Economic problems in the wider world

Whilst we have been preoccupied by the gripping drama of our referendum on the future of our country, there has been plenty going on elsewhere in the world which has led to stock market declines and worries about the economic future.

Investors and commentators have taken to doubting the power of monetary policy to deliver growth, a bit of inflation and better returns for savers. The large experiments with creating additional money and buying bonds have not succeeded in lifting the inflation rate in either Japan or the Euro area. The growth rates of the US, the Euro area, Japan and China all seem to be slowing. As some Central banks push deeper into negative interest rate territory, some wonder if all this has gone too far. Negative rates make it difficult for banks to make money and therefore to lend more. They also give the impression of panic by the authorities which does not help confidence. Meanwhile plunging oil and commodity prices in recent months have wiped billions off share valuations of those sectors, and have worried people about the state of the banks that has lent the money to those industries.

Some have returned to their beliefs in bigger fiscal stimulus. They are asking governments to go easy on deficit reduction, spend more, and borrow it at cheap rates. Some want the monetary experiments to be taken further, recommending more quantitative easing, further cuts in rates, and even so called helicopter money, where the authorities print money to spend.

To get back to normal the authorities have to do something they clearly do not want to do. They have to allow banks to make reasonable returns, and allow them to lend more on their current capital base. If the authorities persist in preventing the banks from lending to reasonable prospects, or if their fines, taxes and interest rates prevent banks making profits, the banks and the economies they seek to finance will remain crippled. If the European Central Bank wants banks to hold more capital and to take a tougher line on the value of loans it will hold back economic growth. When a Central bank does that, and creates new money at the same time, it is like trying to drive a car with one foot hard down on the accelerator(money creation) and the other hard down on the brake (cash and capital controls). No wonder there is not much growth.


  1. Lifelogic
    February 25, 2016


    The regulatory framework on bank is restricting a lot of sensible and perfectly safe lending. Different margins and terms are being imposed (not for reasons related to risk) but for absurd reasons of misguided regulation. Many banks are for example only lending on commercial investment property if the loans are for several £million or larger entirely due to the poor, misguided and expensive regulatory system.

    Business and investment is being held back hugely.

    Pretty much the only argument the stay side has is that the EU will gang up on us when we leave. Surely staying is far more risky. They can gang up far more effectively then with the EU courts and treaties to help them.

    Voting “leave” puts the UK in a far better position for some real free trade only negotiations.

    1. Lifelogic
      February 25, 2016

      Yet more moves by the EU officials to pretend that Cameron’s worthless agreement is legally binding going on all over the place. Worthless ever were it binding.

      “The EU courts cannot annul the agreement” they say and they mutter about depositing it at the UN.

      Perhaps not, but this is not remotely relevant as the EU court can and will just ignore it, they have no need to annul it. The EU court has no duty to consider the agreement at all, nor to take it into account in any way in any of their judgements.

      I really cannot see “remain” winning out, still some good odds available on “leave” though. Most people (the ones who will take the trouble to vote anyway) are not as daft as Cameron thinks they are. If you look at the last 2014 EU election result, UKIP and the Tories alone got 50% of the vote. The vast majority of Tory voters (alas not MPs) are for out and very many Labour voters whose wages have been undercut are for out too.

      Not even all of the Greens and LibDims really want open door, non selective migration and the absurd fishing, greencrap, CAP and other EU agendas do they?
      Nor, one assumes, do they all want the end of any residual UK democracy.

      Cameron has made the wrong decision as usual. I see that the film, Independence Day II (Resurgence) is to be released the day after the referendum.

      1. Hope
        February 25, 2016

        I read more EU laws and more demand for money will come from the EU after the referendum. Slimy underhand behaviour. Cameron’s deceit about immigration is shocking, he is still threatening us with his incompetence that even if the UK leaves the Eau it will not stop immigration! Just imagine if Churchill had that mindset in 1939. When is Cameron going to be removed under a leadership challenge and when is May going to get sacked? Time for Tory MPs to find their back bone and act.

      2. Leslie Singleton
        February 25, 2016

        I was glad to see the Torygraph point out today that the term “legally binding” is not what we should be talking about. The point is that Cameron’s scarcely-existent deal might well be challenged as being inconsistent with the Treaties already in place, perhaps for instance whether Cameron’s effort is “discriminatory”, and then it would be the ECJ’ that would decide whether said challenge were valid or not. If the ECJ were to decide that the challenge were valid then ipso facto Cameron’s effort could hardly be legally binding. I cannot see how anybody can profess to be certain in advance either way because it would be a simple matter of opinion–the ECJ’s opinion–as to whether a small degree of discrimination or whatever is or is not “illegal”. And on a different tack, the point made that Cameron’s effort merely states an intention to amend Treaties in the future makes a lot of sense to me. As I write I do not know whether the word “intention” itself is used but that may be the sense and I was taught half a century ago that in Law “intention” simply does not do it.

  2. mickc
    February 25, 2016

    Quite simply, the banks are insolvent, and have been for many years. The Crunch was simply the realisation that is the case, and the rescue should have been directed to savers with the banks being allowed to go down.
    The much vaunted “City” is merely a fraud, and its “expertise” non -existent, as the Queen pointed out by asking why no-one saw it coming.
    Corbyn’s idea of “People’s QE” will receive growing support as the current attempts to revive the world economy fail….again.

    Reply The UK banks are solvent, and stronger by a big margin than in 2008.

    1. mickc
      February 25, 2016

      I understand that is the Establishment position, and, like the King’s new clothes, has to be. It will be proven wrong by 2020.

  3. The Active Citizen
    February 25, 2016

    Interesting article JR. I suspect there won’t be much public appetite for relaxing lending or liquidity rules in what could be difficult times ahead.

