Comments on: US/UK responses to the credit crunch http://johnredwoodsdiary.com/2008/05/01/usuk-responses-to-the-credit-crunch/ Incisive and topical campaigns and commentary on today's issues and tomorrow's problems Wed, 23 May 2012 13:35:04 +0000 hourly 1 By: APL http://johnredwoodsdiary.com/2008/05/01/usuk-responses-to-the-credit-crunch/#comment-2942 APL Fri, 02 May 2008 09:54:14 +0000 http://www.johnredwoodsdiary.com/?p=1043#comment-2942 JR: "This year I have read many times commentators and market experts tell me the USA is “already in recession”." "WASHINGTON (AP) -- The number of newly laid off workers filing claims for unemployment benefits soared last week. The Labor Department reported Thursday that claims for unemployment benefits rose by 35,000 to 380,000. Private economists had expected claims would rise by a smaller 18,000. The report on jobless claims came a day ahead of a report on unemployment for April. Economists expect that report will show that the unemployment rate edged up to 5.2 percent in April, from 5.1 percent in March. The economy is expected to lose 70,000 jobs, the fourth straight month of job losses." Now exclude the government trickery with the employment statistics, not to mention the election campaign currently going on and these figures are probably understated. JR: "thanks to improvement in exports following the devaluation of the dollar, .." Surely the problem here is that when your primary export actually is the US$ the last thing your customers want is something that is declining in value. Imagine, about eight years ago, Gordon Brown had sold british gold and used 40% of the proceeds to buy US$, that holding of US$ would now be worth about 20% less. Over the intervening period the US government bonds would pay what 5%? Brown wouldn't have done that though would he? JR: "This year I have read many times commentators and market experts tell me the USA is “already in recession”."

"WASHINGTON (AP) — The number of newly laid off workers filing claims for unemployment benefits soared last week.
The Labor Department reported Thursday that claims for unemployment benefits rose by 35,000 to 380,000. Private economists had expected claims would rise by a smaller 18,000.
The report on jobless claims came a day ahead of a report on unemployment for April. Economists expect that report will show that the unemployment rate edged up to 5.2 percent in April, from 5.1 percent in March. The economy is expected to lose 70,000 jobs, the fourth straight month of job losses."

Now exclude the government trickery with the employment statistics, not to mention the election campaign currently going on and these figures are probably understated.

JR: "thanks to improvement in exports following the devaluation of the dollar, .."

Surely the problem here is that when your primary export actually is the US$ the last thing your customers want is something that is declining in value.

Imagine, about eight years ago, Gordon Brown had sold british gold and used 40% of the proceeds to buy US$, that holding of US$ would now be worth about 20% less. Over the intervening period the US government bonds would pay what 5%?

Brown wouldn't have done that though would he?

]]> By: Michael Peevey http://johnredwoodsdiary.com/2008/05/01/usuk-responses-to-the-credit-crunch/#comment-2941 Michael Peevey Fri, 02 May 2008 08:18:42 +0000 http://www.johnredwoodsdiary.com/?p=1043#comment-2941 John, I love your website. So much well written, considered common sense. I would vote for you for PM. I hope you get a cabinet position when the Tories get back in. John, I love your website. So much well written, considered common sense. I would vote for you for PM. I hope you get a cabinet position when the Tories get back in.

]]> By: Tim http://johnredwoodsdiary.com/2008/05/01/usuk-responses-to-the-credit-crunch/#comment-2940 Tim Thu, 01 May 2008 22:54:25 +0000 http://www.johnredwoodsdiary.com/?p=1043#comment-2940 The real shame is that after 10 years when economic growth has been above our Eurpoean competitors. We have a higher budget deficit which means the scope for the Government to cope with these challanges. Currently our Government is running a budget deficit of 3.3% higher than Italy's. This means as the credit crunch hits the real economy we only have to look at todays results by world of leather with a 30% fall in sales to see that Consumer expenditure ( Which makes up to 70% of consumption) is slowing . That the Government has little room for manouvre. The real shame is that after 10 years when economic growth has been above our Eurpoean competitors. We have a higher budget deficit which means the scope for the Government to cope with these challanges. Currently our Government is running a budget deficit of 3.3% higher than Italy's.

