29 Mar 2013

The End Is Nigh

Money Week are predicting a financial Armageddon in the near future.

The basic idea is that we've over-committed ourselves to welfare spending. At the same time private debt (my hobby horse) has also sky-rocketed. Money Week put the UK's total debt at something like 900% of GDP though I struggle to see where they get this figure. Private debt is about 440% and static, and government debt is 73% and rising. They seem to derive the other 400% from welfare spending commitments. We can just about get away with it for now because interest rates have been getting lower for 30 years. The problem will hit when interest rates start to go up again and the government will not be able to afford to pay it's debts. This will trigger a downward spiral. And interest rates have reached their nadir according to Money Week. Sometime soon they'll be going up.

Since their track record of predicting disasters appears to be pretty good this seems to be worth taking seriously. They also have history on their side. No nation in history with this level of debt has avoided financial collapse. It's only a matter of time. They're offering some free advice on the problem, and some free issues, so tying the prediction into a circulation drive. This looks a little cynical, but they do appear to be sincere in the warning.

In the Video version you see the text on the screen one sentence at a time and some one reads it out in a detached and emotionless voice. It ain't hardly Max Keisier. Frankly I think they wasted their money creating a video that is mainly the same text and audio - and has no controls, no timer (it's over 30 mins long) and no way to embed it elsewhere. I don't think it adds much to reading it for yourself. And in the video the charts tend to flash by too fast. I'd suggest reading it for yourself and lingering over the charts.

Now the charts are problematic. They present all their charts in £ terms. So government spending is going sky high in real terms, but such a chart doesn't take into account population growth or the growth of the economy (which both grew exponentially till 2008). I think this detracts from the story a little as it's choosing rhetoric over clarity. Spending as a percentage of GDP is a totally different picture. It's still going up, but the situation is less bad than say 1945 - and Money Week choose to make it look much, much worse.

Yes, the British population is ageing, but immigrants tend to be young and have larger families. What is this doing to the population profile?

I asked a couple of the heterodox economists I know on Twitter and they reckon it's scaremongering in search of customers. "They're trying to sell stuff". Probably true - they are a business. But perhaps it's worth having a gander at the argument to see for yourself.

28 Mar 2013

Meeting my MP

In July 2012 I went to see my MP, Dr Julian Huppert (LibDem), about the levels of Private Debt in the UK. I showed him the chart from the 2011 Budget Report which showed that private debt was about 480% of GDP.

Afterwards he wrote to me
Thank you for coming to see me at the Guildhall to discuss the concerns you have about private sector debt. 
As discussed, I have now written to the Chancellor to ask for his comments on the issues you have raised. Please find attached a copy of this letter and I will write to you again as soon as I have received a response. 
I hope that this will be helpful and once again, thanks for bringing your concerns to my attention.
What he wrote to George Osborne was this (extract):
I would be grateful to know your thoughts on how levels of private debt can be brought down in the UK and the effect you anticipate that this may have on our economy. Additionally, I would be interested to know what the UK has been doing to encourage other EU countries to work to reduce the amount of private debt they have and what effect you believe this will have on the stability of the Eurozone.

My constituent does not think that the Government is paying due attention to our levels of private debt and it would be helpful if you had any comments which I could pass on to him.
Eight months later I've not had any response and attempts to nudge Dr Huppert on Twitter and by email have not produced any responses. I sent an email on 5th December reminding Dr Huppert that went unacknowledged. I can only presume that this issue is of no interest to George Osborne and that Dr Huppert has given up expecting a reply from the Chancellor - not even a form letter apparently, not even an acknowledgement. 

I'm putting this online in the hope that it might facilitate an answer. I noted earlier this month that the updated chart shows that private sector deleveraging stalled in 2012. The level of debt has been stuck at 440% of GDP for more than a year. I don't think it's too much to ask how the government about these figures.

27 Mar 2013

Gove's Hostility to Academia

This is an edited version of a comment I made on an opinion piece in the Independent. Monday 25 March 2013. (Seems like the original comment has been removed anyway). Luke Brunning asks, a little naively I think:
How can we have an Education Secretary so hostile to those who work in higher education?
My question is, given the last forty years, how could we not?

