Figures confirm economy doing well, no recession

Yesterday saw the ONS publish the output figures for the second quarter, which they revised upwards to growth of 0.6% for the three months, 2.2% higher than the previous year. This is right in line with the Treasury March forecast before they slashed it as part of Project Fear.

More importantly we also got their first version of the July service sector output figures, the first full month after the vote. This was the month where the gloom mongers said we would see a sharp shock into recession as confidence was undermined by the UK decision. Instead the service sector grew by 0.4% on the month, and by a lively 2.9% over the year from July 2015. As services are 80% of total GDP, this augurs well for general growth in the economy.

I am sticking with the Treasury March forecast of 2.2% growth for 2016 as a whole, and see no reason to revise that forecast downwards. I note that many of the official forecasters and the Investment banks are busily revising up their stupidly low for casts for 2016, made as part of their belief that there would be a large confidence effect from a Brexit decision. It is difficult to get to a short term post Brexit recession from those July figures. August may not have seen similarly fast growth, but it did not tip us into recession from 2.9% annual growth a month earlier!

There were also surveys yesterday showing growing confidence in business as well as amongst consumers. I am always less inclined to trust surveys, given how misleading the surveys taken a few days after the vote were. What seems to be happening is those answering the questions seem to be wanting to get their answers more into line with the reality on the ground, after letting off steam and anger about the vote in its immediate aftermath.

The previous Chancellor did take actions in March against Buy to let, against purchase of dearer houses, and against insurance policies which are still having some negative impact. The Chancellor has recently announced he sees no need for the special help with borrowing to buy a second hand home, and will be withdrawing parts of the Help to Buy scheme. There’s a sign of confidence for you.


  1. Lifelogic
    October 1, 2016

    You say: Osborne took actions in March against Buy to let, against purchase of dearer houses, and against insurance policies which are still having some negative impact.

    In other words he increased IPT insurance tax to an absurd 10%, stamp duty up to an absurd 15% (with the extra 3%) and he prevented landlords deducting their business costs.

    All these are just tax increases, they increase the cost of housing and decrease supply. They mainly fall on tenants with higher rents. All are hugely misguided and should be reversed as should almost everything the misguided IHT ratter and pension pot robber did.

    1. Lifelogic
      October 1, 2016

      Osborne also (and totally dishonestly) claimed that he was doing this to level the pitch between landlords and owner occupiers (in their treatment of interest). If he really believes this he must be even more stupid than I thought he was.

      What he was actually doing is just taxing people on profits they are not even making. The result is higher rents and less supply of properties to rent in the future. What is needed is more supply of houses and flat (or fewer people) not pathetic & unfair fiscal attacks on landlords and thus on tenants.

      Meanwhile richer landlords without borrowing suffer no such fiscal mugging.

      It all falls back on the tenants in higher rents in the end. Why does Osborne not do the decent thing, resign and perhaps write some real fairy stories in his retirement?

  2. Lifelogic
    October 1, 2016

    Alas we have lefty dope Hammond (see the interview in the Telegraph today). It seems he is pushing May’s bonkers agenda of workers and customers on boards and other totally misguided attacks on businesses.

    The only thing I agree with is better controls (for shareholders) over executive remuneration (often dishonest & dodgy directors and executives too).

    Governments are incompetent at running the state sector so why on earth do they think they know how to run other people’s businesses too? With central wage controls and endless other daft demands? The effect is to render business less able to compete, push some overseas, reduce jobs, standards of living & the tax take.

    What lefty plonkers May and Hammond appear to be.

    1. Lifelogic
      October 1, 2016

      Hammond should be going for lower flatter taxes the abolition of IHT, cheap energy and huge deregulation. It seems he is just another bonkers socialist light.

      But then again is the agenda to go for an early election perhaps? Trying to appealing to all the lefty dopes with this counterproductive, central control tripe. It will, I assume, become very clear in the Autumn statement.

