Wednesday, 30 December 2009

Printing money is a game with potentially dangerous results

"If you were one of the 12 million people who reportedly went to the sales on Boxing Day, then you might be thinking this recession has not been so bad after all. Unemployment is not rising as fast as expected, interest rates remain low and the stock market is up by more than half since March.The truth is, though, that we have been living in an economic La La Land, induced by perhaps the biggest policy undertaken during the Labour Government's period in office: printing money, or quantitative easing, to use its economically correct but unlovely name."

Britain's debt now a 'riskier proposition' than Italy's

"Investors now view Britain as a riskier lending proposition than Italy, with its cost of borrowing rising comfortably above the 4pc mark for the first time this year. .....The Treasury's cost of borrowing has risen by more than a percentage point since March, despite the Bank of England spending £200bn on gilts through its quantitative easing (QE) programme. Experts put the increase down to worries that this and future governments will either prove incapable of reducing their deficit or will resort to inflation in order to erode it. The combined effect has been to catapult UK government bond yields above those of Italy and Spain in the past few weeks alone."

China and South East Asia create huge free trade zone

"A free trade zone spanning more than 1.9 billion people will come into life on January 1 as China and ten South East Asian countries join together to scrap tariffs. In another sign of Asia's ascendancy, and of its growing economic and political union, duties will be dropped on everything from steel to rubber and shoes to electronics.China hopes that the zone will quickly rival the European Economic Area and the North American Free Trade Area and provide new outlets for its goods in the face of Western protectionism."

Sunday, 27 December 2009

Experts accuse Government of 'alarming complacency' over UK's ballooning budget deficit

Daily Mail
"The Government came under heavy fire from experts today over the lack of a 'clear and credible' plan to tackle the dire state of the public finances.In a letter to the Sunday Times, a group of 11 economists said ministers were guilty of 'alarming complacency' after failing to set out detailed proposals to address the ballooning deficit in the Pre-Budget Report earlier this month. ....The letter was signed by:

Tim Congdon (International Monetary Research), John Greenwood (Invesco Asset Management)

Andrew Lilico (Europe Economics),Kent Matthews and Patrick Miniford (Cardiff Business School)

Michael Oliver (ESC Rennes School of Business),Gordon Pepper (Lombard Street Research)

David B Smith (Derby University),Peter Spencer (York University)

Peter Warburton (Economic Perspectives),Philip Booth (Cass Business School/IEA)

Chinese economy overtakes Japan

"The fast-growing emerging economy had been expected to surpass Japan next year, but the transition looks to have happened in 2009, based on China's new growth estimates. Its statistics bureau said that China grew by 9.6pc – rather than 9pc – in 2008, meaning its economic output was 31.405 trillion yuan, or $4.6 trillion (£2.9 trillion), last year."

Saturday, 26 December 2009

Debt-laden Japan shocked by £630bn spree to ‘save lives’

The Times
"Mr Hatoyama swept to power in August with grand promises that the era of wasteful public spending would end. Japan’s unnecessary and notoriously expensive “roads to nowhere” public works projects would be curtailed and the money diverted to supporting beleaguered households.Four months on from that victory and Mr Hatoyama has spent more than any of his predecessors and has yet to make any serious impact on the wider effort of repairing Japan’s shattered economy."

Thursday, 24 December 2009

Gilts sell-off as Britain joins Italy in debt house

"The cost of borrowing for the British Government has surged to within a whisker of Italian levels as global markets issue their punishing verdict on the Government’s spending plans. ....The yield on 10-year gilts spiked Wednesday to 3.97pc, 46 basis points higher than costs on French bonds. Britain and France were neck and neck as recently as last month, before Labour’s pre-Budget report raised deep concerns among Chinese, Arab, and Russian investors about the credibility of British state."

Wednesday, 23 December 2009

Bank voted 9-0 to keep rates, QE steady

"All nine members of the Bank of England's Monetary Policy Committee voted to keep interest rates at a record low of 0.5 percent and maintain the 200 billion pound asset buying programme in December, as expected.Analysts do not expect any further expansion of the Bank's quantitative easing scheme -- pumping money into the economy by buying assets -- and are now looking for an indication of when the central bank might start to tighten monetary policy.Britain is showing signs of recovery after a year and a half of recession and, although it is lagging behind other economies, policymakers expect a return to growth before the year is out.Minutes of the Bank's December 9-10 meeting, published on Wednesday, showed the MPC felt little had changed since November when they expanded quantitative easing, mostly targeted at buying British government bonds, by 25 billion pounds."

Tuesday, 22 December 2009

Charles Goodhart warns of return to recession as bank lending falls

"Professor Charles Goodhart, a former top official at the Bank of England now at the London School of Economics, said policymakers have neglected the flashing danger signal of the monetary data."What has happened to all the monetarists? Growth in money holdings and lending has plummeted. Thirty, or 40, years ago they would have been forewarning doom and destruction at this juncture, and casting anathemas at the authorities," he wrote in a consultant report for Morgan Stanley. "

Fitch warns that Britain and France risk losing their AAA rating

"Highlighting the "unpleasant fiscal arithmetic" facing states across the Old World, Fitch said that none of the "arguably" benchmark AAA states can safely rely on their top rating for much longer.Public debt in both Britain and France will reach 90pc of GDP by 2011, higher than the 80pc (net) level when Japan lost its AAA rating earlier this decade."