It seems like Gove is channelling generalised hostility to academia - as witnessed in some of the depressingly hostile comments on Brunning's piece. To some extent this is a problem of how social sciences are presented to the public. And thus the fault of the social sciences themselves. Academics have lost crucial battles for the attention and admiration of the public. There has been much complacency. Ironic given that the study of the social sciences is 'the public' and they if anyone ought to have understood how to communicate with them. But, no, they allowed others to frame the discussion and to dominate it.

It's not only social sciences that are facing this hostility but arts, literature, history, and everything outside business studies and applied technology. It is hostility towards any threat to the business interests that currently (indirectly) run the world.

In short, NeoLiberals have been framing the debate. Back in 1971, Lewis Powell, in his infamous memo, identified the social sciences and 'liberal' (i.e. socially liberal and politically left-wing) academics as a particular threat to US business interests. Anyone that made people think about their relegation to being a mere consumer of the shit that business pumps out was a threat. Campuses have been aggressively targeted by NeoLiberals - funding for NeoLiberal programs and chairs, but also this cultivation of an hostility towards the threat subjects. The pursuit of profit is at the heart of the NeoLiberal agenda. A lot of quisling academics have gone along with this take over by philistines and done well out of it. Economists being at the forefront of this collaboration.

What Gove is doing to education and what the government are doing to welfare and health, they are doing in fulfilment of a prophecy. The prophet of the NeoLiberals was Lewis Powell and his catechism, the Memo, outlined the NeoLiberal response to the rise of socially liberal values in the USA and elsewhere. Part evangelical tract, part declaration of war, part social engineering blueprint, the Lewis Powell Memo encapsulates NeoLiberal values and urges conservative business people in America to rise up against the threats to their hard won hegemony over the world. But the action spreads out into conservative politics and other social institutions. A decade after the Memo Evangelical Christians were mobilised to support this agenda since it overlapped with theirs. Fundamentalist Christian morality was seen as far more consistent with business values that liberal Christianity or humanism. They have also received help from those militant atheists who attack the very idea of universal values and cultivate a kind of relativism and nihilism amongst the people. The result is a triumph of the values of business - consume, consume, consume.

At present NeoLiberals appear to be winning the battle for hearts and minds. You know they are far ahead when the British Labour party adopts NeoLiberal economic approaches! A few of the comments on Independent article show just how far they have framed the debate and cultivated hostility towards thoughtful subjects.

It is not more than a century since Britain prided itself on the quality of it's philosophers and historians. Hume, Locke, Berkeley, Wittgenstein and Popper (if we can claim them), Bertrand-Russell - were world class thinkers and writers who helped to shape the modern world. Admittedly analytical philosophy did a great deal of damage to that reputation, but we still have some fine intellectuals. However the balance has shifted towards science intellectuals. This is, partly at least, because scientists have staged a very successful campaign to capture the imagination of the public. Through figures such as Prof's Brian Cox, Jim Al Khalili and Alice Roberts science is presented as a fascinating and exciting glimpses into the world. But they do so in ways that do not threaten the hegemony of business interests. They do not question the role of the consumer, or the hegemony of the producer. We might question abstract ideas such as our place in the universe, but there is no questioning of our place in the social order. Economics could not stand the kind of treatment that Jim Al Khalili gave to electricity or chemistry because it is based on an almost religious ideology rather than the empirical method. Such a think show would never make it to air.

So now we hate intellectuals who force us to look at questions about our lives that are intensely uncomfortable. The hegemony don't want us to think about philosophical issues like social and economic inequality. They don't want us to think about the implications of banks operating at pre-crisis profit levels in a lengthy depression. They don't want us to question the ethics of CEO salaries rising exponentially in times of economic hardship when average real wages are falling. They don't want us to think about how this all looks in light of the history of our nation. So we get dramatisations of Dickens, but no history lessons. And Gove will see to it that all subjects which might awaken our critical faculties are dumbed down, and learnt in a fashion that steers away from asking questions.

Now certainly we can point the finger at changes wrought by the aggressive take over by business. But as I said earlier, the academics themselves were well placed to understand the public and communicate the value of their own subjects. But they don't seem to have managed very well. If we had only had a more active interest in the propositions put forward by the NeoLiberal vandals in the 1970s we might have had a different present.

We will look back on this period in much the same way that Germans look back on the 1930s and we will wonder how we could have let this happen. How we could have let our values be degraded. How did our selfishness allow us to let terrible things happen to others in our communities. We will wonder what we thought we would get from endless consumption. We will wonder why the resistance to NeoLiberalism was so ineffective. We will wonder how our heritage was sold off to the highest bidder. Did we learn nothing at all from history or literature? Did we learn nothing from studying psychology or societies that NeoLiberals could just walk all over us? Apparently we did not.