    I wonder if you have a view for us non-economists on the impact of the new EU/ECB regulations since January concerning the responsibility for bailing out banks in the Eurozone? Specifically some Italian banks are deemed to be at risk for investors.

    Here’s the little I know: Italy’s debt is 133% of GDP, second only to that of Greece. Its growth last quarter was 0.1%. Four Italian banks got into deep trouble last year. A worrying 18% of Italian bank loans are in the non-performing category, and Italian investors own €200bn of bank bonds, leaving them vulnerable if banks collapse. Matteo Renzi can’t give the banks state aid without breaking EU laws.

    Do you see an Italian crisis adding to the impending repeat Greece crisis this summer? Should we also be worried about Portugal? Is there any way for the Eurozone to survive without Germany having to accept a massive wealth redistribution?

  4. Mark B
    February 25, 2016

    Good morning.

    You cannot buck the market ! As someone once said.

    All these desperate measures are designed for only one purpose – to prevent revolution. Governments are fearful of what might happen when the music stops and everyone is left without a chair to sit on. They are just trying to stave off the inevitable.

    Are we witnessing the fall of civilization in our own lifetime ?

    1. Jerry
      February 25, 2016

      @Mark B; “You cannot buck the market ! As someone once said. [..//..] Are we witnessing the fall of civilization in our own lifetime?”

      I doubt it but we might be seeing the dying throws of that late 20th Century religion called Mormonism. Oh and that someone, talking about the market was wrong, sort of, whilst you can’t buck a free running market both Bulls and Bears can be guided to cause the least damage in the long term – but often only by the use of some very stout fences and rails, planning and regulation in other words…

      1. Jerry
        February 27, 2016

        @Jerry; I really didn’t mean to bring religion in to this, sorry for the Tyop!

    2. Lifelogic
      February 25, 2016

      Well I am not sure that “preventing revolution” is the real reason (not in the UK anyway). Surely it is just another ways to tax people. You can tax people, you can print money to devalue (tax) their savings and wages or you can borrow (on the back of their future taxes). All three are just forms of taxation in the end – this so that Osborne’s endless government waste, the state sector pensions/wages and the public services can merrily continue delivering largely dross to the public.

      Talking of dire public services, I see that a B grade at A level today in Maths would have been just an “E” back in the 60s. Certainly my impression looking at past exam papers.

    3. oldtimer
      February 25, 2016

      If not anything so dramatic as the fall of civilisation, there might well be a fall of the ruling order.

      Spendthrift governments like, want and need inflation. The Bank of England’s target is 2% per annum. Without that inflation it becomes impossible to inflate away the consequences of the huge debts the government has piled up. The EZ itself is an unstable construct with huge accumulated debts which someone, somewhere will pay for either by investors swallowing defaults or by the German (and British?) taxpayer. (It would be helpful to know your opinion on Javelin’s recent contention that the UK taxpayer is on the hook for these per the Tusk letter).

      No doubt concern about the consequences of Brexit on the stability of the rest of the EU is, probably, one reason for the hand ringing and scaremongering we have witnessed from the PM and the Remain campaigners in recent days. That may be true, but it is not a good enough reason for the destruction of UK democracy.

      Reply No, I do not agree and explained why

    4. Tad Davison
      February 25, 2016


      Some commentators keep saying how well certain economies are doing, but they seem to prefer to ignore the massive debts they have as if that part of the equation didn’t matter. Whilst money is cheap, economists feel that we don’t need to worry about such things. Someone, somewhere has a massive hold over us, and that makes me feel singularly uncomfortable.


    5. Hope
      February 25, 2016

      We will still get benefits without paying in says Hungarian PM! Is this the fundamental change Cameron has got? Come on JR, he has got to go. No one is holding his fake deal to account at the expense of the U.K. Taxpayer. Cameron is literally giving away our taxes to support the economies of EU countries! When is the Tory party going to get rid of this arrogant bully who is doing his best to deceive the British public with civil servants who are paid for by the taxpayer. He will cleanse your party of even more Eurosceptics before he goes.

      Reply We are trying to win the referendum which he has helped us secure!

      1. Lifelogic
        February 25, 2016

        For all his faults Cameron has delivered a referendum, perhaps not quite a fair one, but one that ” leave ” will I think, prevail. This despite the BBC and the clear bias of big business, academia and much of the state sector.

        Helped greatly by the worthless deal he negotiated.

        Well done Cameron!

      2. Hope
        February 25, 2016

        Yes he did, because of the threat of UKIP winning the EU elections. You feel it was because of Tory MPs, but you are in a small minority in your thinking. He ignored you before, he ignored and denied the public wanting a referendum in 2010, he had the chance to alter Lisbon in 2010 and decided not to even though he warned us previously of the dangers of Lisbon, he lost his chance to have meaningful renegotiation when Germany asked for the fiscal pact. He did not expect to deliver on an EU referendum. Like most people he thought it was going to be a hung parliament where the lib Dumbs would save him from delivering. Do not expect to be successful if you carry on with this line of thought while he bullies, deceives and uses every resource available at taxpayers expense.

        1. Jerry
          February 27, 2016

          @Hope; “Yes he did, because of the threat of UKIP winning the EU elections.”

          If UKIP are to be believed, about how much influence MEPs actually have, those EU elections are totally and utterly irrelevant so why would any party be worried about how well they do or not? If Cameron was pressured by anyone it was people like our host, at Westminster, not UKIP in what they themselves call an undemocratic talking shop – if it isn’t, why are UKIP so desperate to obtain Westminster MPs, and if they can’t do so by way of (by-)elections then defections are will do…

          “Hope” is the one thing the UK doesn’t have with UKIP around, boasting as they did about being the cause of the 2010-15 coalition that kept us in the EU for five further years. UKIP, the most pro EU party in the UK!

