Posts Tagged ‘Economics’

19 May

Defending the Bank of England

Posted by freethinkingeconomist in Uncategorized. Tagged: , , .

It is looking pretty dicey for the Bank and it’s inflation-fighting reputation.  Read Jeremy Warner (Does the inflation target actually mean anything any more?) and above all the point made clear in Simon Ward’s post yesterday (UK CPI inflation 3 percentage points above BoE year-ago forecast).  Here is a graph from last year’s May Inflation Report:

One quick observation: the prediction was based on 125bn of QE.  We have had 75bn more than that, which must have had some effect on inflation (though as I droned on in Credit Where It’s Due, the mechanisms are rather wobbly and demand-dependent).

Another is: how on earth did they make such a prediction when they knew VAT would be returning? Did they simply miss it out? the April CPIY index stands at 112.8, which is 2.1 points above the April 09 level of 110.7, or almost exactly 2 per cent higher.   This would put the forecast error down to 1 per cent.  But if it WAS CPI without tax which they were forecasting, they didn’t tell us.  I see a straight mistake.

A third observation is that Britain’s inflation is a bit of an exception within Europe.  See the charts from Wolf’s (rather boilerplate) post today:

A final observation (coz I have to go to lunch) is this: if the Bank has made a mistake, I would rather it made this one than the other one.  Reading Chris Giles today about what this means for you and me, it comes down to this: it makes living standards go down, but it may help make the budget deficit lower.   And so far households are not expecting it to last.  In other words, a one off transfer, lightening the biggest problem (government debt) and making all of us fairly evenly contribute to the problem.

This crisis needs measures OF THAT SORT to get the country back in balance: lower government debt, lower living standards.   (We could also do with being more competitive, which this doesn’t help, but weak sterling manages that).  Though I look like a hubristic fool to some (even though I stand by my points about Base Effects), actual deflation to such an indebted country suffering from insufficient demand may have been worse.

Lunchtime!

18 May

I won’t deny it: the inflation figures suck

Posted by freethinkingeconomist in Uncategorized. Tagged: , , .

Here is the BBC story; here is where you can get the data.

The BBC mentions volcanic ash driving up Food prices. But as far as I can see, the things that rose hardest from March to April were not particularly vulnerable to delayed flights:

(correct me if I am wrong: I did that graph in  2 minutes and who knows what might have slipped)

My concern – and everybody’s – should be the problem Chris alluded to that may be happening in the US (via his blog) – a permanent worsening in the unemployment-inflation trade off.  If we get higher inflation for each level of capacity utilisation, the economy is in for a very poor time.  I continue to hold onto hopes that are still mentioned in the Bank’s Inflation Report – that there is still considerably slack according to surveys, that currency weakness will pass through (commodities are off their highs, driven by world economy weakness), and that working capital will be freed up, which helps drive prices lower.

If these figures DO indicate higher inflation in the future, the consequences ought to be higher Bank rates, a higher currency, and so on. Sep 11 LIBOR futures fell 7 bps on the news, indicating the former at least. If it is any comfort, they are still considerably higher (i.e. rate expectations considerably lower) than at the beginning of May – by 50bps.  However, let the comfort end there, because what probably happened since then is a general expectation that euro growth will be much lower.  That is not, in anyone’s book, good news.

(PS While I am depressing you all, see this graph of a warming world from Econbrowser.

16 May

Crazy spending, or our lifeline?

Posted by freethinkingeconomist in Uncategorized. Tagged: , , .

To no great surprise, David Cameron has announced an immediate audit of the ‘crazy’ spending of Labour’s last years in power.  Politically, this no doubt makes great sense – “look what those idiots got up to” is perfect scene-setting for the blood-letting that will follow.  But what worries me is what sort of a narrative this tells of the crisis that has gone before – and how such a narrative restricts our future scope for action.

I’m rushing, so I’ll explain.   Look what Paul Krugman has found in the latest IMF report into the sovereign fiscal crises worldwide.  You will notice that it agrees with endless repeated polemics I launch on my slightly smaller blog:

what the report says is that there has been a fundamental deterioration in the fiscal outlook for advanced countries. Not only are they running up a lot of debt in the crisis, but — and much more important — they will emerge from the crisis with large structural deficits that weren’t there before. So spending cuts and tax increases loom.

