Saturday, November 01, 2008

Bemusing Economic Questions of Our Time: No 94

If the UK economy is best placed to withstand the economic crisis, can anyone explain this table from last week's Der Spiegel?

Global Financial Injection (billion euros)
(Bank guarantees, buying up of bad credit and capital injection)

Great Britain 571
USA 519
Germany 500
Ireland 400
France 360
Holland 220
Russia 139
Austria 100
Spain 100
Switzerland 48
Norway 41
Italy 40
Saudi Arabia 30
Portugal 20

Surely if we were so strong we wouldn't be at the top of this list? Just askin'.


Anonymous said...

It's the fact that we are well placed that allows the UK exchequer to do this.

judith said...

Iain, we are obviously Best because we are First! Top of the List! You get the most points, you are Da Winner!

Best wishes

James G Brown

interested bystander said...

Don't ask me.

Why don't you pop over to Guido's and place your question to Gordon Brown.

I'm quite sure that Gordon will be pleased to inform you that it's all the fault of the Tories.

Word ver: pimpr???

jeremy said...

Obviously UK plc is a top grade investment. This can be seen clearly by the current value of the pound. Investors are so untroubled by our debts they're not even bothering to hold on to our currency.

Come to think of it, isn't the 571 billion total proposed? Has Brown actually got it yet?

Iain Lindley said...

Wonder what would happen if you made those numbers per capita...

kinglear said...

.. and where is Iceland in all this??

Anonymous said...

This is a fair point - or alarmingly it might mean that the call to 'bring out your dead', has yet to be fully complied with in some of the other countries, and there may be yet more 'skeletons in the cupboards'


Alex said...

We are better liars.

If I may plug my own blog:

ruth kelly's plaything said...

Time to join the Party that brought us this international triumph!

Anonymous said...

Borrowing as a percentage of GDP is much lower in Britain, allowing us to do this.

Iain Dale said...

Yeah, and my Mum's going to win Miss World this year.

ONS figures entirely refute what you (and our Prime Minister) keep telling us about the GDP/debt ratio.

King Athelstan said...

We are screwed. Its time to call McBroon on this.

Victor, NW Kent said...

The amount injected by Ireland must be truly terrifying relative to their population but they did start off with the lowest borrowings - by far - of all EU countries.
Ours is truly terrifying when viewed against the backdrop that we manufacture little these days, we have virtually no minerals industry and food production is down 11% under Labour.
The great windfall of oil has been squandered with little to show except a bloated public payroll.

ross said...

With respect Iain, you've already embarrassed yourself by "just askin" your naive questions about the exchange rate and relative value of sterling, so if the intention of such posts is to satisfy a genuine curiosity I suggest you consult someone with a decent grasp of economics - in private.

Iain Dale said...

Ross, with respect, my comments on Sterling were bang on. It's now at its lowest level for six years and about to plummet further. You seem to think that this is a triumph of economic planning. I don't.

Wrinkled Weasel said...

I know nothing and I don't do the economy but only a blind man with a hard wanking habit will have missed that we are paying for this travesty with devaluation of our currency, loss of jobs and homes and, in the end, higher taxes.

And the lies go on.

WV: bralible

Alcuin said...

This week's Straight Talk has Andrew Neil talking to a refreshingly candid and honest David Owen. Owen also rebuts Brown's fatuous assertion.

If I were Cameron, at the next PMQs, I would promise to hang "We are well placed to meet the financial crisis" around his neck as firmly as "an end to boom and bust". We might see Brown a little more chastened when he next feels like uttering platitudes.

Mike Wood said...

Anonymous @6.10pm

Germany, Iceland, Ireland, Netherlands, Norway and Spain were all net lenders / debt repayers last year.

It's precisely because Brown has run up large deficits during the good times, and even Darling's abandoned the pretence of the "Golden Rule", that the UK is in a worse position to withstand the current problems than most other countries and this is reflected in the currency markets.

Anonymous said...

Iain, this guy ross might be a pain in the ass, but you shouldnt ignore the point he is making.

Unlike on most issues, where you have pioneered being a genuine guy not stuck in a one-party mindset, on the economy you are falling for a hard-right partisan interpretation of the facts.

Sterling is simply not going through some sort of crisis - see this excellent article

And by international standards government borrowing remains low in the UK (comsumer borrowing is a different matter though).

These "just askin" posts risk looking like you agree with a highly partisan and somewhat cooky account of our economic position.

Chris Paul said...

Er? Are you sure Iain?? This particular table does not shine any light whatsoever on the question.

Economies with the biggest banking sectors towards the top?

Economies with the most decisive economic policy towards the top?

Economies with the most capacity to respond towards the top?

Economies in best position to respond may be anywhere in this irrelevant ranking.

Chris Paul said...

Read some more of these comments. Iain and some of the rest of you ... shouldn't you please learn some economics before posting on economics again? Just askin'

Iain Dale said...

Sorry but you are barking. A 25% fall in the value of Sterling within 6 months isn't a problem in your view? Governments have fallen for less. No one has yet been able to answer the question as to why our currency has fallen further than any of our main competitors. The reason is simple. International investors have lost confidence in it. Why? Because the government has mismanaged the economy. if you cannot see that you are living in your own little fantasy world.

robbed expat said...

Anon 11.44 - I agree with Iain - you are quite off your trolley. Where I live the exchange rate for local currency against sterling has plummeted from just over 7:1 to under 5.5:1 in the past 2-3 months - and that means a huge drop in my income simply because of the E/R. You may not notice it yet in UK shop prices, but you will, you will....

