Good and bad numbers

 

              The US budget deficit is tumbling, according to the latest  numbers. The combination  of  recent large cuts in  public spending, and continued economic growth, is working well. The US economy is recovering on the back of the shale gas revolution, cheap energy to power more factory output, and the continued ability of the US to harness the digital revolution to business success.

              Meanwhile, the EU numbers remain dreadful. Italy has been in recession for seven quarters, with economic output falling another 0.5% in the most recent quarter. Germany is down 1.4% on the last year but managed a very small increment to output in the first quarter of this year. France is in double dip recession, with the position continuing to deteriorate.

              The UK economy looks as if it is now picking up. April was probably a stronger month than the previous  half year has seen. There are welcome signs of more full time jobs, some increase in housing activity, and a pick up in consumer confidence. The London economy appears to be doing well, with continuing difficulties spreading the progress to all parts of the UK.

               Some of the extra money being created is now finding its way into activity. Some will also find its way into rising asset prices. We see worldwide in the advanced country Stock markets that the susbtantial sums being created to promote growth are fuelling asset price rises. The authorities have to judge when to ease off the monetary accelerator in a way which does not damage the recovery but does prevent asset prices becoming unrealistic again.

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136 Comments

  1. Nina Andreeva
    Posted May 16, 2013 at 5:36 am | Permalink

    Being a professional cynic I just thought it was too near to the council elections for the GDP numbers not to be massaged to confirm that the UK had not gone to “triple dip”. No doubt with them out of the way now, new data will become available and the existing stuff will be revised to show that we did go under.

    JR why have you not looked at state and municipal debt in the US? Should we not be looking to more cities declaring bankruptcy this year? Are the finances of Illinois, California etc back on the mend?

    Anybody who considers that we are on the road to recovery has truly drank Bernanke’s Kool Aid. Those record highs of the S&P are built on nothing but printed money. Hilsenrath at the WSJ only has to suggest that the QE tap will be reduced for it to wobble and even a fake news story can provoke a “flash crash”, such as on April 23, when AP reported explosions at the White House. The performance of the Yen and the S&P since the beginning of the year appear to be almost in lock step with each other, just as they were in 2007/8 and we all know what happened next…

    • Nina Andreeva
      Posted May 16, 2013 at 5:44 am | Permalink

      Straight out of the NY Fed yesterday ….

      “The May 2013 Empire State Manufacturing Survey indicates that conditions for New York manufacturers declined marginally. The general business conditions index fell four points to -1.4, its first negative reading since January. The new orders index also edged into negative territory, and the shipments index fell to zero.”

      http://www.newyorkfed.org/survey/empire/empire2013/2013_05Report.pdf

      • Acorn
        Posted May 16, 2013 at 9:07 am | Permalink

        The jury is still out on the US economy. It appears they may be draining spending power from the economy too fast, that could kill the private sector recovery due to other than a natural population increase affect. The money supply is not setting the economy on fire.

        The St Louis FED does a good set of graphs in International Economic Trends http://research.stlouisfed.org/publications/iet/ . You could say that Merv King, as he clears his desk, has seen a minute upward blip in UK M4 money, causing him to be optimistic for the economies future.

        Might be worth looking at the Canada charts? It appears Mr Carney may just be getting out in time. Probably best to go and buy that 60 inch plasma soon me thinks, while prices last.

    • APL
      Posted May 16, 2013 at 8:39 am | Permalink

      Nina Andreeva: “Are the finances of Illinois, California etc back on the mend?”

      It is the State pensions liabilities that will destroy these states. Not long to wait.

      Meanwhile, ‘Obamacare’ will finish off the Federal budget, within less than a decade.

      • Credible
        Posted May 16, 2013 at 3:27 pm | Permalink

        “Meanwhile, ‘Obamacare’ will finish off the Federal budget, within less than a decade.”

        Perhaps more ordinary people in the US should just die then (supposedly) for the good of their economy.

        • APL
          Posted May 16, 2013 at 5:02 pm | Permalink

          Credible: “Perhaps more ordinary people in the US should just die then (supposedly) for the good of their economy.”

          You have got the wrong end of the stick. If the US economy collapses – which it will – only the rich will get health care anyway.

          30 years ago in the US, similar to the UK 1950’s there was a substantial charitable sector providing medical assistance to people who couldn’t otherwise afford it.

          As government has involved itself with health care, the health care industry have identified the government as it’s largest source of income, so they lobby the government, wine and dine the civil service, the effect of the cosy relationship between the health care industry and the government is the cost of health care has exploded.

          Oh, the right end of the stick, despite what Mr Redwood would like us to believe, the US economy is very ill, the Obama care measure, will finish it off.

          Just a statement of fact.

          • uanime5
            Posted May 17, 2013 at 9:57 pm | Permalink

            The charitable sector in the US wasn’t sustaining healthcare, which is why being poor effectively meant you had no healthcare.

            Also the cost of healthcare increased in the USA due to hospitals inflating their bills, insurance companies paying these bills and passing these costs onto their customers, and the cost of new pharmaceutical drugs.

        • libertarian
          Posted May 16, 2013 at 8:37 pm | Permalink

          Oh dear, what a silly thing to say, I guess in your ignorance you don’t know that the US Federal government already spends MORE than the UK on public health provision and thats before Obamacare.

          • REPay
            Posted May 17, 2013 at 2:41 am | Permalink

            In the UK 30% of all Healthcare money goes on people who used to work for the NHS. An ever rising amount of cash given the very generous settlement under (word left out-ed) Patricia Hewitt – now a consultant to Boots plc.

            Unfunded pensions are the rarely discussed wrecker of public finances – pace JR and a few others. This is the Labour Party’s toxic issue. Luckily the other parties never discuss it.

    • Man of Kent
      Posted May 16, 2013 at 9:16 am | Permalink

      Sadly the USA is afflicted with all the PC ,equalities, Labour/Democrat mind-set
      that affect us.

      On a recent visit to the Mid West a relative who works in the FAA said their office is overmanned.
      (political correctness affects staff policy-ed)
      However when there were Republican inspired budget cuts [Sequesters] the FAA cut air traffic control budgets to make cuts as visible as possible .

      Bit like our Councils ,usually Labour ,who close libraries and care homes rather than cut councillors, staff ,pensions and allowances ?

      In the Mid West they are concerned that the huge debts of California, Chicago , Detroit and some other Eastern ,Democrat controlled cities will eventually be paid
      for by Republican Kansas, Iowa , Nebraska , et al .

      They fear that now 50% +1 of the population receive a government cheque every month plus food stamps, mobile phones [ paid for by a surcharge on solvent users monthly bills] they are locked in to a Democrat Presidency for the foreseeable future.

      Fortunately the optimism and drive of the people generally makes the USA still a great country. But for how long?

    • waramess
      Posted May 16, 2013 at 9:26 am | Permalink

      You’re right; for the UK the signs of growth are truly delusional. Absolutely no evidence of growth with all the figures associated with real growth still showing the opposite. Certainly bubbles are forming but they will be very short lived. Just look at the price of shares at the moment.

      Sentence says interest rates should increase to 2 percent (why 2 percent exactly?) King says they will stay where they are for another four years and King says he can see green shoots.

      I would like to know exactly what these guys are chewing so that I can buy some. Truly delusional.

    • Denis Cooper
      Posted May 16, 2013 at 2:09 pm | Permalink

      Nina, it was questioned at the time whether there was in fact a second dip, given the error margin on the statistics; but much more to the point even if there had been a second dip it would have been much smaller than the first dip, like an echo of the previous much bigger drop, just reflecting an economy which was bumping along the bottom before it started a significant recovery, hopefully.

  2. alan jutson
    Posted May 16, 2013 at 5:40 am | Permalink

    I agree reported miniscule improvements are certainly better than going backwards, but you will not get real growth until we have more disposable income in our pockets to spend.

    Latest reports show that disposable income is going down, not up.

    • APL
      Posted May 16, 2013 at 8:42 am | Permalink

      Alan Jutson: “but you will not get real growth until we have more disposable income in our pockets to spend.”

      That’s not going to happen either, with the voracious state determined to maintain it’s income at the expense of the real economy – taxes or borrowing will rise – until they can’t, then …….

