Palazzo della Greca Orvieto Classico 2009

Car insurance is big business in the UK as, I guess, in most other places that make it a legal requirement when driving a car. A simple search on the web or a price comparison website (such as Compare the Market) shows that there are myriad different companies offering to save you money. The TV ads are getting more and more bizarre, from the dog who looks wasted most of the time to that annoying Tenor and the lovable Meerkat (OK, the last two are price comparison sites, but they market mainly their car insurance service). Nearly all of these "insurance companies" are intermediaries, ie, they don't actually insure the risk. So, for example, RAC Insurance is underwritten by Aviva and Elephant.co.uk is part of Admiral, which uses several insurers. HSBC Insurance don't underwrite car insurance at all, depsite being an insurance company.

Nevertheless, they are all competing for our business and, as far as I can tell, price is the main route to competitive advantage. Oh sure, there are lots of related products and services that they offer, sometimes for free, such as courtesy cars and roadside assistance; but Aleksandr is principally out to save us money (or not, as he keeps trying to tell us, apparently with poor results). A higher premium? That better come with dancing girls and a free case of wine, thank you very much. And yet, I suspect that most of us are paying too much for our car insurance, due to simple inertia. I'll explain.

Last year, when my insurance was up for renewal, HSBC sent me a renewal notice with a ludicrous increase in the premium. Why? I had not had any accidents, I was not getting younger, the rate of inflation was low...what justification was there for a significantly higher premium? So I jumped on the web and found a better quote from Admiral, who duly took my money. This year, same story: suddenly Admiral are miles higher than the most competitive quote I can find. They all use the same tactic: a low initial premium to attract your business and a higher renewal once you are on board. Banks use the same tactic as do other service providers; however, switching your car insurance is so easy, it's difficult to see how this strategy works. The differential between the initial and the renewal quotes is often so large (I could save over £200 by switching from Admiral) that you would be daft not to switch.

In effect, they have turned car insurance (or, more precisely, the distribution thereof) into a commodity. We don't care who the underwriters are; we seem unconcerned about whether the risk-takers will be solvent in six months time; we are happy to give money to a company called Elephant. The only thing stopping us from paying over the odds is a lack of motivation to switch. Still, if your premiums are low and you are happy with the service, then that's fair enough...

One product which is not a commodity is wine, despite the bewildering range of choice on offer in even the smallest independent stores or supermarket displays. Perhaps this range of options turns people off: there are thousands of grape varieties around the world. Everyone has heard of Chardonnay, but even that grape gives you a staggering number of options. I put to you that, unlike car insurance, the lowest price should not be your main aim. Paying just a bit more than rock bottom can dramatically increase the quality. This is a function of the fixed costs of a bottle of wine: production, bottling, shipping, taxes, etc. Once these are covered (say £3 or £4 a bottle) the rest of the price is all about the product.

That's not say that you shouldn't look for a good deal, which brings me on to the real subject of these blog: the amazing Palazzo della Greca 2009. I came across this wine in a leaflet from Laithwaites. I'll be honest: I liked the label and I have a soft spot for Italian food and wine. Also, it won a Decanter award and was "crafted" by Maurilio Chioccia - named Italian Winemaker of the Year in leading wine guide Luca Maroni. And at £5.99 a bottle, it seemed like a good bet.

Orvieto is a city in Umbria, a region of central Italy. Orvieto DOC is the wine from the region around the commune of Orvieto (DOC, or "Controlled origin denomination" in English, is a quality assurance label similar to Appellation). According to EncycloWine, the term "Classico" is reserved for wines produced in the region where a particular type of wine has been produced "traditionally". In my experience Classico means the wine is better (and commands a higher price).

PdG'09 is made from the Trebbiano grape variety, which apparently is the second most planted grape in the world, perhaps due to its resilience, high yields and neutral taste. It is a common element of many blends and also in table wine. The word that seems to come up most in my research is "undistinguished"...not exactly a word that encourages you to part with your money.