      Are Hammond & May
      A. Lefty misguided dopes like Osborne and Cameron.
      B. Going for an early election by pretending to be lefty misguided dopes (but then becoming a real conservative after getting a better majority)
      C Are they just going to go for a sensible agenda of lower simpler taxes, cheap energy and far less regulation straight away.

      They have after all already flunked cheap energy with the Hinkley C insanity after all.

      1. Lifelogic
        October 1, 2016

        I see that Hammond is also bent on the government picking winners again with tax payers money. Do politicians never learn anything? At least his choices look rather better the outer space exploration or HS2.

  3. Brexit
    October 1, 2016

    Yes, good news yet again, despite some attempts to hijack the news yesterday with some comments in Paris by Nissan.

    O/T – It seems Mr Redwood is being modest. He hasn’t mentioned his role in being the organiser of the private “Road to Brexit Conference” at All Souls College in September, attended by ministers, ex-ministers, MPs, government officials and other experts.

    The report from the Conference was finally released last night and is already being referred to as the “Brexit Blueprint”. It has been circulated to the PM and her advisers, and it makes great reading. We thoroughly recommend it to all interested in Brexit and understanding how it could happen without undue fuss.

    We have more about this here : including a link to the full report, and it will be updated throughout the morning.

    Best wishes, the Team

    1. hefner
      October 1, 2016

      Maybe Daniel Hannan also did a bit more and certainly more efficiently than our host? A question of generation, maybe?

    2. David Price
      October 2, 2016

      thanks for the link, have downloaded and will read.

  4. Iain gill
    October 1, 2016

    The chat boards for my profession are full of doom and gloom. And on the coal face it does appear to be desperate. Mainly caused by mass import of cheap workers from India though, intra company transfer for the outsourcers though and nothing to do with brexit.

    Politicians seem hell bent on destroying the British workforce.

  5. Denis Cooper
    October 1, 2016

    Early days yet, so far it’s only short term. However given that the economic benefits of the EEC/EC/EU/USE project have been vastly exaggerated by its proponents I’m confident about our long term economic future outside the EU even if there are some losses in the medium term. One has to put particular instances of negative effects in the wider context.

  6. Jerry
    October 1, 2016

    Not sure if there is a story here or just more spin from those connected with Vote Leave.

    Scare stories were put out by all sides before and during the referendum campaign, and most were to do with actually (Br)exiting the EU or voting to remain and thus getting dragged further into a federalising union, not our current position limbo. Spending could be up due to many reasons, good or bad weather, people feeling confidant about Brexit, the economy generally or they could be buying (perhaps larger ticketed) items that they fear might be either in short supply or subjected to tariffs post real Brexit. Much the same for “Help to Buy”, yes it could be a sign of confidence, it could also be a sign that the government need to substantially reduce spending in the wake of our pending Brexit.

    On a Brexit related issue, the BBC are running an article on their news website citing your Brexit Blueprint,

    In the article it quotes you as saying [BBC quotation marks];

    “If there is a breakdown or no likelihood of agreement, then the UK should withdraw and after the two-year period the UK will be formally out. Trade will revert to World Trade Organization rules.”

    The article goes on to claim that you asnd your fellow ex-ministers think that once A50 has been triggered (not completed or abandoned) the government should also repeal the 1972 Act of accession. But surely until the UK has agreed exit terms under A50, that would be illegal under EU law and thus hardly the way to obtain the agreement of all EU27 via A50. If the article is correct and this is your thinking then basically such a Blue Print would almost certainly consign the UK-EU trade to WTO rules for at least two yeas and probably much longer.

    Is that a joint of prime lamb being presented on a silver platter before us, or just scrag end of mutton dressed up to look like lamb?….

    1. Patrick Geddes
      October 1, 2016

      Just hang on a little bit Jerry and all your worries will be answered.
      You are getting a bit frantic.
      We’ve been in the EU for many decades and now you want us out in a few months.
      All will be revealed.

      1. Jerry
        October 2, 2016

        @Patrick Geddes; Like Edward2 you seem to be responding to a comment I have not made!