      • alan jutson
        Posted May 16, 2013 at 5:01 pm | Permalink

        APL

        Sadly, I agree with you.

        As individuals many of us live within our means, but the State makes that ever more difficult for those that do by lowering our disposable income with ever increasing tax rates, QE, rising Utility bills, and continuing Government waste etc.

        When you are in work, you can sometimes work harder or longer to try and compensate, should you desire to do so.
        When on a fixed income you simply curtail your expenditure, thus you help the economy shrink even further by purchasing less..

    • uanime5
      Posted May 16, 2013 at 12:35 pm | Permalink

      I suspect that the decline in disposable income is due to falling wages, underemployment, benefit cuts, and the rising cost of living. The the fact that income disparity is increasing means that while the disposable income of the average person is falling the rich are still getting richer.

      • APL
        Posted May 17, 2013 at 9:05 am | Permalink

        uanime5: “I suspect … ”

        Uanime5 emotes again.

        But addressing your attempt to make a point, you identify the symptoms and claim they are the causes, typical leftist perversion of the facts. No wonder the left can never offer a credible solution.

        • uanime5
          Posted May 17, 2013 at 10:02 pm | Permalink

          The fact that you were unable to identify the cause of disposable income falling, yet somehow were able to ascertain that all my points were symptoms leads me to believe that I did point out several possible cause. However because they weren’t the causes you considered correct you attempted to but ultimately failed to criticise them.

  3. Lifelogic
    Posted May 16, 2013 at 5:45 am | Permalink

    Yet still the BBC, Labour and Libdems talk of government “cuts” doing damage and risking a double dip. It is government waste, high taxes, high (nonsense religion) energy prices, lack of confidence in government and massive over regulation that does all the damage.

    Good to see the criticism of the absurd HS2 by the national audit office this morning , HS2 it is clearly bonkers in economic terms. A huge net negative to the economy on balance in the short, medium and long term.

    I also learned from radio 4 the other day on how the police often just record your mobile phone theft as a lost phone I assume without telling you. This in order to massage the crime figures. I am quite sure, from personal experience, that the extent of this contrived misinformation and refusal to accept crime reports is quite huge. No doubt someone in government thinks it is another good way to waste taxpayer’s money and the public sector’s time. I assume you have to tell them it was racially or an anti-gay motivated phone theft, if you want it to be recorded.

    This police attitude also deters people from making crime reports in the future – why bother to make the effort to report if they are clearly not interested. Doubtless this is what they intend.

    • uanime5
      Posted May 16, 2013 at 12:37 pm | Permalink

      Interesting some people report their lost mobile phone as stolen because companies won’t replace lost mobiles but will replace stolen ones. Maybe the police aren’t always inaccurately recording this.

      • lifelogic
        Posted May 17, 2013 at 1:50 pm | Permalink

        In that case they should probably record it as an attempted insurance fraud, either way it is a crime and should be reported.

        If someone reports a crime it should go on the crime register, unless the police have very good reasons and real evidence to suggest the person is lying and no crime was committed. They should not be massaging the crime figures in this way.

    • lifelogic
      Posted May 16, 2013 at 1:09 pm | Permalink

      I read that Switzerland with a population of about 1/9 that of the UK exports more to China than the UK does. Just what is it that makes Cameron so frightened of a Greater Switzerland?

      • APL
        Posted May 17, 2013 at 1:40 pm | Permalink

        lifelogic: “Just what is it that makes Cameron so frightened of a Greater Switzerland?”

        Switzerland is a democracy. That’s enough to scare any UK tenured politician.

        • Life logic
          Posted May 19, 2013 at 10:14 am | Permalink

          Indeed that must be it.

    • Hope
      Posted May 16, 2013 at 5:21 pm | Permalink

      How about the toxic EU and the devastation is it causing in Spain, Portugal, Cyprus etc. All for a political ideological dream. It is truly appalling and the devastation to people is not being reported on. Ministry of Truth in action. Today we hear Lord Astor being reported to say Tories will fight heart and soul to stay in the EU! There appears little point in a Tory referendum and it does not appear a genuine choice as it is being portrayed. Cameron’s comments about pessimism are absolutely incredulous. He cannot be trusted and nor can the party it is clear he is trying to deceive the public to get in office. No wonder the Ministry of Truth is spreading into social media as well.

    • Jerry
      Posted May 16, 2013 at 5:40 pm | Permalink

      If the BBC didn’t exist “Lifelogic” would have to invent it, so he could have a good rant each morning!

      • lifelogic
        Posted May 16, 2013 at 9:49 pm | Permalink

        I suppose I could just breakfast with a few slightly dim, Guardian reading, arts graduates, from minor universities, with slight a chip on their shoulders instead? But it is easier just to switch radio 4 on. Womans’ hour is always very funny indeed.

        • Bazman
          Posted May 17, 2013 at 7:18 pm | Permalink

          Or some dim right wingers like yourself who believe tax avoidance and evasion will help society. Maybe you could explain how and why it is not helping the third world and why by the same principal should help our society? As jerry point out most of what you say when challenged is just ranting. Cutting the state by 50%? Have a think what would happen? Could someone as fat as yourself survive in such a situation. I think not.

          • Life logic
            Posted May 19, 2013 at 10:19 am | Permalink

            I have never encouraged tax evasion but it is self evident that individuals and companies usually spend money far better than governments do and to the benefit of jobs and the general economy.

          • Jerry
            Posted May 20, 2013 at 8:19 am | Permalink

            @Lifelogic: It has also been shown that if governments did not spend money as they do many a private company would not exist, of if they did they would be very different companies…

            I doubt that John would allow examples of such companies that have grown rich on government contracts (both civilian and military) but a long list could be drawn up.

      • Edward2
        Posted May 16, 2013 at 10:55 pm | Permalink

        I see the BBC’s flagship current affairs programme Newsnight has been forced to apologise for yet another poor programme, this time on the Help for Heroes charity Jerry.
        Well worth a rant I would say.

        • Jerry
          Posted May 17, 2013 at 6:55 am | Permalink

          @Edward2: Actually that programme has not been the BBC’s Flagship current affairs programme for several years (I seem to recall that R4’s Today and The World Tonight programmes seem to hold the honer between them), since the advent of the television Rolling News channels in the UK the Newsnight has been floundering badly, in fact I half expected it to sink below the surface earlier this year – and quite rightly to.

          I don’t know the details of this latest censure but no doubt the criticisms are correct. Newsnight has for far to long been nothing more than a Tabloid version of its old (and greater) self. It should be taken off life-support allowed to die…

          • Edward2
            Posted May 17, 2013 at 4:45 pm | Permalink

            Ok delete flagship if it makes you happy Jerry

          • Jerry
            Posted May 18, 2013 at 10:53 am | Permalink

            @Edward2: I would be quite happy to delete Newsnight -and Question Time, assuming that I could not re-brand them back into the broadsheets they once were.

      • APL
        Posted May 17, 2013 at 7:08 am | Permalink

        Jerry: “If the BBC didn’t exist.”

        But since it does, I think every criticism of the BBC could be addressed by converting it to a voluntary subscription model and abolishing the BBC license fee.

        At a stroke you’d address the criticism leveled by people like LL and myself of the BBC.

        • Jerry
          Posted May 17, 2013 at 10:35 am | Permalink

          @APL: My Point is, there are other media/broadcast companies that make as many ‘howlers’ or are just as ‘bias’ as the BBC but those who criticise the BBC would prefer to invent the BBC -if it did not exist- rather than complain about those other (existing) companies.

          I have no problem when the criticisms are fair, I object to biased criticism though [1] and will carry on (John’s hospitality permitting) objecting until the truly biased people find a clue or stop their rants.

          [1] if ‘someone of the left’ was to continually rant on about uncited/unproven bias from Sky News (for example) then I would be saying exactly the same to them

          • APL
            Posted May 17, 2013 at 1:53 pm | Permalink

            Jerry: “if ‘someone of the left’ was to continually rant on about uncited/unproven bias from Sky News (for example) then I would be saying exactly the same to them”

            Of course ‘someone from the Left’ doesn’t rant on about the bias of the BBC because the BBC has been entirely captured by the left – to the extent the BBC was used to subsidize the Guardian newspaper at the public expense.

