The three most important things you missed in the Apple keynote

The signals sent below the watermark.

Apple's press conference on Monday evening was always going to be about one thing and one thing only: the new Jony Ive-led interface for iOS 7. It's a bold departure for the company, the first major visual change to the entire operating system since it was debuted in 2007, and it's garnered mixed reactions.

On the one hand, it's been praised for inserting sense of physicality back into the design. As John Gruber writes:

In iOS 6, you open a folder on the home screen, and linen is something you see underneath. You pull down Notification Center, and linen is something see over. It’s both over and under…

The design of iOS 7 is based on rules… It is three dimensional not just visually but logically. It uses translucency not to show off, but to provide you with a sense of place. When you pull the new Control Center panel up from the bottom of the screen, its translucency lets you know that you haven’t gone somewhere new, you’re just looking at something over where you were.

On the other, some of the more concrete design decisions aren't quite so strong. The new home screen icons, for instance are… an acquired taste, hopefully. Particular criticism has been offered for the Newsstand, Safari and Game Center ones, which seem to illustrate little design philosophy beyond "lots of bright colours":

 

But while the visual redesign might be the most exciting thing revealed in the keynote speech, it isn't the most illuminating. We knew it was coming, and it's neither good nor bad enough to have a long-term effect on the company. So what things ought we pay attention to instead?

Bing

Apple's pushing out a major update to Siri, its voice-automation system, which lets you do "eyes free" control – perfect for in-car use. But while Siri is powerful once you know its limits, asking it a question its not prepared for pushes you back to a basic Google search. So "set my alarm for 8:00am" works fine, but "what is the tastiest brand of mayonnaise" just opens up Safari.

In iOS 7, your mayonnaise questions will continue to be answered with a web search – but now, they'll still be answered inline. And that's happening thanks to a partnership with Bing, Microsoft's search engine.

The Apple-Google relationship has been cooling rapidly for years, and even though the iOS 6 update was overshadowed by the misstep of switching the built in Maps app away from Google's data to Apple's proprietary information, the strings are still being cut. The last major link to sever is in Safari itself, where a Google search remains the default on all new iPhones (although you can choose to use Bing or Yahoo! instead). Once that changes – and you can bet it will at some point – the open warfare can begin.

Mac Pro

It may be hard to remember, given its reinvention as a consumer electronics company, but Apple used to only make PCs. I know, right? But still, the company's got a die-hard core of users who do serious work on the machines, and have done for over 20 years. And serious work requires a serious machine – which is why it's problematic that the company hasn't updated its most serious one for two years.

The Mac Pro is the powerhouse of Apple's computer lineup, a massive box which sits under the desk and is plugged into an external keyboard, monitor and mouse. Aimed at users who need more than an iMac can provide, it needs to be on the bleeding edge of technology. But after a speed boost in 2011, there's been radio silence from the company. That's not only concerning for the developers, visual artists, and so on, forced to contemplate trying to cram their needs in an iMac or MacBook Pro; it also hinted at a company unsure as to whether its future lay in computing at all.

So the announcement of a new Mac Pro will be relieving to the users who have been holding out for one for years. But it also says where Apple sees the future of computing when it comes to the power user. The new Mac Pro is tiny, just one eighth of the size of the old, and has no internal disk drives and no internal expansion slots. Instead, it has a heck of a lot of ports on the back. The plan is clear: everything you need beyond the stock configuration will be plugged in and sitting next to the Mac Pro itself, whether that's a Blu-Ray drive, an HDD, or even an external processor (of the sort used to boost intensive rendering).

That might not be a future which pros are comfortable with, but it's the one Apple wants – and they've never been afraid of being the first to abandon the old.

There's a second nugget hidden in the Mac Pro's launch, though: it's to be built in the US. That fulfils a number of goals for the company, from a handy PR boost (much needed as the company is accused of un-American tax-dodging) to instilling a sense of prestige on the product itself (whether it's true or not, "made in the USA" tends to be synonymous with high-quality).

Maps on Mavericks

The B-movie of the night was the reveal of the next version of Apple's computer operating system, OS X. Having all but run out of big cats for the codenames (although Serval never got its chance to shine), they've gone for a California theme, naming it "Mavericks" after the NoCal surf spot.

For users, the most interesting stuff comes in the form of a new version of Finder, a notification centre which works, better support for multiple displays, and a brand new syncing keychain. They all look like they will make life easier, but are evolutionary changes.

Instead, the important feature is the Maps app. The company has built a new front-end to its own mapping data – the same data which got it into so much trouble last year, but now much-improved – and is shipping it as a built-in app for the desktop.

While the rest of the world moves towards web-apps, Apple is moving in the opposite direction, taking functions which nearly everyone thinks of as web-only and squeezing them into apps. That's how it's worked on iOS, and now it's taking that attitude back to the Mac. For a company which is so notoriously awful at web services, it isn't a bad move – but it is still going decidedly against the grain. If the Maps app is good enough to make up for the change, then they might get lucky; if not, expect it to languish in applications folders for years.

Photograph: Apple

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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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?