        I am fully aware that there is 44 years of EEC/EU derived legislation, that said though, actually it would take no more than a couple of full days in parliament to leave the EU and either repeal or absorb such laws into post Brexit UK law – Spain did something similar back in the mid ’70s when their parliament abolished 36 years of Franco era dictatorship and many laws.

        My point was that we can not leave the EU until any A50 agreement has been made or we choose to simply leave on WTO trading terms etc. should A50 negotiations fail, if that is not the case perhaps someone could explain how UK can be both legally in and outside of the EU at the same time! Nor does today’s news (Sunday) that Mrs May [1] will be introducing a “Great Repeal Bill” shed any more light on this, a Bill could sit around for years before being passed into an Act, and then an Act can also sit around the years (if not decades) before enacted – in this case actual repeal.

        [1] In my opinion Mrs May has been very ill-advised in announcing this, she will now be a millstone around her governments neck.

        1. Jerry
          October 2, 2016

          Oops, that should have read; …this will become a millstone her governments neck.

        2. Patrick Geddes
          October 2, 2016

          You make things sound so very complicated Jerry
          Seems simple to me and the PM
          We shall see

          1. Jerry
            October 2, 2016

            @Patrick Geddes; If it is so simple why wasn’t Article 50 triggered on the Monday following either the referenda or Mrs May becoming PM, why will it have taken possibly something like nine months just to trigger said Article 50 – heck if it’s as simple as you suggest why has it taken three months already…

          2. Edward2
            October 2, 2016

            What’s the hurry Jerry
            We’ve been in for over 40 years and now you want us out in weeks !
            I thought you wanted to stay in.

          3. Patrick Geddes
            October 2, 2016

            It’s a strange argument Jerry
            You don’t want us to leave and you constantly tell us leavong will cause us grief yet you want us to hurry up and invoke Article 50
            I’m confused.

  7. Lifelogic
    October 1, 2016

    Did the EU taxpayers get anything useful from the Euro 1.3 billion of tax payer’s money they “invested” on the Rosetta mission? If so what was it and where is my share?

    I cannot help thinking that all these clever engineers and scientist could have done thousands of times more good in many other areas of science, medicine, desease control, and engineering. Was it just another EU, political publicity stunt? Indeed perhaps millions of times more good or even an infinite number of times more good.

    1. Lifelogic
      October 1, 2016

      I suppose Rosetta make even HS2 look relatively sensible!

    2. chris
      October 1, 2016

      I suppose you do not think we should have gone and proved the earth was not flat either.

      1. Chris
        October 1, 2016

        Not me posting above as chris. Please can something be done to protect an individual’s identity, Mr Redwood? Just changing one letter from upper to lower case is not good enough. I do not wish to be assigned comments which I did not make.

        Reply I cannot take responsibility for what people call themselves

      2. Lifelogic
        October 3, 2016

        When everthing we can see in the sky is fairly spherical, why did people ever think it was flat anyway? It even looks curved from on Earth, did the sensible ones really think it was flat?

        Anyway I merely make the point that we do not have enough money to do everything, so why not get the best bank for our bucks. Do the more sensible things first. Rosetta should be way, way down the list. £1 billion could easily have saved more than 10,000 lives for example, were these 10,000 lives a price worth paying, for the almost nothing of value we got from the project?

  8. Ian Wragg
    October 1, 2016

    Re your last paragraph, Gideons nonesense approach to the housing situation made matters worse.
    My friends wish to buy a derelict property to renovate and eventually move into funded by the equity in their current property. Under the new rules they are penalised on stamp duty so it is unattractive.
    Talk about the law of unintended consequences.

    1. Lifelogic
      October 1, 2016

      Indeed, they are hugely damaging, unfair and totally counter productive, but then most of what Osborne did was exactly the same. His attacks on non doms, which is driving many away, for example.

    October 1, 2016

    The Help to Buy Scheme was seen in some circles, my circles, as placing even more people in a position where any change to the downside in the economy would cause heartache and despair.
    Home ownership is populist and as far as British Conservatism is concerned,Conservative. It’s a mugs game for all that.