            The same ‘someone from the left’ has recourse if they object to listening to bias from Sky – don’t subscribe to Sky.

            The leftie too need not if they identify an advertiser they object to buying time on Sky network, buy the advertisers product.

            Myself and LL by contrast are forced ( I don’t know about LL actually, as I think he lives abroad and anyway sounds far too sensible to be paying for the BBC ) to pay for a product I despise, the quality of which has plummeted over the last twenty or so years; viz Brand and Ross impersonating comedians, not to mention the dire East Enders.

            We have no recourse but to ‘rant on and on’ in impotent fury.

          • Edward2
            Posted May 17, 2013 at 4:55 pm | Permalink

            Jerry, you define anyone elses views as being biased or as being rants, but your own views are of course sensible comments, without a trace of bias!

            There is a difference with the BBC that you fail to accept.
            It is a public service broadcaster (their words not mine) and because they are funded in the way they are, they are bound by a Charter which requires them to act in a certain way, very much different to other commercial operators.
            If you had your own TV or Radio Channel Jerry, you could say what you wanted to, within basic guidelines which bind all broadcasters, but the BBC is different.

          • Jerry
            Posted May 18, 2013 at 11:00 am | Permalink

            APL: “Of course ‘someone from the Left’ doesn’t rant on about the bias of the BBC because the BBC has been entirely captured by the left

            That is because not many, if any, members of the SLP (for example) post here, that doesn’t stop them complaining about perceived right wing bias as I have pointed out before (and John allowing I could cite proof). Trouble with the likes of yourself and Life, and your mirror images on the left, you only ever see what you want to see, only ever agree with what you already agree with, anything else is wrong or must be biased. Please do try to post with your long trousers on!

          • Jerry
            Posted May 18, 2013 at 11:16 am | Permalink

            @Edward2: If Lifelogic, APL or yourself believe the BBC is breaking its Royal Charter then challenge them, take it up with the Trust, take the Trust to court if needs-be, but of course you (like all the other right and left wing complainers) will not because you know full well that the only bias present is that found in your own heads and you would thus be laughed out of court.

            Do you REALLY think that those on the right would not have taken such action if there really was left-wing bias in the BBC, considering that people were even complaining of such biased back in the 1980s when the BBC’s DG had been appointed by Mr Thatcher’s government.

            Oh and you are wrong, if I owned my own TV or radio station in the UK I would not be allowed to say what I like, I would be governed by the law of the country, DfCMS and the governance (licensing) of Ofcom.

          • APL
            Posted May 19, 2013 at 10:31 am | Permalink

            Jerry: ??

            What I take from your own little rant is that you deliberately chose to avoid addressing the substantive point.

            Jerry: “Please do try to post with your long trousers on!”

            .. and resort to infantile attempts to provoke rather than actually discuss and debate.

            Leading me to pop you in the same group as uanime5, a troll who’s only merit is for our amusement.

          • Jerry
            Posted May 20, 2013 at 8:23 am | Permalink

            @APL: “I take from your own little rant is that you deliberately chose to avoid addressing the substantive point.

            Don’t worry yourself to much, the feeling is mutual…

    • REPay
      Posted May 17, 2013 at 3:39 am | Permalink

      The cuts “kootz” agenda is what the Labour Party ranted about in the 1980s. The BBC trots this out religiously to this day – speak to anyone under 35 and they will tell you Mrs Thatcher closed factories and mines to defeat the unions. There is rarely a mention of crisis in the 1970’s or when there is it is linked to Thatcher as though she was responsible for that. the government Brown Balls’ splurge of the 200o’s – tax take up 40% to what end? Is Balls were called Osborne he would be a pariah for his advice to Gordon Brown

      Since 2010 cutting back a percent or two a year in public expenditure can’t hurt…except if your model is the Brown model, sell our gold cheap, ramp public sector salaries and pensions and swell the public payroll by 750k jobs. Also look the other way on financial regulation because we love bankers’ bonuses paying the public sector wage bill. (Sorry our voters’ salaries and benefits.)

      This is mainly the Tory party’s fault. It needed a ruthless and intelligent management of ideas and vocabulary at which they are hopeless at. “Share the proceeds of growth” – every junior economist in the City knew public finances were trashed in 2006 onwards as did many at Central Office but the incoming Cameron team thought talk of problems was “toxic” (i.e. unpleasant even if real.)

      The Liberal Party under Gladstone was numerate. 2/3rds of the Liberal Democrats should be in the Labour Party. I hope they are obliterated in 2015. I am a natural Liberal – personal freedom, small state, balanced books, help the needy (not the same as the public sector workers) but they are just Labour light for people who are better educated than the Lab, “money no problem we’ll get it from the rich” drones. (Excluding the public sector people of course – my small pension fund will be raided before Sir Jeremy or Ed Balls forgoes his 2.5m equivalent fund!)

      Only idiots would pretend there were cuts when they are tiny. The coalition leaders are clever and well-educated. They are not evil, but like our senior civil servants, they have no skin in the game. (QE, fine, my pension is index linked!)

      DC is a “happy to decline” slowly leader and like Blair will find having been British PM a useful credential when he wants to make some serious cash or look for a really big international role where posing is the main focus. Obviously that role won’t be in Europe now but I am sure he will be able to bag something through his the OE network. Clegg will be an EU commissioner and very nice too. Lovely to think our nation’s futures rides on the back of these two disinterested careerists. Perhaps both could join Tony Blair Associates? I see in the Economist he is advertising for managers. Heir to Blair? Send your resume in and let TB and Cherie judge.

      Fourth Party – yeh right! Sorry UKIP is just the free pass to Labour back in power. If splurger Balls and wife control the public purse strings (forget the other Ed) then it is “game over.” Balls is MR Off-balance sheet. Labour made strategic investments in unsustainable pay and rations. I know senior civil servants, doctors and teachers who will vote Labour just to protect their entitlements.

      Can someone make me feel better and say that the numbers still add up?

  4. Richard1
    Posted May 16, 2013 at 6:02 am | Permalink

    The EU has moved in 30 years from being (relatively) a pioneer of free trade and liberalization to being a bulwark of reactionary high taxes, over-regulation and sclerotic labour markets. No wonder ‘out’ is becoming a mainstream view in the UK for those who value prosperity ahead of a political ideal of European federalism.

    • Brian Tomkinson
      Posted May 16, 2013 at 8:08 am | Permalink

      Riacherd,
      Good point. Even Newsnight ran a story last night about protectionism in the EU. In this case, if they are successful, the immediate losers will be Chinese manufacturers of solar panels and a British manufacturer of installation equipment. The winners will be manufacturers in town in the old East Germany. In the long term of course we shall all be losers if/when the Chinese retaliate.

      • Brian Tomkinson
        Posted May 16, 2013 at 8:09 am | Permalink

        Richard,
        Sorry I do know how to spell your name!

      • Richard1
        Posted May 16, 2013 at 10:23 am | Permalink

        A small item yesterday, which doesn’t affect the UK, but illustrates the prevailing EU mindset: The French Govt are planning to impose an additional sales tax on ipads, smartphones etc, with the proceeds to be used to subsidize approved producers of French culture. ‘you couldn’t make it up’ as the Daily Mail might say.

    • Tad Davison
      Posted May 16, 2013 at 8:53 am | Permalink

      I agree Richard, but getting to what the EU should have been all along, will prove impossible without wholesale reform, and that just isn’t an option. The EU hierarchy have said so.

      Tad

    • Kenneth
      Posted May 16, 2013 at 9:40 am | Permalink

      Not only that, but I was also taken with Bill Cash’s point in the HoC yesterday that the situation is now urgent and 2017 will be too long for us to wait while we are shackled to a dying economy.

    • uanime5
      Posted May 16, 2013 at 12:41 pm | Permalink

      Which “high taxes” are you referring to? It can’t be the Tobin Tax because that was implemented as a form of enhanced cooperation between member states, rather than an EU law.

      Also can you provide examples of over-regulation from the EU. Laws supported by UK MEPs or made by the UK Parliament don’t count since the politicians didn’t consider them over-regulation.