No arguments so far.

where are those structural deficits coming from? It’s not interest on the debt: the IMF shows a large increase in primary (non-interest) structural deficits. So is it permanent increases in spending? No: the report shows that discretionary spending increases are a minor cause of rising deficits even in the crisis, and these increases will be reversed as stimulus winds down.

As I argue repeatedly, above all in A Balancing Act (see the pie chart), the revenue collapse was what finally revealed our massive deficits, the deficits that will characterise this premiership of David Cameron, and every subsequent premiership he might have.*

Why does all this matter?  Is it not just a matter for historians in what order things happened?  We are where we are: laden with debts and deficits.  Get over it, I hear you call.

But it does matter because the stories we tell of the past influence our future behaviour.  Consider the following crude account of how things happened:

  • We were going along nicely while the banks gambled madly
  • They made the economy collapse.
  • Governments responded by spending masses of money on two things.  Hundreds of billions on the banks (just read Peston)
  • And then this daffy thing called ‘Keynesianism’ encouraged that spendthrift Brown to go nuts with public money
  • Despite all this the economy has tanked by 6%, and is not growing well.  And we have a massive debt

Reading this, what would you conclude?  Well, that saving the banks and doing the Keynesian ‘splurge’ certainly left us with a debt, but only possibly helped the economy.  Next time, if we went badly into recession again, we should on no account repeat the same measures.

Which would be a terrible mistake.  The truth is that we did very little Keynesian spending indeed.  The government’s spending** did not rise very much (check out any economic reports).  The deficits happened because its ability to raise money was muellered by the collapse of the asset bubbles that fed it.  The states that were best able to do the Keynesian spending appear to have had faster recoveries.

I am not sure that I agree with Krugman in thinking this proves we need more spending, now; at some point, the risks of a sudden stop from the bond market just outweigh the benefit.   But we should be very careful that we don’t tell ourselves the wrong stories about the recent past.  We have a truly horrible fiscal situation.  Yes, cut the pay of highpaid civil servants.  But it was not the Labour government going crazy with Sir Humphrey that got us in this mess.  It was a collapse in nominal GDP, and revenues that are far too geared to an asset bubble.  Let’s get on with fixing that.

*amusingly, my working title for that piece was ‘The Cameron Inheritance’.  I was told off for begging the question – but they were 15% ahead in the polls.  Oh, how right the critics were …

**by which I mean its CONSUMPTION.  Look at the supplementary documents in the pre budget reports (table 1.12)

http://www.hm-treasury.gov.uk/d/pbr08_chartstables_501.pdf

and

http://www.hm-treasury.gov.uk/d/pbr09_chartstables.pdf

the figures for 2009 rose by just £20bn.

14 May

Some stuff to add learning and entertainment to a sunny weekend

Posted by freethinkingeconomist in Uncategorized. Tagged: , , .

Sorry, I am in a sunny mood.

Martin Wolf is also infected with the sun, because he comes out with a surprisingly generous verdict on The economic legacy of Mr Brown. The general theme is that his mistakes were shared by most of the economic policymaking world, and Wolf makes this telling point:

“In retrospect, the government also trusted too readily in the stability of contemporary finance. Would a Tory government have been much more distrustful? If you believe that, I have a bridge to sell you.”

And on the spending splurge myth (see posts, passim), Wolf gladdens my heart again:

“The jump to a ratio of 48.1 per cent, forecast for this year in the 2010 Budget, is due to the recession. Nominal spending is currently forecast at 3.5 per cent higher in 2010-11 than forecast in the 2008 Budget.  But nominal GDP will be 10.3 per cent lower and tax revenues 16.4 per cent lower.”

Yes, spending is too high.  Yes, the deficit has leapt up.  But no, the high spending and the deficit leap are not the same thing.

A fantastically Euro-intellectual column about the Euro being the right side of history.

The euro remains on the right side of history, Tommaso Padoa-Schioppa

“Over many months, a mighty army has advanced on the citadel of the European currency with the cry: “It will never work””

“Their reasoning was as follows: the euro area is not a political union and can never become one, because Europeans have no appetite for it and nation-states will not relinquish power …the advent of the euro is just an episode – a most significant one – in the building of a post-Westphalian order… In this battle, the citadel emerged as the winner because it finally set aside hesitation, prejudice and division. But in a deeper sense it lost, too. It was mistaken in its belief that the euro and full national sovereignty are compatible. The attackers saw the incompatibility, but were mistaken in their belief that it was the euro, rather than the Westphalian dogma, that would emerge most damaged.”