  5. bluedog
    February 25, 2016

    The authorities have been very astute, Dr JR. One reads they have been issuing Gilts on coupons around 3 pct and with a maturity of up to 45 years. If this is correct the quickest way to reduce the value of Britain’s outstanding debt is to raise interest rates and let the market do the rest. This is the sort of fiddle that should appeal to Cameron, so it’s surprising we haven’t seen it.

    1. Lifelogic
      February 25, 2016

      Well if people are daft enough to buy these 45 year gilts – caveat emptor.

      1. Lifelogic
        February 25, 2016

        Are perhaps the pension/insurance companies and banks being regulated or pushed into hold these “investments”?

        1. Colin Hart
          February 25, 2016

          They certainly seem quite happy to sign anything No 10 puts in front of them.

          How any self-respecting CEO can claim we now have a ‘reformed EU’ suggests they are either stupid or dishonest.

          At least some of the military top brass have now admitted to being pressured.

        2. bluedog
          February 26, 2016

          A lot of the buyers would be sovereign wealth funds and central banks seeking to diversify from US dollars and Euro.

    2. ChrisS
      February 25, 2016

      Raising interest rates when there is no inflation to choke off would be foolhardy in the extreme.

      The British economy is still in no shape to take interest rate rises. This particularly applies to households who are are only just starting to see the benefit from fuel cost reductions which will be, at best temporary. Only the maintenance of very low mortgage costs have enabled many to keep going in the face of increasing prices and low or no wage rises over the last five years.

      Most households would find even a small rate rise and the resulting increase in mortgage costs extremely disconcerting. Worry about future rate rises would rapidly lead to a reduction in household spending just at a time when we need to see domestic spending increase to help demand.

      The vast majority of small businesses, the kind that don’t sell into Europe, and are likely to vote NO, are not making big profits. Customers of all kinds demand prices so low that they can barely make enough to cover costs, let alone invest for the future. We have seen this in our marine business where we have frequently been made offers for our boats that are ludicrous : way below cost.

      Thankfully events have postponed the likelihood of rate rises well into 2017 at the earliest. I have been seriously worried about the prospects for the economy had rates been increased in May 2015 as was forecast in 2014.

      1. bluedog
        February 26, 2016

        A collapse in the Chinese banking system is not out of the question and would have serious implications for global liquidity. In that event the currently bizarre incidence of near zero or negative interest rates would rapidly become a memory. We can’t expect exceptional circumstances to last indefinitely and the banking system and investors need returns rather than negative returns. It follows that Events rather than Policy may be the catalyst for a change in interest rates – upwards.

        Reply The Chinese banking system is heavily supported by the Chinese government. Chinese monetary policy can cut rates, create more money, lend on favourable terms to banks etc I do not think your scare is a sensible prediction.

        1. bluedog
          February 26, 2016

          Reply to reply. One would love to believe you, Dr JR, but the omens are not good. In the first instance, recall the Chinese stock-market was backed by the full resources of the Chinese state, but that didn’t work too well, did it?

          We need to consider the underlying philosophy of the Chinese Communist Party, which is essentially that no-one shall fail. This makes sense in a politically totalitarian state where the political voices and aspirations of the masses are denied. However the economic implications are that moral hazard is inadvertently encouraged, and that risk is not merely mispriced but completely removed. Thus decisions are made by business, local government and individuals that bear no relation to economic reality, and to protect its position of power, the CCP implicitly assumes these risks. The sovereign risk represented by the Chinese state is therefore very large, unquantified and unmanaged but accruing on an ad-hoc basis. At some point this policy will reach its natural conclusion with catastrophic results. See Prof. Zhu Ning’s book ‘China’s Guaranteed Bubble’, sponsored by Prof Robert Schiller of Harvard.

  6. Mike Stallard
    February 25, 2016

    Mr Peckover of Wisbech was a convinced Christian and a Quaker. His aim in life was to get nearer and nearer to his God. His life was straight and honest and he was totally trustworthy.
    People loved Mr Peckover because he took their money, put it in his house safely and then gave it back when they needed it.
    They trusted him totally. Their money was safe. And, being Christian, he took interest in them as people and would perhaps lend a bit to reliable friends if they needed it. His town became one of the richest in England.

    Motto: without probity and without trust the whole thing crashes. Do I trust these huge banks? Why are they there? What function do they actually perform? On what are they basing their capital? Paper?
    If I don’t understand it, I do not trust it. Just like the derivative scandal…

  7. matthu
    February 25, 2016

    I see that Lord Owen is supporting Brexit (Lib Dem. Really?) and that Michael Gove is supposedly facing the sack as Justice Secretary in the wake of his decision to oppose Cameron over Brexit and recently we had Boris being trashed in parliament.

    What is going on? My guess:

    I guess the government is desperate to position anyone from the establishment who will be acceptable to the Leavers as a potential leader.

    Originally the intention had been to have Vote Leave designated as the official Leave team, but this is looking increasingly unlikely since Farage sacked his deputy chair (who had aligned herself with Vote Leave) precisely to frustrate the chances of Vote Leave gaining official designation by being to claim they represented all the interested political parties.

    So now they want to parachute almost anyone in to lead Grassroots Go. Whether it is a supposedly disaffected Boris, a slighted Gove or a new champion in the guise of Lord Owen.

    The point being that IF the government can get the people to back this new champion, he can later win a resounding victory for OUT and then immediately appear to have the authority to re-open negotiations with the EU – and we end up with associate membership under another name.

    Grassroots are equally determined not to be seen to have a readily identifiable leader precise because they want to avoid this carefully orchestrated scenario.