Monday, 21 December 2009

The rise of Germany belies the chaos a strong euro is causing

"The super-strong euro is having sharply varying effects on the different countries in the eurozone and causing the rift between north and south to widen further, according to a new report by Standard & Poor's (S&P). ..The headache for the ECB is that Germany seems well able to cope with a strong currency after screwing down wages and raising productivity, even if Club Med is squealing. German firms have gained some 18pc in labour cost competitiveness against Italy and 15pc against Spain since 2005, and far more going back to the mid-1990s when the exchange rates were set in stone."

UK recession to be declared over – but recovery remains distant

"However, the CBI will warn that GDP will not return to pre-recession levels until after 2011 – illustrating the depth of Britain's economic troubles. The economy has contracted since June 2008, the most prolonged recession since records began in the 1950s, and has shrunk by 5.1pc in total."The economy will be on a fragile path of very slow growth as we continue to feel the lasting effects of the financial crisis," said John Cridland, CBI deputy director general. "

Saturday, 19 December 2009

National debt hits post-war peak as tax receipts slide

"The Treasury borrowed some £20.3bn in November – the biggest monthly amount since records began – according to official figures released on Friday.The debt built up in the month alone is just shy of the annual transport budget and would take a 5 percentage point VAT increase for an entire year to recoup. However, in a sign of just how pessimistic investors are about Britain's outlook this year, the figures were described as "better-than-expected" by a range of economists, who added that it was broadly in line with the Chancellor's deficit projection of £178bn from last week's pre-Budget report."

Friday, 18 December 2009

UK hit hardest by banking bailout, with £1trillion spent to save the City

Daily Mail
"The burden of the banking bailout has been heavier in Britain than the rest of the western world, according to alarming figures published today.The UK has committed public funds worth almost 75 per cent of national income, or around £1trillion, to saving the City, according to the Bank of England.That compares with bailout costs worth just 30 per cent of gross domestic product in the Euro Zone and 50 per cent in the United States."

UK borrowing hits record monthly high of £20bn

"he £20.3bn is more than was borrowed by the UK for the whole of 2002 and on a par with International Monetary Fund estimates for the entire 2009 output of economies such as Costa Rica and Uruguay."

Thursday, 17 December 2009

There's only one escape from our debt trap

"What is far more likely, or so investors fear, is that Britain will inflate the deficit away by debauching the currency: as inflation rises alongside the money supply, every pound we owe will be worth that little bit less. This is what we did in the 1970s – and most other times we have faced a debt crisis. So suspicions that a repeat performance is on the cards are not difficult to understand: the pound has already fallen by around a quarter since the start of the crisis; the Bank of England has embarked on a quantitative easing scheme that involves printing enough money to buy the annual economic output of Denmark; and inflation is threatening to leap well above the Bank's 2 per cent target."

Wednesday, 16 December 2009

Alistair Darling in cover-up scandal as he is accused of not revealing full extent of Britain's debt

Daily Mail
"The Chancellor told MPs that the Treasury had made 'estimates' of increases to the debt interest bill - which experts predict will hit £70billion to £80billion a year within five years - but refused to release them to Parliament.The Institute for Fiscal Studies, Britain's most respected economic forecaster, has given projections to MPs suggesting the debt interest bill will hit £60billion by 2012/13, £66billion by 2013/14 and £71billion by 2014/15.Mr Darling also declined to reveal Treasury 'assumptions' showing deep cuts to public spending outside of Labour's protected areas of schools, hospitals and police numbers, despite demands to do so from the Treasury select committee."

S&P downgrades Greece while concerns mount over secret defence budget

"Standard & Poor’s has become the second rating agency to downgrade Greek sovereign debt to near junk levels of BBB+, issuing a withering verdict on Spartan plans unveiled this week by premier George Papandreou. .....Fitch Ratings precipitated the Greek crisis earlier this month with a surprisingly harsh downgrade to BBB+, accompanied by a “negative outlook”.

Gulf petro-powers to launch currency in latest threat to dollar hegemony

"The Arab states of the Gulf region have agreed to launch a single currency modelled on the euro, hoping to blaze a trail towards a pan-Arab monetary union swelling to the ancient borders of the Ummayad Caliphate. ....“The Gulf monetary union pact has come into effect,” said Kuwait’s finance minister, Mustafa al-Shamali, speaking at a Gulf Co-operation Council (GCC) summit in Kuwait.The move will give the hyper-rich club of oil exporters a petro-currency of their own, greatly increasing their influence in the global exchange and capital markets and potentially displacing the US dollar as the pricing currency for oil contracts. Between them they amount to regional superpower with a GDP of $1.2 trillion (£739bn), some 40pc of the world’s proven oil reserves, and financial clout equal to that of China."

Tuesday, 15 December 2009

Moody’s warns of 'social unrest’ as sovereign debt spirals

"It said that in the coming years, evidence of social unrest and public tension may become just as important signs of whether a country will be able to adapt as traditional economic metrics. Signalling that a fiscal crisis remains a possibility for a leading economy, it said that 2010 would be a “tumultuous year for sovereign debt issuers”.

Monday, 14 December 2009

Biggest expansion of Bank of England's balance sheet in two centuries

"All interesting stuff, but one bit I find particularly fascinating is this chart from the section on markets and operations.It is, as far as I know, the first time the Bank has investigated just how its £200bn programme of quantitative easing compares with previous episodes of central bank balance sheet expansions in the past. ..."