Beautifully written.  Doesn’t make it right, of course.

And a letter repeating my point in yesterday’s post (I really ought to have written to the FT) about German monetary orthodoxy.

“Sir, John Taylor (“Central banks are losing credibility”, May 12) makes a number of interesting points, but several are erroneous ….  he criticises the European Central Bank for not buying distressed government debt, arguing that it is not conventional monetary policy. Having the financial system teetering on the edge of collapse with interest rates already close to zero is hardly a conventional position and the ECB should be applauded for what it has done. This is no time for mindless orthodoxy … Or perhaps he is thinking what a triumph has been achieve in Japan since the 1990s”

Finally, a hugely entertaining short piece from Gideon Rachman about the day he interviewed George Osborne for a job at the Economist.

I had just been appointed editor of the paper’s Britain section and we were looking to recruit a new reporter. Osborne had been working as a political adviser to the Conservative Party, which had just gone down to a crashing defeat at the hands of Tony Blair and New Labour. Self-deprecatingly, Osborne explained that his job had been to try to “destroy” Tony Blair – but, as he pointed out, “I obviously didn’t do a very good job of it.” His frank admiration for Blair’s skills as a politician was obvious.

Finally, under Aren’t Americans Extraordinary, this League Of Ordinary Gentlemen piece debates a piece of legislation. Boy, am I glad that we have never reached the point in this country that this even needs debating.

14 May

‘Labour’s electoral strategy’ – and a call for Empiricism

Posted by freethinkingeconomist in Uncategorized. Tagged: , , .

Given that the next election is possibly 5 years away, am I the only one to find arguments about Labour’s election strategy just a little premature?  I keep trying to remember what such discussions must have been like for the Lib Dems in 2005, and then find I can’t.  Because five years is such a long time … What is that saying about a week in politics?

But there are some excellent discussions, and I can’t ignore this one: between Julian and the Fink on Comment Central.

Meantime (and thank goodness, for this policy oriented blog), the discussions about POLICY are restarting.  Here is the excellent Rick on May 2012, and a Grand revolt against the Immigration Cap. Rick is an HR guru:

A combination of factors has meant that, five months into the year, the 2012 immigration cap has already been reached. Unemployment has fallen rapidly as the economy has improved and ideal weather conditions have caused farmers to bring in foreign workers to prepare for a bumper harvest. There has been little interest from local people in jobs at the Olympic Games, so London 2012 sent out an urgent appeal for migrant workers in January. The annual cap on migrants was reached a few days ago when EasyTandoori, the joint venture between Stelios Haji-Ioannou and Gulam Noon, brought 500 Indian waiters and kitchen staff to the UK, in preparation for the opening of its restaurants later this year.

Ian Cowie of the Telegraph is more, well, Telegraph-ish about the prospects for people suffering higher CGT bills.

Investors with substantial portfolios of property and/or shares who have not protected them in tax shelters – such as trusts, individual savings accounts (Isas) or pensions – face the daunting possibility that HM Revenue (HMRC) may grab half their gains.

If you are a reader with substantial wealth, it is a very expert and informed piece that may help you work out what to do to protect your wealth.  If you are NOT such a fortuante person, it is an intruiging insight into the amount of brainpower and cunning that goes into protecting the wealth of people who have the ‘problem’ of how best to sell their artwork, racing cars and second properties.