Academia complains, and with some justification, about the degrading of our great universities from places of learning to places of profit seeking. But where were academia when the seeds of this revolution were being sown in the 1970s? Now it's too late, the change is a fait accompli. A new Dark Age is upon us. Gove is an angel of the NeoLiberal desire for profit above all other values. We knew all along what this path would lead to. We English ought to have no delusions about the perils of power because Shakespeare spelled it all out for us 400 year ago. 150 years ago Charles Dickens described a world were middle-classes were content to get on while the poor were exploited. But he also described a world which had abolished slavery and was about in build public libraries. As well.

Best of luck to those people who think a world run by NeoLiberals will be kind to them. Consume, consume, consume.

22 Mar 2013

The Worst Recession Ever?

Here is NIESR's chart showing the path of recession and recovery in various previous downturns, updated for their estimate of monthly GDP, published March 12, 2013.

from Not the Treasury View

So certainly this is the longest recession ever. Indeed all this talk of double- and triple-dip recessions is meaningless. We're been in one long recession since 2008. Growth has been virtually zero for about 30 months or 2.5 years. It is 60 months - 5 years - since the peak of GDP was reached on the back of a massive debt fuelled bubble.

With the government determined to pursue reduction of the fiscal deficit at any cost, the stagnation will no doubt persist for the foreseeable future - based on what I've read I'd say at least another 10 years (2023).

We were going to have to pay for the debt bubble one way or another. The growth rates under New Labour were unrealistic and unsustainable precisely because they relied on everyone, including the government, borrowing money to finance spending. And it was spending rather than investment. Investments pay dividends but we have little to show for our spending spree.

And what will it take to get everyone to see that this is no ordinary recession?

21 Mar 2013

The Most Important Chart You'll See This Year

This is an updated version of a chart I've used before - from the recent Budget Report (chart 1.3). It shows private sector debt in the UK. This chart shows ONS estimates and in previous years these estimates were lower than those produced by McKinsey. However let's take it at face value.

From the 2013 Budget Report.

What this shows is that private debt is still ca. 440% of GDP. Household a little under 100% of GDP and non-finance business debt at about 105% of GDP.

Clearly there have been some deleveraging from the peaks in 2010, in the order of 50% of GDP (About £750 billion). But none of it was in 2012.

Households account for very little of the deleveraging, perhaps 10% of the total (and recall that the OBR predict household debt will rise to 2018). Non-finance business debt has dropped by about 10% points. Most of the deleveraging has in fact come in the finance sector - and most of their debt is owed to each other.

The most important thing this chart shows is why growth is slow.
Growth is slow because demand is low. Demand is low because non-finance business and household debt have doubled in the last 20 years.  
The last 20 years were not years of increasing prosperity they were years of increasing personal and business indebtedness. 
We can't expect more private investment to change this situation. Only government investment can turn this situation around. If the private sector invests while it's customers are mired in debt, then the investment won't pay off because there won't be increased spending to make the investment pay off!

20 Mar 2013

What is Wrong with the Obsession with Public Debt?

In Australia they have the same political rhetoric about public debt being the big problem that we should all be worried about. But they have a TV show with some smart young presenters, who collar Tony Abbott, Leader of the Opposition Liberal Party (a centre right party). In this clip they confront the Honourable Mr Abbot with some hard truths about his own debt levels. 90 seconds of quality economic commentary!

So what about in the UK? Governments revenue is about £1.5 trillion per annum, and their debt is about £1.1 trillion. Australia has vast mineral reserves and has not had a recession, whereas the UK has been in depression since 2008.

According to the Guardian, Osborne, earns £134,565 a year and owns at least one house,  but he has a £4million trust fund. He also has a 15% stake in the family business. Reports on his wealth vary by quite a bit so it's hard to pin down exactly. He may also "receive a six figure" in rental on a Notting Hill Property. Ironically Osborne manages to not be in the top tax bracket despite being a millionaire.