Well balderdash to that, I say. I enjoyed this wine immensely, from the first sip one summer evening over dinner. The wine is deep yellow, almost golden. The taste is dry, but not tart; smooth and light enough to be drunk all day, yet with enough flavour to be memorable. The leaflet describes "crisp lemon and line flavours" and I agree; I would drink this with any dish, it is so versatile.

This wine helped to rediscover my faith in white wines after a long (cold) winter of drinking red. It is the perfect accompaniment to a warm, sunny afternoon. Buy a case (though Laithwaites will sell you six) and save it for special occasions. No, scratch that - buy a case and enjoy it right now. While we still have some summer left!

Tacking!!

From today this blog will make a tack and focus not only only current affairs and the musings of my own meandering expatriate life, but also wine. Despite being a hard-core rum drinker while I was in Barbados, I have come to love this sweet nectar of the gods. And so, to justify my ever-increasing investment in said nectar, I will pass on my (completely random) experiences to anyone with an internet connection.

Pigeage is a French winemaking term for the traditional stomping of grapes in open fermentation tanks, in order to keep the liquid in contact with the skins. This can be done by foot (Pigeage à pied), which to me evokes visions of people emptying freshly-picked grapes into vats, doffing footwear and rolling up trousers and dancing around on the crop. Sounds like a fun day out...

For Sale

The Bank of England has, for the last several months, been attempting to increase the amount of lending and spending in the UK by increasing the amount of money in circulation. So-called "Quantitative Easing" sounds more like an advanced Physics lesson. Or the solution to a bout of constipation.

The Bank has done this by buying up government debt from banks using money that it has "created", electronically. However, it seems that the banks are doing what economists would describe as "rational" - using the money to shore up their balance sheets. The result: less impact on lending and spending than Mervyn King would like. Some of the cash has even gone overseas. Also rational.

Well, I am no expert in macroeconomics, but I would like to suggest a simple solution. The BoE is wasting its time targeting banks and investors. It should target ordinary consumers. After all, we are much less likely to have the willpower to act rationally. When faced with extra cash, we will buy the latest fashion, games console or smash 'em up DVD by Clarkson. There is no better way to kickstart the economy than to give unexpected cash to ordinary consumers. In this vein, I would like to announce that my mortgage is up for sale.

It is a simple solution: buy my mortgage from the lender, cancel it and save me a shedload of cash each month. I may use that money to bolster my reserves, as have the banks, but more likely I will spend it on consumption, especially at this time of year. Businesses benefit from increased sales and cash flow, reducing the need for emergency credit from the banks, which is hard to come by. My lender benefits from increased cash reserves, which it may use to lend or it may not; even if the money goes to capital-building that is no worse than the current situation. In addition, increased traffic through the doors on the High Street increases confidence and improves the overall mood of retailers (it couldn't get much worse than one year ago, can it?).

I am surprised that Mr. King has not thought of this, as it is such a simple concept: put the money in the hands of the people who are most likely to spend it the way you want them to. Of course, there is the issue of moral hazard, but then again, Mr. King has not exactly won that argument, has he?

Bar stool economics

Janice Turner thinks that the rich in this country should bugger off to Zurich or Hong Kong if they dislike the proposed 50% tax band. In her article last April, aptly subtitled "How dare the rich whine at paying more tax", she suggests that the rich are "merely being asked to help to clear up a mess that is more theirs than ours". (Because, of course, none of us had any credit card debt at all.)

Turner appears to be a class warrior, but in fact she is not so narrow-minded: her envy is much broader. When she's not slagging off the rich, it's the middle classes (those pushy parents), beauty (cheerleading is a totty-fest), women who want to be full-time mothers (all men's fault) and, of course, Tories (increase tax on super-strong cider will you..uncaring bastards!). Honestly, I think the Times only employs her to balance out Clarkson.

Yet she is not alone on this one: 57% of people polled were in favour of the new tax band. Perhaps because less than 1% of the population will have to pay it. People are always in favour of taxes that don't affect them. Except this one will, as Fraser Nelson pointed out in the weeks following the budget. It's up to the Tories to make this case, but they have decided that this argument is too hard. I suppose they could be right; after all, it's difficult to work "Laffer Curve" into a sentence that the average voter will find interesting.

