Prospects for 2013

 

On both sides of the Atlantic 2013 begins with the hang over from 2012. Just how much more debt will the US, the UK and Euroland take on this year? Can they go on adding to borrowing at the frantic pace of 2009-12? What do they all mean when they say they are cutting the deficits? Can they achieve it?

All main political parties in the US, UK and Euroland agree that the deficits have to be brought down. All understand that faster growth would help bring that about. By their deeds, all acknowledge that the huge deficits being run are not in themselves able to bring about the faster growth they crave. Some parties of the west speak with forked tongues on the deficits. They both claim with the rest that they need to be brought down, but also claim that prolonging a larger deficit for longer would somehow help speed growth.

In the USA the row over the so called fiscal cliff arose because the last time the US had to confront its excessive debts the politicians put in automatic tax rises and spending cuts in case no-one got around to making some necessary changes. These came back to haunt them. Neither the Republicans nor the Democrats wanted the combination of tax rises and spending cuts they had enacted to trigger  at the end of 2012. Both parties had every incentive to find a different way through. The Republicans wanted no tax rises at all. The Democracts only wanted tax rises for the rich. The Democrats wanted very few spending cuts. Even some Repuiblicans were uneasy about defence cuts. Compromise entails borrowing more, the easy way out. That is why they are bound to end up doing just that. The US will borrow more, and will raise its borrowing ceiling. We have seen the first compromise to keep most of the Bush tax cuts. Now there will be a row about the spending, before they solemnly decide to raise the permitted borrowing ceiling.

What was  bizarre in the USA was to see a Democract President claim credit for renewing Republican tax breaks from the Bush era, whilst increasing taxes on the highest payers to fulfill a campaign pledge, whilst the Republicans came over as split and part of the “problem”. They did not get across to much of the media that the tax cuts were originally Republican, and that Obama care entails higher taxes and charges offsetting some of the benefit of the tax cuts.

In the UK the Chancellor towards the end of 2012 admitted he would not start cutting the state debt as a proportion of our output by the end of this Parliament as originally promised. The UK is likely to end up borrowing more. In the second half of the Parliament Ministers are likely to want to relax spending totals. The big welfare reform package starts to come in and will doubtless need large sums to pump prime the changes.  The government is itching to boost capital spending, the one area the outgoing Labour government and incoming Coalition did make large cuts.

In Euroland they will carry on cutting in the distressed countries. Continuing recession will undermine revenues more, forcing more spending cuts. The German economy will recover as the emerging markets improve and take more German exports. Their recovery will be assisted by the German government’s own spending cuts, as they are more determined than most to control their deficit.  There is also some scope for extra private sector domestic demand in Germany. Meanwhile, the weaker countries will struggle with the iron discipline of the Euro, and without the ability to offset it individually by the kind of national monetary action the US and UK are taking.

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56 Comments

  1. Mike Stallard
    Posted January 9, 2013 at 6:49 am | Permalink

    Why?
    Are our politicians really so craven that they simply cannot see the crisis coming?
    Are they really so blind that they suck up to us offering little packages of money which they themselves would disdain?
    Debt is one of the very few constants in history: it leads first to impotence, then disaster.
    We should be very afraid as the West sinks into penury and powerlessness.
    Yet even threatening to cut a few pence off the ballooning welfare bill causes the BBC to have the vapours.

    • Ralph Musgrave
      Posted January 9, 2013 at 4:17 pm | Permalink

      At zero interest rates, government debt is the same as money (monetary base to be exact). And given that the real or inflation adjusted rate of interest on government debt is currently zero, there is very little difference between government debt and money.

      You claim that “Debt . . . leads first to impotence, then disaster”. Now replace the word debt in that sentence with “money” and you get “Money leads first to impotence, then disaster”. Doesn’t sound quite right, does it?

      The reason for this nonsense is that almost everyone is fooled by the overtones or nuances behind the word “debt”. Actually thinking out the NATURE OF government debt, money, etc (which I’ve done in a VERY VERY brief way above) is too much like hard work for 99% of the population.

      • APL
        Posted January 10, 2013 at 8:29 am | Permalink

        Ralph Musgrave: “Doesn’t sound quite right, does it?.”

        Just because debt or as it is more popularly known today ‘credit’ spends like real money, doesn’t mean they are the same. It doesn’t sound right because it is wrong, money reflects prior productive activity, wealth and savings – the excess of a human beings productive capacity over his or her life time. Debt on the other hand reflects at best, the promise of future human surplus activity.