      • Richard1
        Posted May 17, 2013 at 7:35 am | Permalink

        The Tobin tax is certainly an example of the sort of nonsense that comes out of the EU. The fact that it gets implemented through some other technical mechanism is irrelevant. Check Tax / GDP ratios around the world. You will notice Europe has the highest ratios – and the lowest growth. Your posts are a spur to the Outs. Are you in reality a UKIP plant?

        • uanime5
          Posted May 17, 2013 at 10:18 pm | Permalink

          Surprised that you’re criticising enhanced cooperation, given that the UK is trying to use it to liberalise the services market in several other EU countries (they’re taking this route as there is opposition from most EU countries, so this can’t be done using EU law).

          Regarding taxes to GDP ratio this is low in most developing countries because these countries lack infrastructure such as free healthcare, free education, welfare, water, electricity, and transportation. By contrast among developing countries the UK has a normal taxes to GDP ratio.

          Regarding growth developing countries almost always grow faster than developed ones. The reason for this is because a country with a GDP of £100 billion needs to increase GDP by £2 billion to grow by 2%, while a country with a GDP of £1 trillion needs to increase GDP by £20 billion to grow by 2%. So developed countries often have a lower growth percentage even when in cash terms they’ve grown many times more than developing countries.

          • Edward2
            Posted May 18, 2013 at 11:11 am | Permalink

            I love that remark Uni, referring to the new Tobin tax as “enhanced co-operation between member states” and “liberalising the service markets”
            Very George Orwell eg Tax makes you free

          • Richard1
            Posted May 18, 2013 at 10:59 pm | Permalink

            The marginal £1bn of growth is only coming from a developing country because it is competitive. How big the economy was to begin with is not relevant. The UK must consider constantly what’s needed to be globally competitive. The comparison also works on a like-for-like basis. Compare the growth of the US (low tax/GDP) with the UK (high tax/GDP for most of the post-war period) for example. The correlation of high taxes to growth is always and clearly negative.

  5. lifelogic
    Posted May 16, 2013 at 6:11 am | Permalink

    Patrick McLoughlin MP defense of HS2 was pathetic. We are in a global race he says – so we have to build bonkers pointless trains for £Billions he seems to think? We need to compete internationally, which is exactly why we should not build it. Nor should we litter the countryside with pointless wind farms and Photo-voltaics – just stop all the barmy subsidies. Taking tax of productive companies to give to nonsense ones is not the way to go.

    • oldtimer
      Posted May 16, 2013 at 7:12 am | Permalink

      The Audit Commission reports that the cost of HS2 has been underestimated by c £3 billion (or just under). No doubt it will be brushed aside.

    • zorro
      Posted May 16, 2013 at 8:37 am | Permalink

      Look at the recent NAO report……The case for jobs has not been made. In fact, HS2 may cost jobs which otherwise would have been created…..

      zorro

      • lifelogic
        Posted May 16, 2013 at 2:57 pm | Permalink

        It will indeed cause a net loss of jobs as most government activity nearly always does much beyond law and order and defense.

      • Jerry
        Posted May 16, 2013 at 6:10 pm | Permalink

        @Zorro: Not only that but HS2 might actually increase the (often complained about) North-South divide, set up offices in the North when your staff can be in London within a couple of hours….go figure! I also heard one vox-pop were a business man was suggesting that the faster trains would actually waste his time, the existing slower trains actually allow him to do (with the aid of on-train mobile/WiFi internet access etc.) useful work, something he would not have time for on HS2…

    • Tad Davison
      Posted May 16, 2013 at 9:07 am | Permalink

      LL, I’ve never quite understood why we should invest in very long-term projects, that won’t bear fruit for years if not decades, if at all, when we could be looking at more immediate infrastructure projects such as widening the A14 in this fair county of Cambridgeshire. Far better to give employment to people now, and let that money percolate through the economy, doing everybody some good. The tax man will soon get most it back again anyway.

      Perhaps better still, let the private sector build it, and toll the road. The user pays, the country gets it’s goods quicker, lives are saved (and believe me, that is a factor in this particular equation) people have jobs, and the government doesn’t have to stump up the money either if it’s done right.

      Perhaps we need a ‘can do’ mind-set to get things moving. Action this day! As Churchill would have said.

      Tad

      • Lindsay McDougall
        Posted May 16, 2013 at 1:14 pm | Permalink

        Amen to that.

      • Bob
        Posted May 16, 2013 at 1:31 pm | Permalink

        @Tad
        “and toll the road”

        But road users are already paying huge sums of money in fuel duty and vat etc.

        Why not let private enterprise build HS2 and “toll the railway” instead?
        Then the £38 billion can be used to sort out our decrepit road network.

      • lifelogic
        Posted May 16, 2013 at 2:59 pm | Permalink

        Indeed it is a time for make do and mend and only investing when a real return can be shown. HS2 and all the green energy drivel are not even close to a real return.

      • livelogic
        Posted May 16, 2013 at 6:09 pm | Permalink

        Indeed history is littered with pointless grand projects driven by idiotic politicians, corruption and self interest while all around things are let fall to pieces – for want of a ha’peth of tar.

      • Bazman
        Posted May 17, 2013 at 7:30 pm | Permalink

        There are so few motorways in Cambridgeshire and most will head south on the A428 and A1 to avoid the toll causing congestion in my town as today proves when there is as accident on the A428. Which in the dim and distant future will be dual carriageway and joined to the Black Cat roundabout on the A1, another bottle neck. The problem is that the A14 is classed as a local road and funded as, but in reality is a two lane motorway where lorries to Felixstowe just pass through.
        The Spittals Interchange is one to avoid could have built it in a lot of ways built it like this.
        http://www.cbrd.co.uk/badjunctions/14-14-141/
        All to complicated for you though Tad and don’t forget who cancelled the 3 billion pound upgrade.

        • Edward2
          Posted May 18, 2013 at 11:12 am | Permalink

          Perhaps if they stopped HS2 the billions saved could be better spent on your improved roads ideas Baz.

          • Bazman
            Posted May 19, 2013 at 9:21 am | Permalink

            You laughably believe that cancelling projects such as the A14 upgrade, Trident and the high speed rail links will actually find these cost savings spent on infrastructure or find its way into the pockets of the average person.
            All evidence shows it would be spent on corporate welfare, tax cuts for the rich and the middle class social security system. Like North Sea oil spent on benefits propping right wing fantasy and dogma. For example the rent rise due to having a spare room in a council house which much evidence shows will cost more than it raises. Now when tax rises are said to do this the very same people are shouting from the rooftops how ‘wrong’ ‘ ‘absurd’ and ‘not sensible’ it is. Do tell why you shout for one and not the other?
            Mean minded petty middle class dogma is the answer.
            Ram it.

          • Edward2
            Posted May 20, 2013 at 12:13 pm | Permalink

            What a rude, ranting, rambling, incoherent reply to the simple point I made, which is that HS2 is costing the State billions and saying that if HS2 were to be cancelled, that amount of money could be spent better on the kind of road improvement schemes you have mentioned.

          • Bazman
            Posted May 20, 2013 at 5:43 pm | Permalink

            Are you offended Edward Too? Good. Stay offended.

          • Edward2
            Posted May 21, 2013 at 3:24 pm | Permalink

            Offended?
            Don’t flatter yourself.
            Most of the time I struggle to understand your poorly written rants.

    • Richard1
      Posted May 16, 2013 at 10:28 am | Permalink

      There is no good defence for HS2. It is clear the assumptions have been made up to back-solve into the required conclusion. This is the big danger with state-ordered ‘infrastructure’ spending. The real objective is political, and there is no market to test the assumptions. (another example is the BBC”s absurd move to Salford). Whenever an infra project like HS2 comes up, if it cant be financed in the private sector a big red warning light should be flashing over it saying: ‘taxpayers’ wealth and future prosperity at risk’.

      • Bazman
        Posted May 19, 2013 at 9:24 am | Permalink

        The defence is that many European countries have thousands of kilometres of high speed rail links and we have none. Leaving use at a disadvantage. What do you want? A return to Stevenson’s Rocket?

