Launch of the Daily: the verdict

A round-up of media comment on the launch of Rupert Murdoch’s new iPad newspaper.

Yesterday saw the launch in New York of the Daily, a newspaper designed exclusively for the iPad and other tablet computers. Rupert Murdoch has made an initial investment of $30m (£18.5m) in the project, in what is billed as an attempt to revolutionise journalism. Below are highlights of press reaction.

Shane Richmond, in an article for the Telegraph writes:

The problem for publishers is that I can get the latest news by opening up the iPad's browser.
And this is a general publication, which means that, whoever you are, The Daily will offer something you don't care about. For me, it's the "gossip" section: I couldn't care less. Perhaps for you, it will be sport or arts.
In print, this is a problem that you are just stuck with; you get what you're given. On the iPad I can have my own magazine.

Alexandra Frean, writing for the Times (£), takes a different view:

The Daily's engineers and designers have used every possible digital trick to make the publication's pages come to life, including still and moving pictures, sound and animated graphics.
Certain features work fully only when the device is connected to a wi-fi signal, a disadvantage perhaps for commuters. Breaking news will be displayed on a ticker but it may take readers some time to learn how best to navigate their way around the publication's news, gossip, opinion, arts & life, apps & games and sports sections.

In a blog for the Guardian, Dan Sabbagh writes:

What is also unclear is how far the Daily will act as a "walled garden". Will it be easy to link to the external content referred to in the Daily's news items? And will it be possible to link into the Daily's content via an iPad? Significantly, no Daily content will be available on the open internet, thus greatly restricting the pool of potential consumers.

Stephen Foley in the Independent comments:

Even the fun stuff, such as a piece on a New York disco for dogs, barely stands out from the great amount of "fancy that" fare available to iPad owners for free at the click of a Safari web browser button.
Here's the problem. The Daily's premise is that newspapers' decline is a delivery problem, that people are out of the habit of nipping to the newsagent and unwilling to pay the built-in costs of trucking papers round the country, but will happily pay a few cents for something that pops up on their iPad.

For the Financial Times, the columnist John Gapper writes:

Who exactly is it aimed at? The publication is sending very mixed signals to readers and advertisers about its editorial intentions.
The Daily is a crossover, not only in looking like a cross between a magazine and a newspaper, but in its style of reporting. It seems closest to the New York Post, with headlines such as: "Obama's No. 1 Nerd Now Citi Slicker in NY" over a piece about Peter Orszag.
As it happens, I had a chance to ask Rupert Murdoch my question at the press conference, but did not get much joy. "That's your suggestion," he growled amiably as I posited that papers tended to be aimed at distinct upmarket or downmarket audiences.

On the Huffington Post, Larry Magid comments:

The cover story, "Falling Pharaoh," did a pretty good job of covering yesterday's news including the subhead "Obama pushes Mubarak to quit now as a million march in Egypt revolution." That was accompanied by some gorgeous photos from yesterday's demonstrations and some sidebars about activism in Syria and Jordan and a profile of Mubarak's sons. All of this was great but as I was reading it, TV and radio news and all of the web-based news services were telling today's news, about counter-protests in Tahrir Square and violent clashes between pro and anti-Mubarak demonstrators. I found none of this in The Daily nor did I see any reports about Egypt turning the internet back on, a subject that I and multiple other online journalists had already covered.

Rob Pegoraro, writes in the Washington Post:

Reading the Daily can involve a certain amount of sluggishness. The "carousel" interface that greets you when you launch it lags behind your gestures, and some turns of an onscreen page also leave you waiting for a moment. I also noticed one outright bug: With the Daily open, an iPad would not shut off its screen automatically, quickly draining its battery.

There's no reason to think that the Daily or its business model represents the last, best hope for journalism. But there are many reasons to think we'll see more attempts such as this.

Jeremy W Peters and Brian Stelter, for the New York Times, write:

As groundbreaking as The Daily is, it is also freighted with risks. Whether consumers will regularly pay for news content on their tablets is far from certain. Sales of iPad applications for magazines have been uneven, and many newspapers give their applications away free.
And as with many first-generation innovations – the Newton tablet from Apple, the internet service Prodigy and the EV1 electric car from General Motors – there is always the risk that The Daily is ahead of its time.