  10. Anonymous
    October 1, 2016

    Slightly off topic here but it’s time to dispel the myth that those who voted Brexit followed extremist opinion (of which I heard nothing of the sort during the referendum.)

    I’ve heard it rather often that even John Redwood is an ‘extremist’.

    That the EU is a bad thing is the mainstream opinion in Britain – confirmed by referendum – and with encouraging economic figures such as those that you report today I think a referendum taken this day would be in favour of Brexit by 70%. So many people in my circle voted to Remain because they feared the unknown.

    I understand that we have not left the EU and that things could well be tough but I believe they will be even tougher if we stay.

    I would like to say to such as PvL and Newmania that their opinion lost the referendum for the simple reason that it was wrong. The ego is a delicate thing, I understand that. So much easier to say that the people were ill informed, nasty or stupid rather than admit that one’s own towering intellect is flawed.

    1. Lifelogic
      October 1, 2016

      JR is surely just the expression of fairly middle of the road common sense and what actually works best. Alas common sense is not that common, particularly at the BBC and in most politicians & bureaucrats.

  11. Prigger
    October 1, 2016

    The media spends a great amount of time each day repetitively telling everyone how bad the economy is doing—how this or that statistic proves how bad it is and even the seemingly good statistics suggest a variety of “overheating” which will inevitably bring doom.
    The BBC and Sky News are very good at weather forecasting however. Nine out of ten times they predict typical British weather, bit of this, bit of that, bit of wind, bit of calm , drop of rain, a touch of sun. We would be a lesser nation without their sterling efforts to inform and communicate at all levels.

  12. Antisthenes
    October 1, 2016

    Too many have beliefs set in stone like science on climate change is settled, only Keynes has the correct economic theory, social democracy and progressiveness is right every other political ideology is wrong, socialism is good free market capitalism is bad, the NHS is the envy of the World, only the EU can make us prosperous and keep us safe. The list is long(a book could be written on the quantity of erroneous beliefs we hold) and everyone one of those beliefs is based more on idealism and intuition instead of on evidence, logic or common sense. So it is no surprise that forecasts have the propensity to be consistently wrong. So much of what we do is a leap of faith.

    Those of us who wish to leave the EU I would like to think we want to based on the evidence which is available in abundance. Evidence which we interpreted correctly which the remainers did not or just ignored as idealists are prone to do. I believe we did based on the number of incorrect forecasts made by both sides. A quick tally would suggest that all of the remainers claims are wrong so far at least and only one of the leavers claims has yet been proven wrong and that only partially. Many of the claims of both sides are yet to be tested. So far the remainers have managed to gain a reputation for falsehood and a bad track record on forecasting it is to be hopes that will remain the case up to and after Brexit.

  13. Yudansha
    October 1, 2016

    Well. To date the figures certainly don’t bear out the Remainer’s gloom about Brexit but we are still in the EU.

    We should aver from the Remainer’s trap of attributing all good news to our arguments and all bad news to theirs. Alas there will be bad news from Brexit (which I voted for.)

    Doubtless some anti-Brexit corporateers mean what they say when warning that they will relocate factories.


    The demands they place on us for having those factories here – loss of political control and border control – are far to high both in principle and economic cost.

    The Freedom of Movement demanded by the factory owners puts far too high a burden on the welfare and NHS system. The EU is not ‘Tariff Free’ the tariffs we pay are indirect and the collapsing NHS proves it.

  14. Anonymous
    October 1, 2016

    REALLY off topic:

    “Don’t let them eat cake.”

    I think Mr Hunt has just surpassed Marie Antoinette ! Those of us who don’t get out for meals very often aren’t going to like being lectured by people who enjoy subsidised restaurants.


    Proposed reductions in drink drive limits ‘to stop death on the roads through drunk driving’:

    A) How many drivers in accidents were under the present limits and the drink the cause of the accident ? (I doubt there were many at all)

    B) Will those who were over the present limits be deterred by new ones ?

    Perhaps I can make a tenuous link to topic with both issues because we’ve just voted Out of the EU because of its controlling nature.