        Now where debt is taken on by government then it reflects the forced subjugation of future generations – it is inherently immoral since you nor I have the right to extract the productive capacity of people we have not even asked to supply our credit. What you are advocating is slavery or at best indentured servitude of future generations. Even a lefty should be able to recognize that is immoral and wrong?

        Money and credit spend exactly the same, but they are not the same. Money is good when it reflects the freely undertaken surplus production of a past life. It can be good when it reflects the freely undertaken obligation of an individual to work hard and be productive in the future.

        Your proposal, to increase the money supply, which in the absence of growth in the economy – economic growth is not growth of the money supply, leads to a devaluation of those productive resources put in store by individuals, the destruction in value of the productive surplus of a past life and the enslavement of future generations – is evil.

      • Gary
        Posted January 10, 2013 at 10:26 am | Permalink

        And that demonstrates exactly that in this fiat money world, money is debt and debt is money and debt can never be a store of value, and without the store of value component, debt as money is never sound money. And that is where the root problem lies.

  2. Gary
    Posted January 9, 2013 at 7:27 am | Permalink

    ” Meanwhile, the
    weaker countries will
    struggle with the iron
    discipline of the Euro, and
    without the ability to offset
    it individually by the kind
    of national monetary
    action the US and UK are
    taking.”

    they should count their blessings. They are restructuring, we are kicking the can.

  3. alan jutson
    Posted January 9, 2013 at 7:51 am | Permalink

    They all want to talk the talk, but not walk the walk.

    Eventually they (or someone else in most cases) will have to take action, then it may have to be really drastic, such will be the end result of higher and higher debt.

  4. lifelogic
    Posted January 9, 2013 at 8:54 am | Permalink

    Rather a depressing outlook alas, the triumph of parasites over the productive and the politics of envy over the rational and honourable. Still there will be money to be made for the worldly mobile, the sensible and those who read economics, technology and political matters correctly. No doubt lawyers will continue to multiply also too.

  5. Brian Tomkinson
    Posted January 9, 2013 at 11:11 am | Permalink

    JR : ” The UK is likely to end up borrowing more.”
    More than what exactly? More than Labour? More than they said they would in 2010 or 2011 or 2012? We know that they planned to virtually double the debt in just 5 years – they will certainly achieve that! The only area they really reduced spending was capital projects and they now want to spend on those again, whilst at the same time increasing current spending. Yesterday’s Commons argument was about whether it was “fair” to increase (not cut) benefits by only 1% per annum. If the BoE took more interest and care about inflation not even the media could then say that this was a “real terms cut”. I see no prospect of this government reducing the deficit. Politicians here, in the EU and the USA seem clueless. The USA has a legal federal debt limit of $16.4 trillion, so now some “clever” people suggest that the Treasury department should mint a $1trillion platinum coin to effectively allow them to raise the limit without any attempt to make spending cuts. What happened to the idea of small government and allowing people to keep more of their own money to spend as they wish not to buy votes for politicians?

    • uanime5
      Posted January 9, 2013 at 5:16 pm | Permalink

      A 1% increase is a 2% cut in real terms due to high inflation. Your comments about the BoE are wrong as it is unlikely to get inflation below 2%.

  6. Neil Craig
    Posted January 9, 2013 at 11:16 am | Permalink

    Deficits are not intended to achieve growth. They are intended as a distraction to pretend that governments are in in growth. The fact is that we could be out of recession and into at least world average growth (6% a year) any time governments were prepared to allow the market to operate. The LabConDems are actively opposed to growth. Every serious politician knows this.

    Which means that no honest politician can deny it, which in turn means honest politicians are, with a tiny number of exceptions, to be found only in UKIP.

    • lifelogic
      Posted January 9, 2013 at 5:16 pm | Permalink

      Exactly as you say-

      “The fact is that we could be out of recession and into at least world average growth (6% a year) any time governments were prepared to allow the market to operate. The LabConDems are actively opposed to growth. Every serious politician knows this.”

      Indeed all they have to do is fire the parasites, deregulate, get out of the quack energy religion, reduce taxes and stop paying people to do nothing.

      On the quack energy religion I see even the met office seem to be noticing the lack of warming since 1998 (in a release of date done christmas eve! I wonder why?)

      Meanwhile Prince Charlie is on the agenda again about the world left for his grandchildren. I assume he will be stopping his £1M PA + (that we pay) travel arrangements PA then and selling his Astons?