David Cameron's salary is £190,000 but his personal wealth has been estimated at £30million. The PM denies this, but his family accumulated an enormous fortune and he has followed in their footsteps. No doubt most of his fortune is hidden from view. Mr Cameron’s house in North Kensington is valued at £2.7million, and his Oxfordshire home at £960,000 (we're not sure what his mortgages are on these if indeed he as one). (Telegraph)

So neither Cameron or Osborne are likely to be in debt in the same way poor Mr Abbott and, sadly, we couldn't repeat the joke here unless Osborne or Cameron was seen to buy an expensive new house. Indeed you could say the joke is on us.

Also household debt here is not 6 times government debt. Household debt (including mortgages) is about £1,456 trillion (Debt Simple Dec 2012). This is about equal to Gross Domestic Product. However the Office of Budget Responsibility is forecasting this is rise! So the UK public is more indebted than the government is. Gross Disposable Household Income figures lag behind GDP but in 2010 were £15,709 per head so about £900billion or £0.9trillion. Which is substantially less that the amount of debt.

The government is actually in a much better position than the average household who's debts exceed their income by a substantial amount.

17 Mar 2013

We're past the worst.. again

Since late 2008 there have been predictions that the worst is over, that there are "green shoots", or that the UK economy is recovering. The stories below come from searches of Google news of these and other phrases.

At any given time there are in fact a greater number of stories indicating a gloomy outlook. However in almost every month since the crisis began someone has predicted that 'the worst is over', or 'the recovery has begun.' 60 months and counting.

updated 26 March 2013.


  • 2008-11-18 (nebusiness) But there are some green shoots of optimism with manufacturers’ expectations of export orders for the next three months positive and exceeding August expectations.


  • 2009-01-14 (Sky News) Business Minister Baroness Vadera was asked on ITV's Lunchtime News when she believed the UK could expect to see "green shoots"... ""I am seeing a few green shoots but it's a little bit too early to say exactly how they'd grow."
  • 2009-03-27 (Evening Standard) Britain has been in a deeper recession than was first feared, official figures have revealed. But members of the Bank of England's monetary policy committee are today insisting the first green shoots of recovery may be about to sprout.
  • 2009-04-03 (Telegraph) Back in February, Mr Brown predicted April 2, when the G20 leaders met in London, would be the start of a "move towards recovery". However, while economists were excited that the data suggested things had stopped getting worse, no one was prepared to call an outright recovery.
  • 2009-04-17 (Mail Online) 'The worst of recession may be over', says Bank of England's newest recruit.
  • 2009-04-20 (Bloomberg) The CBI will today join the growing list of economists and business groups arguing that the UK recession is now bottoming out.
  • 2009-05-06 (Bloomberg) More 'Green Shoots' in Battered Britain
  • 2009-06-10 (BBC) The first monthly increase in manufacturing output since early 2008 has re-ignited the debate about the green shoots of recovery. Economists, even at the gloomier end of the spectrum, are dusting down and reworking previous forecasts.
  • 2009-06-11 (Evening Standard) The number of people signing up to new mortgages leapt in the spring, the latest signal that green shoots in the UK economy may be taking root
  • 2009-06-15 (BBC) The UK economy is stabilising but it will not be until early next year that a "slow and gradual" recovery will begin, business leaders have said.
  • 2009-06-29 (BBC) There are signs that the financial services sector is emerging from the worst of the downturn, a quarterly survey from the CBI suggests. The UK's finance services sector could be on a "gradual" road to recovery, said the survey by the business group.
  • 2009-07-08 (Telegraph) The International Monetary Fund (IMF) admitted on Wednesday that economic recovery in Britain would happen earlier than it previously thought.
  • 2009-07-23 (Bloomberg) -- U.K. retail sales jumped four times as much as economists forecast in June as signs of improvement in the economy and discounts encouraged shoppers to buy more food and clothing.
  • 2009-08-03 (BBC.) "We're past the worst of it on the manufacturing side, and we could even be getting back to growth by the third quarter of this year," said Jill Evans, co-portfolio manager, Alpine Dynamic Dividend Fund." 
  • 2009-08-05 (SkyNews) The UK economy is showing more signs of recovery as industrial production expands at its fastest rate for nearly two years.
  • 2009-09-10 (BBC) "If you look at survey data, you see the signs of green shoots, but if you look at hard numbers on the real economy, green shoots are much more difficult to see," said Graeme Leach, Chief Economist at the Institute of Directors business group.