    1. Anonymous
      October 1, 2016

      Lowering drink driving to zero will cause many more pubs to close.

  15. forthurst
    October 1, 2016

    That the economy would be damaged, was the only plausible reason given by Remain to maintain a status quo which, however, the majority of people rejected by voting to leave the EU. Mr Hammond has said that British people who backed Brexit “do not want to see the economy suffer” or “to see standards of living decline”. Why would they? However, the majority also rejected the economic argument because they believed, as Nigel Farage had warned that taking back control might result in a temporary blip in the economy whilst the economy was repositioned to take advantage of the new freedoms which Brexit offers, that that was an acceptable price to pay, if it transpired, for our freedom. So when Mr Hammond implies that full continuing access to the Single Market as before, even if the Brussels regime threatens to cut off its nose to spite its own face, if we reject their right to assist us with economic growth by continuing to send ‘highly skilled workers’ to us, was more important to the voters than taking back control, he is dead wrong. Mr Hammond’s job is to steer the economy in the right direction irrespective of any adverse winds which might blow, not to demand a change of course to run before those winds to make his job easier. Immigration as a means of economic growth needs to end; multi-national companies need to be able to move their staff around as they do now, but that is not the same thing.

  16. Denis Cooper
    October 1, 2016

    JR, this seems a decent, calm and well-researched blog, and if you take a look at it you may even wish to add it to your sidebar:

    “A Door to Freedom”

    “Brexit examined, analysed, defended, and contended for.”

    The last two articles are about conformity assessment and the WTO option.

  17. fedupsoutherner
    October 1, 2016

    Did I miss this great news on the TV?? I can’t recall seeing anything about it. I wonder why?

  18. Denis Cooper
    October 1, 2016

    I wonder whether I may repeat that the vexatious legal cases against Brexit will have their hearing at the Divisional Court on October 13th, and if anyone wishes to read the detailed defence being offered by the government it is here:

    Case law back to 1610 is being cited, on top of references to Acts passed by Parliament itself over the past forty-four years.

    No doubt even if the claimants fail to stop Brexit in this court, and fail miserably, they will still want to have another go in the Supreme Court in December. Because that is what they are like, anti-democratic diehard Remainers and bad losers.

  19. brian
    October 1, 2016

    It is too early to judge the effect of the Brexit vote. The consequences of the delays in investment plans eg in the car industry will not be seen for a couple of years at least.

  20. Bert Young
    October 1, 2016

    Britain’s place in the world post World War 2 was unhinged to a large extent by the USA who sought dominance at our expense ; today the City of London and our Banking services are under similar attack . It is no wonder that much of the “gloomongering ” was aided and abetted by US banks who are desperate to be unchallenged . The fact that our economy has shown no sign of threat so far is a tribute to our resilient character .

    The Empire has gone and we are no longer No.1 , however , we have great experience as innovators well fed by top class Universities . The support system of labour – now much more unhinged from Union control , has an integrity of its own and an ambition to succeed , these characteristics can only mean one thing – success . I can foresee nothing that will stop us being successful – let Brexit begin !.

  21. Lifelogic
    October 1, 2016

    Interesting to read about Maidstone’s litter warden muggers. £80 fines to people just feeding the ducks it seems. It seems they raise about £170K PA in this way of which 50% goes to the warden company.

    So 50% goes on pointless jobs and then the other 50% goes to the council (so mainly on other pointless jobs and gold plated pensions). I cannot see it even does very much for preventing litter either.

    If you really want to drop you litter you just make sure you look round first to ensure the council muggers are not watching.

    A few more rubbish bins around might be a rather better approach.

    I do not suppose that 50% straight down the is the most inefficient tax around either. In fact it is worse than 5% as they will have all the appeal processes and time & money wasted by those appealing and hearing the appeals.