    Getting interesting!

    1. matthu
      February 25, 2016

      Perhaps that is also the reason for having that particular lurid shade of green tie as the symbol behind Grassroots Go: they figure that no-one from the establishment would want to be seen dead wearing such an awful tie! So they inoculate themselves from being too easily taken over by a member of the establishment!

      1. Tad Davison
        February 25, 2016


        I couldn’t care who wears what, just as long as people campaign to vote for ‘out’.


    2. James Matthews
      February 25, 2016

      How Machiavellian are our established leaders? I hope not as much as you suggest, but who knows? Richard the Second is said to have talked himself out of trouble when he met the peasants at Smithfield during Wat Tyler’s rebellion by promising them “I will be your leader” after the Lord Mayor of London had attacked and fatally injured Tyler. The end result – all concessions to peasants withdrawn.

      A few mildly concerning historical resonances of late. Not least the tendency of Grayling, Boris, and to some extent even Gove, to pull their punches when speaking of Cameron’s abysmal agreement.

  8. Richard1
    February 25, 2016

    Interventionist monetary policy has distorted asset prices and investment decisions. whilst there seems to be an endless stream of regulation, taxes and fines on banks, governments have still shied away from the one thing that would ensure banking stability in any future restructurings – obliging banks, like companies in other sectors, to work with sensible levels of leverage.

    One effect of the EU driven bonus cap seems to be that base salaries over the last few years have risen 2-3x. This of course makes banks’ cost bases less flexible and makes incentivising performance more difficult.

    The problem’s the government as Ronald Reagan might have pointed out.

  9. Gary
    February 25, 2016

    we are coming to the end of “money as debt”, as mathematically sure as a geometric progression of debt eventually consumes all equity.

    They first tried fractioning reserves ever finer, then they tried stoking loans into a house bubble, then they tried transferring that into a sovereign lending bubble under QE, then they tried a student loan bubble, a car loan bubble, and when all that creaked under its own weight they started negative rates. Now that will failed. They tried moving the debt off book into the OTC derivatives markets and that is now $ hundreds of trillions notional. Painted into a corner, it’s game over. The toolbox is empty and the crisis is global.

    Next comes what von Mises promised :

    “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

  10. Lifelogic
    February 25, 2016

    The way to growth and to economic recovery is to reduce the size of the largely parasitic state sector and release the private sector from the absurd burdens or over regulation, over taxation, over borrowing and money printing by the state. It is hardly rocket science.

    The government’s current policies create perverse and damaging incentives to do endless economically stupid things and also grows the vast armies of tax consultants, HR experts, H&S experts, the legal profession, bureaucrats, tax inspectors and the likes. Essentially yet more parasitic activity on top of the largely parasitic and nearly 50% of GDP state sector.

    Just as the green grants and HS2 create endless perverse incentives to pointless and damaging actively.

    Just get Osborne to stop wasting money hand over fist for a change. Leave the money with the productive people who made it and who would invest it or use it far more wisely than the state ever will.

    Indeed it would be very hard to invest it worse than Osborne manages to do.

    Furthermore make the UK a destination for the wealthy and hard working rather than chasing them away as now with his changes to non dom laws, his inheritance tax ratting, pension robbing, landlord/tenant thieving and all the similar damaging nonsense.

    We only have to vote “leave” to be rid of Osborne and Cameron. Surely they should both join the LibDims where they would feel completely at home with their pro EU, greencrap, big state, ever more government, regulations and tax, magic money tree dopes. Let them enjoy their gold plated, inflation linked, state pensions – having robbed and destroyed everyone else’s.

  11. alan jutson
    February 25, 2016

    I am but a simple soul as far as finance is concerned, and have always attempted to live within my means, only ever borrowing for house purchase, or if the interest rate was absolutely zero, with no charges whatsoever.

    Seems to me, the more you mess about with trying to avoid confronting a financial problem, the worse it is in the end.

    All these so called stimulus ideas are really just smoke and mirrors, and delay the inevitable day of reckoning.

    Aware that Government can print money, and do “fake” transfers (creative accounting) by moving from one account to another, but in the end you end up devaluing the currency or get further into debt.

    I am now retired and so on a limited income, I recognised that would be the case many years ago, and so had planned accordingly.

    Shame the government cannot do likewise.

  12. Antisthenes
    February 25, 2016

    Monetary and credit expansion like QE and low interest rates only give the illusion of prosperity and leads to malinvestment and inflation. Fiat money and central banks make booms and busts inevitable and more frequent and harmful. Central bank policies are about to prove once again that truth. We have seen it all too often before.

    We said QE would have repercussion and it has by inflating asset prices and causing money to be invested in non productive areas of the economy and now that asset values are tumbling a bust must surely follow. Of course the clamour is to repeat that which is causing the problem which is like throwing fuel on to a fire to put it out. Even some notably the Corbyn’s of this world calling for governments to indulge in legal counterfeiting. So once again the cycle will start all over again.

    Do we have the means to cope with another recession. I am doubtful as we have used up most of our resources in fighting the last one.

  13. Lifelogic
    February 25, 2016

    It is indeed like trying to drive a car with one foot hard down on the accelerator(money creation) and the other hard down on the brake (cash and capital controls). No wonder there is not much growth.

    The brake though is not just cash and capital controls. It is also the bloated state, the vast over taxation of everything, the over regulation, the expensive religious energy, the endless tax and regulatory complexity, the absurd litigation culture, the augmenting of the fit but feckless, the low skilled net liability immigration, the endless misdirection of the private sector (though grants and regulations to encourage daft things like wind, PV, cap, set aside …..