      Or is it the usual do as I say not as I do hypocrisy we have come to expect of him? Could his dad and mum not tell him to shut up, grow up and get real on the Climate religion?

      • lifelogic
        Posted January 9, 2013 at 10:55 pm | Permalink

        Release of “Data” not “date” sorry.

  7. Ralph Musgrave
    Posted January 9, 2013 at 11:52 am | Permalink

    JR, I know you’re an intelligent bloke, but you just don’t have a grasp of this subject. E.g. you ask “Can they go on adding to borrowing at the frantic pace of 2009-12?”. The answer is: “Yes, easy peasy”. National debts relative to GDP in the US and UK were over 200% after WWII, and in the case of the UK, same applied in the early 1800s. The sky didn’t fall in in any of those cases. And US and UK debt are not yet at the 100% level.

    And the statement that “deficits have to be brought down” is nonsense. It’s a bit like saying that when setting out on a car journey you must eventually come to a halt, therefor you should think about coming to a halt ten yards after starting the journey. The car should be brought to a halt when the objective of the journey is achieved. Likewise we need to run a deficit as long as the economy is sluggish (which is not to say a monster deficit will automatically bring economic nirvana). When the economy recovers, the deficit can come down. That might be in six months time or it might be five years hence. It’s completely immaterial which of the two turns out to be the case. Keynes summed this all up brilliantly. He said “Look after unemployment and the budget will look after itself”.

    • A different Simon
      Posted January 9, 2013 at 6:55 pm | Permalink

      Ralph ,

      Keyne’s was living in a different era with different challenges .

      If he was alive today the crisis would probably never have developed and if it had he would probably have prescribed a different course of action .

      Of course we should learn from history but we shouldn’t expect to find all the solutions to the challenges of the 21st century in the rear view mirror .

      Sadly Osborne et Al have limited guts and even less imagination which is why they are condemned to looking in the rear view mirror .

    • Edward
      Posted January 9, 2013 at 8:09 pm | Permalink

      Yes but, who is it who is to “look after unemployment” as Keynes said.
      I presume you mean the Government and sadly I have seen them waste billions “investing” in job creation schemes without much success.

  8. Electro-Kevin
    Posted January 9, 2013 at 12:12 pm | Permalink

    These predictions from a blog commenter with a proven track record over the years:

    1. The eurozone will begin the process of turning itself into a stand alone state with new treaties by-passing the EU; effectively the EU will become a moribund shell. Mr Cameron will be left floundering.

    2. The new EZ will be seen to be more sound financially than the UK, and even on a par with the USA. The euro will, of course, survive.

    3. The latin part of the EZ will be still be in financial trouble – recession and even depression in some states. There will be job riots and business (inc bank) collapses, mergers and nationalisations.

    4. Cameron will continue to be outmanoeuvred by the EZ elites. He will continue to waste money on crackpot wheezes including DfID, CAGW and greenery, failing to cut back the deficit sufficiently. The UK will flirt with recession. Consequently we may still end up, cap in hand, applying to join the EZ (euro) within 5 years.

    5. UK inflation about 5%; FTSE will rise to around 7000, but fall dramatically in the autumn below 5000; national house prices level but London up; bank rate to stay low unless UK downgraded (quite likely).

    6. Oil, gold and commodities will be very volatile, but relatively high
    priced, because of the political uncertainties.

    7. BRICs will continue to grow but more slowly; China will continue its
    Africa expansion, and purchases of Western companies.

    8. Obama will think his second term makes him invincible, and do something monumentally stupid.

    9. Wars will continue mostly to be fought in cyber space and with drones, thereby largely being ignored by the msm.

    10. The “Arab spring” will continue to result in repressive Islamist states.

    (Budgie)

  9. Alte Fritz
    Posted January 9, 2013 at 12:30 pm | Permalink

    Growth here, and elsewhere I think, was based on excessive borrowing both privately and in the public sector. That inflated asset prices. It inflated profits (especially at banks) which artificially inflated tax revenues. The past five years pain has been a corrective exercise.

    The state must shrink. Growth for the UK and Euroland can, as JR surmises, come from emerging markets.

    This alone seems to me a reason to think outside the EU box, but also to be realistic that consumer growth in the UK and Euroland cannot be counted on.