  6. Andyvan
    Posted May 16, 2013 at 6:29 am | Permalink

    So what you’re saying is that the US and UK financial figures are being juiced up by money printing and the moment they ease off the funny money injections the economy is very likely to go into shock and return to it’s real state of coma.
    The EU economy is a catastrophe because of gross mismanagement by their governments and is getting worse because of a refusal by Germany to jump on the money printing bandwagon with the same enthusiasm as our “leaders”.
    Bear in mind also that current financial statistics issued by the US government are every bit as reliable as the Kremlin’s five year plan statistics and what you have is large parts of the world economy only sustained by lies and criminally incompetent financial fraud.

    • Tad Davison
      Posted May 16, 2013 at 9:09 am | Permalink

      Andy! Shhhhhhhhh! Don’t tell Peter, let him slumber on!

      Tad

  7. Mike Stallard
    Posted May 16, 2013 at 6:53 am | Permalink

    If the economy does start to pick up, we ought make paying off the debt and kicking the deficit into touch the main priority. However this is going to seem like political suicide just before the election.

  8. Ben Kelly
    Posted May 16, 2013 at 7:01 am | Permalink

    Give a man a fish and he will eat today, teach a man to fish……………

    This is the difference between the European model and the US model.

    Providing sustenance at a level more than the minimum for those who are not contributing (usual disability and transitional exceptions apply) lifts the cost of living through inflation and taxes of those who are contributing who then have no spare money to drive the economy.

    The only winners in UK & Europe are those who are protected (including institutions) and the money they harvest is not recycled (buy to let landlords in this country).

    We need the earners to have spare cash to spend on descretionary items which can be recycled to create jobs and growth not to drive inflation on staples which have been monopolised by the institutions.

    • uanime5
      Posted May 16, 2013 at 12:50 pm | Permalink

      Providing sustenance at a level more than the minimum for those who are not contributing (usual disability and transitional exceptions apply) lifts the cost of living through inflation and taxes of those who are contributing who then have no spare money to drive the economy.

      1) The benefits that you can get while unemployed are almost always less than the amount of money you’d get if you were working in a minimum wage job. So sustenance is below the minimum.

      2) The unemployed will find it difficult to get a job if they’re just barely surviving. Unemployment will remain high as long as the Government tries to do as little as possible to support the unemployed.

      3) Your assumptions only hold true if there’s a large ratio of people not working to people who are working. When this ratio is small the tax difference is minimal if your provide more than the minimum sustenance.

      We need the earners to have spare cash to spend on descretionary items which can be recycled to create jobs and growth

      People on benefits can also do this if they have spare cash.

      • Ben Kelly
        Posted May 17, 2013 at 7:28 am | Permalink

        If I were not working I could claim (capped) £25K of benefits. Under the new universal credit if I subsequently get a job paying me £12k annually I get to take home £36k.

        That rather comfortable lifestyle will be susidised by current working contributors who will then not be able to afford to drive the economy.
        I go to work to provide for my family not because it fulfills me or makes me feel good. I expect to be amply rewarded for that sacrifice. I understand that does not fit into your utopia but capitalism requires self interest and it largely works better than socialism which can only run out of our money.

        • uanime5
          Posted May 17, 2013 at 10:34 pm | Permalink

          If I were not working I could claim (capped) £25K of benefits.

          Unless you have about 8 children and live in a high cost part of the UK you will never be able to claim anywhere near that amount.

          Seriously a couple gets £112.55 per week and if you have 8 children you’ll get an additional £114.10 per week; which equates to £11,785.80 per year. So to get £25,000 in benefits you’ll need to claim at least £13,214.2 in housing benefit a year (about £250 per week).

          Under the new universal credit if I subsequently get a job paying me £12k annually I get to take home £36k.

          Under Universal Credit you’d lose 66p of benefits for every £1 you earned. So if you earn £12K you’ll lose £7.92K of benefits.

          I understand that does not fit into your utopia but capitalism requires self interest and it largely works better than socialism which can only run out of our money.

          Capitalism ran out of money in 2008, which is why the banks needed to be bailed out.

          • Edward2
            Posted May 18, 2013 at 11:18 am | Permalink

            Hilarious statement “capitalism ran out of money in 2008” Uni.

            I must have missed that, I remember a few USA banks and a few UK banks getting into trouble but that is all.
            If your glorious leader Brown had not rushed in to nationalise them and just allowed them to fail as Capitalism suggests should happen, then we would be much better off now.
            Billions were spent bailing out rich shareholders which could have been used to bail out poorer depositors and savers and allow successful banks to take over the failed ones.

          • Bazman
            Posted May 19, 2013 at 9:33 am | Permalink

            Facts are not what we are dealing with. Duncan Smith has number fantasies that are challenged after the horse as bolted and is what he relies on. They are not mistakes by any means. He is a fanatic with friendly ‘good honourable chap’ face. As for fish and fishing. Peasants do not and cannot exist in Britain, do tell us how they can? The equipment needed is education and social engineering to release the poor from a poverty of ideas, forward thinking and hopelessness being passed onto the next generation. This is not what the Tory government is or will ever be about. Tax cuts for the rich and the trickle down effect is where it begins and ends. Especially for the grass root loons, as Cameron points out.

        • Bazman
          Posted May 19, 2013 at 9:36 am | Permalink

          What is your reply to uanime5’s point Ben Kelly that you cannot claim 25k in benefits?. You cannot just come out with this nonsense and expect to get away with it. Is it a lie, a fantasy or a mistake? No reply? What does that tell us. You’re are a …?

      • David Price
        Posted May 17, 2013 at 5:32 pm | Permalink

        You have your notion of ratios the wrong way round …

        “3) Your assumptions only hold true if there’s a large ratio of people not working to people who are working. When this ratio is small the tax difference is minimal if your provide more than the minimum sustenance.”

        This is a misinterpretation/misunderstanding of reality. Each individual that receives £25k in capped benefits requires sufficient net tax payers to pay taxes to fund that £25k. If the average income is £25k with taxes of roughly £3k you need about 8 workers to fund the person on benefits. If you have fewer then the government would also need to borrow money to pay the £25k.

        The point is you need a large proportion of net tax payers to fund the “few” on benefits. We do not have enough net taxpayers to fund the current government largess and level of welfare benefits.

        “We need the earners to have spare cash to spend on descretionary items which can be recycled to create jobs and growth

        People on benefits can also do this if they have spare cash.”

        Spare cash for people on benefits comes from the “spare” cash of others who actually earned it, why should those people give up their hard-earned spare cash for you to feel good about giving it away to others?

    • lifelogic
      Posted May 16, 2013 at 3:08 pm | Permalink

      “Give a man a fish and he will eat today, teach a man to fish……………”

      Worse still the Coalition and Labour approach, steal money off the productive thus handicapping them and give it to the feckless thus augmenting them. This (after wasting half in admin costs) to encourage them not to even bother to learn to fish. Indeed even make it a condition of benefit that they do nothing at all.

    • Bazman
      Posted May 17, 2013 at 7:33 pm | Permalink

      You will have to explain how desperation creates work Ben?

      • Bazman
        Posted May 19, 2013 at 9:37 am | Permalink

        Still waiting for this fundamental explanation Ben. Anyone else explain it to me?

  9. oldtimer
    Posted May 16, 2013 at 7:18 am | Permalink

    As others have already commented, this is a very fragile recovery. It will only strengthen when investment in non productive assets is curtailed (think HS2 and subsidised renewable energy) and redirected to areas which improve productivity and/or reduce prices (risk bearing private investment including, potentially, shale gas).

  10. Gary
    Posted May 16, 2013 at 7:55 am | Permalink

    So why is the fed printing $85 bn per month?

    I don’t believe a word of this so called recovery until they stop this vast QE.

    • stred
      Posted May 16, 2013 at 10:29 am | Permalink

      Gary. At least they don’t seem to be counting daft government spending or goverment imports as growth, assuming JR’s piece was right.

    • zorro
      Posted May 16, 2013 at 11:30 am | Permalink

      Apparently until they get unemployment down to 6%…….if you can believe that……

      zorro

  11. Ralph Musgrave
    Posted May 16, 2013 at 8:11 am | Permalink

    JR ponders how to “ease off the monetary accelerator in a way which does not damage the recovery but does prevent asset prices becoming unrealistic again.” There’s a very easy solution to that one: abandon QE and never do QE again – ever.

    Printing money and buying up assets will – er – boost asset prices. (Nobel Prize please, for that insight.)