This means as the credit crunch hits the real economy we only have to look at todays results by world of leather with a 30% fall in sales to see that Consumer expenditure ( Which makes up to 70% of consumption) is slowing . That the Government has little room for manouvre.

]]> By: Matthew Reynolds http://johnredwoodsdiary.com/2008/05/01/usuk-responses-to-the-credit-crunch/#comment-2939 Matthew Reynolds Thu, 01 May 2008 19:59:19 +0000 http://www.johnredwoodsdiary.com/?p=1043#comment-2939 A pro-growth agenda of cuts in taxes & public spending is required so that we can try to match the Eire economic success story ! That would be shock treatment to an economy suffering a neo- Carter Malaise under Gordon Brown ! A pro-growth agenda of cuts in taxes & public spending is required so that we can try to match the Eire economic success story ! That would be shock treatment to an economy suffering a neo- Carter Malaise under Gordon Brown !

]]> By: Matthew Reynolds http://johnredwoodsdiary.com/2008/05/01/usuk-responses-to-the-credit-crunch/#comment-2944 Matthew Reynolds Thu, 01 May 2008 18:59:19 +0000 http://www.johnredwoodsdiary.com/?p=1043#comment-2944 A pro-growth agenda of cuts in taxes & public spending is required so that we can try to match the Eire economic success story ! That would be shock treatment to an economy suffering a neo- Carter Malaise under Gordon Brown ! A pro-growth agenda of cuts in taxes & public spending is required so that we can try to match the Eire economic success story ! That would be shock treatment to an economy suffering a neo- Carter Malaise under Gordon Brown !

]]> By: Matthew Reynolds http://johnredwoodsdiary.com/2008/05/01/usuk-responses-to-the-credit-crunch/#comment-2938 Matthew Reynolds Thu, 01 May 2008 18:53:42 +0000 http://www.johnredwoodsdiary.com/?p=1043#comment-2938 The Bank of England should get back its powers and be left to preside over a clear cut , streamlined regulatory system . Excess red tape could undermine the £50 billion plan announced recently while the tripartite system is too unwieldy . Stamp duty needs cutting on shares & property to help the Square Mile & housing market at a time of economic uncertainty . If those economic sectors show a marked improvement in the short to medium term then the UK can bounce back from the credit crunch on the back of sound tax reform . It is shocking that public borrowing will be £32 billion more over the next 4-5 years - this is even more than Gordon Brown predicted & that was bad enough . Spending what you have not got is never wise - the never never always becomes the now now . If you have not got the cloth - then trying to make the coat is stupid . Rising public debt is really bad - future generations will face higher taxes or diminished public services as a result of higher debt interest payments . We need a harsh period of austerity with public expenditure barely rising in real terms as money is moved from QUANGO's to priority areas like Defence , pensions , higher child benefit , more police etc . That tough period on government expenditure ought to last as long as is needed to wipe out the PSBR . The right response to the credit crunch must mean a more effective regulatory framework for the banks and a tight fiscal policy meaning a far smaller state sector leading to year on year cuts in the budget deficit . On the monetary policy side the MPC should have greater independence & be told to slash RPI-x to 2% within four years . RPI-x is a far more credible inflation measure - HCIP excludes too many factors & was a fudge to get us in sync with the Euro Zone . Time we had a British monetary policy to wring out that old British economic nemisis : Inflation ! We cannot have a sound economy without low inflation , a balanced budget and a stable system of financial regulation . On that basis we need a Conservative government to implement a conservative economic policy - socialists do not understand economics ! Just look at Northern Rock et al..... The Bank of England should get back its powers and be left to preside over a clear cut , streamlined regulatory system . Excess red tape could undermine the £50 billion plan announced recently while the tripartite system is too unwieldy . Stamp duty needs cutting on shares & property to help the Square Mile & housing market at a time of economic uncertainty . If those economic sectors show a marked improvement in the short to medium term then the UK can bounce back from the credit crunch on the back of sound tax reform . It is shocking that public borrowing will be £32 billion more over the next 4-5 years – this is even more than Gordon Brown predicted & that was bad enough . Spending what you have not got is never wise – the never never always becomes the now now . If you have not got the cloth – then trying to make the coat is stupid . Rising public debt is really bad – future generations will face higher taxes or diminished public services as a result of higher debt interest payments . We need a harsh period of austerity with public expenditure barely rising in real terms as money is moved from QUANGO’s to priority areas like Defence , pensions , higher child benefit , more police etc . That tough period on government expenditure ought to last as long as is needed to wipe out the PSBR . The right response to the credit crunch must mean a more effective regulatory framework for the banks and a tight fiscal policy meaning a far smaller state sector leading to year on year cuts in the budget deficit . On the monetary policy side the MPC should have greater independence & be told to slash RPI-x to 2% within four years . RPI-x is a far more credible inflation measure – HCIP excludes too many factors & was a fudge to get us in sync with the Euro Zone . Time we had a British monetary policy to wring out that old British economic nemisis : Inflation ! We cannot have a sound economy without low inflation , a balanced budget and a stable system of financial regulation . On that basis we need a Conservative government to implement a conservative economic policy – socialists do not understand economics ! Just look at Northern Rock et al…..