  10. Denis Cooper
    Posted January 9, 2013 at 12:31 pm | Permalink

    I wouldn’t worry too much about the eurozone in the shorter term: the foolish purists who believed that the EU should obey its own treaties have now been defeated and sidelined, and the ECB will just create as many new euros as may be needed to preserve the present eurozone intact.

    And nobody is rocking the boat about that, least of all the UK government which wants to Save the Euro and urges rapid federalisation to secure its future, irrespective of what the peoples of the eurozone may think about that.

    Which in general is what some of us always predicted would happen, unless the eurocrats committed some huge blunder from which there was no possibility of recovery, although few of us would have predicted that any UK government would be so active in working against our vital long term national interests.

    And it is the longer term which is more of a worry, when the eurozone expands further, as it is legally required to do, and eventually, inevitably, engulfs us as well.

  11. Pleb
    Posted January 9, 2013 at 1:18 pm | Permalink

    The EU is a forth richt. The sooner everybody admits this the better.

  12. Narrow Shoulders
    Posted January 9, 2013 at 1:33 pm | Permalink

    Out of necessity governments will not allow their economies to reboot and so continue to borrow rather than halt their addiction to deficit budgets.

    In reality only the extremely wealthy would suffer in a reboot, most would continue as normal with the wealthy losing their hoarded assets.

    Cut the deficit to zero and print the debt then see what happens in 2013.

  13. BARMOUTH FAN
    Posted January 9, 2013 at 1:34 pm | Permalink

    I don’t see myself as an optimist!
    The US is very complicated –
    Rep.s allowed renewal of Bush tax cuts and tax rises for those on $400k , but there is still a 2% tax rise on everyone with non-renewal of EE’S NI (equivalent). Only 1/3 House Rep’s voted for it and Whip and Majority Leader voted against. The debt ceiling is a different ball game – for fiscal cliff whole electorate would have blamed Rep.s if no deal, but 70 % DO NOT WANT ANY INCREASE IN DEBT CEILING. Also Rep.s know that the debt ceiling is their last chance. Sensible people know that US can’t keep running up 1 TRILLION DEFICITS and some of Rep’s have made it clear that they will shut govt down if they have to.
    On EU very trenchant report by COMMISSIONER this morning on what is happening in S. He doesn’t draw conclusion that P I G S must LEAVE but it simply is not possible for these societies to go from 25% GDP loss to 30,etc and this is all that awaits them. The electorates will choose people who will leave.

    • uanime5
      Posted January 9, 2013 at 5:19 pm | Permalink

      Given that neither Greece nor Spain chose people who wanted to leave the EU don’t expect the PIGIS to leave any time soon.

  14. Ilma
    Posted January 9, 2013 at 1:38 pm | Permalink

    A question that has always confused my poor, economically illiterate brain, is who is (financially) bigger than national governments to lend them all this money to create these debts? It has to come from somewhere? Is it just fantasy money artificially printed (QE) to fill the deficit gap? I don’t think it can be, as if you print your own money, you don’t owe it to anyone, so isn’t a debt.

    • peter davies
      Posted January 9, 2013 at 2:25 pm | Permalink

      QE means BOE printing money and ‘lend it’ to the treasury which will probably never be paid back – one possible outcome of this could be future hyper inflation which none of us want or need.

      The bit that makes me feel more uneasy is the borrowing from open markets (there are commentors on this blog who know more about how this works) who will be able to hold the UK to ransom at some point.

      The previous govt did so much damage, I’m afraid we are going to be living with the consequences for years to come, and they might even get back in soon to finish us off.

    • Denis Cooper
      Posted January 9, 2013 at 5:32 pm | Permalink

      It’s capital accumulated over the years, mostly in private hands for example pension funds and insurance companies and other investment companies and to a much lesser extent banks, some in the hands of other national governments or state agencies which have not been so profligate in the past.

  15. oldtimer
    Posted January 9, 2013 at 1:46 pm | Permalink

    It sounds from your comments, with which I agree, that we will end 2013 in a bigger hole than we are in today. There is neither the political will nor the political capacity to climb out of the hole.