  • 2010-03-08 (Bloomberg) -- Bank of England policy maker Kate Barker said she is optimistic that the U.K. economy is recovering and that it faces fewer threats than before.
  • 2010-04-07 (Reuters) - Britain's economy continued to recover in the first quarter of this year, a clutch of industry surveys showed on Wednesday, but concern about a public spending squeeze is making firms reluctant to invest.
  • 2010-05-25 (Vogue News) THE recession is over, so said Marks & Spencer executive chairman Sir Stuart Rose, as he presented the company's end of year results this morning.
  • 2010-07-23 (Telegraph) UK's 'startling' economic growth reignites austerity debate. The UK economy has confounded experts in the past three months by growing at almost double the rate predicted.
  • 2010-07-26 (FinFacts) UK fiscal tightening should not choke off the recovery.
  • 2010-09-28 (BelfastTelegraph) The UK economy is on the mend and "recovery is under way", according to a report by the International Monetary Fund (IMF).
  • 2010-10-26 (Telegraph) George's Osborne's economic recovery plan for Britain gets double boost. Britain has scored a welcome double boost from strong economic data and a credit rating upgrade that will add to hopes the recovery is gathering momentum.
  • 2010-12-06 (Scotsman) Manufacturing output rose to its highest level for seven months in October, official data yesterday revealed, suggesting the UK's economic recovery remains on track in the final quarter of the year. 


  • 2011-01-04 (Sky) Hopes of an export-led economic recovery have been bolstered by the latest survey of activity in the manufacturing sector. Rob Dobson, senior economist at Markit and author of the survey, believes it was a "spectacular" performance.
  • 2011-03-15 (Sharecast) “We have delivered further strong organic growth of 6.6% in New Markets, which now account for 29% of revenue and 33% of profits, and we are encouraged by signs of economic recovery in our larger developed markets of the US and the UK,” [G4S chief executive Nick Buckles] added.
  • 2011-06-07 (Mortgage rates) IMF on UK Economic Policy. The International Monetary Fund (IMF) has issued a report on the state of the nations economic policies and reforms. The report has suggested no changes are needed to the UK policy on economic recovery and growth, a compliment that the government is only too happy to welcome.
  • 2011-06-15 (Reuters) - Britain's economy is slowly on the mend but faces substantial global headwinds, as well as weak credit growth and a crippled financial sector at home, finance minister George Osborne will say on Wednesday.
  • 2011-07-07 (BBC) UK manufacturing output rebounds in May. "Manufacturing is not as structurally soft as some people had feared," said David Page at Lloyds. "We think it will continue to be the cornerstone for an economic recovery over the next few quarters."
  • 2011-10-05 (My Finances) Service sector growth bodes well for economic recovery.
  • 2011-11-02 (MailOnline) A glimmer of hope for he UK as economy grew 0.5% in the past three months. "'This is a positive step forward,' said Mr Osborne."


  • 2012-03-02 (Guardian) UK construction growth bolsters economic recovery hopes. Construction PMI survey shows sector growing at fastest pace in 12 months, boosting hopes the economy has returned to growth after a 0.2% contraction at the end of last year.
  • 2012-03-13 (Huffington Post) UK Recession: 'Positive Shift' In Economic Activity as Jobs Market 'Turns Corner'. The Organisation for Economic Co-operation and Development (OECD) said its composite leading indicators, a survey designed to anticipate turning points in the economic cycle, had signified stronger but tentative signals of improvement.
  • 2012-03-19 (BBC) Mark Prisk on economic recovery outside London. Business and Enterprise Minister Mark Prisk rejected claims that growth had been patchy across the UK and said there were positive signs outside London.
  • 2012-04-02 (UK Net Guide) Despite the gloom, signs of recovery are tentatively appearing: the UK was recently judged to have the largest proportional online economy in the G20 - responsible for 8.3% of GPD - and jobs in the high-tech and online sectors are simultaneously increasing at a relatively rapid rate.
  • 2012-04-04 (Investors Chronicle) Hopes of an economic recovery increased this week, as two surveys pointed to brighter business conditions.
  • 2012-04-30 (Deadline) Rich list hints at an economic recovery. Journalist Philip Beresford, who is in charge of compiling the Rich List, said that the appearance of these individuals shows evidence of “a revival of British manufacturing shown by the rise of industrialists and high-tech tycoons” and believes this could signal the beginning of an economic recovery for Britain
  • 2012-05-09 (ilm) Despite the gloomy economic outlook caused by the UK's slip into a double dip recession, 60% of bosses believe their organisation will grow its output over the next year with almost a fifth (19%) expecting it to grow significantly, according to research published today (Wednesday 9 May) by the Institute of Leadership & Management (ILM).
  • 2012-07-23 (Telegraph) Britain Unleashed: Truth and courage can power an economic recovery
    Remind ourselves of some basic principles and we can rebuild our faith in business enterprise
  • 2012-09-13 (The Sun) Whisper it quietly – there are green shhhoots for economic recovery. "Ross Walker, chief economist at the Royal Bank of Scotland, said: “I think we are through the worst, in the sense that I don’t think the economy is shrinking. I think growth has resumed."
  • 2012-09-16 (Independent) UK's economic recovery has begun, says Sir John Major.
  • 2012-09-20 (BBC) Sir Mervyn King says economic recovery on its way.
  • 2012-09-28. (Touch Stone Blog) Celebrating the 'Economic Recovery' covers various headlines.
  • 2012-10-25. (mni news) BOE Bean: UK Past The Worst; Growth To Pick Up.
  • 2012-10-30 (This is Money) Retail revival adds to optimism on UK economic recovery as High Street sales pick up
  • 2012-11-12 (Telegraph) UK recovery gathering steam, OECD says. The recovery in the UK is gathering steam despite recent signs of economic weakness, according to the Organisation for Economic Co-operation & Development.
  • 2012-12-14 (This is Money) Builders lay foundations of economic recovery with unexpected surge in business [financial website of the year]