  14. rick hamilton
    February 25, 2016

    Despite all these global problems BBC World TV continues every day with its pro-EU brainwashing. Business News today prompting the head of Airbus to say he can’t guarantee no job losses if we leave (even though they have said they will stay in UK whatever happens), and stating flatly that the fall in GBP is due to “Brexit fears’.

    Can nobody stop this out of control propaganda machine or force it to give the other side equal airtime?

  15. Ian Wragg
    February 25, 2016

    The markets are suffering a massive realignment after years of government stupidity. This is reflected in politics where the failed legacy parties are being swept away by upstarts who aren’t going to use unlimited immigration to give the illusion of growth.
    People are starting to see through the climate change con which is nothing more than a transfer of wealth from the ruled to the rulers.
    The people have had enough of lying and spin and are making it known at the ballot box.

    1. Jerry
      February 25, 2016

      @Ian Wragg; “This is reflected in politics where the failed legacy parties are being swept away by upstarts who aren’t going to use unlimited immigration to give the illusion of growth.”

      Swept away by what upstart parties? The SNP have been around since before WW2 so are hardly “upstarts”, whilst both the Greens and UKIP have but one MP a piece in the HoC (and remember that UKIP actually lost a seat at the 2015 GE).

      “The people have had enough of lying and spin and are making it known at the ballot box.”

      Indeed!… Hence why UKIP only have the one MP, who seems to have been re-elected more on his personal relationship with his constituency rather than the policies of the party he chose to join. Whilst of course the Greens have lost control of the one council they ran as a majority, primarily because the electorate comer4ed their record with their promises.

      1. Hope
        February 25, 2016

        Back to drivel Jerry. First past the post system should feature in your comment. Be glad UKIP secured an EU referendum for the country by people voting for them at the EU elections. Cameron denied the public the referendum in 2010.

        1. Jerry
          February 26, 2016

          @Hope; Back to personal assertions, and personal abuse, backed up by no facts what so ever, if I am so wrong @Hope you’ll have no problem citing the election results figures from the 2015 GE…

          As for your assertion that UKIP secured an EU referendum, how did they do that with just one MP, and as for the 2010 GE, what do you not understand, UKIP couldn’t even deliverer a single MP – the only person talking utter drivel is you @Hope, and your fellow failed UKIP friends. It is UKIP who owe a debt of gratitude to Mr Cameron and the Tory party not the other way around. Stop[ trying to rewrite the historical facts!

      2. Timaction
        February 25, 2016

        4million votes for UKIP at the general election. More than SNP, Libs and other minor parties combined. Many think fptp is archane and undemocratic. However, in the EU it doesn’t matter who hangs out at Westminster to implement their laws!

        1. Jerry
          February 26, 2016

          @Timeaction; 4 million out of a total electorate of 46,354,197 million, hardly a pin prick on the page of history!

          As for Scotland, yes the total electorate is a mere 4m total but the SNP obtained all but 50% of the vote (compared to UKIP’s 1.62%, heck the Greens in Scotland did better than UKIP…), something any other party can only dream of, even more so when compared to UKIP’s measly 12.64% for the whole of the UK

          Check you facts before spieling off silly UKIP spin-doctoring as a fact, you just make yourself look silly.

    2. Hope
      February 25, 2016

      Talking of lying and spin, I thought Cameron was against the something for nothing culture! Does he realize his Hungarian counter part is gloating how his citizens are actually getting exactly that on the back of the U.K. Taxpayer! Today we hear lies and spin from cabinet ministers who claimed to be sceptics supporting the failure of Cameron and his continued giving away powers, money and sovereignty to the Unelected EU. In stark contrast he is doing everything he can to silence his cabinet from speaking out against his failed negotiation. Doctor Owen is exactly right Cameron and his beloved EU are a dangerous threat to our security, defence, economy and culture. Why should the British public want the same laws, justice, rules and regulations as 27 other nations, some of whom are back what countries who joined the EU to escape the USSR?

    3. A different Simon
      February 25, 2016

      The progressive media elite on both sides of the pond seem to think that ordinary American’s are choosing to ignore Mr Trump’s flaws .

      They cannot grasp that ordinary people have assessed the flaws and still prefer Trump over the political class’s own candidates .

      UKIP valiantly tried to take on the establishment from the outside by starting a new political party .

      Trump has not done this . Instead he’s using the elites own tactic of undermining from within .

      If Trump can pull it off in America , ordinary people everywhere in the World will start believing voting can make a difference .

      1. Anonymous
        February 25, 2016

        If Trump can pull it off in America , ordinary people everywhere in the World will start believing voting can make a difference .

        We are getting PM after PM who are being promoted into office by the Security and Intelligence Services using their agents in the main stream media. Blair, Cameron, Theresa May, Osborne. The problem is our Intelligence and Security Services are themselves controlled by foreign powers.

        1. bluedog
          February 26, 2016

          The problem is our Intelligence and Security Services are themselves controlled by foreign powers.’ Fascinating. Exactly which one(s)?

  16. agricola
    February 25, 2016

    Descriptions of monetary policy of this nature are beyond my sphere of knowledge. Surviving the incompetence of economists tended to be my life experience. In my comparative youth, left foot braking was a norm in my chosen sport.

    I am much more concerned with Cameron’s banal performance at PMQs yesterday, at which he invoked his mother. She may have preferred not to have been dragged into his act. Whatever he may think of Jeremy Corbin it does not require descent to schoolboy playground levels of discourtesy. He is in danger of arousing the great British public’s sympathy for the underdog.

    Cameron would be better advised to answer the questions, than behave like some latter day Flashman.

    Cameron also needs to be taken to task for involving the civil service in support of his Europhile stance while denying their services to the out campaign. I would have thought that any information generated by the civil service should be available to all, not hijacked by one side or the other. It must be embarrassing for many members of the civil service, and not career enhancing should Brexit become a reality.