Sunday, 13 December 2009

Greece defies Europe as EMU crisis turns deadly serious

"Euroland's revolt has begun. Greece has become the first country on the distressed fringes of Europe's monetary union to defy Brussels and reject the Dark Age leech-cure of wage deflation. ....Mr Papandreou has good reason to throw the gauntlet at Europe's feet. Greece is being told to adopt an IMF-style austerity package, without the devaluation so central to IMF plans. The prescription is ruinous and patently self-defeating. Public debt is already 113pc of GDP. The Commission says it will reach 125pc by late 2010. It may top 140pc by 2012.If Greece were to impose the draconian pay cuts under way in Ireland (5pc for lower state workers, rising to 20pc for bosses), it would deepen depression and cause tax revenues to collapse further. It is already too late for such crude policies. Greece is past the tipping point of a compound debt spiral."

Be proud we're giving another £1.5bn to beat global warming, says Mr Brown (just don't mention our £800bn national debt)

Daily Mail
"Gordon Brown told hard-pressed taxpayers yesterday they 'should be proud' Britain was the biggest EU contributor to a new global warming fund.In a week in which it emerged that the national debt is expected to near £800billion this year, the Prime Minister pledged £1.5billion.The amount to help Third World countries cut emissions and protect themselves against climate change is double what he had previously promised."

Saturday, 12 December 2009

(image from Burning our Money)

Friday, 11 December 2009

£2,400: the bill every family will pay to cut the deficit

"The true extent of the financial pain that will be felt by households and public services over the next few years was laid bare yesterday by the Institute for Fiscal Studies. ...To protect the "ringfenced" areas of hospitals, schools and the police, there will have to be savage cuts to defence, housing, transport and higher education budgets. Cuts of almost 7 per cent a year, 20 per cent over three years, mark the severest squeeze since the Second World War, tougher than anything in the austerity years of the 1970s or early 1980s."

Britain's ballooning public debt sparks massive gilts sell-off: Investors dump UK debt amid fears of default

Daily Mail
"Investors moved away from gilts - the bonds issued by the Government to finance its debts - amid concerns that Alistair Darling had ducked tough questions on how Britain will balance the books.Ratings agencies have warned that Britain's triple-A credit rating, which enables the Government to borrow more cheaply than less credit-worthy nations, could be at risk unless Gordon Brown and his Chancellor lay out a credible plan to cut the deficit."

Darling's plan to halt spending in Pre-Budget Report 'overruled by Brown and Balls'

Daily Mail
"Gordon Brown and Ed Balls hijacked the Pre-Budget Report and insisted it should not outline plans to rein in public spending, it emerged today.The Prime Minister is said to have wanted Labour's pledges for an extra £30billion in spending kept despite the already-gaping hole in public finances."

Thursday, 10 December 2009

Pre-Budget report: the nasty come-down

"The gilts market is having the hangover from hell this morning, as the nasty realisation dawns that the pre-Budget report was an exercise in smoke and mirrors of the Brownian type....At first glance, the PBR, as I said in my analysis piece this morning, was ostensibly convincing. But the more you dig in, the more flaws become apparent."

Wednesday, 9 December 2009

Pre-Budget report: national debt will hit £1.5 trillion

"Figures in the Treasury’s pre-Budget report documents reveal that in 2014/15, the national debt will be £1,473 billion. That is 77.7 per cent of gross domestic product
The debt currently stands at £798 billion, or 55.6 per cent of GDP."

It's worse than we thought, admits Darling

"The Chancellor admitted today the recession was far deeper than he had predicted as he announced a public sector pay squeeze to help curb soaring national debt.Alistair Darling laid out plans to slash public spending in real terms from 2011 - after the General Election - as he revealed the economy would shrink by 4.75 per cent in 2009 compared to his April Budget estimate of 3.5 per cent.He also said the public finances were deeper in the red with a deficit of £178 billion this year compared to the £175 billion he had predicted."

Looking Down the Toilet Bowl

"And Osborne had the best lines. The Prime Minister wants to get the forecasts wrong on purpose; the Chancellor wants to get them wrong by accident.And he nailed the Labour "core vote" strategy, which defines as I pointed out yesterday a party that is going down the toilet:If you want to get on in life, the Labour Party is not for you."

Pre-Budget Report: Darling unveils stealth tax and public sector pay cap

The Times
"In fact, the national insurance change will hit everyone earning more than £20,000 – less than average earnings – and the public sector pay cap will also hit low earners.
Vince Cable, the Liberal Democrat Treasury spokesman, said that the wage freeze and national insurance changes could hit low earners in a similar fashion to the 10p tax."

Darling hits everyone earning over £20,000 with 0.5% NI increase (but public spending just goes on and on)

Daily Mail
"Alistair Darling today gambled Labour's future on a highly political Pre-Budget Report that targets the better-off to help reduce Britain's collossal debt."

Pre-Budget report 2009: the key points at a glance

"Alistair Darling's third pre-Budget report comes amid the worst recession in decades and within months of a General Election. Here are the key points at a glance."

Pre-Budget report: middle-class, bankers and public sector staff will all suffer

"Middle-class workers, City bankers and public sector employees will have to sacrifice billions of pounds to pay off Britain’s record debts, Alistair Darling, the Chancellor has announced in his pre-Budget report. ...But he also admitted that the recession has been the worst in modern history, forcing him to borrow more than £700 billion over five years. ...In the Budget in April, Mr Darling said the economy would shrink by 3.5 per cent. Today, he admitted the decline will be 4.75 per cent, the worst since the Second World War."

Pre-Budget report: A shocker in every line

"Even before we’ve trawled through the small print on pensions and tax changes, the pre-Budget report has lived up to the billing. Scorched earth, poison pill, you can choose your metaphor but the key point is that this was a political statement designed to protect Labour’s sectional interests, boost its core vote and stuff the Tories at every turn."