  16. Barbara
    Posted January 9, 2013 at 1:55 pm | Permalink

    I’ve got no faith in any of them, least of all the EU, Germany will survive because it looks after No 1, others have to keep up or fall. We are not in the euro and we can thank GBrown for that, but what about the bankers who appear to have got away with fraud on a large scale, and we now see the poor bearing the burden more than the well off. Tax cuts given to the rich were wrong, so much for so few. We all know we have to repay the debt, but caused this debt, bankers firstly, and then Labour who spent as though there was no tomorrow. No one seems to mention the bankers now but just Labour and that’s deceiving. Past governments and present are complicit in denying us all the real truth. I’m fed up with the lot of them, we now know we can’t trust any of them. Demonising the poor, and unemployed is a cheap trick for short term politicial gain. It is now beginning to back fire on the Conservatives and the language they have been using, which has been discriminating to say the least. You are now cutting from the sick and the disabled, and the elderly via tax credits, and that’s the lowest form of behaviour any government can resort to. It will lose you the next election, that in its self is a big let down for this nation. I shall vote UKIP.

    • peter davies
      Posted January 9, 2013 at 2:32 pm | Permalink

      “but caused this debt, bankers firstly, and then Labour who spent as though there was no tomorrow. ”

      – correction, it was labour via Ed Balls under GBrown which re wrote bank regulation and adjusted the rate of capital they needed to hold down to circa 5% from circa 18% – the banks were setup to fail on this action alone, step forward and explain ED BALLS if you are reading this blog.

      I’m afraid the regulatory authority must be the first to bear responsibility before the banks themselves – why has no one in the treasury not taken action to call these people to account?

      • uanime5
        Posted January 9, 2013 at 5:22 pm | Permalink

        By your logic we should blame all the political parties that supported reducing the rate of capital banks needed.

        Also why aren’t you blaming the banks as they were free to keep up to 18% capital and weren’t forced to take on bad debt through mergers or offer 120% mortgages.

        • APL
          Posted January 11, 2013 at 7:30 am | Permalink

          uanime5: “By your logic we should blame all the political parties that supported reducing the rate of capital banks needed.”

          Err, Yes!

          Ultimately, it is the politicians that are in charge – so who else should we blame?

          Somewhere, there is a definition of insanity: doing the same thing repeatedly yet expecting a different result.

          By that token, the British voting public are insane, since they keep voting for the same old politicians regardless of the success, failure or just plain bovine stupidity of the politician, or party policy in question.

      • A different Simon
        Posted January 9, 2013 at 7:35 pm | Permalink

        Does that mean that the gearing ratio effectively goes from 5.5:1 to 20:1 ?

        Peter , the regulators will all have defined benefits pensions which they think are guaranteed by the taxpayer .

        They have no skin in the game so their interests are not aligned with those of taxpayers .

        It’s like the old one about the investor who asks his stockbroker whether he should sell his holding or accumulate more . The stockbroker tells him that it doesn’t matter , the commission is the same either way .

  17. Cliff. Wokingham.
    Posted January 9, 2013 at 2:27 pm | Permalink

    John,

    I am just a simple person with no economic training or insight. I have a question that has puzzled me for many years now: Why do so many western economies always run in deficit? Is it advantagous to them?
    The UK and USA and I suspect, most of the main western European nations, were very rich and had cash surpluses at some point in time. Why did the governments of those nations decide to run those countries on pretty much an ever increasing debt basis?
    Will cash rich emerging nations eventually follow a similar model? Will China, India and Brazil soon be in hock in the way we and other western nations are? If so, why?

    Could you recommend a good book on global economics that an ordinary person would be able to understand? Thanks in anticipation.

    Reply : I think its more about politics than economics. Many elected politicians want to spend more money on services for electors, amnd it is tempting to some of them to do it on borrowed money so there is no tax rise.

    • cosmic
      Posted January 9, 2013 at 4:20 pm | Permalink

      Bribing the electorate with their own and their children’s money has long been attractive to governments. We have arrived in a position where political parties are in a bidding contest to do this. Nu Labour were past masters at it, although they had a favourable wind in the shape of cheap imports from China etc.

      I believe government debt on a huge scale first took place to pay for the Napoleonic Wars, which lead to the introduction of income tax to help pay it off, but I’m happy to be corrected on that.

      • Denis Cooper
        Posted January 9, 2013 at 5:45 pm | Permalink

        It goes back further than that, eg the debts built up by Edward I to pay for his wars.

    • Bazman
      Posted January 9, 2013 at 7:24 pm | Permalink

      Had the past Labour government not taxed and spent large amounts of tax money on infrastructure what would the average British person got out of this economic boom? The companies refused to raise rates of pay no matter how much profit they made using the usual excuse that they could not afford it and had to remain competitive. The unions were to weak and more importantly their support fell with the members refusing to take any action. Many of the companies except the banks who could do no wrong, are no sitting on large amounts of money waiting for the market to pick up. No correct that! Even the banks are. Public money. It ain’t going to pick up with everyone out of a job. being put on the dole then blaming them for this and then cutting their benefits so there is even less money.