]]> By: Matthew Reynolds http://johnredwoodsdiary.com/2008/05/01/usuk-responses-to-the-credit-crunch/#comment-2943 Matthew Reynolds Thu, 01 May 2008 18:53:42 +0000 http://www.johnredwoodsdiary.com/?p=1043#comment-2943 The Bank of England should get back its powers and be left to preside over a clear cut , streamlined regulatory system . Excess red tape could undermine the £50 billion plan announced recently while the tripartite system is too unwieldy . Stamp duty needs cutting on shares & property to help the Square Mile & housing market at a time of economic uncertainty . If those economic sectors show a marked improvement in the short to medium term then the UK can bounce back from the credit crunch on the back of sound tax reform . It is shocking that public borrowing will be £32 billion more over the next 4-5 years - this is even more than Gordon Brown predicted & that was bad enough . Spending what you have not got is never wise - the never never always becomes the now now . If you have not got the cloth - then trying to make the coat is stupid . Rising public debt is really bad - future generations will face higher taxes or diminished public services as a result of higher debt interest payments . We need a harsh period of austerity with public expenditure barely rising in real terms as money is moved from QUANGO's to priority areas like Defence , pensions , higher child benefit , more police etc . That tough period on government expenditure ought to last as long as is needed to wipe out the PSBR . The right response to the credit crunch must mean a more effective regulatory framework for the banks and a tight fiscal policy meaning a far smaller state sector leading to year on year cuts in the budget deficit . On the monetary policy side the MPC should have greater independence & be told to slash RPI-x to 2% within four years . RPI-x is a far more credible inflation measure - HCIP excludes too many factors & was a fudge to get us in sync with the Euro Zone . Time we had a British monetary policy to wring out that old British economic nemisis : Inflation ! We cannot have a sound economy without low inflation , a balanced budget and a stable system of financial regulation . On that basis we need a Conservative government to implement a conservative economic policy - socialists do not understand economics ! Just look at Northern Rock et al..... The Bank of England should get back its powers and be left to preside over a clear cut , streamlined regulatory system . Excess red tape could undermine the £50 billion plan announced recently while the tripartite system is too unwieldy . Stamp duty needs cutting on shares & property to help the Square Mile & housing market at a time of economic uncertainty . If those economic sectors show a marked improvement in the short to medium term then the UK can bounce back from the credit crunch on the back of sound tax reform . It is shocking that public borrowing will be £32 billion more over the next 4-5 years – this is even more than Gordon Brown predicted & that was bad enough . Spending what you have not got is never wise – the never never always becomes the now now . If you have not got the cloth – then trying to make the coat is stupid . Rising public debt is really bad – future generations will face higher taxes or diminished public services as a result of higher debt interest payments . We need a harsh period of austerity with public expenditure barely rising in real terms as money is moved from QUANGO’s to priority areas like Defence , pensions , higher child benefit , more police etc . That tough period on government expenditure ought to last as long as is needed to wipe out the PSBR . The right response to the credit crunch must mean a more effective regulatory framework for the banks and a tight fiscal policy meaning a far smaller state sector leading to year on year cuts in the budget deficit . On the monetary policy side the MPC should have greater independence & be told to slash RPI-x to 2% within four years . RPI-x is a far more credible inflation measure – HCIP excludes too many factors & was a fudge to get us in sync with the Euro Zone . Time we had a British monetary policy to wring out that old British economic nemisis : Inflation ! We cannot have a sound economy without low inflation , a balanced budget and a stable system of financial regulation . On that basis we need a Conservative government to implement a conservative economic policy – socialists do not understand economics ! Just look at Northern Rock et al…..