Tuesday, 8 December 2009

UK backs £167bn of overseas bad debt

"British taxpayers stand behind more than £167bn of toxic assets in the US, Ireland, the Middle East and beyond, it has emerged as the Treasury disclosed details of what Royal Bank of Scotland has dumped in the state insurance scheme for bad debts."

UK manufacturing output stagnates unexpectedly in October

"IHS Global Insight's Howard Archer said: "This highlights the fact that the UK still faces a difficult battle to develop a sustainable, significant recovery." ...Mr Archer said: "Serious doubts remain about the strength of demand for manufactured goods over the medium term, particularly once stimulative measures start being withdrawn." .
ECB begins to turn off the liquidity tap (Telegraph)
"There are particular worries about Greece and Ireland, where banks have relied massively on ECB support because they cannot raise money cheaply on the open market. The ECB has let them use a wide range of low-grade mortgage debt as collateral for loans. Private markets are unlikely to be so forgiving, raising the risk of a roll-over crisis for weak lenders."

Warning over UK economy sees pound and FTSE take a dive

Daily Mail
"The pound fell against the dollar and the euro today after rating agency Moody's described the British economy as weaker than Germany and France.A report today said Britain and the U.S. had 'resilient' AAA ratings, as opposed to the 'resistant' top ratings of Canada, Germany and France, mainly because of the dreadful state of the public finances in Britain and the United States."

Monday, 7 December 2009

Iceland reveals worst economic slump on record

The Times
"Iceland's economy recorded its worst-ever fall, tumbling by 7.2 per cent in the third quarter, as the collapse of its banking sector and its currency continued to lay waste to its finances.Official figures revealed that national output in the third quarter fell by 5.7 per cent from the previous quarter. Year-on-year gross domestic product was down 7.2 per cent — the biggest decline on record."

Elusive and fragile recovery threatened by soaring deficit

"As the Chancellor adds the final polish to his pre-Budget report on Wednesday, some of Britain's leading business organisations have warned that the recovery will be fragile and that soaring public borrowing threatens the UK's international credit rating. Britain runs a high risk of a "relapse" into recession next year.The Engineering Employers' Federation says that conditions in the British manufacturing sector have continued to improve, but that signs for a strong rebound in 2010 "remain elusive."

Sunday, 6 December 2009

Pre-Budget report: UK ‘faces decades of debt’, warns Treasury

"Britain faces decades of rising public sector debt, increasing taxes and, potentially, falling living standards unless it tackles the growing costs of its pensions and health bill, the Treasury will warn this week."

Saturday, 5 December 2009

A rudderless economy and a once great Treasury that's now not fit for purpose

Daily Mail
"Today, however, Britain faces economic and financial crisis on a scale that far outweighs even these catastrophes of the 1970s and 1990s.This time the Treasury is utterly unable to cope. Indeed, it is facing the greatest crisis of confidence in its history. ...But such is the degradation of Treasury competence and morale under Gordon Brown, Alistair Darling and the department's supine Permanent Secretary Nick Macpherson that it is now considered normal to sub-contract out this kind of work, which ought to be meat and drink to Treasury mandarins. .....In other words, even as late as October 2008, and therefore after the collapse of Lehman Brothers, Treasury officials were clueless about what was going on in financial markets."

Friday, 4 December 2009

£40,000 a family: The taxpayers' cash used to fund the £850billion bailout

Daily Mail
"The extent of taxpayer support for Britain’s banks is revealed today to be £40,000 for every family in the country.An official report concludes that bailouts, guarantees, insurance and loans offered by the Government and the Bank of England reached £850billion."

Ben Bernanke says Gordon Brown hurt Britain's ability to resolve banking crisis

"Ben Bernanke said that Mr Brown’s decision to strip the Bank of England of its supervisory role over banks had led to a “destructive run” and a “major problem for the British economy”. "

£850bn: official cost of the bank bailout

"Government support for Britain's banks has reached a staggering £850bn and the eventual cost to taxpayers will not be known for years, the public spending watchdog says today.
The National Audit Office (NAO) revealed that £107m will be paid to City advisers called in to work on the rescue because the Treasury was too "stretched" to cope with the sudden financial crisis which broke in the autumn of last year."

Wednesday, 2 December 2009

It’s déjà vu all over again as Sarkozy takes aim at City of London

The Times
"One senior banker said: “Surrendering control of the City of London to the French in return for some nonentity getting a non-job [Baroness Ashton of Upholland’s appointment as EU foreign affairs chief] is one of the biggest fiascos of British diplomacy since Suez. The fact that Sarkozy is now being gleeful makes it worse. The Prime Minister must explain how he will protect the City from EU meddling or lose what remaining credibility he has in the City.”

China wary of gold 'bubble’ danger after quietly doubling its reserves

"The Chinese authorities have given the clearest indication to date that they view the surge in gold to an all-time high of $1,217 (£730) an ounce as a speculative frenzy."

Tuesday, 1 December 2009

There is still no evidence QE is working

"In fact, the data that will really have worried the PM yesterday was released not in Ottawa but at Threadneedle Street, where the Bank of England's latest report on bank lending and money supply advances the case that its £200bn quantitative easing programme is working not a jot."
At midnight last night, the United Kingdom ceased to be a sovereign state (Telegraph)
"At midnight last night, we ceased to be an independent state, bound by international treaties to other independent states, and became instead a subordinate unit within a European state.Yes, a European state. Take a quick dekko at the definition set out in Article One of the1933 Montevideo Convention on the Rights and Duties of States: “The state as a person of international law should possess the following qualifications: (a) a permanent population; (b) a defined territory; (c) government; and (d) capacity to enter into relations with the other states.”