  22. Prigger
    October 1, 2016

    “The previous Chancellor did take actions in March against Buy to let”

    There does not appear to be any lessening in the share prices for “buy-to-let” companies. In fact their share prices have increased markedly after an initial downward blip.
    Here are paraphrases of 2016 half yearly reports from a Buy-to-let financing companies here in the UK. ( I hide the names and the exact wordings to protect legal teams from overworking and perhaps earning salaries they may wish in vulnerable emotional times to secrete in off-shore accounts, as if )–:

    “Yet again an outstanding performance ”
    ” Massive profit increase…”
    “notable advances in lending activity”
    “acquisition activity: advanced considerably”
    “increased strength in lending”
    ” we predict tax & regulatory changes will give relative benefits for us ”

    From the start, Mr Osborne’s efforts in curbing the saliva glands from over-production in buy-to-let entities did not bring the situation to heel. Sit!!!!! No.

    Of course Mr Osborne was up against the biggest gangster network in the UK. The fact he is still alive/or not in a wheel-chair is evidence of his unutterable failure. He continues to walk not-proud.

  23. John Finn
    October 1, 2016

    I agree you were right about the immediate GDP effect following the vote and I agree with you that some of the 2017 forecasts are a bit too pessimistic. However, I remain a bit concerned about what happens when we actually leave. I still can’t see how the EU can offer a free trade deal or anything like it. I’m also concerned that we might see a boycott on UK goods by EU customers. JLR are reporting a reluctance to buy UK cars.

    1. ian wragg
      October 1, 2016

      I bought a new 66 plate Honda Civic as my bit towards Brexit. I don’t buy French or German goods on principle and I’m sure there are many more like me.
      having worked for both French and German power companies I can vouch for the fact that preference is always given to their own countries goods (and service companies).
      How many foreigners will be employed as contractors on Hinckley Point. Just watch.

  24. Denis Cooper
    October 1, 2016

    Doing it again:

    10.30 – 11.00 Symphony Hall
    Leader of the Welsh Conservatives in the National Assembly for Wales
    Secretary of State for Wales
    Secretary of State for Scotland
    Secretary of State for Northern Ireland”

    I was going to quote G K Chesterton, as usual; but it is no longer applicable insofar as the people of England have now spoken, on June 23rd.

    October 1, 2016

    Rt Honourables and lesser mortals at various upper points in the political/social banana tree are for ever pointing to “experts” “grandees” “Lords”, “Barons” “Leaders in Industry” “Small Businesses” “Trade Union Leaders” ; in fact, everyone who has given the pencils and exercise books out at various times and got a merit badge because they were secretly fancied by teacher.
    It is a old rhetorical joke: “What about the workers? ” BUT
    Is there any method in the UK for rewarding work other than remuneration and “who one knows ” ( hence recognition ) for people who actually WORK? In my opinion, there isn’t.
    Tax cuts to the lower-paid is not a Socialist principle. It is pay-back time for those who do not have leisure to form synergies/inter-connections, via networking and golf-club appreciation societies, and need and do WORK. Our economy has enough chiefs and mock-chiefs. We need paid little-taxed Workers! It may seem communistic.We do not have sufficient unappreciated people.

  26. wayne faram
    October 1, 2016

    I’m having difficulty understanding how these figures so far give an accurate account of how Brexit might affect the UK, especially bearing in mind the third quarter GDP has not yet being published. The other thing is that it is perhaps thanks to the extraordinary steps taken by the Bank of England the U.K. has done such a sterling job of riding the waves. Talking of which, the fall in sterling will inevitably have an impact on the UK householder once settled in. I am worried that your 2.2% 2016 forecast is far too limited, some may even say even disingenuous and misleading. To the most fervent Brexiteer, bearing in mind reports we are getting from the press early October regarding industry concerns and assessments from the FT, your garden is far too rosy sir.

  27. petermartin2001
    October 1, 2016


    I hope you are right but the relative prosperity we might be currently seeing is the result of too much private sector debt which is plain to for all to see in the economy. The recent reduction of interest rates was designed to increase those levels even more.

    When we borrow we borrow to spend. So borrowing can increase economic activity, through extra spending, in the immediate period afterwards. But, then the money has gone and the debt remains. So the effect of lowering interest rates diminishes after a time and another reduction becomes necessary. They are now so low that they really can’t be lowered any further.