  • 2013-02-13 (Microsoft Business) Economic recovery on the way say CBI. "Organic growth is beginning to return to the UK economy, the Confederation of British Industry (CBI) has claimed. The business organisation says modest gross domestic product (GDP) growth is expected in 2013, with the pace picking up in 2014."
  • 2013-02-14 (Scotsman) BANK of England Governor Sir Mervyn King yesterday insisted a “recovery is in sight”, but warned the path ahead for the UK economy will not be smooth.
  • 2013-03-04 (Sky News & elsewhere) Economic Recovery 'In Sight', Says Mervyn King. Mervyn King says there is momentum behind an economic recovery coming to the UK after at least two recessions in five years.
  • 2013-03-26 (Telegraph) George Osborne, confidence returning, tells Tory doubters: no shock therapy for the UK economy. James Kirkup
  • 2013-05-01 (Guardian) UK manufacturing shows signs of recovery – but firms remain cautious. Strong export sales help UK manufacturing sector stabilise after slump earlier in year, Cips/Markit survey shows
  • 2013-05-01 (journalism.co.uk) High-income earners bet on the housing market’s recovery: Leicestershire estate agency. Britain’s housing market is poised to return to pre-crash levels according to Ernst and Young ITEM Club and the Telegraph. Rising prices on real estate throughout the country is benefiting the economic recovery.
  • 2013-05-01 (Telegraph) Factories boost for recovery hopes. Britain's factories almost stabilised in April after months of contraction, sending the pound higher on hopes that the recovery is bedding in.
  • 2013-05-03 (Express & Star) Hopes of sustained recovery boosted. The UK services sector leapt ahead again in April, figures showed, driving forward growth for the wider economy and boosting hopes of a sustained recovery.
  • 2013-05-06 (Telegraph) Ignore the IMF naysayers, Britain is on the slow road to recovery. Jeremy Warner (Strong growth in the Markit/CIPS purchasing managers' index for April)
  • 2013-05-06 (GrantThorton) Economic recovery continues to strengthen in 2013.
  • 2013-05-07 (MoneyMarketUK) UK economy to grow by 1.5% in 2014 (NIESR prediction)
  • 2013-05-10 (Telegraph) UK recovery gathering momentum after 'stunning' rise in manufacturing.
  • 2013-05-10 (London Evening Standard) UK on road to recovery, says Chancellor George Osborne.
  • 2013-05-10 (FT - Paywalled) Better UK economic data – but risks remain. Chris Giles and Claire Jones.
  • 2013-05-10 (MyFinances) NIESR predicts UK GDP growth accelerating in April
  • 2013-05-11 (WalesOnline) Some grounds for optimism that the UK economy is on the road to a sustained recovery. A raft of economic data shows that the UK economy could be entering a sustained recovery period says Professor Dylan Jones-Evans.
  • 2013-05-13 (Telegraph) CBI adds to optimism over UK economic recovery. The CBI has added to mounting optimism over the recovery of the British economy, forecasting a gradual pick-up in growth this year and next. Emily Gosden.