      • Edward
        Posted January 11, 2013 at 8:34 am | Permalink

        Baz, wrong again. The Labour party didn’t tax and invest in building infrastructure. The genius Gordon used PFI to borrow at ludicrously high rates, over cripplingly long terms. He has fixed us into debt for decades.

        • Bazman
          Posted January 11, 2013 at 2:10 pm | Permalink

          Was initiated in the UK by John Major’s government in 1992 – but was expanded under Labour after 1997 and used to cover large spending towards the end of office. More cash to the private sector privatising profits and socialising losses. This being paid for by the poorest is OK?

          • Edward
            Posted January 11, 2013 at 5:08 pm | Permalink

            I didn’t realise that only the poor have to pay back the huge PFI debts run up by “save the world Gordon”, Baz.
            You learn something every day.
            Theres me in my right wing fantasy world thinking it was all of us, saddled with this debt.

          • Bazman
            Posted January 12, 2013 at 4:07 pm | Permalink

            As a proportion of their income they pay more tax and as they are being hit the hardest in the form of benefit cuts so you are right it is right wing fantasy that we are all in this together equally saddled with the debts ran up by pandering to the elite. Ram it.

  18. Tad Davison
    Posted January 9, 2013 at 2:32 pm | Permalink

    All very worrying, but absolutely predictable. Spending has to be paid for, at some point, by somebody. I argued long and hard that cuts and the proper rationalisation of public services needed to be tackled from day one of this present administration, to undo Labour’s appalling legacy of tax, spend, and waste. I beleive we can now see how necessary that was.

    Some on the left of the political spectrum need educating in the ways of the real world, not some fanciful ‘nanny state’ Utopia that cannot palpably work. Borrowing to pay for these things is not the answer, because just as with a family budget that relies on credit, one day, the credit stops flowing and reallity kicks in.

    If we want real growth, we must do whatever we can to encourage those who take the initiative, and create wealth by creating new businesses and making existing ones more competitive. Tax hikes might sound like a good think for the traditional Labour and Lib Dem supporter, but in effect, do just the opposite. They kill any incentives. Their whole ideology and political philosophy is wrong – 180 degrees out in fact. God forbid they ever get anywhere near government again, but the Tories aren’t making the case strongly enough for my liking. We need an alternative, as they too are seduced by the easy way out, just that now, to do any good at all, the painful stuff has to come at the end of this parliament, not at it’s beginning, when by now, we could have been making real progress in bringing down debt.

    Tad Davison

    Cambridge

    • uanime5
      Posted January 9, 2013 at 6:14 pm | Permalink

      Some on the right of the political spectrum need educating in the ways of the real world, not some fanciful ‘capitalist’ Utopia that cannot palpably work. Perpetually reducing salaries to increase the profits is not the answer, because just as with a family budget that relies on benefits, one day, the benefits stops flowing and reality kicks in.

      If you want people to take the initiative it must be profitable for them, not those in existing businesses. Benefits cuts might sound like a good think for the traditional Conservatives supporter, but in effect, do just the opposite. They kill any incentives by making it harder for people to take risks without losing everything if anything goes wrong.

      Also right wing delusions that cutting taxes and benefits to make the poor more desperate will result in anything other massive increase in crime and poverty don’t help.

    • Bazman
      Posted January 9, 2013 at 7:00 pm | Permalink

      The Economy did not get into this state due to Labours spending polices and hitting the least well off who made the least from the financial mistakes of of the elite is not right or fair, so do not try to argue this via the backdoor. Many companies and individuals are sitting on billions of profits added to by the bail outs from taxpayers. It is they who should do the investing or take the hit. Many are still operating here without paying their taxes. Pay or stop operating. We do not respond to threats. As they tell their employees. We are their backers with our infrastructure and education. Ram it. 180 degrees…

  19. margaret brandreth-j
    Posted January 9, 2013 at 3:04 pm | Permalink

    I was just wondering about this cutting the deficit lark and wondering why it was imperative. Fast growth maybe good for cutting the deficit , but not good for creating a continuum in that growth. I maybe talking a load of rot ,as like Barbara, I learn from these financial interactions which are discussed on this site , but Ralph does have a point.