Joel Mathis, writing for the website Macworld:

As a piece of technology, then, The Daily is promising. As a journalistic endeavour, though, it's confusing. Who is the intended audience? News junkies? Unlikely. New Yorkers? There's a Big Apple feel to the content, but the coverage is everywhere and nowhere all at once. Commuters? Why would they shell out a dollar a week for this when they can pick up a similar product, for free, off the rack in a subway kiosk?

Daniel Lyons, author of Options: the Secret Life of Steve Jobs, in Newsweek:

In both the Murdoch and Denton approaches [CEO of Gawker Nick Denton is planning to launch a new advertising business concept], the vital thing is the content itself. Their strategies will work only if their sites deliver compelling, unique material, stuff you can't find anywhere else. That too is a bold idea, as up to now the goal has been to get content as cheaply as possible, either by persuading people to write articles for little or no pay or by aggregating stuff that's been published elsewhere. As a result, the news business has been engaged in a race to the bottom, churning out more and more garbage and then wondering why our industry is collapsing.

Ryan Tate, at Gawker.com:

Being walled off will hurt not only The Daily but its readers, too, who expect, as Rosenberg puts it, "news that you can respond to, link to, share with friends." As web inventor Tim Berners Lee recently wrote, "Walled gardens, no matter how pleasing, can never compete in diversity, richness and innovation with the mad, throbbing web market outside their gates."

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We're racing towards another private debt crisis - so why did no one see it coming?

The Office for Budget Responsibility failed to foresee the rise in household debt. 

This is a call for a public inquiry on the current situation regarding private debt.

For almost a decade now, since 2007, we have been living a lie. And that lie is preparing to wreak havoc on our economy. If we do not create some kind of impartial forum to discuss what is actually happening, the results might well prove disastrous. 

The lie I am referring to is the idea that the financial crisis of 2008, and subsequent “Great Recession,” were caused by profligate government spending and subsequent public debt. The exact opposite is in fact the case. The crash happened because of dangerously high levels of private debt (a mortgage crisis specifically). And - this is the part we are not supposed to talk about—there is an inverse relation between public and private debt levels.

If the public sector reduces its debt, overall private sector debt goes up. That's what happened in the years leading up to 2008. Now austerity is making it happening again. And if we don't do something about it, the results will, inevitably, be another catastrophe.

The winners and losers of debt

These graphs show the relationship between public and private debt. They are both forecasts from the Office for Budget Responsibility, produced in 2015 and 2017. 

This is what the OBR was projecting what would happen around now back in 2015:

This year the OBR completely changed its forecast. This is how it now projects things are likely to turn out:

First, notice how both diagrams are symmetrical. What happens on top (that part of the economy that is in surplus) precisely mirrors what happens in the bottom (that part of the economy that is in deficit). This is called an “accounting identity.”

As in any ledger sheet, credits and debits have to match. The easiest way to understand this is to imagine there are just two actors, government, and the private sector. If the government borrows £100, and spends it, then the government has a debt of £100. But by spending, it has injected £100 more pounds into the private economy. In other words, -£100 for the government, +£100 for everyone else in the diagram. 

Similarly, if the government taxes someone for £100 , then the government is £100 richer but there’s £100 subtracted from the private economy (+£100 for government, -£100 for everybody else on the diagram).

So what implications does this kind of bookkeeping have for the overall economy? It means that if the government goes into surplus, then everyone else has to go into debt.

We tend to think of money as if it is a bunch of poker chips already lying around, but that’s not how it really works. Money has to be created. And money is created when banks make loans. Either the government borrows money and injects it into the economy, or private citizens borrow money from banks. Those banks don’t take the money from people’s savings or anywhere else, they just make it up. Anyone can write an IOU. But only banks are allowed to issue IOUs that the government will accept in payment for taxes. (In other words, there actually is a magic money tree. But only banks are allowed to use it.)

There are other factors. The UK has a huge trade deficit (blue), and that means the government (yellow) also has to run a deficit (print money, or more accurately, get banks to do it) to inject into the economy to pay for all those Chinese trainers, American iPads, and German cars. The total amount of money can also fluctuate. But the real point here is, the less the government is in debt, the more everyone else must be. Austerity measures will necessarily lead to rising levels of private debt. And this is exactly what has happened.

