Here's another one for Labour apologists to explain. If our economy is so strong, why is it that our economy is the only one of the G7 economies likely to meet the technical definition of going into recession, according to the OECD today? Just asking...
32 comments:
As the son of a mere peasant farmer you would not be expected to understand the explanation even if I could give you one... an explanation, that is! I don't want to give you one, you understand? It's jus a figure of speech.
Oh, bugger! No.....!
Can't be true! That intellectual heavyweight & fiscal genius, Prudence, has been in charge of our money for the past 11 years, just getting on with the job. Must be a horrible mistake! Who to blame?
Its perfectly simple.
Labour has tackled the "root cause" of Britain's economic problems.
That is our manufacturing costs were too high too allow us to compete with third World countries.
Therefore the decision was taken to make Britain a third world country, with third world debts and third world services. Thats why we sold all the gold. We don't need it anymore.
Of course we still retain first world tax levels.
So all that's left is to complete the total devaluation of the pound and we are back to being a first rate, third world manufacturing country again, full of happy Labour supporters.
Why we even managed to keep taxing fuel, even at record crude prices, at the highest rate in Europe, just to give the new Coal powered car a fighting chance. The miners are terribly pleased that so many pits look like reopening.
Gordon is very happy. Its just like old times.
Why, here's a direct quote from Harold Wilson, the previous Labour visionary, that really shows how far we have come in the 21st century.
"In a radio and television broadcast this evening, the Prime Minister said devaluation would enable Britain to " break out from the straitjacket" of boom and bust economics.
It does not mean that the pound here in Britain, in your pocket or purse or in your bank, has been devalued...
Where is Chris Paul when you need him?
'apologists' Iain?
Surely you've not sunk to the depths of some of your commentators with their zaNU Labour EUSSR speak. You may not like the government, but it is offensive to label those who support the government in the same vein as someone who would support some sort of regime.
Let's flip that little confection around: if at least one other G7 economy moves into recession in the next 18 months will you Tory apologists accept that there are global factors at work here?
Just asking.
Anyone with the slightest understanding of economics will realise that different countries will enter downturns at different times. Our economy is particularly exposed to global conditions and therefore will enter recession sooner, but come out of it stronger than other EU countries. Back to school, Dale.
"only one of the G7 economies likely to meet the technical definition of going into recession"
I'm no way Labour but I find it hard to believe the above statement when the financial experts I've seen seem over the last couple of weeks seem to think the world is slipping into recession.
Oh well, what do I know?
Yes, put's paid to the nonsense trotted out every day that, because of the Great One Brown, supposedly the best Chancellor ever, the British economy is the 'best placed' to withstand these global events.
Suspect they'll have to rethink that line, though it should be quoted at them day and daily to expose NuLab for what they really are.
The OECD report is suggesting that the reason why the UK economy could be worse is that we are dependent on the Housing and construction Market to a larger extent than many of our competitors. As you know there is a lack of liquidity in the financial markets, as a result of the credity crunch (started in the US) - it is affecting all Western economies but ours more so because of the importance of the housing market to the UK.
This is further exacerbated by the very high LIBOR rate that the banks are charging each other (each Bank thinks that the other banks are lying about their finances and will have to write down further losses and each bank is desperate not to loan out too much in case of further defaults from customers). and that is putting additional strains on liquidity.
One could argue that the reason for this is all down to Gordon Brown and his lax regulatory regime - but the Conservatives have not (fundamentally or at all) argued against that regime.
You could argue that the demise of our traditional enginneering industries - started in the 80's by Mrs T - has meant our economy is insufficiently diverse and overly dependent on the housing sector - but few complained when their house increased in value year on year over the last 10 years and this Government has done insufficient to correct that.
An interesting aside - is that Spain's GDP is more dependent on the Housing and construction industries than our own - and based on the OECD analysis it should enter into recession(its GDP growth is below minus 0.2%). But the report does not suggest that. As such it may be that the collective strength of the Eurozone nations economies is keeping each failing individual national economy above recessionary water?
The OECD report also notes that the UK economy will see a bigger reduction in inflation than our competitors - and the further fall in the price of oil - to 109 USD last night will hasten that.