  20. Pete the Bike
    Posted January 9, 2013 at 4:55 pm | Permalink

    Prospects for 2013
    Governments will continue and increase their attempts to rob their citizens in order to keep the show on the road a bit longer. They’ll also need to continue the propaganda to convince the gullible it’s on their own interests to be mugged and pauperized. We’ll hear a lot more about patriotism and the need to demonise some group or other as scape goats (the rich maybe?).
    Money printing will continue or the whole edifice will collapse more or less immediately.
    Additional money and laws will be given to increasingly militarized police forces, possibly justified by more false flag ops against soft targets, in order to keep the not quite so gullible in line.
    Nothing will be done to cut deficits or to counter the EU super state. Violence will erupt in the EU against job losses.
    Stock markets, exchange rates and precious metals will be very volatile. Bigger cracks will appear in banks, oil supply, food distribution.
    If you watch the mainstream propaganda channels you won’t even realise what is going on.

  21. Antisthenes
    Posted January 9, 2013 at 5:32 pm | Permalink

    Most developed nations are now held together by sticking plaster and chewing gum with no plan to replace them with something more substantial. The problem stems from no one accepting the need to live within their means and look to governments to ensure that living standards are maintained. Governments cannot realistically deliver this desire as they have set up economic and social models that predicate against sustainable wealth creation because they have pursued equality, fairness and justice for all without creating an economic framework to compliment them. So 2013 and beyond is going to see the slow but definite increase in impoverishment and deepening of crises in Europe and the USA. Even with QE and devaluation the laws of economics cannot be dodged forever; Mr Micawber’s observations on matters financial are just as true now as they were in the days of Charles Dickens. So the future is one of change and forced change at that as what politicians and the people are not prepared to do the laws of economics will do for them.

  22. uanime5
    Posted January 9, 2013 at 6:16 pm | Permalink

    It seems that according to the Government’s own report they’ve missed 76 of their pledges.

    The coalition is also changes the definition of RPI in order to reduce people’s pensions to pay down the deficit:
    http://www.telegraph.co.uk/finance/economics/9790408/Pensioner-backlash-expected-over-inflation-reform.html

  23. ian wragg
    Posted January 9, 2013 at 6:17 pm | Permalink

    Off topic but I see Obummer is getting involved in our EU referendum. No doubt after Roon asked him too. All the Bilderbergers will be working overtime to ensure the Brits are coerced into accepting the status quo. Don’t think it will work though. We tend to react very badly when foreigners tell us what to do.

  24. Chris
    Posted January 9, 2013 at 8:15 pm | Permalink

    Meanwhile Obama apparently tells Cameron to stay in the EU, and van Rompuy states that no reopening of Lisbon Treaty needed (the eurozone can effect changes they want without reopening the Treaty, at least until after 2014) so renegotiation opportunities for Cameron will not be available….
    http://www.telegraph.co.uk/news/worldnews/europe/9791662/British-EU-power-settlement-ruled-out-for-the-foreseeable-future.html

  25. Christopher Ekstrom
    Posted January 9, 2013 at 9:14 pm | Permalink

    The courts are the last chance to eviscerate obamacare. The USA is heading into democratic socialism in any case. It was a good long run. Mark Steyn is quite right that chaos will follow the end of America. Just as the worlds poor are advancing via the triumph of Western values in the hinterlands; the homeland is overcome by boshlevism of the most insidious kind. Triumph of the Frankfurt School. Insanity.

    • uanime5
      Posted January 10, 2013 at 4:03 pm | Permalink

      The courts already ruled that Obamacare was legal because it was a tax and the Government has a right to impose taxes.

      Just as Marx predicted feudal countries are becoming capitalist and capitalist countries are becoming socialist.

      • Edward
        Posted January 11, 2013 at 8:27 am | Permalink

        Shame Marx failed to predict socialist countries turning capitalist.
        But don’t let history get in the way of your loony le$t wing delusions and rewriting of history

  26. Barry
    Posted January 9, 2013 at 10:34 pm | Permalink

    A lot of good stuff by JR is being sabotaged by idiots in No.10…off topic, but needs to be said….the latest fiasco…who is the clown of an advisor to No. 10 who wanders around with a sensitive document for all to photograph?

    Why doesn’t someone buy this “advisor” a bag and send him on a lengthy course to help him learn that the bag is for carrying sensitive documents to avoid them being photographed. Better still get rid of the so called advisor and employ someone who is not an idiot (I dread to think of the quality of his advice). Better still; get an advisor to advise DC to get a grip. If DC is incapable of such a hiring (or no one from Eton is up to the task) then perhaps JR (you) could lend a hand to employ suitable advisors for No. 10….