I think CGT is an important issue.  But I am most exercised about the people starting up value-added business that end up making the whole economy grow well, not the multi-generational maintenance of wealth hordes.  There are dilemmas, sure – the sanctity of property, social justice clashing as always, blah blah – but I am more concerned about the truth or otherwise of the complaints of Private Equity managers:

The British Private Equity & Venture Capital Association, which represents the industry, said it would be “bizarre” if the sector’s capital gains were taxed as non-business gains. It said the generous exemptions for entrepreneurial business activities should “obviously” be applicable to private equity and venture capital, highlighting “the positive role that private equity and venture capital are playing in the recovery”

I am an empiricist.  All sorts of things might be true in theory about taxes, but we need to know what actually happens. For example, the Right loves to construct a narrative in which the Government is the whole cause of the financial crisis. Sure, you can ‘construct a narrative’ (read my review of Norberg for an example).  But is it true?  Barry Ritholtz takes it to pieces – see this post on Economist’s View, concluding in damning fashion:

I demand evidence, data and facts. The blame Fannie & Freddie crowd have managed to remain blissfully data free. They have steadfastly ignored all calls for proof. Its way past the time to call out their intellectual dishonesty. If you cannot show any data, if you cannot prove what you are alleging with actual facts, you need to be called out for what it is you actually are: Proponents of a failed philosophy.

The version over here is our own dear IEA, so very right in the 1970s, but so pure and religious in their views against taxes that they go to the extremes, those extremes where your views are just ignored for being predictable in advance.  Consider their post asserting that inheritance tax is a tax on entrepreneurialism. I keep asking where the proof is, and I keep getting fanciful, evidence-free theories back.  There is huge cash wealth in this country.  Asserting that IHT prevents the venture capital industry getting what it needs is just daft.

13 May

Now is not a time for uber-German monetary policy

Posted by freethinkingeconomist in Uncategorized. Tagged: , , , .

The FT reports on the ECB’s seeming conversion to QE: Backlash stirs in Frankfurt.

“Germans are clear about the job of a central banker: to fight inflation, and nothing else … The conservative Frankfurter Allgemeine Zeitung described the turnaround – announced at 3:15am on Monday after a late-night meeting of European finance ministers – as “Americanisation of monetary policy”. Mr Trichet would prefer to describe it as confirming the ECB’s ability to react quickly.

Will they stop complaining about ‘Americanisation’ in Europe? They could do with an ‘Americanisation’ of their growth rates, soon.  And when will the Germans get over Weimar inflation?  Perhaps if the French start eyeing up the Ruhr’s telegraph poles, they may have a reason to worry.  But in demand-deficient Europe, inflation is surely a long way from being their big problem.

Wolfgang Munchau seems to join in, writing History has warned about slippery slope of monetisation

“The total amount of central bank money should be thus unaffected. However, we should not for a minute be fooled into thinking that such sterilisation is really neutral. If the ECB buys Greek bonds, which it did last week, and if, as seems likely, Greece will eventually default on part of its obligations, the ECB will take a very large loss. This shortfall would either have to financed through fiscal measures – a big increase in the debt of the ECB’s shareholders, notably Germany – or through the printing presses.”

Oh, people hate slippery slopes.  They so prefer gradually subsiding into low-growth irrelevance.  My view is strongly that if fiscal stances can’t be expansionary, we must get more out of monetary policy.  Read Credit Where It’s Due, it’s still what I think. Europe needs to expect strong nominal growth, otherwise all these impossible fiscal situations really will turn out that way.

Another profound enemy of monetary looseness is John Taylor:

most worrisome for the euro, and the likely reason for its remarkable reversal in the currency markets on day one, is the agreement by the European Central Bank to buy the debt of the countries with troublesome debt burdens, just days after it said it would not engage in such purchases. This agreement raises questions about the independence of the ECB …

and once again the US is set us as a bad example:

You can imagine the phone conversations between Brussels and Frankfurt. “The Fed helped the US Treasury conduct its bail-out policy during their financial crisis; why can’t the ECB help us in our bail-out?” Even the Fed’s “whatever it takes” mantra was being repeated in Brussels last weekend. In my view we are definitely seeing contagion, but it is a contagion of deviations from the independent and credible monetary policy that has served us well in the past

I just don’t get how all these people think the strength and credibility of the Euro, right now, is so much more important than the future levels of nominal growth.  I must be missing something. However, I can recognise the criticism of my support of this policy of buying national bonds, via Marginal Revolution*

“Finance ministers in the eurozone might argue that they acted to save the euro, but in reality they acted to save national bond markets – and the euro is the fall guy,” says Steve Barrow at Standard Bank.

If lots of money is printed, does this mean the euro being the fall guy?  But why is that not the case for the dollar? How unfair ..


*if you’re interested in Tyler Cowen and his uncanny genius, read this article

12 May

Some spiffing quotes, what

Posted by freethinkingeconomist in Uncategorized. Tagged: , .