The inflationary evidence suggest that our UK interest rates wil start to come down soon - perhaps as early as October - and will continue to fall, so interest rates will be at or below 4.75% by early next year. This will see further modest falls in the value of the pound - which our exporters will continue to cheer.
On the glomy side Unemployment will start to increase from December onwards (assuming the usual lag of 9 months between GDP quarter growth and employment figures). Discussing with economists yesterday, we agreed that the unemployment numbers will probably peak around summer 2010.
In answer to your question Iain - it is useful to have a more thorough analysis than your quick blog entries allow for - whilst i appreciate yours is a partisan perspective - you do need to understand the complexity of markets and its relation to wider macro economic policies and intenational influences. At the moment your economic blog entries are worthy of some drunk old buffer sat in the corner of the Conservatiove club chunterrring to himself about the goold old days
No comment from the ever hilarious Ms Chris Paul! I wonder why....
simon said
So Chris Paul is a woman. I didn't know that when I asked him/her on another of Iain's blogs why the people of Glenrothes were being denied the services of an MP, in comparison with the unseemly haste with which Labour called by-elections for Glasgow East and Crewe and Nantwich.
Still waiting for your answer Ms. Paul.
Ermm... Ahh.. Ermm, well, you see, erm..Its because of the..erm..
Look let's face it.
Its Thatcher's fault!
Because other countries have already gone into a recession.
Simply not true.
So what were German, French and Japanese growth figures for q2 2008 and what are the range of likely outcomes for q3 and q4 2008. Can I suggest you read the report before making such blanket statements - economics is not a precise science and economists are not prone to the same broad brush statements as employed by politicians.
Daniel
What's it like working at Labour HQ right now? Can't be very uplifting.
Did you get that out of the manual or did you make it up yourself? Looks very good, to tell the truth, but, really, do you believe it?
US AND UK banks are bust, insolvent, going to the wall (without massive taxpayer help). That's why LIBOR is so far above BoE base.
It's why mortgage rates in the US have increased whilst the Fed rate has fallen from 5.25% to 2%. The Central Banks are now pushing on a string - it makes no difference what their bank rates are.
Any bailout has absolutely nothing to do with saving Average Joe either here or in the US - it's all to do with saving the banking system from complete implosion. And the latest taxpayer funded scheme to get Gordon off the hook also brings the building companies into the equation. They too need saving from bankruptcy.
Gordon has been so proud as he stood there on Budget Day, reeling off figures at a rate of an Uzi submachine gun. And how the UK has had the longest growth period since 1,600BC. But it was flawed, very flawed.
It has been built on a near 300% increase in personal borrowings in 11 years - just under £500bn, now nearly £1.5tn. It's been built on Enron-style accounting of Govenrment finances - PFI, guarantees of Network Rail debts, unfunded pension liabilites and the latest, Northern Rock debt.
The credit bubble has exploded and with it the myth of Gordon's pre-eminence as a Chancellor. The truth will out - and it's here!
Daniel "You could argue that the demise of our traditional enginneering industries - started in the 80's by Mrs T"
Utter nonsense. Yet another walk around the block for the canard. Mrs T did not go around shutting companies, but companies burdened by union dead weight, inefficient practices and, specifically, high cost of labour could not compete internationally.
Gordon did not take to prudence, but, rather, prune juice. His financial incontinence is now plain for us all to see, yet it is us that gets shat upon and have to clear up the mess.
I bet Gordon will soon suggest joining the Euro as "the answer", the treasonous scumbag, just at the point when we will get the rawest deal ever. Gordon's reward? A cosy desk at the ECB.
@Daniel
Erm, the report doesnt mention Spain because it isnt a member of the G7, but it probably will fall into recession - Italy is clearly in a major economic slowdown.
I didnt see where the OECD interim report mentioned UK inflation. The fall in Sterling will of course raise imported inflation. In sterling terms oil is proably around where it was when the price was US$130 or so a barrel.
@Iain
Part of the deal is down to the OECD's quarterly projection (forecasting at the quarterly level is going to be iffy at best), beause of the use of two consecutive negative quarters of GDP growth as a definition of recession. Italy (a member of the G7) is on a much lower growth rate for the year 0.1% for 2008 than the UK, 1.2% in 2008. But Italy had negative growth in 2007Q4 and 2008Q2, the quarterly prjoections for Q3 and Q4 are low, but not negative so there are not two consecutive quarters of negative growth.