    In contrast, if stimulus money is fed to ordinary households, you get stimulus, but no powerful or specific asset price boosting effect.

    In fact even better: abandon monetary policy and concentrate on fiscal policy. There is no relationship between base rates and credit card rates. Second, no one with any sense will boost investment just because base rates have been cut for a couple of years: investments are LONG TERM projects. Third, in the initial stages of a recession, there is a SURPLUS of capital equipment, so more investment is exactly what is not needed. Fourth, the Radcliffe Report on monetary policy in the U.K. published in 1960 concluded that ‘there can be no reliance on interest rate policy as a major short-term stabiliser of demand’. Fifth, QE just benefits the rich.

    I could go on.

    • waramess
      Posted May 16, 2013 at 9:31 am | Permalink

      Excellent

    • Denis Cooper
      Posted May 16, 2013 at 2:15 pm | Permalink

      In the UK almost all the QE money has been fed to ordinary households.

      That’s what will happen when the Bank of England creates new money, and gets it passed across to the Treasury through the gilts market, and the Treasury then uses it to help fund government spending.

  12. Mike Wilson
    Posted May 16, 2013 at 8:11 am | Permalink

    The biggest and most important asset for people is their home.

    Government policy is designed to ensure that the insane house price boom that happened under Gordon Brown will not be allowed to correct and THE NEXT GENERATION MUST REMAIN PRICED OUT OF HOUSING.

    Presumably, eventually, prices must return to a normal relationship with wages. But this will require either massive wage inflation or falls in house prices of at least 50%.

    Which young person these days can afford a 3 bed semi in Wokingham at £275k. Or bog standard 4 bed detached estate boxes at 400k?

    • stred
      Posted May 16, 2013 at 10:35 am | Permalink

      My Gas Safe boiler fitter. His is a new semi-detached in London.

      • Bazman
        Posted May 17, 2013 at 7:36 pm | Permalink

        Maybe if he runs the company. Not as a gas fitter. Urban myth.

    • zorro
      Posted May 16, 2013 at 11:31 am | Permalink

      Don’t forget Gideon’s latest wheeze to subsidise house buying and pump up/hold up prices even more…….

      zorro

    • lifelogic
      Posted May 16, 2013 at 3:12 pm | Permalink

      A good time to buy property with a long term capped or fixed rate mortgage in my opinion in many areas at the moment. Borrow the money at 4% and watch it being inflated away at about the same rate. Idiotic government policies will not go on for ever, even with Cameron and Miliband the penny will drop eventually.

      • Mike Wilson
        Posted May 16, 2013 at 4:46 pm | Permalink

        I hope you are not in a position to advise any young person to buy.

        Money is only inflated away if WAGE inflation takes place. What we have had for some years now, and will have for a good few more years to come, is PRICE inflation without WAGE inflation. The worst of all worlds for debtors.

        And, of course, one of these days interest rates will go up.

        • APL
          Posted May 17, 2013 at 9:10 am | Permalink

          Mike Wilson: “The worst of all worlds for debtors.”

          Only applicable if you are not the biggest debtor of them all, the government.

          It can squeeze all the other debtors from both sides, increase taxes and simultaneously reduce the value of any cash or assets they hold through the mechanism of QE, aka inflation.

    • Chris S
      Posted May 16, 2013 at 6:06 pm | Permalink

      Having been in the finance business all my career, I know the housing market, mortgage criteria and affordability issues quite well and I come from Maidenhead, just a few miles away.

      Over almost all of my 40 year career, it has been unrealistic for any young person to be able to buy a semi detached house in a town like Wokingham as their first home. Invariably they have to start with a flat.

      Currently, there are 2 bedroom flats for sale in Wokingham for well under £150,000 and mortgages are available at up to 5 times joint earnings at historically low rates of interest.

      Consider this : My wife and I bought our first flat in Maidenhead in 1973 at the ages of 20 and 21. We took an 80% mortgage at 8%pa and earnings multiples were then just 2.75 times joint. We had saved 10% of the deposit and the other 10% came from family.

      In my view, a young couple in similar jobs wanting to buy a flat today will be spending a far smaller proportion of their joint income on their mortgage than we would have done.

      Crucially those looking to buy a first home today are invariably up to 10-15 years older and are therefore far higher up the earning scale than we were.

      Unfortunately, in my experience, young people wanting mortgages today often present with substantial credit card debt, car loans and little savings of their own. They have not saved and as a consequence often intend to borrow a substantial proportion of the deposit as well.

      Lenders will invariably deduct the repayments on their existing commitments from their income before applying the multiples and more often than not, it is this, and not the price of property that make it very hard to secure a mortgage of the size they need. Many also have unrealistic expectations of buying a semi as their first home rather than a flat or terraced starter home.

      With very few exceptions have there ever been times when it has been easy to buy a first home and in my view that’s fair enough.

      A mortgage is a substantial financial commitment and only those that really want too should take one on.

      • Mike Wilson
        Posted May 17, 2013 at 9:10 am | Permalink

        Your figures make no sense to me. I bought my first property in 1979. A 2 bed maisonette in Uxbridge. I paid £22,500 for it. I had saved £4500 (I was 27) and the mortgage of £18k was 2.2 my income of £8k. I was working, at that time, as a site engineer in construction. My pay was average for the time. As the time I was working in Central London – all the employment agencies had boards on the street advertising for office temps at between £3 and £4 an hour. A good secretary could get £4 an hour – about £160 a week or £8k a year. So, a secretary, or me – a site engineer – could afford a nice 2 bed flat in a nice road in Uxbridge – with a multiple of 2.2 times their salary. No partner’s salary needed to be taken into account.

        Friends of mine who married after they finished their apprenticeships – between, say, 1972 and 1974 – many of them bought 2 bed terraced houses as their first property. Some of them bought 3 bed semis or terraces. It used to be the done thing that whilst the lad was finishing his apprenticeship, a couple would get engaged and the girl would begin saving for her ‘bottom drawer’. When they married and moved into their own home – they would have most of what they needed to furnish etc.

        The maisonette I moved into would sell now for about 250k. (They have sold for 300k in Brown’s ‘boom’). An average salary now is, they say, 25k. So, when I was a lad, 2.2 times one average salary bought that property. Now 10 times an average salary is required. If interest rates move up to 8% again ….

        • Bazman
          Posted May 17, 2013 at 7:44 pm | Permalink

          Good work! Oh it was not down to work, but due to circumstances personal and public. Austerity may find its nemesis in the young unemployed who cannot afford their own property. Does anyone think they care about any austerity except their own. Maybe they do not understand and need the policy explaining to them and then they would come round to this way of thinking of tax cuts for millionaires and accept that they did their bit when in their 40’s and fifties with a crap job and rented house with additional payments for extra rooms or additional payments for a smaller privately rented one as the council do not have any smaller ones. They also should not have children as they cannot afford them too?

  13. Iain Gill
    Posted May 16, 2013 at 8:24 am | Permalink

    asset prices are already unrealistic, house prices in this country are way over the odds, sustained by robbing savers to prop up mortgage holders, it can only end in tears

  14. Tad Davison
    Posted May 16, 2013 at 8:37 am | Permalink

    I tried to make this point to your esteemed pro-EU contributor from the continent yesterday, but for some reason, it didn’t appear.

    The EU is rapidly becoming a basket case. It won’t need a trade deal with the US, it will soon need another Marshall plan!

    In France, there was yet another socialist elected, who promised great things, and now the people have seen that he can’t deliver, his popularity has plummeted. Like so many other countries, France’s voters are like drowning men clutching at straws. They vote out of desperation, but there is only one sure way to recover, and that is to bite the bullet, and deal with the deficit. A deficit that should never have happened in the first place, had the EU been governed properly.

    And as we saw one highly-regarded MP reveal yesterday in the British House of Commons, the EU leadership aren’t about to give any concessions. Their refusal to change, just means more of the same, so Mr Cameron’s attempts to get them to change, could well be pie in the sky.

    Oh, and the BBC’s Newsnight ran an interesting piece last night on solar panels. Germany are having a difficult job selling the ones they make, because China has flooded the market with cheap ones, and there is now talk of EU tariff barriers of 48% to stop the imports. Thus, the Chinese could reciprocate. And given Britain’s recent inroads into the Chinese market, one of the countries that has the money to buy our goods, that doesn’t look good.