Gosh, I’m beginning to sound like a Tory already!  help

From Megan McArdle of the Atlantic – a wise and self-doubting piece about, well, Greece and intellectual triumphalism.  Could apply this to the whole Credit Crunch analysis:

You cannot graft rich-world policy onto emerging markets … Conservative fiscal and monetary policy… -emerges from the social and political institutions of a country; it cannot be imposed.

As Tyler Cowen says, “The fundamental cause of the financial crisis has been people and institutions thinking they are more wealthy than they are; this spread to Europe as well and now we are seeing the comeuppance.”  To which I’d add, the problem is often less the overall level of spending, than the fixed commitments … Because these obligations are very hard to adjust in downturns, their governments are, like individual debtors, more vulnerable to individual income shocks.  It also makes the coming pensioner problems harder to deal with.

As Felix Salmon says, banking crises often become sovereign debt crises, and vice versa.  There is no neat separation between “the government” and “the free market” in a financial crisis,

The fact that some moron is willing to lend you money is not a good reason to borrow it.

Underwhelming negotiation of the decade:

By afternoon the Labour team appeared to have shifted further towards the Lib Dems – they did come up with an offer on the third runway “in principle” and they seemed to come up with a better offer on increasing money for renewables “in principle”

If the Conservatives had known about Ed Balls’ attitude, would they have played harder?

Jonathan Freedland gets ahead of himself in predicting the outcome of 5 years of coaltion government.

the Lib Dems have already passed the peak of their power. They will never again have the leverage they have enjoyed this last week. Once they have signed on the dotted line, they will be at the mercy of their new Tory masters. They cannot threaten to walk away: if they do, despite the reported agreement on a fixed-term parliament, they risk triggering a general election at which the Lib Dems stand to be crushed. To use an idiom both these public schoolboys will recognise, Clegg has just become Cameron’s fag.

Shocking honesty about Labour councils in the North from Ellie:

Thatcherism destroyed the local economy (based on coal mining and steel), but in some cases the Labour-run local authorities made things deliberately worse. Sheffield City Council is widely thought to have tried to bankrupt itself in order to force a government bail-out. City funds were piled into paintings for the town hall and building Sheffield Arena (where ironically Neil Kinnock delivered his death speech in ‘92). Local rates were increased to such high levels that the poor couldn’t pay and were forced to default. Nationally this was mirrored in the rate-capping rebellion. Now they try to deny it, but party members were quite aware of what was going on. The strategy was to create huge difficulties for the Tory government, while maximizing local rage.

Read Labour history now and you’d forget why Thatcher remained so popular in the mid 1980s.

Some robust good sense from Sunny on Liberal Conspiracy:

This coalition won’t fail easily, and a lot of Labourites should be careful of being optimistic about that. Cameron and Clegg know that if their government fails soon, then a new Labour leader plus severe budget cuts would hurt them electorally. So expect this to be at least a 4-5 year parliament.

and his biggest worry

if the Con-Dem-Nation works well, then it may seriously re-align politics in a way that could put Labour out of power for a generation… If the future of politics is indeed coalition governments, then there is a real danger here that the future is anti-Labour majority than an anti-Tory majority.

Labour writers are often in the flush of unexpectedly strong tactical voting and Council results last week, which helps to set the framework for their ‘we’ll annihilate the Lib Dems’ stuff.  Maybe.  But 4 years is a long time.

11 May

Game changing Bazooka or the biggest dose of Moral Hazard ever?

Posted by freethinkingeconomist in Uncategorized. Tagged: , , , .

Believe it or not, I have been reading up on the Greek/European/World scenario as a way of taking my mind off fingernail-destroying horsetrading over here in Westminster.  Yes, those perfidious Europeans used the cover of a protracted UK negotiation over AV Plus to sneak out a 750bn Euro guarantee fund.

Several points are worth making, and most of them are made in the FT today.  First, we seem to have had an amazing turnaround from the ECB.  Or have we?  As Jeremy Warner reported, Axel Weber threatened to shoot Trichet if he so much as mentioned QE.

Quantitative Easing, or buying sovereign bonds, was not discussed at the council meeting. So did this mean that it wasn’t even being considered? “We did not discuss the matter and I have nothing more to say on it”, M. Trichet replied.