Now, if this seems to have very little to do with the way politicians talk about such matters, there's a simple reason: most politicians don’t actually know any of this. A recent survey showed 90 per cent of MPs don't even understand where money comes from (they think it's issued by the Royal Mint). In reality, debt is money. If no one owed anyone anything at all there would be no money and the economy would grind to a halt.

But of course debt has to be owed to someone. These charts show who owes what to whom.

The crisis in private debt

Bearing all this in mind, let's look at those diagrams again - keeping our eye particularly on the dark blue that represents household debt. In the first, 2015 version, the OBR duly noted that there was a substantial build-up of household debt in the years leading up to the crash of 2008. This is significant because it was the first time in British history that total household debts were higher than total household savings, and therefore the household sector itself was in deficit territory. (Corporations, at the same time, were raking in enormous profits.) But it also predicted this wouldn't happen again.

True, the OBR observed, austerity and the reduction of government deficits meant private debt levels would have to go up. However, the OBR economists insisted this wouldn't be a problem because the burden would fall not on households but on corporations. Business-friendly Tory policies would, they insisted, inspire a boom in corporate expansion, which would mean frenzied corporate borrowing (that huge red bulge below the line in the first diagram, which was supposed to eventually replace government deficits entirely). Ordinary households would have little or nothing to worry about.

This was total fantasy. No such frenzied boom took place.

In the second diagram, two years later, the OBR is forced to acknowledge this. Corporations are just raking in the profits and sitting on them. The household sector, on the other hand, is a rolling catastrophe. Austerity has meant falling wages, less government spending on social services (or anything else), and higher de facto taxes. This puts the squeeze on household budgets and people are forced to borrow. As a result, not only are households in overall deficit for the second time in British history, the situation is actually worse than it was in the years leading up to 2008.

And remember: it was a mortgage crisis that set off the 2008 crash, which almost destroyed the world economy and plunged millions into penury. Not a crisis in public debt. A crisis in private debt.

An inquiry

In 2015, around the time the original OBR predictions came out, I wrote an essay in the Guardian predicting that austerity and budget-balancing would create a disastrous crisis in private debt. Now it's so clearly, unmistakably, happening that even the OBR cannot deny it.

I believe the time has come for there be a public investigation - a formal public inquiry, in fact - into how this could be allowed to happen. After the 2008 crash, at least the economists in Treasury and the Bank of England could plausibly claim they hadn't completely understood the relation between private debt and financial instability. Now they simply have no excuse.

What on earth is an institution called the “Office for Budget Responsibility” credulously imagining corporate borrowing binges in order to suggest the government will balance the budget to no ill effects? How responsible is that? Even the second chart is extremely odd. Up to 2017, the top and bottom of the diagram are exact mirrors of one another, as they ought to be. However, in the projected future after 2017, the section below the line is much smaller than the section above, apparently seriously understating the amount both of future government, and future private, debt. In other words, the numbers don't add up.

The OBR told the New Statesman ​that it was not aware of any errors in its 2015 forecast for corporate sector net lending, and that the forecast was based on the available data. It said the forecast for business investment has been revised down because of the uncertainty created by Brexit. 

Still, if the “Office of Budget Responsibility” was true to its name, it should be sounding off the alarm bells right about now. So far all we've got is one mention of private debt and a mild warning about the rise of personal debt from the Bank of England, which did not however connect the problem to austerity, and one fairly strong statement from a maverick columnist in the Daily Mail. Otherwise, silence. 

The only plausible explanation is that institutions like the Treasury, OBR, and to a degree as well the Bank of England can't, by definition, warn against the dangers of austerity, however alarming the situation, because they have been set up the way they have in order to justify austerity. It's important to emphasise that most professional economists have never supported Conservative policies in this regard. The policy was adopted because it was convenient to politicians; institutions were set up in order to support it; economists were hired in order to come up with arguments for austerity, rather than to judge whether it would be a good idea. At present, this situation has led us to the brink of disaster.

The last time there was a financial crash, the Queen famously asked: why was no one able to foresee this? We now have the tools. Perhaps the most important task for a public inquiry will be to finally ask: what is the real purpose of the institutions that are supposed to foresee such matters, to what degree have they been politicised, and what would it take to turn them back into institutions that can at least inform us if we're staring into the lights of an oncoming train?