    Tad Davison

    C ambridge

    • uanime5
      Posted May 16, 2013 at 12:53 pm | Permalink

      Given that Germany’s trade deal with China is worth nearly 10 times the UK’s trade deal Germany may suffer more if the Chinese reciprocate.

      • Tad Davison
        Posted May 16, 2013 at 10:43 pm | Permalink

        You’re missing the point. I couldn’t give a stuff about Germany, I want this country to be able to trade freely and on an equal basis with whomsoever it chooses. If there’s an EU-wide trade tariff war with China, we’ll suffer too. We don’t need to be a part of that!

        • A different Simon
          Posted May 18, 2013 at 9:37 am | Permalink

          Tad ,

          ” I want this country to be able to trade freely and on an equal basis”

          The Chinese system is brutal and lack any humility as exemplified by the way in which the one child policy was enforced and their justice system .

          It is difficult for Western companies to compete with Chinese companies because there simply are not the social overheads over there – it is not on an equal basis .

          Shouldn’t we expect China to treat their own people better if they want to trade with us ?

          Aren’t tariffs needed to encourage China to treat it’s people better and enable Western companies to “trade freely on AN EQUAL BASIS” ?

    • Bob
      Posted May 16, 2013 at 2:11 pm | Permalink

      “so Mr Cameron’s attempts to get them to change, could well be pie in the sky.”
      🙂 Surely not!

      “Newsnight ran an interesting piece last night on solar panels. Germany are having a difficult job selling the ones they make, because China has flooded the market with cheap ones, and there is now talk of EU tariff barriers of 48% to stop the imports.”

      The BBC R4 Today program reported this morning that Germany wanted the UK to remain a member of the EU to help them resist French pressure for more EU protectionism.

      Maybe the Today producer doesn’t watch Newsnight?

  15. Kenneth
    Posted May 16, 2013 at 8:50 am | Permalink

    What a mess.

    The title of this blog sums it up: “Good and Bad Numbers”

    The disconnect between real life and the ‘elite’ and the disconnect between real life and so called ‘markets’ smacks of rigging to me.

    What forces are at play that allows this hypocrisy to continue?

    Will the Dow Jones crash? Will Cyprus and Italy start printing their own currency? These events and may be unpalatable for some, but they will start the work of bringing real life into line with ‘official’ life.

    If these corrections are not made and continue to be side-stepped through continued rigging, then I believe we are heading for violence and potential revolutions across parts of Europe.

    We must allow markets to work naturally again. Market corrections can be brutal but once they are done, we dust ourselves down and face the new reality. The current situation is unhealthy and will lead to calamity in my view.

    • Mike Wilson
      Posted May 16, 2013 at 10:02 am | Permalink

      Yes, and that calamity may well take the form of intergenerational war.

      When I was 25 (mid 1970s), half of my friends were settled down. They had bought houses (not flats, most of them) and started a family.

      Almost without exception, my 25 year old son’s peers are living at home and still acting like teenagers. They don’t earn enough to live independently, so they spend what money they have on enjoying themselves. But, sooner or later, they are going to become fed up with waiting for Mum and Dad to die so they can inherit and ‘start their lives’.

      And, of course, they are going to spend their lives repaying our debts. Paying for the NHS services we demand now. How will they pay for our NHS services, the interest on the debt, and their own services?

      One of these days someone of their generation will cotton on and lead them. When they do, it may well turn out badly.

      • sjb
        Posted May 17, 2013 at 11:06 pm | Permalink

        @Mike Wilson
        I think their leader might compare British youngsters prospects such as housing with, say, French and Germans of the same age group and perhaps campaign for “ever closer union”.

        Did you know RIBA claim Britain has the “smallest homes in Western Europe”?

        http://www.architecture.com/NewsAndPress/News/RIBANews/News/2013/Provocativenewfilmrevealstheaveragenewonebedhomeisascrampedasatubecarriage.aspx#.UZa130ppXao

        • A different Simon
          Posted May 18, 2013 at 9:42 am | Permalink

          Smaller is the market solution to the affordability problem .

          Until there is a cost attached to hoarding land and exclusive use of land so that society as a whole benefits from land and not just landowners the situation will not get any better in Britain .

      • sjb
        Posted May 17, 2013 at 11:56 pm | Permalink

        Mike Wilson wrote: But, sooner or later, they [adult children without a home of their own] are going to become fed up with waiting for Mum and Dad to die so they can inherit and ‘start their lives’.

        Few realise the local authority can place a charging order on the family home to pay for Mum and/or Dad’s residential care costs (£1,000 per person per week for a good home). Imagine what a shock that will be to a daughter who, having spent years caring full-time for her parent(s) at home before the burden became too great, now faces homelessness.

  16. English Pensioner
    Posted May 16, 2013 at 9:44 am | Permalink

    But today I read that Brussels is demanding another £770 million and HS2 has a 3 billion “black hole”. The government won’t stop spending. Why don’t the just say “No”?

  17. Robert K
    Posted May 16, 2013 at 10:15 am | Permalink

    The dotcom bubble and broader economic boom of the late 1990s was fuelled by cheap credit. The solution to the consequent crash (in which 9/11 clearly played a part) was more cheap credit. That led to a wider banking crash that brought down some smaller countries – Iceland, Ireland, Greece, Cyprus. The solution again has been more cheap credit. Unless a proper grip is taken on the money supply the next crash will take major economies with it – Italy, Spain, France. The UK and US would not be immune in this circumstance.

  18. Roy Grainger
    Posted May 16, 2013 at 10:42 am | Permalink

    “The combination of recent large cuts in public spending, and continued economic growth, is working well”

    Is that true ? What was the magnitude of these “large” cuts and when were they implemented ?

  19. uanime5
    Posted May 16, 2013 at 12:54 pm | Permalink

    The US budget deficit is tumbling, according to the latest numbers.

    The US federal budget deficit is still 22% higher than it was in 2008. I suspect that this huge financial stimulus is the main reason why the US economy is recovering while the UK economy is not.

    There are welcome signs of more full time jobs

    Yet unemployment is continuing to rise.

    http://www.guardian.co.uk/business/2013/may/15/unemployment-rises-jobless-figures

    Also a study of 12,000 scientific papers has found that the overwhelming consensus among scientists is that global warming is caused by human activity; with less than 2% of scientists feeling that it was due to other causes. So given how strong the evidence is that global warming is man made it’s no surprise that the BBC refuses to give an airtime to the deniers who lack any evidence to back up their claims.

    http://www.telegraph.co.uk/earth/environment/climatechange/10061285/Scientific-consensus-that-humans-to-blame-for-climate-change.html

    Reply The US deficit is smaller than the Uk deficit as a proportion of GDP and has fallen faster.

    • Edward2
      Posted May 17, 2013 at 9:39 am | Permalink

      Uni,
      You say ….”The US federal budget deficit is still 22% higher than it was in 2008. I suspect that this huge financial stimulus is the main reason why the US economy is recovering while the UK economy is not.”

      Given the UK debt figures were £0.53 trillion in 2008 and are now £1.1 trillion and the UK deficit in 2008 was about £60 billion whereas it is now about £120 billion I think you need to rethink your argument.

      Your point on the BBC fails to allow for the BBC’s charter which places a requirement on it, not to take up particular political positions but to present a balanced argument without bias..
      So for the BBC to refuse to give any airtime to alternative views as you allege, must be against that charter.
      The alternative view may be abhorrent to you Uni, and I would think it fair for the BBC to give more prominence to the consensus view, but to refuse to allow the alternative view some part in the debate on such topics is plainly not fair.

      • uanime5
        Posted May 17, 2013 at 10:54 pm | Permalink

        In 2008 the USA’s total federal spending was $2.9 trillion, in 2012 it was $3.538 trillion; an increase of 22%. By contrast in the UK total government spending was £618 billion, in 2012 it was £682; an increase of 10.4%. So the US economy has been far more stimulated than the UK economy.

        The BBC’s charter states that the BBC only has to provide balance when each side of an argument has merit. As more than 98% of scientists are claiming that global warming is man made it’s clear that the deniers lack the required support for equal airtime.