What many of these 'the worst is over' stories illustrate is that public commentators see nothing very special about the recession which began 2008. There seems to have been an assumption that as in other recessions since 1973 we would bounce back after a little while and return to trend growth. 5 years later and there is no sign of a return to growth in the UK.

And in reality?

13 Mar 2013

Month of March

I've been neglecting this blog for a while now because I'm busy with other things. But some things have stood out in the last couple of weeks.


Firstly I note that some pundits are pointing to another bubble in the stick market. Stephanie Flanders is not so sure about the FTSE, but the Dow went through 14k this month and some sources are trumpeting madly that it might rise to 36k. See for example Dow 36000 is back at Zero hedge. It speaks of "euphoria" in the markets. See also 13 European Housing Markets Sure Look Like Bubbles, and the blog The Bubble Bubble generally.

Steve Keen tweeted: "It's the private debt bubble that counts. Debt rising again in USA & that's why both economy & stock market seem to be recovering."

The rise on the FTSE may be a result of the weak pound as Flanders suggests, but the bubble in the USA isn't. This month HSBC bank recorded record profits, well beyond pre-crash levels. Banks' income comes from speculating on assets and commodities, and from interest payments. Record bank profits is not a good sign when economies around the world are struggling. It either means their speculations have forced up commodity prices or that another debt bubble is building up somewhere.

David Cameron

DC has been caught out several times recently being economical with the truth.

Back in Oct the New Statesmen ran this story: Cameron hasn't created "a million" private sector jobs". This got less coverage than it deserves I feel. Cameron has repeated this false claim recently. There's been some analysis of the way that DWP have warped the figures by shuffling people around job schemes.

The way unemployment figures are reported hid that the actual number increased last month.

Mean while December 2012 the Telegraph ran a story entitled  "David Cameron ordered to stop saying NHS spending is up". The leader said "David Cameron and Jeremy Hunt have been ordered to stop claiming that NHS spending has increased after the official statistics watchdog found health funds had fallen."

Cameron misrepresented the Office of Budget Responsibility. The Chairman Robert Chote felt moved to publicly rebuke the PM (I first I think) and to point out that the OBR consider the governments austerity to have a negative impact on GDP.

Fact Check made it clear that the government was not been "rebalancing the economy" as they claimed to be.

It's quite likely that the government will miss their deficit target because they do not understand national accounting.

Cameron keeps telling us that the good news will keep coming. It appears that he's quite willing to make it up if need be. And politicians wonder why we are cynical about politics?


With the IMF and the OBR questioning the success of austerity it is difficult to find any reputable economists who still supports the government policy of cutting public spending (to the extent that it has been cut). Austerity squeezes demand even more and has appreciably slowed growth - according to the OBR. There is a growing consensus that without growth the government will not meet their deficit targets. This is because, as the IMF pointed out some time ago, the problem with the deficit is not created by over-spending, but by drops in revenue caused by the long recession - now the longest depression in modern history.

Growth has to come from spending and investment. Spending is low because consumer debt is still high and the risk of investing is high. Everyone I know with a bit of spare cash is putting it into rental housing; surfing the property bubble that makes so much profit that it can afford to support a whole layer of middle men that leach 10% (or more) of the gross.

Investment is low because business debt is still high, and risk is high. So interest rates at the sharp end are still high (despite banks borrowing at next to nothing and being bribed by the government) and lending criteria are high. Bankruptcy levels are high, with a series of high-profile insolvencies and in each case the business seems to have been carrying substantial debts borrowed in a boom, that it could not service in a recession. Businesses are sitting on surplus cash because risk is high.

So banks lending money is not really an option for creating growth in the UK. All power to Dave Fishwick and the Bank of Dave, but he's a small player, and I don't think Burnley reflects the national situation.

In the end I agree with Ha-Joon Chang (Britain: A Nation in Decay) that facts about austerity are irrelevant to the Tories:
In reality, though, the coalition government isn't as stupid or stubborn as it appears. It is sticking to its plan A because spending cuts are not about deficits but about rolling back the welfare state. So no amount of evidence is going to change its position on cuts.
The government are like those asset strippers in the 1980s who would buy a company, run it into the ground and sell of its assets. Only the Tories, with the assistance of their LibDem toadies, are doing it to Great Britain. Great for how long I wonder? And even if we vote for labour in the next election would things really be better?