The last G20 nation still in recession is... Britain

Daily Mail
"Britain was shamed yesterday by official figures showing it was the only country in the G20 group of the world's most powerful economies still in recession.Canada, the other country lagging behind the rest, had resumed growth in the three months from July to September, going up 0.1 per cent.This has left Britain as the only G20 country where the economy is still contracting."

Chancellor needs an extra £15bn, ITEM says

"The Chancellor needs to find an additional £15bn over the medium term if he is to meet government borrowing targets set out in the Budget, a respected group of economists has warned."

Monday, 30 November 2009

The cost of China’s excess capacity

"In China’s current development model, household income is taxed, to support corporate profits. Corporations now generate more than half of China’s huge savings. Since consumption tends to grow more slowly than GDP, excess capacity can only be used up via yet more investment or exports. This year, economic crisis has made the latter impossible. But China desperately needs to expand its exports once again. The result may well be a crisis in the trading system."

Morgan Stanley warns UK risks full-blown debt crisis

The Times
"Economists from Morgan Stanley said that if next year’s elections resulted in a hung Parliament, the country could face losing its AAA debt rating as investors panicked over whether the majority party had the authority to push through the fiscal tightening needed to get the UK’s finances back on track."

The leaks that prove how worried the Treasury is

"The significance of this should not be underplayed. The Treasury, it appears, is going to the extent of leaking market-sensitive details of the forecasts in the PBR because, one presumes, it is extremely worried about the market’s reaction to the red book itself. This probably shouldn’t be surprising: we all know full well that the UK is heading into unknown territory when it comes to its fiscal position: total UK net debt is set to rocket from around 50pc of gross domestic product to close to 100pc in the next few years."

Morgan Stanley fears UK sovereign debt crisis in 2010

“In an extreme situation a fiscal crisis could lead to some domestic capital flight, severe pound weakness and a sell-off in UK government bonds. The Bank of England may feel forced to hike rates to shore up confidence in monetary policy and stabilize the currency, threatening the fragile economic recovery,” they said."

Friday, 27 November 2009

Fears stalk global markets on Dubai debt crisis

The Times
"Masayoshi Okamoto, head of dealing at Jujiya Securities in Tokyo, said: “I think we won’t know the full impact of Dubai until Monday after we see what happens in New York, where bank shares are likely to be hit pretty hard.”

Treasury 'forced' to reveal secret £62bn loan for banks

"Edward Leigh, Conservative chairman of the Public Accounts Committee, and John McFall, Labour chairman of the Treasury Select Committee, indicated that the prospect of this information being "outed" had been the primary reason why the news was finally released this week."

Dubai's ruling family moves to calm debt fears as global markets slide

"Dubai's ruling family has attempted to calm international fears over its economic stability, saying its rescue package for its most indebted state company was "carefully planned"."

Thursday, 26 November 2009

Why was I kept in the dark over £61bn loans - asks Leigh

"Edward Leigh, chair of the public accounts committee, has written an angry letter to the Chancellor demanding to know why the £61bn loans to HBOS and RBS have only just been made public."

Wednesday, 25 November 2009

Treasury rift with Bank deepens over secret loan

The Times
"Relations between the Governor of the Bank of England and the Chancellor hit a new low today after Alistair Darling faced a barrage of criticism from both sides of the Commons over the emergence of a £61.6 billion secret loan to RBS and HBOS."

As one crisis recedes, the fiscal one may be only beginning

"It is hard to recall a time when opinion on asset markets was more sharply polarised between bulls and bears. But then it is also hard to recall a time when the future course of the world economy looked so uncertain."

How the Bank of England made £62bn 'disappear'

"In order to hide the emergency loan, all it had to do was, when printing the details of its balance sheet, to plop the loans in the same category as these currency swaps. Voila, no-one could be sure that all that fizzing in the Bank’s accounts wasn’t just due to those volatile currency swaps."

Tuesday, 24 November 2009

Bank of England propped up RBS, HBOS with £61.6bn in emergency loans at height of crisis

"Royal Bank of Scotland and HBOS received £61.6bn in emergency loans last October, the Bank of England said as it revealed for the first time the scale of crisis that brought Britain's financial system close to collapse."
Bank gave RBS and HBOS 'secret' £62bn loan (The Times)
"Royal Bank of Scotland (RBS) and HBOS were secretly kept afloat with £62 billion of emergency Government support at the height of the credit crisis last year, it was revealed today.The Bank of England kept the massive liquidity injections secret until today, when it judged calm had been restored and there was no longer any need for secrecy."
Bank of England gave RBS and HBOS £61.6bn in 'secret' loans at height of credit crisis (Daily Mail)
"The Bank revealed for the first time the details of its Emergency Liquidity Assistance (ELA) to both banks in a submission to the Treasury Select Committee."

Monday, 23 November 2009

Warning on borrowing, with third of Britons in fear of debt

"Britain's debt levels have been a source of concern for finance professionals and regulators. While most of the banks now say the increase in bad debts levels is slowing and some, such as Lloyds Banking Group, say they have peaked, experts argue that only historically low interest rates have prevented tens of thousands of people from defaulting on mortgage payments."

UK economy is the 'sick man' as rivals recover

The Times
"The leading industrialised economies emerged from recession between July and September, but Britain remained the "sick man", staying in an economic slump, figures from the Organisation for Economic Co-operation and Development (OECD) showed today."