Then on Monday we learnt that … the ECB is intervening in private and public debt markets, and according to the FT today, has helped knock huge numbers of points off sovereign bond yields everywhere.  But so determined is it to neutralise the monetary effects that it plans to soak up any cash by issuing bills.  ‘Tight money’ people must be gnashing.  Instead of monetary stimulus, it is carrying out what Greg Ip of the Economist recognises as fiscal policy

This qualifies as fiscal policy because the clear intent is to enable member governments to borrow who otherwise could not. Greece is experiencing a solvency crisis, not a liquidity crisis. The ECB’s balance sheet is thus subsidising the credit risk of a member government.

As Ed Conway of the Telegraph observes, “the ECB has started its QE journey on the worst footing imaginable, appearing to be forced into taking the decision, rather than doing it off its own back.”

Further more, moral hazard is surely a major issue here. That seems to be a theme running through the FT’s extensive comment, who say

That the package was prompted by a market rout, moreover, makes it a European “Greenspan put”. It entrenches moral hazard not just for sovereign borrowers but for a banking sector which, unless radically reformed, will learn to rely on taxpayers coming to the rescue.

But their long leader focuses on a more immediate, pragmatic problem: that of taking big losses.

And liquidity does not equal solvency: buying vulnerable states time to rein in shaky finances does not by itself cut deficits or stabilise debts. Their willingness to push the painful process through remains unproven … There is a real chance that a euro member’s failure to pay its debts will land neighbours or the ECB with losses that can only amount to fiscal transfers or money-printing.

On the subject of that unproven willingness to take pain, Gideon Rachman nails it in Europe is unprepared for Austerity.

I used to think Europe had got it right. Let the US be a military superpower; let China be an economic superpower – Europe would be the lifestyle superpower … As the riots on the streets of Athens illustrate, however, not all Europeans will react so stoically to deep cuts in spending. Many have come to regard early retirement, free public healthcare and generous unemployment benefits, as fundamental rights. They stopped asking, a long time ago, how these things were paid for.

He sees the bailout producing massive political tensions.  Too right, just like the banking bailout in the US; one interest group benefiting from another. Toxic.  This is the answer to Dave’s naive question about why public services should take the hit.

Simon Johnson and Peter Boone have weighed in with perhaps the most pessimistic take on this. I am currently 2/3 through 13 Bankers (reviewed here**) and so not surprised by their take: that nations behave just like banks in their risk-seeking, cost-off-shouldering selfish behaviour:

Given the incentive problems in the eurozone, it is no wonder more nations want to join – the requirement is just to appear prudent for a few years. No wonder also that it blew up. Nations with profligate governments or weak financial systems have a bonanza; overall, this system encourages a “race to the bottom” – led by governments in smaller countries, which relax fiscal and credit standards to win re-election (or just to enjoy a boom). They borrowed funds from the (unnaturally) less profligate in the eurozone. The Germans were austere; the periphery enjoyed the boom.

They are concerned about moral hazard above all: this bailout sends out terrible signals.

this weekend’s actions jammed open the ECB credit window and send a clear message to creditors: you can again lend to the profligate without risk. Such emergency measures actually further undermine any government’s willingness to address its solvency issues.

Perhaps the most important message from the whole crisis is that those who lend to the profligate and foolish need to take some pain as well. But this makes for an awkward result: capital costing more, which has costs everywhere.

Above all this European crisis is about solvency not just liquidity.  Punning: liquidity problems can be solved, solvency issues can’t be washed away.  For that you need growth*. So, finally, Munchau needs to get a word in that seems to tie together both matters: how this influences future reforms, how it is a liquidity solution to deeper issues.

How can a loan guarantee solve a problem of excessive indebtedness? It surely saved the eurozone, which might otherwise have been pushed over the brink this week. But beyond this week, the benefits are less clear. At best, it provides sufficient stability to allow Spain and Portugal to press ahead with reforms. So the judgment about the success of this programme depends critically on whether the two countries can reform their labour markets, sort out their banking sectors, improve productivity and speed up fiscal adjustments

UPDATE: I would like to draw attention to the article linked to by Luis (see comment below).  The bottom line: debt restructuring would not work right now.