Mike Wood said...

We really do need to knock this fallacy on the head. Government borrowing is not low by international standards and anyone who suggests that it is is either being disingenuous or is confusing borrowing with debt.

Over the past few years, UK PSBR as a proportion of GDP has been broadly similar to the US and higher than almost all other major economies apart from Japan. For three out of the last five years, UK Government borrowing has been above tht allowed under the Stability and Growth Pact - a worse record than almost all of the other countries in the EU. Of the 27 EU Member States, only Greece and Hungary had a higher deficit as a proportion of GDP last year. How does this put us in the best position to withstand a recession?

UK Government debt is lower than many other countries (although it looks rather less impressive if you include public sector pension liabilities, PFI, banking guarantees etc that would normally have to be included in a company's accounts), due to budgetary discipline in the mid-nineties and early years of Labour's first term. However, this isn't the same as a low deficit.

The Government's high borrowing requirement causes different problems, including keeping interest rates higher than they might otherwise be and crowding out investment in the private sector. The existing high level of borrowing restricts the scope for measures to stimulate the economy - whether through tax cuts or capital expenditure.

Vienna Woods said...

I totally agree with 'robbed expat' as I'm in the same position with part of my Pension coming from the UK State. Every month this year it has fallen due to the sinking Pound/€ exchange. I wouldn't trust Brown with a child's piggy bank, never mind an economy the size of the UK's.

ross said...

Respectfully Iain, you were only "bang on" with your comments about sterling if you are comparing with USD and Yen. For virtually all others, 2008 has been a year where sterling has been either stable or strengthening on the Forex markets. In assessing matters with reference only to two currencies, there's no doubt why you've reached the conclusions you have. The correct conclusion, of course, is that the dollar and the yen, as the world's biggest reserve currencies, have strengthened. No slight on Britain, just this is what happens when money is moved from company stocks into currencies and assets. Since the major escalation of the crisis at the end of September, the pound has in fact strengthened considerably against most "lesser" currencies, eg. AUD, ZAR, CAD, MXN, INR, NOK and others.

Iain Dale said...

Ross, you embarrass yourself.Conveniently you ignore the Euro and many other currencies.

Mike Wood said...


Not sure where this idea that the pound has been stable against virtually all currencies has come from.

According to over the past 12 months, Sterling has:

Risen by more than 5% against: The Icelandic kronur, the South African Rand, the South Korean Won,
the Australian Dollar and the Chilean Peso

Been stable (+/- 5%) against:
Pakistani Rupee, Turkish New Lira,
New Zealand Dollar, Canadian Dollar, Zambian Kwacha, Romanian New Lei, Indian Rupee and the Brazilian Reai

Fallen by 5% - 10% against:
Norwegian Kroner, Indonesian Rupiah, Swedish Kronor, Colombian Peso, Mexican Peso, Kenyan Shilling and the Fijian Dollar

Fallen by 10% - 20% against:
Hungarian Forint, Albanian Leke, Bulgaria Lev, the Euro, Estonian Krooni, Danish Kroner, Philippine Pesos, Tunisian Dinar, Moroccan Dirham, Polish Zloty, Thail Baht, Croatian Kuna, Sudanese Pound, Russian Ruble, Argentinian Peso, Iranian Rial, Costa Rican Colon, Mauritian Rupee, Malaysian Ringgit, Vietnamese Dong, Dominican Peso, Slovakian Koruna and the Jamaican Dollar

Fallen by more than 20% against:
Peruvian Nuevo Sol, Czech Koruna, Egyptian Pound, Taiwanese New Dollar, Singapore Dollar, Bangladeshi Taka, Swiss Franc, Qatari Riyal, Bahraini Dinar, Jordanian Dinar, Saudi Arabian Riyal, United Arab Emirates Dirham, Omani Rial, Bahamian Dollar, Bermudan Dollar, US Dollar, Barbadian Dollar, Hong Kong Dollar, Lebanese Pound, Sri Lankan Rupee, Algerian Dinar, Kuwaiti Dinar, Trinidad and Tobago Dollar, Iraqi Dinars, Israeli New Shekel, Afghanistan Afghani, Chinese Yuan Renminbi and the Japanese Yen

Not exactly a rosy picture

ross said...

I'm not ignoring other currencies at all Iain. Euro has dropped a bit but been pretty stable since the start of the year. My very simple contention is that as an effect of the financil turmoil, all stable currencies have increased in value, just the bigggest ones faster than the smaller ones. To draw partisan political points from this fact is stretching it and betrays a lack of basic economics. I wouldn't be so disrespectful to say you're embarrassing yourself Iain; you'd be the first to admit that your forte is words not numbers.

Perhaps Mike may now like to list the comparatives of the dollar and yen against every other world currency to support my point...

Mike Wood said...

The fact that the dollar and the yen are strong doesn't alter the fact that sterling is weak, having fallen against almost all other currencies over the last twelve months. The strength of the dollar and the yen would only support your point if sterling had, as you previously claimed, been stable or risen against most other currencies. This is simply not the case.

The dollar's current value is essentially a bounce back from its previous low position, helped by its position as a major reserve economy.

Sterling is the fourth most traded currency. Against the other nine currencies in the top ten, the pound has fallen against 7, risen against 1 and been virtually unchanged (down 0.7%) against the other. To say that this is all down to the strength of the dollar and the yen does not make sense.