Britain has run out of money, the CBI is told

"....the Prime Minister stuck to already announced plans for halving the deficit over four years. He promises to keep fiscal support measures in place for as long as it takes to produce a sustained recovery in private demand.Yet in placing so much of his hope for future growth on infrastructure spending, he seems to have plain forgotten that his fiscal consolidation plans involve some of the biggest cuts to capital spending by the public sector ever seen. The rhetoric on creating a business friendly Britain wide open and attractive to inward investment says one thing, but the practice of higher taxes and more regulation the complete opposite."

Sunday, 22 November 2009

Greece tests the limit of sovereign debt as it grinds towards slump

"The newly-elected Hellenic Socialists (PASOK) of George Papandreou confess that the budget deficit will be more than 12pc of GDP this year, four times the original claim of the last lot. After campaigning on extra spending, it will have to do the exact opposite. "We need to save the country from bankruptcy," he said."

Saturday, 21 November 2009

Deflation hits Japan ... again

"The monthly report from Tokyo's Ministry of Finance is blunt in its assessment. "Recent price developments show that the Japanese economy is in a mild deflationary phase," it says starkly, before calling on the Bank of Japan to implement "appropriate and flexible monetary policy" to help fix the problem. ....In Japan, it is already happening. As Tokyo admitted yesterday, deflation has haunted the country since the spring and is now worsening faster even than in the years after the bursting of the 1989 asset bubble. Core CPI – which excludes fresh food – was running at minus 0.1 per cent in March. By June it was minus 1.7 per cent. Now it is between minus 2.2 and minus 2.4 per cent. But CPI is not all there is, and real deflation is typically taken to include falls in the nominal value of all kinds of assets, not just consumer prices."

An inflationary spike is not just hot air - it's a very real threat

"n October, UK inflation rose sharply - with the Consumer Price Index up 1.5pc annually, compared with 1.1pc the month before. Most prominent British economists say this is a "blip" and that "deflation" remains the most serious danger. I'm afraid such economists are wrong."

Government deficit now increasing at £3bn a week

"The government borrowed some £11.4 billion in October, bringing the total borrowed so far this year to £86.9 billion - the highest running total in history - according to the Office for National Statistics."

Thursday, 19 November 2009

UK borrowing spirals as tax receipts dwindle

"October's shortfall reached £11.4bn compared with £130m at the same time last year. City economists had pencilled in a deficit of £7.1bn.Although October is traditionally a strong month for revenues such as corporation tax, Britain's deepest recession since the 1930s has hit the tax take hard and spurred spending on unemployment benefits. Overall tax receipts fell 9.1pc in the month as spending gained 10.3pc."

Its the deficit, stupid

John Redwood
"The deficit is estimated to be running at between 12% and 14% of national Income. It is, as David Cameron reminded us, double the level of deficit relative to the size of the economy that the UK struggled with at the time of the IMF loans in the 1970s. It is massive, growing too rapidly, and out of control. Today’s figure for October confirms that the Treasury was not for once overestimating it when they forecast £175billion of borrowing for the year. Some forecasters now think it will be £200 billion. This surge in borrowing is an interesting backdrop to the decision to print another £25 billion."

Britain's borrowing hits record £11.4 billion

The Times
"The threadbare public finances were thrown back into the spotlight today as it was revealed the Government was forced to borrow £11.4 billion in October to meet its bills - the worst figure for the month since records began in 1946.Tax receipts collapsed by £4.1 billion compared with October 2008 while spending was £4.5 billion greater as the recession took its toll on corporate profits and consumer spending while welfare payments surged.Total public sector net debt grew to £829.7 billion, equivalent to 59.2 per cent of total national output, by the end of October. That compares to £695.1 billion and 48.6 per cent a year earlier."

Tuesday, 17 November 2009

Yo dude - where's the Deflation ?

Guido Fawkes
"It seemed too handy a coincidence that they would print money on a scale never seen before at the same time as issuing debt on a scale never seen before. They subsequently, coincidentally, bought the debt using the money they had just printed."

Inflation leaps- before the VAT increases hits us..

John Redwood
"The inflation increase was the largest since August 1990, when our economy was being distorted by following the German currency. RPIX (Retail Price Index without housing) stormed above the growth of the CPI (Consumer Price Index, Mr Brown’s preferred measure), hitting an annual increase of 1.9% compared to 1.3% a month earlier. ..."

QE has not yet improved lending

"He also admitted the Bank's £200bn programme of quantitative easing (QE), which injects money and spending power directly in the economy, had not yet had the desired effect, despite some £175bn already having been spent by the Bank in buying gilts and corporate bonds."

Core deflation in the US continues to gather pace

"Mr Fisher said the “peak impact” of the Obama fiscal blitz has already come and gone. “Several recent sources of strength are likely to wane as we head into next year. Cash-for-clunkers and the first-time-homebuyer tax credit have both shifted demand forward, increasing sales today at the expense of sales tomorrow. Neither of these programmes can be repeated with any real hope of achieving anywhere near the same effect. The more demand you steal from the future, the less future demand there is for you to steal,” he said."

Monday, 16 November 2009

Inflationary armageddon? Not yet, but come 2011 it's another story

"In many ways, the real test for the inflation numbers won't come next year but rather in 2011. By that stage, barring another major commodity price move, the effects of that roller-coaster will have fallen out of the annual inflation numbers, along with the effects of higher VAT rates. Moreover, the inflationary effects of a lower pound should have faded away too."

Sunday, 15 November 2009

China has now become the biggest risk to the world economy

"Far from taking over as the engine of growth from an exhausted West, China is making matters worse. Its "beggar-thy-neighbour" policies continue to play havoc with global trade and risk tipping the world into a second leg of the Great Recession."