*On that issue, here is another sliver of hope: manufacturing in the UK seems to be growing fast.

**I tend to agree with the FT reviewer: that Johnson & Kwak have written an excellent book that nevertheless overstates its case, particularly in terms of how much the sinful players in this game have actively anticipated the costs of their actions landing on others.

10 May

Before anyone panics or misinterprets it

Posted by freethinkingeconomist in Uncategorized. Tagged: , , , .

… the gilt is down one point today (to 116 on the June futures, still 4 points above its level in Feb) ….  NOT because or solely because of hung parliament negotiations ‘dragging on’ but because there is a huge relief rally in equities, a return to risky assets, etc.  The FTSE is up 2-3% and the pound stronger against the dollar (weaker against the Euro, but then it is they who’ve been bailed out by all this money).

Popular and well meaning conspiracy theorists like to think the markets just wag to the dog of politics.  No, the FTSE is full of international companies.  Simple rule of thumb: things are never as simple as Marxists think they are.

9 May

No idea what this all adds up to

Posted by freethinkingeconomist in Uncategorized. Tagged: , , , .

To file under why Labour recovered/Lib Dems lost

ThoughCowardsFlinch – Sheer class, people cheering Gordon Brown.  Solidarity

The Times: Liberal policies, including ‘amnesty’; failure of Lib Dem activists to congregate Rennard-style in lower hanging fruit; Cornish county council;

Alex commenting here: “The difference in Lib Dem vote (high 20s down to 23%) was mostly due to a gain in those voting “Other” (i.e. not the main three parties). Perhaps those who were voting “anti-establishment” decided that the Lib Dems weren’t anti- enough or something?”

To file under ‘We’re not Greece’

The Economist: “Greek politics still includes a Communist Party that is rigorously Stalinist (it damns Khrushchev as a liberal backslider) and commands some 8% of the vote”

File under ‘Cross Tories shouting at Cameron and trying to drive him right’

Heffer.  Cameron is not a conservative, and should maybe try to be PM of England.

The Observer: Cameron faces Tory Party Anger

The Observer again: Hague memo exposing massive Conservative-LibDem gaps on European policy.  Deliberate leak?

Under “Personality differences matter”

The Telegraph: Brown shouting at Clegg. “It was claimed Mr Brown’s approach was to begin “a diatribe” and “a rant” and the source said the Labour leader was “threatening in his approach to Nick Clegg”.”

Under Good election to Win

Hamish McRae: we are heading for strong growth(could also be under ‘we are not Greece’

David Smith: this need not be a poisoned chalice.  Our floating exchange rate will make rebalancing much easier than in Europe

Under Janet Daley failing to read the mood on PR: Half of voters support PR.  Maybe she couldn’t hear this massive protest going on.

Under Left wing thinkers still hoping for a Rainbow something

Observer editorial: A lib lab pact, if Brown stands aside.  Tories have no right to pre-suppose that Greece shows that a Right Wing government is needed – in fact, quite the opposite.  There is nothing unconstitutional about Clegg dealing with Labour.

Will Hutton: Only Lib-Lab can deliver banking reform, electoral reform, and appropriately timed fiscal cuts.

Whereas Andrew Rawnsley is involved in commentary, not advocacy (like your author), and is keenly aware of the snares in Conservative offers:

Cameron very publicly dangles the opportunity to shoulder the burdens of power. One of his motives for offering cabinet seats is to try to turn this into a pitiless test of whether the Lib Dems are willing to step up to the plate in what the Tory leader calls “the national interest thing”. The two parties do have overlapping policies on education, the environment, ID cards and tax. They can probably paper over their disagreements over Trident, immigration and even Europe. They could split the difference on the timing of spending cuts. The two leaders get on well enough at a personal level. They certainly like each other more than either does Gordon Brown.

Could file under ‘personality differences matter’?

——————

What do I conclude from this?  Maybe LibLab is a few % points more credible, policy-wise, than I appreciated with my ‘tied to a half dead shark’ analogy.  Still don’t understand why Labour are so scared of being in opposition for so long. Loss of discipline in the wilderness? GB himself becoming a major factor.  Solidity of Labour’s activist/class base also, for longer term calculations.

Now I need to prepare a chicken for the mother-in-law*

*insert own jokes about pagan sacrifices

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