So, Call me Dave, let me help you out. Here is a simple parable that nearly everyone will be able to relate to:

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that's what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. "Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20."

Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get his 'fair share?' They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

"I only got a dollar out of the $20," declared the sixth man. He pointed to the tenth man, "but he got $10!"
"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got ten times more than I!"

"That's true!!" shouted the seventh man. "Why should he get $10 back when I got only two? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!"
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

Before urging the people who pay the most tax to bugger off, Janice Turner should ask herself if she could afford to drink at the bloated bar that is our public services if her wish came true.

Finally

At last, Allister Heath has said what most other people are too afraid or too stupid to admit: that bankers, and specifically their bonuses, had but a supporting role in the financial crisis and subsequent economic downturn. Bashing then is not just pointless, it is counterproductive and does not address the true reasons for the crash - which means it may happen again.

The seeds of the crash were sown years ago, with an oversupply of cheap money from China and the East. This funded our addiction to debt in the West. More than. Hence the continued downward pressure on interest rates despite the increasing debt levels. Add to this the central bankers' focus on price inflation, rather than asset values (despite the efforts of William R White), which encouraged a housing boom of epic proportions. Low inflation, rising personal wealth (on paper) and access to easy credit along with changing attitudes towards debt made us believe that the good times would never end.

The banks had their role, of course. Collateralized debt is a sensible way of spreading risk, not an investment opportunity itself, but in world of cheap money and a relentless search for higher returns, the latter was always going to be the case. Irrational exuberance took hold and the financial system collapsed. Being the the lifeblood of the economy, it took it down as well.

However, the instability was already there, in the form of assets bubbles and unsustainable personal and corporate debt. Think of all the leveraged buy-outs and sizes of the numbers involved. Think of all how many people had multiple credit cards, using new ones to pay off old ones. Remember that it was sub-prime losses that triggered the loss of confidence in asset-backed securities. In this sense, CDOs were not the problem, just the messenger.

The moralistic finger-wagging by politicians of all stripes in the direction of the financiers is all about deflecting blame. They know that, as overseers of the economy, they could have prevented much of the pain. As individuals it is easier to march on London and kick in a bank shop window than to admit that we are in debt because we lived beyond our means, spending money (credit) on crap and not saving nearly enough.

It feels good to make jokes about The Shred, or to call everyone in a suit a bastard. Hypocritical politicians had fun grilling bankers in public, ignoring the campaign contributions or other benefits received in the past. But by ignoring our own culpability we lose sight of the changes we need to make: save more, consume less; encourage the banks to hold more reserve capital, make it possible for even the biggest to fail without taking the whole system with it. And politicians must address the global macroeconomic imbalances that precipitated all of this...and still exist today.

Boris the Badass

In the criminal justice system of London, the people are represented by three separate yet equally important groups: the police, who investigate crime, the district attorneys, who prosecute the offenders, and the Boris Johnson, who personally beats up the offenders.

This is their story...

'Knight on shining bicycle'

Power of free speech

It is still an hour and 45 minutes until Question Time airs, but I have just had a thought. I have said, in my previous post, that the oxygen of publicity will suffocate Nick Griffin with his own bigotry. However, this presumes that he will answer questions fully and honestly. Hmmm....but he is a politician - whether he is a good or a bad one depends on your view of what "good" or "bad" means for a politician.

I suspect that he is average at the game of dancing around the ugly truth. And I have listened to enough Radio 4 to know that even the most incompetent politician is adept at batting away difficult questions.

As a result, far from suffocating, Griffin might simply stall. Picture this:

Audience: "Mr. Griffin, what is your view on the Holocaust?"

Griffin: "I believe that Labour has failed to protect the heritage of the working class".

Straw: "Does the BNP wish to expel foreign-born nationals from British shores?"

Griffin: "The Establishment has spent much time decrying the democratic rise of the downtrodden BNP, when we have only sought fairness and a better life for the repressed working class."

Baroness Warsi: "Do you love Hitler?"

Griffin: "It is alarming that trusted Westminster representatives could have been allowed to spend so much money on moats and duck houses, when the average working class voter was struggling to make ends meet".

Etc...