Saturday, 14 November 2009

Dollar carry trade could herald the next global crisis, analysts warn

The Times
"The warning was issued at the Apec summit of Asia Pacific leaders in Singapore and came after a variety of assets started to display bubble-like patterns of inflation: everything from gold and copper to fine wine and Hong Kong penthouses."

Currency devaluation is no magic bullet

"Mervyn King, the Governor of the Bank of England, was at it again this week. The fall in the exchange rate over the past two years, he said, will help smooth what he characterised as a necessary rebalancing of the economy, away from consumption and towards exports.His remarks were reminiscent of past currency crashes under Labour. Remember Harold Wilson? "It does not mean," he said, when he announced a 14 per cent devaluation, "that the pound here in Britain, in your pocket or purse or in your bank, has been devalued. What it does mean is that we shall now be able to sell more goods abroad on a competitive basis." Nobody was fooled then, and it would be unwise to rely on that idea this time, either."

Friday, 13 November 2009

Simple truths about the economy

"The truth is sometimes simple, however elaborate the detail. The main feature of the world economy over the past few years has been the growing savings surplus of China and other Asian countries. Until recently it was offset by consumer borrowing in the west, especially in the US and the UK. .....The best place to begin is the International Monetary Fund’s current World Economic Outlook . One table shows savings rates in “emerging developing economies” rising far faster than domestic investment. The difference, known as “net lending”, rose from negative numbers at the end of the 20th century to a peak of 5.2 per cent of gross domestic product in 2006. The figure of 5.2 per cent of GDP may not seem much, but the countries concerned are estimated to account for nearly 45 per cent of world output or more than $30,000bn a year."

Britain lags as eurozone climbs out of recession

"From a UK perspective today's figures do not make pleasant reading," said Charles Davis, senior economist at the Centre for Economics and Business Research. Richard McGuire, senior fixed income strategist at RBC Capital markets said the Eurostat data "further underlined the UK's isolation, itself a reflection of the more structural nature of the latter's downturn."

Thursday, 12 November 2009

Britain's recovery is only just starting, warns bank boss Mervyn King

Daily Mail
"Governor Mervyn King said the recovery was under way, and signalled that interest rates will remain low at least another year, in a boost to mortgage payers.But he warned the country has 'only just started along the road' towards getting the economy back to business as usual, in the wake of the worst financial crisis in modern history."

Britain will take two more years to regain strength

"In its quarterly Inflation Report, the Bank produced new research showing that annual UK economic output was unlikely to return to the £1.4 trillion level it peaked at in early 2008 for two more years. The warning, which underlines Governor Mervyn King's repeated warnings that the UK faces an arduous struggle as it attempts to rebuild and rebalance its economy, came as the Bank signalled that recovery is nevertheless in store, and that interest rates may rise, or quantitative easing (QE) be withdrawn, in the coming months."

Wednesday, 11 November 2009

Overhaul the EU budget

"Fraud and mismanagement have long been endemic in the EU. Its taxpayers are concerned less about which nondescript politician will take on this or that role, than about whether any of them will get to grips with the colossal waste of their money. This extends beyond the familiar stories of phantom tobacco plantations and inefficient French farmers."

Obama has lost his way on jobs

"The past week brought news of US double-digit unemployment and the Federal Reserve’s decision to maintain near-zero interest rates. Both pieces of news expose the inadequacy of US economic policymaking. The Obama administration’s stimulus policies are not well-targeted. The Republican alternatives are even worse. Both sides are missing the key fact: the US economy needs structural change that requires a new set of economic tools."

Tuesday, 10 November 2009

Outlook for jobs will remain grim ‘for several years’

The Times
"Gerwyn Davies, public policy adviser at the CIPD, said: “The UK jobs market remains flat on its back. Things aren’t anywhere near as bad as they were earlier in the year, when redundancies spread through the economy like a virus — [however] the patient remains seriously weak and won’t recover for several years, even if a return to robust economic growth provides the necessary tonic, and could easily relapse if the recovery is as fragile and anaemic as many economists fear.”

UK most exposed to losing AAA credit rating

The Times
"The UK Government is most at risk of losing its AAA sovereign debt rating among the top-rated nations because of its huge budget deficit, Fitch, the ratings agency, warned today.However, the country does not face the imminent threat of a downgrade, because whichever party is voted in at the next general election is then expected to announce radical measures to cut debts, Fitch added.David Riley, the head of global sovereign ratings at Fitch, said that he has a “stable” outlook for gilts to reflect “our expectation that the UK Government will articulate a stronger fiscal consolidation programme next year”.

European Commission asks UK to deliver £25bn a year in spending cuts

"The European Commission will propose tomorrow that the UK's budget deficit be brought down from a prospective 12 per cent of GDP to just 3 per cent by 2014-15, requiring tax increases and public spending cuts as yet unimagined by the main political parties. It would mean about £25bn in spending cuts and tax rises every year."

Barack Obama pledges to tackle Beijing on yuan

"Concerns are that Beijing artificially hold backs the value of the yuan to cheapen the cost of its exports, therefore making Western goods more expensive.But Mr Obama will have to tread carefully as the Chinese government owns almost $800bn (£477bn) of US Treasuries, its largest foreign creditor.Earlier in the day, the Chinese premier, Wen Jiabao, urged the US to "effectively discharge its responsibilities" and "maintain an appropriate size" to its budget deficit."