    1. Denis Cooper
      February 25, 2016

      Hold on, Cameron promised us an EU referendum, and he is delivering on that promise so we should be grateful. On the other hand as far as I can see he never promised that it would a FAIR referendum. He did say that for the Scottish independence referendum, but not for this referendum.

      1. agricola
        February 26, 2016

        You highlight the difference between some politicians and the norms of society, or the gap between the electorate and the Westminster bubble.

    2. stred
      February 26, 2016

      These days, with talk of negative interest rates and cashless banking and only 0.5% pa taxed, for the first time in my life I have considered taking my savings out in wads of £20s and sticking them under the floorboards. I live very inexpensively and should perhaps instead buy some very expensive classic car or paintings.

      Regaring Flashman’s performance, he should remmember that many conservatives, including aristocracts are scruffs, inclluding his ex mate on the back benches. I would consider Corbeau a good example of modest sartorial taste in his jacket and trousers. Eural comes over as some slick pushy bloke in a main dealer car showroom trying to sell you dodgy extras. Which other PM would have given his hairdresser an honour.

  17. formula57
    February 25, 2016

    But why the obsession with getting banks to lend? None of them can lend if there are not customers who wish to borrow and given the lack of demand for goods and services, which customers will have a need for borrowed funds for much-desired investment?

    So called quantitative easing has likely failed, except for its probable true purpose in inflating asset values (to preserve the value of loan collateral and prevent bank failures). The asset bubbles are deflating and the solution to that is apparently even more QE. This will not end well.

  18. Lifelogic
    February 25, 2016

    So Michael Gove faces the sack, reported today. Telling the true is always a rather dangerous thing to do in politics indeed in life too often. Cameron’s agreement is clearly worthless even were it binding. It clearly is not even binding.

    Sacking the messenger will not change these facts. It must be rather irritating for Dave to have used all those years and air miles and be given so very little, but there it is those are the facts.

  19. Bert Young
    February 25, 2016

    A hybrid approach to banking is confusing to bankers and customers alike ; banks are disciplined to keep their capital base in line with the risks they take and , at the same time restricted in the range of services they provide . Attempting to manage a business with the constraints they have is like trying to make a cake blindfolded .

    The Banking Industry needs controls , but the question is where should the controls end ?. Customers have a free choice as to what and how they borrow ; they have watchdogs on their side making sure things are kept in line , in the end they get what they bargain for and , if the Bankers step out of line ,they are punished and their shareholders suffer .The Vickers of this world have done a good job with reports and outside scrutiny and I think the time has now been reached to let market forces do the rest .

  20. Antisthenes
    February 25, 2016

    I have just come across this” It articulates far more informatively and eloquently the points which I tried not that well to back up my opinion that fiat money and central banks are the problem not the solution to our economic woes in my previous comment. In fact will be the cause of the next bust.

  21. JJE
    February 25, 2016

    I have read a little of the history of the German hyperinflation. One thing that struck me is that the authorities sincerely thought they were doing the right thing by desperately printing ever more bank notes. They thought the economy needed more money and they were doing what was needed to get it moving. The policy was crazy but when they saw it failing to work the solution was to ramp up the craziness. It didn’t end well.

    Today we have interest rates at negative levels never seen in economic history going back to Babylonian times and a Chief Economist at the Bank of England who wants to reduce rates further and abolish cash. No doubt he sincerely thinks this will help.

    We need to crawl back out of the rabbit hole while can still find the exit.

  22. acorn
    February 25, 2016

    Could I recommend a read of my “acorn” comments over at “mainly macro”, it will save JR having to read them here, before he deletes them. That site, Oxford Prof, JR’s alma mater, is central banks can cure everything with monetary policy, type site. Alas the last eight years have proved that they can’t and never could.

    MMTers already new this because they understand how fiat currency systems work; neo-liberals and new Keynesian economists, that study the subject at Oxford, don’t. My comments are in “The austerity winds have changed”. “Austerity’s apologists on the left”. and, “Whatever happened to the General Theory”. Follows a sample:-

    Agreed [Prof Simon Wren-Lewis], it is basically neo-liberal smoke and mirrors to fool the 99% and make the government budget look like a regular household (currency “user”) budget.

    No Bank, BoE included, has the power to bounce a Treasury cheque. Most entities operate with some form of balance sheet, including the BoE. The Treasury operates with an unbalance sheet, because it is the currency “issuer” and the currency “withdrawer”, via taxation, into and from the economy.

    Neo-liberal governments operate with what they call a “Full Funding Rule”. This means it issues what it calls “debt” instruments (Gilts and Treasuries), to match its fiscal (budget) deficit. There is no operational requirement to do this. It does it voluntarily, as part of the smoke and mirrors game. It has other voluntary constraints that keep circa 5,000 people employed at Treasury and the BoE. One is a “no overdraft rule”, which needs a daily cash management function by the DMO, (CGNCR = central government net cash requirement), another is keeping liquidity pools in commercial banks for big Treasury / HMRC pay days, to prevent destabilising commercial bank clearing functions.

    It is worth understanding the “DMO Remit”

    Look at who is holding all the Gilts that the Treasury does not actually have to issue! Ask yourself why Treasury, this year, is giving free money (£13 billion as interest) to foreign holders. Likewise, why is it giving free money (£13.6 billion) to private pension and insurance companies!

  23. Mitchel
    February 25, 2016

    If there is anyone out there who still buys into the security angle for staying in,Con Coughlin shreds it in today’s Telegraph.He also informs us that the special advisor who penned the botched letter from the former defence chiefs for No10 used to be Catherine Ashton’s advisor which says it all really.

