Do we really need growth?
26 Jan 2010 [0 Comments | 403 views]
The UK left recession in the final quarter of last year. Should we all go out and celebrate? Of course, some economists argue that it will be a hard climb back, and it will be years before the economy is back to where it was. Others say that in order for the UK to repay [...]
Is the UK bust?
7 Dec 2009 [1 Comment | 861 views]
It’s the eve of the Pre-Budget Report. Last winter, Alistair Darling delivered his shocker. Just a few months earlier he had been clinging to Gordon Brown’s beloved golden rule, the one which was supposed to limit government borrowing over the course of an economic cycle to fund spending on capital items only; and the sustainable [...]
Beneath the surface, the runes provide reason to be cautious
12 May 2009 [0 Comments | 63 views]
The snag is, when you scratch beneath the surface, things look different.
So last night and this morning we have seen a raft of reasons for cheer. From a buoyant High Street, to news that more regions saw rises in house prices in April than in any other month since the beginning of last year, while even the OECD sounded optimistic.
It is just that there is another side to it.
IMF puts boot into hope, and Chinese trade crashes
11 Mar 2009 [0 Comments | 68 views]
But while US banks gave us a sliver of hope, the news on the economic front was pretty awful.
This time it was the latest comments from the IMF's big cheese, Dominique Strauss-Kahn, who has become even more bearish, and has now coined the phrase "Great Recession" to describe the current conditions.
Meanwhile, the National Institute of Economic and Social Research released its latest set of economic estimates for growth in the last quarter up to February, while the latest trade figures from China made last month's figures, which at the time seemed awful, look rather good.
But cheer up, it’s Wednesday already, and besides, you can make a positive twist on all this.
It’s the recession, stupid
23 Jan 2009 [0 Comments | 80 views]
Every now and again, one of those days comes along when so much occurs that is truly of quite profound interest, that it is a real challenge to squeeze it all into your daily digest of business news.
So, never shy of course of meeting a challenge, today we are supplying you with a whistle-stop tour of these fascinating developments.
Before we get into some of the profound stuff that has been uttered and occurred, and which we will be coming to in the articles below, here is a quick run down of the major developments seen over the last 24 hours.
Strap yourself in. There is enough news and analysis packed into today’s relatively short articles, to keep your mind working for days after you have finished reading.
The headline of the day, of course
Why economists have got it wrong: we need more investment, not spending
12 Jan 2009 [4 Comments | 83 views]
We used to believe you can spend your way out of recession,” said James Callaghan in 1976. “I tell you in all candour that this option no longer exists,” he famously concluded. Come the early 1980s, when recession was biting, then-chancellor Geoffrey Howe increased the rate of interest. Yes, he did the unthinkable; he upped rates in a recession. Come the early 1990s it was different. The recovery then was kick started by the ejection of sterling from the ERM, and the cheaper pound enabled us to export our way out of trouble.
Those three famous moments were characterized by one implicit belief. It wasn’t down to consumers to get us out of recession, it was down to business. The onus was on supply side.
Now, however, all the talk is on consumption. In this morning’s Telegraph, Roger Bootle made a persuasive argument against saving, saying: “In the current environment, trying to boost saving is the economics of the madhouse.”
So that’s a bit of kick in David Cameron’s teeth. He wants to encourage saving by removing tax on interest payments.
The likes of Mr Bootle are effectively saying Keynes would be turning in his grave. Keynes' big discovery was to realize that what makes sense for individuals does not make sense for the economy as a whole. He called it the paradox of thrift. It may seem sensible for an individual worried about job security to save more. But when everyone does this, aggregate demand falls, and job losses mount. Fears about job security become a self-fulfilling prophecy.
Mr Cameron’s other big idea got something of a slamming in The Sunday Times. The newspaper's economics correspondent, David Smith said: “The Tories have proposed a £50bn loan guarantee scheme for small firms, which Cameron wants to ‘shake the Prime Minister’ to introduce. But Treasury officials fear that losses under a scheme could amount to £12bn, making guarantee costs prohibitive.”
Mr Smith, by contrast, is a fan of the chancellor's move to cut VAT. Many
Worst GDP and manufacturing results in 20 years, and counting
12 Jan 2009 [0 Comments | 66 views]
Take another deep breath; it is time for some more rotten economic stats.
This time, it's the Office for National Statistics with news on manufacturing, and the National Institute of Economic and Social Research with woeful data on economic growth.
The IMF puts the boot in
7 Nov 2008 [0 Comments | 76 views]
The IMF really put the boot in yesterday. It predicted the UK economy will contract by 1.3 per cent next year.
How bad is that? Well, let’s put it this way, in its main chart projecting growth, the IMF showed 24 economies/economic areas. The UK came bottom.
The second-worst performers on the IMF list were Spain and the US, in joint second place, with their economies expected to contract by 0.7 per cent each.
The IMF expects
Consumers are in denial
21 Jul 2008 [0 Comments | 78 views]
Of the various bodies out there who make economic forecasts, the ITEM Club from Ernst and Young is one of the best. Its proud boast is that it is the only independent consultancy which uses the same forecasting model as HM Treasury, so its quarterly reports deserve to be taken seriously. This morning its latest report was published.
“The UK economy is in danger of being crushed between the jaws of world credit and commodity markets, with little prospect of early relief†began the report. It went on to talk about the flirting with recession. Actually, though a mere flirtation will be real achievement seen in the context of what is going on.
The ITEM club predicts growth of 1.5 per cent this year, followed by 1 per cent next. If its is right, and frankly the ITEM club has good track record and it may well be right, then actually the UK will have done extraordinarily well.
The tough one, though, is this:
The ITEM Club says consumers are in denial.
IMF: Global economy “better-than-expected”
18 Jul 2008 [0 Comments | 59 views]
It’s a bit like one of those cakes a child may make in your kitchen. It looks awful, crumbing in the middle, mess everywhere. But when you actually take a bite, well, it tastes pretty good.
Yesterday, the IMF talked the talk of gloom. But when you drill down into the report, well, it really was good news, at least good news by the standards of 2008.
"The IMF expects global growth to slow significantly in the second half of the year, before recovering gradually in 2009," begins their latest report. We all know the developed world is under the cosh. But then the IMF added: “Expansions in emerging and developing economies are also expected to lose further steam.â€
But the real gloom was on the twin perils of inflation and deflation. "The global economy is in a tough spot, caught between sharply slowing demand in many advanced economies and rising inflation everywhere, notably in emerging and developing economies."
The IMF went on to predict growth slowing to virtually standstill in the US by the final quarter of this year.
So, why was the report good? Well, first of all, actually, all those comments made above are not new. But what is new is altogether more promising.