On a yearly basis for 2008, Canada (0.8%), France (1.0%) and Italy (0.1%) are doing worse than the UK.
On the main question: Is Britain better placed to weather the storm?
The answer is "No". Britain has a much higher dependency on finance and housing - both areas where there will be a downturn. Consumption is likely to be hit by the fall in aggregate wealth especially housing. The housing boom over the past decade helped a great deal in the last downturn.
Unemployment (and youth unemployment) are now in line with the wider OECD averages, suggesting that structural side of the economy is no longer in a better state than elsewhere. Something that was true when going into the last downturn. 10 years of Labour meddling in labour markets has had a slight negative impact.
The UK is running a large government deficit, but overall debt is not bad relative to the OECD average. Some room for manouevre there. Again, the UK was in better shape going into the last downturn than this one. Government spending and job creation in the last downturn helped to ameliorate the downturn, but didnt help productivity. Now the government are squeezing real public sector wages by about 2-3% p.a., helping to control costs, but not exactly helpful for economic growth.
Actually I did submit a comment on this story from Iain almost as soon as the post went up. Perhaps I didn't get through the process correctly? I'm new to this new fangled interweb after all. Or perhaps it was lost some other way, providing a lovely hook for a running gag.
What I said was that in Q2 where the UK is flat there are Germany, France, Italy and Japan in negative growth. They are expected to go flat in Q3 or into micro growth.
There are a cluster of at least five economies in much the same position as the UK.
The spokesman from the OECD was extremely upbeat about this suggesting that the smidges either side of the gain line were pretty much unnoticeable. And he also admitted that the instruments i.e. sums they use to make these forecasts are simply not good enough to b relied on.
The difference suggested by the OECD man for why the UK economy might be mildly out of step was the housing market. Here based largely on mortgage financed equity. In some other G7s based more on renting. So it's the over-cooked property market in his view that may be causing UK plc just a little more pain.
Perhaps Iain would like to link to a video or tape of this independent expert explaining that things ain't that bad? Perhaps Iain would like to let on at least that 4 of these economies are negative ahead of us? Perhaps Iain would like to explain why the MSM are ignoring the man who leads on the report and spreading doom and gloom?
Perhaps it is the uber narrative that Da Fink referred to on Newsnight on Monday night. There is a miserable sentiment in the air.
I took this to mean that in this regular presentation pundits summit Da Fink thought the coverage of everything was overly miserable at the moment.
There you are. Sorry to have let you all down yesterday. I did think I had already posted some hilarious comedy tank production fodder for you all to sink your teeth into.
Perhaps Iain can confirm whether something did get through that was unsuitable in some way?
(Copies this before pressing post)
PS I also commented quickly on the Glenrothes matter. Have I been banned Iain?
Until two days ago I hadn't had comment moderation on for three weeks. Thanks to Mr Ireland it has been reinstated.
Every comment you have submitted, Chris, has gone through.
The only comments not allowed through over the last two days have been from Ireland and one or two anonymous cronies of his.
Thanks Iain, Every now and then the word verification changes, t'internet drops, or I make some other mistake. Guido's is worse because of the layout it's harder to spot errors. And of course he *does* delete on sight.
PS The Glenrothes comment got through. I've added another - bigger one - as anon 9:03 obviously couldn't find it.
@Chris Paul
Actually, Italy is in trouble, Germany is looking OK, France somewhere in between. The use of QoQ numbers causes problems because Q1 in Germany was so strong, that Q2 ended up negative. Yet whole year numbers show Germany in a better position than the UK.
2009 will probably show the UK in a worse position still, with Italy and France also bad. I dont exactly go with the mass media hysteria - this whole technical recession thing being a case in point - but I also think that Gordon is talking crap when he claims that the UK is in a better position than other major economies, I'd say it is marginally worse than the average, but better off than places like Italy. I also dislike the claims made by the likes of Jack Straw claiming Gordon knows what he is doing, on the back of 97-05 economic performance. This was almost wholly on the back of a Goldilocks global economy, with inflation tamed by Chinese imports, commodity prices low, a UK economy that didnt directly compete with cheap manufacturers offshore, a great time for capital (and thus for the financial sector). Gordon spent money like crazy during the last downturn and didnt bring spending back under control.