    So the question arises as to how else can we regulate spending? If the GDP of the UK is £2.017 trillion then we need to recognise that government has somehow to ensure we have £2.017 trillion of spending to keep it going.

    There has to be another way besides the ever lowering of interest rates to achieve that.

    1. Edward2
      October 2, 2016

      I worry about debt levels too.
      But it’s worth considering that all mortgage debt is in the figures as is all credit card debt and all debit card payments nit yet paid.
      It’s like a snapshot of payments yet to be made and defined as outstanding
      If most card holders pay off in full a few days later is it really debt?

      1. petermartin2001
        October 3, 2016

        “If most card holders pay off in full a few days later is it really debt?”

        Technically yes. But if I borrow some money for just a few days the effect on the economy is much less than if I borrow the same amount of money and repay over a much longer period.

        If I have a credit card I can spend slightly more ( and we need to bear in mind that it is spending that drives the economy) than I otherwise would. But it only happens once when I first get the card or when the limit on my card is raised. If I always spend my monthly salary on a card in the month before I get paid then I’m not spending any more in subsequent months than I otherwise would had I not had it.

  28. Chris
    October 1, 2016
  29. acorn
    October 1, 2016

    It will be another two quarters yet before you will be able to say “no recession”. Assuming the Chancellor lets the deficit stretch a reasonable amount, no austerity worries, no recession worries.

    For those who have read up on MMT and (Wynne Godley type) “sectoral balances”, have a look at part 6. Net lending (+) and net borrowing (-) by sector in

    Figure 8 and Table 1. Each of these sum to zero, give or take a bit due to accounting lags. You can see where the Treasury cash is going. Lending (+) means that sector is running a surplus, stashing the cash obtained from the borrowing (-) sectors that are running deficits. You can see what would need to happen if Osborne had managed to get a surplus in the government sectors by 2019.

    So who is piling up the cash, RW, the “Rest of the World”. That’s the Pounds Sterling those UK high street BMW Dealers are amassing in just one instance! They have to find something to do with those Pounds. Chelsea mansions; government Bonds or issue some of their own currency to pay their own workers back home, using them Pounds as collateral. Or, they could stash it under a central bank mattress for a rainy day in the next century or beyond, it really doesn’t matter, it is fiat money, it is not Gold.

    1. petermartin2001
      October 2, 2016

      Yes, it is the Rest of the World which is largely doing the saving in pounds and it’s been like that for many years. When was the last time the UK ran a trade surplus? When you are I save our money we are told that’s a good thing. When the Bundesbank save pounds by buying Gilts we are told that is bad thing!

      So there’s clearly something wrong with the conventional way of looking at economics, and which is not confined to this country. We see the same mistakes, and worse, perpetrated in the eurozone too. If we want our economies to function better we have to understand how they work. We have to start by recognising that cutting Govt spending or raising taxes like VAT isn’t going to much, if anything, about the Government’s deficit while the country is running a large trade deficit.

      We can have a trade deficit if we want, but we have to have a government deficit to fund it. Once we understand Godley’s sectoral balances, it is immediately obvious that this is just arithmetic and not ideology.

  30. Peter Daviesp
    October 1, 2016

    The elephant in the room has nothing to do with brexit, I suspect deutche bank see brexit as a convenient deflection from their own problems.

    October 1, 2016

    Off Topic
    The bombs dropping on Aleppo lack power.

    In WWII, Coventry, Liverpool, Hull..oh my poor poor poor Hull ..flattened in its docks area…terraced homes with outside toilets and tin-baths hanging in the backyards of posher terraced homes of what were then fishermen of England. Their wives and kids got it whilst they were gone fishing for protein. So, what is it about Syrian and Russian bombs? Why do they take months and months and years of bombing when the Luftwaffe managed it in a couple of nights over our Isle? Russians have weakened since Stalingrad and Leningrad. They have lost fighting capacity…obviously.

    Reply Most of us are glad if the bombs spare homes and civilians. The bombs I have seen on tv falling have terrible power in Aleppo and kill people.

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