    1. Denis Cooper
      February 25, 2016

      So it was Daniel Korski, who used to write for the Spectator puffing up the EU.

      What strikes me is that it shows up the inconsistency in UK government policy; if EU membership is so crucial for our defence as these military gentlemen have now said at the urging of Daniel Korski, why when he was speaking to the press in Brussels last Friday did Cameron gratuitously rule out the UK ever participating in a European army, even those his “deal” had nothing at all to do with that and did nothing at all to change the present position:

      “Likewise, we have established once and for all in international law that Britain’s national security is the sole responsibility of the British Government – so, for instance, we will never be part of a European Army.”

      As has been said, “never” is a very long time.

  24. ChrisS
    February 25, 2016

    Pro-Remain statements become more ludicrous by the day and smack of growing desperation. Minsters and CMD really should know better.

    Following on from accusations of the pressurisation of senior military figures to sign that letter ( I always thought that Generals were selected on their ability to stand their ground ), we have Theresa May supposedly tweeting :

    “Migration crisis would be same whether UK in EU or out. But as EU member we can work with others to strengthen external borders.”

    This is such an obvious lie !

    We are outside Schengen so our external border does not need strengthening.

    Contrary, to what Mrs May is tweeting, if we were Out we additionally would have the ability to precisely control the entry into the UK of all EU citizens and migrants ( both now and after they are inevitably granted EU passports). This we currently can’t do.

    When are the voters of the UK going to realise this ?

    About the middle of June, I would think :

    With 10 times the number of migrants having arrived in Greece in the first two months of the year compared with 2015, and no sign of any way of halting the flow, by the final three weeks of the referendum campaign, the crisis will be totally out of control.

    Hungary has already seen this coming and is to hold a referendum on whether it should accept compulsory quotas of migrants. Few would doubt that the result will be an overwhelming NO. Other countries will likely follow suit. This will give Brussels a real dilemma : another referendum result they will prefer to ignore but this time they won’t be able to get the country to vote again till they get the “right” answer.

    In a desperate attempt at a short term fix for Merkel’s migrant crisis, Brussels is likely to tell Turkey it can proceed with its request to join the EU, opening the doors to 90m more people of a different culture from every other current EU state. There can be little doubt that the accession of Turkey will be vetoed by the former Eastern Block states, whatever pressure is brought to bear from Brussels.

    One or two of the few net contributors to the EU budget might also exercise their veto because allowing Turkey in will open their coffers to pay to bring that country up to EU standards in every area.

    If we are still In that would mean another big increase in our net contributions.

    I always thought that June 2016 would be a good time to hold our referendum !

  25. Richard1
    February 25, 2016

    Just watched the video of your debate with the FT’s Martin Wolf (6 mins see FT website). Mr Wolf is probably much less accustomed to this kind of debate than you are, even so his arguments were astonishingly weak. They all revolved around trade barriers being put up if we leave. This seems highly unlikely as you point out. He is of the view we must be in the political union to enjoy free trade with the EU.

    A stronger argument by him would have been that there are all sorts of other market access issues, other than trade barriers. eg the pharamaceutical / biotech industry fear we would no longer be part of the European Medicines Agency approval processes and that body would leave the UK. Large banks such as Goldman Sachs argue that the EU system of passporting financial services within the EU has enabled huge synergies and market share gains for London based banks, which would be lost post Brexit. I think these will be the real areas for debate.

  26. John Swannick
    February 25, 2016

    So what to do? Seems to me the fundamental problem is collapse of faith in markets as the ultimate solution. Aren’t markets supposed to smoothe out volatility long-term yet we are seeing greater volatility. I was taught markets were supposed to even out (not remove) inequality but we are undoubtedly seeing greater inequality. The corporatist resurgence, the stockpiling of cash in companies or as payments to executives and stockholders without any commensurate increase in productivity or wealth generation, despite the new technology, is fuelling a new Luddism; people are afraid. Presumably the cause is government interference yet the world is turning against deregulation and liberalisation. It’s little wonder we now have the emergence of neo-Keynesianism. And those making the intellectual running in behavioural economics – which is where I suspect the answers lie – are Keynesians….including the Chairman of the Fed’s husband!

  27. Lifelogic
    February 25, 2016

    Alastair Heath is spot on as usual today.

    Also:- Net migration for the year to Sept 2015 was 323,000, well “no if no buts” I suppose it is in the tens of thousands, just 32 of them. Doubtless Cameron will tell us net migration would be even higher if we left the EU by some warped logic. Dave is backing the wrong horse as usual I think.

    1. Timaction
      February 25, 2016

      A no ifs or buts promise and a request not to vote for him if he didn’t achieve it. I took his advice knowing he is a man of no substance or principle. A Prime Minister who represents all foreign issues with our taxes. It’s a shame he forgets who he is supposed to represent. History will not judge him well.

  28. Bob
    February 25, 2016

    It seems that every interviewee on the BBC R4 Toady program this morning, when asked, said they were pro “Europe” (whatever that is supposed to mean). I wouldn’t be surprised if anyone who said they are pro independence got edited out.

    I see that the Bullingdon Bully Boy is putting pressure on his cabinet colleagues to keep schtum about the failings of his “EU reform” non-treaty.

    One of my forex broker’s fx email updates says:
    “The potential Brexit is one of the biggest risks facing the UK economy and the uncertainty leading up to the vote is likely to place a heavy cloud upon appetite for the pound. What should you be doing to protect your position?”

    If I were a speculator, maybe I would buy pounds. My my fear is that the referendum is going to be a 1975 style stitch-up. Mr Cameron is fully living up to his reputation as Mr Slippery.