Gordon can be blamed for the tripartite regulation system, a lack of improvement in productivity and a lot of irresponsible spending on the public sector. I dont hold him to be responsible for the housing bubble, except to the extent that one can blame him for not including asset prices in the inflation target for the Bank of England (and the academic debate on this shows that one really cant set asset price inflation into inflation targets easily.) I generally am in favour of BoE independence, but it is clear that central bank independence is not a cureall.
The laughable attempts to blame the global economy, while claiming Gordon knows what he is doing, are silly. Gordon benefitted from the benign global economy and now he is being hit by the aftermath.
What he (and the labour government over the past decade) can be blamed for are 1) Poor quality improvements in public services, especially education - I acknowledge some improvement, but relative to the money thrown at it, the improvement appears marginal. Thanks to ever more grade inflation, we cant be certain how large the improvement is - something that I also blame the government for. 2) Poor fiscal management post 2003 recovery. 3) An overreliance on IT systems to deliver productivity gains, and poor management of these. 4) An increase in centralisation and the rise of a "targets" culture.
Some of these criticisms could be made of John Major (who really was a crap PM contrary to the desperate attempts to rehabilitate him recently) - grade inflation accelerated under Major, as did centralisation and the poor management of projects - remember the Dome started under the Tories. They cannot be made of Mrs T, because she was dealing with a wholly different ball game.
Gordon is getting the blame now just as he got the credit for things outside his control. The government didnt spend money wisely or well and now they are in trouble. They clearly have no ideas (mainly because in a downturn the government always has so little leverage - something discovered by each government going into a serious downturn) and not much money.
the current private eye has a cartoon showing an economist with the caption' i also read palms'
we could of course consider reintroducing killing an animal to read the entrails. the results were as likely to be accurate as any other method and the carcase formed the basis of a meal.
is the answer 'what i say three times is true' or is that reserved for the jesuits?
Chris Paul: I did think I had already posted some hilarious comedy tank production fodder for you all to sink your teeth into. LOL! Things getting under your skin?
In the spirit of irony on irony, allow me to have a go.
Gordon Brown being in company with the crazed loonies running the semi-permanent basket cases of Italy and Spain is hardly a reassurung argument for what good a job he has done!
Italy is in demographic collapse (the child to woman ratio is below what demographers call 'lowest low', the point from which no human society has ever recovered) and its battles with gypsies are just a foretast of what is to come (probably a Kosovo on a much larger scale). Spain has the mother of all property bubbles and its banks are all on life support from Europe via the special liquidity scheme, a situtation which cannot go on much longer and unless the boom restarts will result in the mother of all crashes.
Compared with these countries, with the liklihood of civil war just round the corner, I am glad I live in England. None of England's advantages, however, are anything to do with Mr Gordon Brown, alas. Sooner or later there was bound to be a recession; there always is. It's just that by believing his own bulshit about abolishing boom and bust, he's ensured that this will probably be the worst recession for 'more than sixty years' (c) Alastair Darling.
@Daniel
The idea that the UK's economy is dependent on housing is absurd.
Looking from the outside, you would never state that a country had great prospects because it had a great housing sector, would you? Housing, like sewage, is a completely internal matter for a country, and has no bearing on its long term prospects in the world economy.
If we have begun to believe that we can all become rich by wheeling and dealing in property rather than doing something useful, that might explain the mess we're in!
Finally caught up with your reply, but it wasn't worth the bother.
Summary-"we can delay it so we're going to delay it".
The "David Cairns MP flannel" is what he said on BBC Radio Scotland about the poor people of Glenrothes having to get used to the death of their MP.
Are the people in Glenrothes more sensitive than the people in Nantwich and Crewe?
Is it possible for a person to be manufactured as a charismatic leader during their childhood years?
Please someone assist me on this. Is it possible for a person to be manufactured as a charismatic leader in their childhood years, instead of through the media?
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