If you subscribe to conventional interpretations of economics, and if, also, you are inclined to take official assurances at face value, then you might believe that normality has been restored after the near-disaster of 2008. On the other hand, if you share our view that a distinction must be drawn between the ‘real’ economy and its monetary counterpart, you will not be surprised at the view, set out in a new report, that major value-destruction remains inevitable. Read more
Today’s publication of the preliminary estimate of first-quarter economic output was never going to be particularly exciting. Analysts should focus instead on the underlying picture, which remains a disturbing one. The economy is flat-lining, the living standards of the majority are continuing to deteriorate, neither the country nor the government is remotely capable of living within its means, and no-one in a position of authority really has much of a clue about how to put things right. Read more
The traditional shoe-making industry deserves to be remembered for its multiplicity of esoteric trades and titles. Whilst the shoe-maker himself might be known as a “cobbler”, a “cordwainer” or a “snob”, his employees ran the gamut from “last-maker”, “drum-man”, “finisher” and “knot-tier” to “press-man”, “skiver”, “sorter”, “tabler” and “toggler”. The most intriguing job title of the lot, though, surely has to be “bottom-scourer”. Though long obsolete in the shoe trade, perhaps the term could be resurrected to describe the citizens of a flat-lining economy? If so, we’re all bottom-scourers now. Read more
On 31st March 1982 – wearing working rig, not the full-dress uniform of subsequent myth – the First Sea Lord, Admiral Sir Henry Leach, hastened to the House of Commons to assure Margaret Thatcher that Britain’s armed forces could indeed, if so ordered, re-take the Falkland Islands. Sir Henry did not receive a warm welcome from the majority of those present, and the Prime Minister seems to have been beleaguered by ministers and officials anxious to persuade her not to launch what was to become Operation Corporate. Read more
If you’re familiar with the thesis set out in Perfect Storm, you’ll appreciate two things about our approach to economics. First, there has been an ever-widening divergence between the “real” (energy-based) economy and the “financial” economy of money and debt. Second, the unavoidable reconciliation of the real and the financial economies must involve the degradation of the value of money as an energy claim (and of debt as a future energy claim). Seen through this analytical prism – which must lead us to expect both money-printing and the deliberate stoking-up of inflation – Japan’s new economic strategy looks ultra high-risk (well, that’s a polite way of putting it). Read more
Though largely ignored by the media, the latest full-year current account data reveals some very disturbing trends in Britain’s financial relationship with the rest of the world. The cost of essential imports (such as energy and food) is rising inexorably and, together with interest on government debt, cost about £57bn last year. Against this, earnings from financial services have declined, and net investment income has crashed, reducing inflows from these sources to £46bn in 2012 from £73bn in 2011. These patterns – which contributed to an alarming current account shortfall of £58bn in 2012 – are already unsustainable, yet seem destined to worsen. Read more
I’ve been pretty critical about the government’s economic policy, but nothing that George Osborne or his colleagues have done can compare for sheer irresponsibility with Labour’s siren calls for even more borrowing. The Keynesian prescription is mistaken (and highly dangerous) for three main reasons, which we can categorise as ‘experience’, ‘logic’ and ‘risk’. Read more
Today’s budget confirms, as I’ve been saying all along, that the British economy is far weaker than most commentators have been prepared to accept. As well as a further sharp downwards revision to growth expectations, debt projections have risen again. This budget surely confirms, were confirmation needed, that spending at (or anywhere near) current levels is simply unaffordable. Read more
The prices of essential purchases were 3.1% higher in February 2013 than they were in February 2012, according to the Tullett Prebon UK Essentials Index. This annual rate of change was little different from the January figure (3.0%). Tobacco, domestic energy and water rates and charges saw the biggest year-on-year increases in February.
The Tullett Prebon UK Essentials Index is designed to track changes in the cost of non-discretionary consumer costs. Overall, these costs increased by 33% between 2007 and 2012, which compares with much smaller increases in official CPI (+17.4%) and RPI (+17.5%) inflation. A detailed description of the index can be found here.
How do you start a budget speech? Well, “stop me if you’ve heard this one before” would be appropriate, because, to quote Yogi Berra, this budget is likely to be a case of “déjà vu all over again”. The economy will, yet again, have confounded the serial optimists at the OBR. The deficit reduction plan will…er, yet again…have gone further adrift of the government’s plan. The debt target will – well, “yet again” – have slipped by another year. Read more