy committee, said in a speech last week that it was not clear before the crisis that, except for a tiny minority, household debt levels were unsustainable.

Spencer Dale, her MPC colleague and the Bank’s chief economist, made the very good point that, while household debt rose substantially in the years leading up to the crisis, so did financial assets owned by households. A kind of conveyor belt operated. As he put it: “The money borrowed by young families ended up in the bank accounts of older households.”

Most of that money was not spent — consumer spending did not rise as a proportion of gross domestic product — but invested. There was a 10-year rise of £1,000 billion in debt alongside a £750 billion increase in household financial assets.

People may change their views on how much debt they want to carry as a result of the crisis, and it is no bad thing that the overall amount has levelled off. It will fall for a while in relation to income. But a healthy scepticism is in order about this.

The vast majority of borrowers had their mortgages in place before the crisis, and the advent of a 0.5% Bank rate. The gradual return to a semblance of interest-rate normality, probably starting next year, is not going to result in a scramble to deleverage. They can leave that to the banks.

What about a related aspect of this, the saving ratio? Previous recessions have seen reductions in the growth of borrowing and a rise in saving. In the recessions of the early 1980s and early 1990s, the saving ratio hit 12% of household disposable income.

The saving ratio in the first quarter was 3%, down from 4% in the final quarter of 2008. Figures this week should show a second-quarter rise. If it were to hit 12%, consumer spending would indeed suffer.

Many people think that Britain’s low saving ratio reflects our modern-day, plasma-screen, get rich quick society. If only we were as prudent as, say, in the 1950s, before the credit card era, when it was safe to leave your door unlocked at night.

In the 1950s, however, the saving ratio was zero, on average. It normally rises at times of economic distress and high unemployment. In both previous recessions, it peaked close to the economy’s low point. If it were going to rise sharply, therefore, it probably should have done so by now.

One reason it has not is staring us in the face. Household saving reflects the interaction between borrowing and saving, and includes a large element which is out of people’s hands, such as contributions by firms to pension schemes.

To the extent that it does reflect decisions by individuals, though, there has not been much incentive to save of late. The Bank, in another contribution to the spending-saving debate in its latest quarterly bulletin, out last week, noted “the substantial stimulus provided by monetary policy” had cushioned the rise in saving. A Bank rate of 0.5% will not bring out the inner squirrel in anybody. Policy has been aimed at dampening down the saving ratio rise.

So we should not exaggerate the likely effect of debt aversion or saving on spending. Taxes may be a different matter, but that depends on how draconian the next government intends to be.

The past, as always, may be the best guide to the future. After the recession of the early 1990s, taxes were raised over a number of years. There was a housing and debt hangover.

Yes, consumer spending growth averaged 2.75% a year over the first four full years of recovery. Nobody would be too upset, or surprised, if it were a bit weaker than that over the next four years. Beyond that, however, don’t expect a new age of austerity. Britain’s consumers may be down, but they are certainly not out.  (David Smith, The Sunday Times) http://business.timesonline.co.uk/tol/business/columnists/article6850761.ece