]]> By: mikestallard http://johnredwoodsdiary.com/2008/05/01/usuk-responses-to-the-credit-crunch/#comment-2937 mikestallard Thu, 01 May 2008 17:49:59 +0000 http://www.johnredwoodsdiary.com/?p=1043#comment-2937 There are a number of long term problems which have to be faced sooner or later: 1. The EU dominates our finance system through the FSA. The EU is not England friendly at all and the Commissioners are lobbied all the time by the French government and technocrats and, no doubt, the German bankers. The CAP, which is cast in stone, rules out any form of agricultural reform or even cooperation. How much help, for instance, was France in the BSE crisis or foot and mouth? The USA does not have this. 2. The government collects tax and then hands it back. This is shown most clearly in the 10p fiasco. It is not going to change. Taxation levels, therefore, will remain prohibitive - including petrol and diesel prices. The USA does not have this. 3. After Hungary, we have the largest debt in Europe. (Telegraph today). There are a number of long term problems which have to be faced sooner or later:
1. The EU dominates our finance system through the FSA. The EU is not England friendly at all and the Commissioners are lobbied all the time by the French government and technocrats and, no doubt, the German bankers. The CAP, which is cast in stone, rules out any form of agricultural reform or even cooperation. How much help, for instance, was France in the BSE crisis or foot and mouth? The USA does not have this.
2. The government collects tax and then hands it back. This is shown most clearly in the 10p fiasco. It is not going to change. Taxation levels, therefore, will remain prohibitive – including petrol and diesel prices. The USA does not have this.
3. After Hungary, we have the largest debt in Europe. (Telegraph today).

]]> By: Brian Tomkinson http://johnredwoodsdiary.com/2008/05/01/usuk-responses-to-the-credit-crunch/#comment-2936 Brian Tomkinson Thu, 01 May 2008 11:21:18 +0000 http://www.johnredwoodsdiary.com/?p=1043#comment-2936 I fear your analysis of the strength of the US economy is premature and that the real effects of this mess have barely been seen yet in the UK. In this country these problems have been caused by the greed of bankers and others in the financial markets encouraged by politicians who in order to satisfy their own greed and lust for power have encouraged the process. This Brown government has spent taxpayers' money profligately, taken massive future liabilities off balance sheet (something which he now cynically criticises banks for doing) and set in train massive problems for years to come. In general, the country and its citizens have been living wildly beyond their means. The delusion that this could go on forever had to end and the necessary corrections will take time to work through. Regrettably, those thrifty people who didn't join in this binge will also lose out and the main culprits in the banks and government will still be financially rewarded for their abysmal failure. I fear your analysis of the strength of the US economy is premature and that the real effects of this mess have barely been seen yet in the UK. In this country these problems have been caused by the greed of bankers and others in the financial markets encouraged by politicians who in order to satisfy their own greed and lust for power have encouraged the process. This Brown government has spent taxpayers' money profligately, taken massive future liabilities off balance sheet (something which he now cynically criticises banks for doing) and set in train massive problems for years to come. In general, the country and its citizens have been living wildly beyond their means. The delusion that this could go on forever had to end and the necessary corrections will take time to work through. Regrettably, those thrifty people who didn't join in this binge will also lose out and the main culprits in the banks and government will still be financially rewarded for their abysmal failure.

]]> By: Jon http://johnredwoodsdiary.com/2008/05/01/usuk-responses-to-the-credit-crunch/#comment-2935 Jon Thu, 01 May 2008 10:12:03 +0000 http://www.johnredwoodsdiary.com/?p=1043#comment-2935 I do hope George Osborne is a regular reader of your column! I do hope George Osborne is a regular reader of your column!

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