    Finally, DC wake up….many lifelong Conservatives are growing weary of the pantomime of advisors who are gifting DM. No. 10 advisors are so bad that they even make DM look good!

    • Wilko
      Posted January 10, 2013 at 11:14 am | Permalink

      Some ruses reveal a subtle hint of being set up. On camera, even the most talented actors rarely accomplish the raw spectre of reality. Most viewers, cutting into a channel, detect instantly whether the speaker is real or performing an act. Instinct reveals much; deception is normally way beyond the reach of those who attempt it. The email purporting to witness the Pleb incident exudes such clues in high measure.

      Whereas you describe the document revelation as idiot sabotage, it is conceivable that exposure was intended. BBC’s Nick Robinson described it as being so blatant that it was as if the document had been stapled to the chap’s head.

      Apparently, the document referred to the down side of revealing Govt performance. One would expect any advisor to consider the pros & cons of alternative action, whatever they are intending to advise. Since the document cited disadvantage in revealing Govt failings that would be made public, but David Cameron didn’t take the advice, the exposure presents him in a favourable light.

      If he received advice to conceal facts, and chose instead to reveal, in the interests of truth & transparency, he emerges very well. Whether the exposure was intended or not is a matter for those responsible. Exposure may well have been a careless blunder, yet its semblance to being set up might have been merely caused by even more naivety.

      • Bazman
        Posted January 10, 2013 at 4:35 pm | Permalink

        The characters in the film Withnail & I. In particular Richard E Grant as Withnail. Gielgud is quoted as saying in reference to Grant as Withnail, that when one plays a role so perfectly ones career can only go down. Dave could play Withnail to a tee after a few light ales.

  27. wab
    Posted January 10, 2013 at 9:17 am | Permalink

    “Even some Repuiblicans were uneasy about defence cuts.”

    Yeah, “some”, i.e. only 99% of them. You can see the true nature of current Republicans over the Hagel nomination. He is a Republican but he is not for all out war against Iran so must be opposed. On foreign policy the Republican Party is still run by the neo-cons and so is still the party of perpetual war. The US military should be the first target for spending cuts, it is completely bloated. The Republicans are not opposed to spending, they just do not like spending on “those people” (poor, black). They are happy for the government to throw billions of dollars at oil companies and at the military.

    “Obama care entails higher taxes and charges offsetting some of the benefit of the tax cuts”.

    ObamaCare will reduce the government debt/deficit. And still the Republicans oppose it and tried to beat up the Democrats over this during the last election.

    “What was bizarre in the USA was to see a Democract President claim credit for renewing Republican tax breaks from the Bush era, whilst increasing taxes on the highest payers to fulfill a campaign pledge, whilst the Republicans came over as split and part of the “problem”.”

    The Republicans are part of the problem. During the recent tax/spend negotiations the Republicans made not one serious attempt to specify exactly what they wanted cut. They wanted Obama to tell them what he would cut, so they could then blame the cuts on him. The Republicans are currently so detached from reality they have no hope of offering any constructive analysis of the economic problems facing the US. But it is pretty clear that they want to turn the clock back to 1930 if not 1860.

    The Bush tax cuts are the major contributor to the US debt. (Yes, tax cuts do not pay for themselves, contrary to what the US right-wing fantasists have insisted for decades.) The Bush tax cuts should have been ended, but it would have caused a serious short-term problem if they had been. Fortunately Obama managed to get rid of the tax cuts for the super-rich.

  28. David Langley
    Posted January 10, 2013 at 10:40 am | Permalink

    I think Antisthenes above is correct. I remember when you purchased things with money, now you can purchase things with debt. This promise to pay is not guaranteed with debt as it is with money. A premium is added to the debt to reward the risk taker. This edifice is fraught with danger when the risk spirals out of the control of the creditor. But something much worse has happened, the debtor is now having feelings of worry and alarm that he may not be able to repay. These feelings have been blunted by everybody’s acceptance of debt and a general “in for a penny in for a pound” attitude. I now feel that that this situation colours the strategy and tactics of the whole government. The best form of defence is attack and our country needs leadership that concentrates on releasing us to become vigorous and ac
    tive in selling Britains manufacturing and intellectual skills to the world. Stop adding up our debts and start adding up our profits and start paying as we go.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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