    Reply On the same day that the pound fell, UK government bonds rose in price. So shouldn’t we say UK government debt is more valuable on fears of Brexit? Does that mean we could borrow more cheaply outside the EU, when we no longer have to pay all that borrowed money in to them?

    1. Denis Cooper
      February 25, 2016

      In their case the uncertainty is a potential source of profit waiting to be tapped.

  29. LondonBob
    February 25, 2016

    Negative interest rates are absolutely daft, bring back the Taylor rule. So little discussion of the now proven disastrous failure of the Euro, not just suppressing growth in the Eurozone but affecting global growth too.

  30. Bob
    February 25, 2016

    If the BBC were doing their job properly they would invite people from various sectors of British society to discuss the actual pros and cons of EU our membership.

    But they constantly gravitate towards people of their own persuasion so we will never get a proper analysis of the issues, just like the AGW racket, where they have closed down dissent completely.

    It feels like we are sleepwalking into totalitarianism.

  31. Antisthenes
    February 25, 2016

    Going off on a tangent. Richard North someone I do not often see eye to eye with compared David Cameron’s deal with that of a UK parliamentary white paper. If I am understanding that correctly and he is correct in that assumption then the deal has no more legality than a white paper which is none until it is incorporated into law. So until the deal is written into a treaty then no one is bound by it and probably like a white paper will not respond to the many provisions that are not already covered by existing treaties.

    Reply Not so. It is a legally binding international agreement, binding on the parties to it – the member states. It can only be changed by all 28 including the Uk consenting. It does not, however , bind the ECJ which will still have to interpret the treaties in any case coming before it on matters covered by the Agreement.

    1. ian wragg
      February 25, 2016

      So the ECJ will side with all the challengers and so the agreement is worthless.
      The ECJ is there to promote the project so will find against anything not enshrined in a treaty.

    2. Denis Cooper
      February 25, 2016

      And what effective legal remedy could we, by which I mean the British people not the UK state, seek if one of those 28 EU leaders, or his successor, changed his mind after we had voted to stay in? One would be enough to stop it proceeding, and it could be one of the other 27, perhaps after a change of ruling party or parties in their country, or in view of his record it could even be David “Jam Tomorrow” Cameron himself. The true answer is: we would have no feasible, effective, legal recourse at all. There is no court to which we could turn to enforce this political agreement which is claimed to be binding in “international law”, and surely if an agreement cannot be enforced by any accessible court and depends entirely upon politicians keeping their word – LOL – then that agreement may be a political agreement but it cannot honestly be described as “legally binding”, can it?

    3. graham1946
      February 25, 2016

      Reply to Reply

      Exactly. It may be a legally binding agreement in international law, but the ECJ does not do international law – it only does EU law. So if it’s not an Eu enacted law, (which it isn’t, unless there has been an act which we have not been told about), but is just something lodged at the UN, what then? It is free to interpret it anyway it sees it to fit in with the EU and when push comes to shove, they will support the UK against the EU? I’m certain Gove, will have had legal opinion before speaking and knows more about it then Cameron or Tusk. It may be their intention, but law it ain’t.

  32. Robert Christopher
    February 25, 2016

    Issues far away in distance need to be monitored, as do issues far away in time. We many not have the resources to deal with ‘far away’ concerns. For example, the Commission need to be questioned about what they are planning, post referendum:
    Brussels presses the hold button on Brexit
    Ahead of referendum, EU seeks to avoid controversy.

    “European Union officials aren’t just determined to keep mum during the U.K.’s referendum campaign: They are refusing to move key legislation out of fear that they might fuel support for a Brexit.

    Officials and politicians said several EU initiatives have been put on ice or pushed off the agenda in an effort to avoid stirring up controversy before the June 23 referendum in Britain.

    It never rains, but it pours.

  33. miami.mode
    February 25, 2016

    I’ve just read on the Guardian website that David Cameron in a speech at the BAE Systems factory has said that 3 million jobs depend in some way on our trade with the EU and that if we come out this could lead to higher prices in the shops and, I guess, higher inflation.

    I thought that George Osborne, by his approval of QE, was trying to get a bit of inflation. Are they confused about which side they should be on?

    1. Anonymous
      February 25, 2016

      3 million jobs are no good to us if we must take in 5 million people from the EU. Especially if we have no say on the quality of those coming in.

    2. miami.mode
      February 25, 2016

      PS I see that Network Rail have got a proper train running on their tracks today.

    3. stred
      February 26, 2016

      A couple of the giant Airbuses fly over us at about 3000ft about 5am on their way to Heathrow from down under and the Far East. They whisper by and it makes me proud that these marvellous machines have British wings, engines and other bits which, together with parts from other partners in Airbus, are assembled in Toulouse. I wonder where Dave thinks they will find the wings and other parts once they have ditched British Aerospace and whether the dreaded falling pound will discourage them from making further purchases.

  34. ian wragg
    February 25, 2016

    Just for the record, with a grid load of 46 GW as I type, wind is supplying 0.42 GW pr 0.88% of demand…..and still they want to build more of these useless monstrosities.
    Stupid or what……..

  35. Denis Cooper
    February 25, 2016

    More from our “jam tomorrow” Prime Minister:

    “David Cameron has said that a future British Prime Minister could seek to negotiate more opt outs for Britain if the UK stays in the European Union after the June 23 referendum.

    He said: “Is it the end of the need for reform in Europe? No.

    “And the next time there’s a full on discussion of treaties and treaty changes, I think we could go even further and say, ‘right, we’ve sorted out getting of the single currency, we’ve sorted out staying out of the Schengen no borders agreement, we’re now out of the ever closer political union’ and at the next set of discussions, there may be more arrangements that Britain wants to confirm or strengthen.””

    If people believe this con artist then they will deserve what they get, just a pity that the rest of us will have to suffer it as well.

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