        Rerply More figures of fantasy by choosing different base dates

        • Edward2
          Posted May 18, 2013 at 11:06 am | Permalink

          Good attempt at goal post moving to try to shore up failing arguments Uni.
          Your switch of statistics fools no one.
          On the BBC issue, if you read what you first said it was about the BBC “refusing to give air time” now you are saying its “equal airtime” which is a big difference.
          Some air time would be a start.

        • zorro
          Posted May 18, 2013 at 3:59 pm | Permalink

          http://www.ukpublicspending.co.uk/index.php?year=2008

          http://www.ukpublicspending.co.uk/index.php?year=2012

          UK total public spending – 2008 – £576bn

          UK total public spending – 2012 – £688bn

          You will note that I have sourced these figures unlike you who always moans about others but continually cites fantasy figures…..I make that a 19.4% increase on spending figures.

          zorro

  20. Lindsay McDougall
    Posted May 16, 2013 at 12:55 pm | Permalink

    The FTSE is usually an index of profitability in the future. Let us hope that the rcent surge in the FTSE 100 reflects increased profitability over a wide range of business areas, not just a surge in asset prices. Incidentally, if you adjust the 1997 FTSE 100 index for inflation, you come up with an index of 8000 as against the current 6700. Hopefully, there is room for some more upward movement before asset prices start going through the roof.

    The history of the British economy is one of governments doing too much too late. We should be slowly tightening monetary policy while at the same time reducing the public expenditure deficit, trying to keep government debt interest payments on an even keel. Reducing wasteful public expenditure should continue to make a major contribution, e.g. reducing ‘investment’ in incompetence and in yesterday.

    We need to sort out energy and transport policy. Transport policy in a rational world should be easy:
    – The case against HS2 becomes ever stronger; cost estimates have already escalated and you’ve seen nothing yet. The regeneration effects are extremely dubious.
    – Minimise rail overhead costs by reconfiguring privatisation to create vertically integrated regional monopolies. Don’t worry; there would be lots of competition from car, bus and air.
    – Minimise public transport subsidies, including concessionary fares, and subject public transport to the same VAT taxes and excise duties that private transport pays.
    – Privatise all individual civil airports and ensure that London airports compete against each other, allowing the owners complete discretion over landing charges (if Heathrow is to expand, the business case has to be made by sweating existing assets and raising capital for expansion on the markets).
    – Carry out a programme of motorway widening and junction improvements, using Concessions and tolls where feasible.

  21. SImon Conway-Smith
    Posted May 16, 2013 at 1:13 pm | Permalink

    Just an observation:
    – The EU economy is falling
    – The UK economy is recovering
    – Cameron wants to keep the UK tied to the EU

    Something doesn’t add up, and must be plainly obvious to everyone, Cameron (& Clegg & Miliband) included, that staying with the EU is exactly the WRONG way to go.

    Why are they all wanting to inflict such a death wish on the UK??

    • Pleb
      Posted May 16, 2013 at 10:45 pm | Permalink

      Simon, So they can protect their pensions and jobs in the EU gravy train. Ask the Kinnocks. They both got 100k commisioner jobs + perks for what? Complying with the herd.

  22. javelin
    Posted May 16, 2013 at 1:32 pm | Permalink

    I would agree. I’m seeing quite a few new front office projects kicking off in the investment banks. However they are very much focused on automated trading and reducing costs by removing traders. So less big bonuses – and less taxes – in future.

  23. Denis Cooper
    Posted May 16, 2013 at 2:26 pm | Permalink

    Off-topic, JR, it is of course excellent news that the Tory MP James Wharton came top of the ballot and he will use the opportunity to introduce another Private Members’ Bill for an EU referendum, with a much better chance of progressing it than John Baron had with his Bill that he introduced on February 6th. But please could you suggest to Mr Wharton that he should not simply adopt the Tory party draft Bill? Because that has some serious defects; the proposed timing of the EU referendum is far too late, and there is no attempt to entrench the Act against normal repeal by the next Parliament, but on the other hand it would effectively give the Lords a veto over the referendum being held.

  24. Gary
    Posted May 16, 2013 at 2:31 pm | Permalink

    Just in :

    Philly Fed index turns negative in May By Jeffry Bartash

    WASHINGTON (MarketWatch) – Business among manufacturers in the Philadelphia region worsened in May, the Philadelphia Federal Reserve said Thursday. The bank’s business-conditions index sank to -5.2 from 1.3 in April. Economists polled by MarketWatch expected the index to rise to 2.0. The Fed reported that the index for new orders fells to -7.9 from -1.0 in April, while shipments dropped to -8.5 from 9.1. The index for employment decreased to -8.7 from -6.8

  25. Chris S
    Posted May 16, 2013 at 3:32 pm | Permalink

    Way off topic, I know but I see that Ian Katz, deputy editor of the Guardian has today been appointed editor of the flagship Newsnight programme on the BBC.

    Yet another crucial BBC appointment going to a left of centre figure in the run up to a General Election must be of real concern, especially coming so soon after the appointment of ex-Labour MP James Purnell to a senior role.

    We can expect to see even more of That Toynbee Woman on Newsnight from now on and the equally annoying Helena Kennedy.

    Why is the Baroness chosen so often to review the papers on Andrew Marr ?

    The other week she was absent from the programme – but only because she was doing the same job on Broadcasting House on Radio 4 !

    Lets have some balance at BBC News : bring back Rod Liddle !

  26. Vanessa
    Posted May 16, 2013 at 4:11 pm | Permalink

    I would not hold your breath. The EU is planning to take the trade in the City of London over to Brussels (etc)

    As long as we are in the EU our “recovery” will be miniscule if not trodden on in a blink of an eye.

  27. margaret brandreth-j
    Posted May 16, 2013 at 6:00 pm | Permalink

    We are celebrating the anniversary of the dam busters today. The very real history of how many young men died for the freedom of GB. Not nostalgia. The impotence as we allow ourselves to be sucked in and taken over by Europe is weakness and compliance to the score of being traitors to our own. Jobs! money! ..for the big boys only …fools.

    • Pleb
      Posted May 16, 2013 at 10:47 pm | Permalink

      Its a forth reich Margret. Without bullets.

    • Tad Davison
      Posted May 16, 2013 at 10:54 pm | Permalink

      Just watched the film ‘The Dam Busters’ Margaret. I think people ought to read Daniel Hannan’s account in the Daily Mail today (Thursday) and they would soon see that the EU treat us as the enemy, because some of us still have the temerity to fight to preserve what 617 squadron themselves fought for 70 years ago.

      The worst of it, is that the erosion of our democracy was undertaken by British politicians, who 70 years ago, would have been rightly denounced as traitors, as was Lord Haw-haw.

      Tad

  28. zorro
    Posted May 16, 2013 at 8:36 pm | Permalink

    The US recovery is very patchy and irregular even with their more competitive energy. They still feel the need to QE US$85bn per month including US$40bn in mortgage securities. Some states are doing better than others, and that includes Texas. There is no doubt that the UK is performing less badly than the Eurozone, but these figures for ‘growth’ need to be seen in the context of ZIRP and mega QE…..

    ‘Some of the extra money being created is now finding its way into activity. Some will also find its way into rising asset prices.’….There is evidence of some bank lending, but asset prices/share prices have been rising since 2009 0n the back of QE…..

    ‘The authorities have to judge when to ease off the monetary accelerator in a way which does not damage the recovery but does prevent asset prices becoming unrealistic again.’….Oh, yesssssss, the US$64,000 question……Will they be competent enough to do that (check the track record….) or will they fluff it again?

    zorro

  29. Christopher Ekstrom
    Posted May 17, 2013 at 10:29 pm | Permalink

    If the USA were not hamstrung by its first socialist regime can you imagine the pace of growth relative energy independence would have brought? Unlike the parlimentary system it’s citizens cannot demand the ouster of a President. Of course the former Tory party can ( & will, I think) deep- six Cast Iron; but is it too late? After all, the taxes imposed on energy have permanently damaged the social fabric & economy. The mincers who “manage” the UK economy are indifferent as they plan a “democratic” socialist leveling for Britain. America will experience another wife swing of the pendulum & many in high places will be brought low.

    British subjects must stand in line & not complain. No lurch to the Right!

  • 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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