Monday, 9 November 2009

Obama has lost sight of the centre

"But the Democrats should be worried about what voters think of them right now. The lesson for Mr Obama and his party is simple: listen to the centre. They are not listening. They appear to be stone-deaf. In Mr Obama’s case this is perplexing. He triumphed last year as a moderate, a pragmatist and a bridge-builder. He promised to change Washington. It was what centrists wanted to hear. It helped, of course, that Mr Obama is a man of charm and intellect, enormously likeable, a case-study in presidential demeanour."

Bank of England says it is hard to measure QE’s success

The Times
"When will it end?Nobody knows. The Bank’s latest £25 billion tranche of purchases will be completed in February, but the MPC could decide to extend the £200 billion limit again."

The Big Question: Is quantitative easing creating more problems than it is solving?

"..Evidently, the economy has not been responding to the medicine with the alacrity once hoped for."

Harmony in the G20 is starting to unravel

"But behind the ostensible harmony, the shared interests forged at the height of the financial crisis are starting to diverge. Some countries are already going their separate ways (see box). Australia and Norway are both already tinkering with monetary policy, although their commodities-fuelled economies have few implications elsewhere. But last week's statement from the ECB also included noises about an exit strategy: "...looking ahead, not all our liquidity measures will be needed to the same extent as in the past." And within 24 hours of the weekend's G20 communiqué, Manmohan Singh, the Indian Prime Minister, signalled that stimulus measures are set to be withdrawn from 2010."

Europe's industry slams China over currency

""I am deeply concerned about recent exchange rate developments," said Jurgen Thumann, president of Business Europe, the pan-EU lobby."An overvalued euro is not good news for growth and is inconsistent with the commitments of the G20 countries for an orderly resolution of global imbalances. We must insist that our partners honour their commitments." ...China has held the yuan fixed to the dollar despite its huge trade surplus through vast purchases of foreign bonds. This has allowed it to flood Europe with cheap exports, gaining market share on the coat-tails of dollar devaluation."

Sunday, 8 November 2009

This financial mess isn't even the end of the beginning for UK wealth

"So terrible was Gordon Brown's economic stewardship during his decade as Chancellor from 1997, and so huge has been his "fiscal stimulus" since, that the UK now has the biggest structural deficit of any major country.

Britain faces a 2009/10 fiscal shortfall equal to 13pc of GDP – the biggest in our peacetime history – with little sign of improvement. The Government will borrow some £200bn on taxpayers' behalf every year until 2012/13 at least – eight times above "normal" levels. In just four years, an extra £32,000 will be added to the existing sovereign debt burden of every British household."

In an admirably frank report last week, the International Monetary Fund singled out the UK as "uniquely vulnerable" to spiralling debt service costs as we deal with the mess left by Brown's fiscal incontinence. In 2007, Britain spent 4.2pc of its tax revenues on debt interest. By 2014, we'll spend almost 10pc of receipts on servicing government loans, before we even start paying them back, as our national debt sky-rockets from 40pc to more than 100pc of GDP.

Saturday, 7 November 2009

Bank of England says financiers are fuelling an economic 'doom loop'

"On the eve of the G20 meeting of finance ministers in Scotland, Andy Haldane, the Bank's executive director for financial stability warned that the relationship between the state and banks represents a "doom loop" which will keep inflicting crises on the public unless arrested. ....Mr Haldane, who was a key part of a Bank unit which was among the first to warn, well ahead of the crisis, of a dangerous gap between what banks had in their balance sheets and what they were lending customers, made the comments in a paper written with Piergiorgio Alessandri, published on Friday."

Friday, 6 November 2009

£1.5trn could be added to national debt

"The financial crisis is likely to add up to £1.5 trillion to the national debt, the Office for National Statistics (ONS) said today.The surge comes from the huge liabilities of bailed out banks such as Royal Bank of Scotland and Lloyds Banking Group being taken on to the public balance sheet."

Thursday, 5 November 2009

Bank of England primes money presses for another £25bn to fight recession

"The Bank's Monetary Policy Committee voted to extend its programme of quantitative easing (QE) by £25bn to £200bn as it stepped up the fight against the most severe recession the country has faced in post-war history. It left interest rates unchanged at the historically low level of 0.5pc."
Bank of England pumps extra £25bn into economy (Independent)
Bank of England to inject another £25bn into economy as rates remain at 0.5% (Daily Mail)

Wednesday, 4 November 2009

National debt likely to double in four years

Daily Mail
"In research released as the Treasury unveiled its latest City rescue, the European Commission warned Britain's national debt is likely to double between 2007 and 2011 - a leap only exceeded in the EU by Ireland and Latvia.It lashed Gordon Brown's government for entering the downturn with fraying public finances, releasing estimates showing we are running the worst underlying, or 'structural' budget deficit in the EU, at twice the regional average."

Fitch Cuts Ireland's Credit Ratings

"The Irish government suffered another blow Wednesday as Fitch Ratings Inc. cut the nation's credit ratings by two notches, citing a decline in gross domestic product and ballooning government liabilities."

MPC’s 'feeble six’ need to do their jobs before the economy falls off a cliff

"The MPC needs to increase QE by at least £50bn at this meeting. Posen and Tucker seem likely to vote to do more. Why Sentance, Fisher, Barker and Bean voted against more QE remains unclear, as they haven't told us. It's time for them to shape up and do their jobs, and take out more insurance to prevent the economy dropping off a cliff. My guess is that King, Miles, Posen, Tucker and probably Barker at least will vote in favour."

US to reduce Quantitative Easing as rates kept low

"The Federal Reserve reiterated its desire to keep American interest rates “exceptionally low” for an extended period, but gradually reduce some of its quantitative easing as the US economy begins to recover."
U.S. to Sell $81 Billion in Long-Term Debt Next Week (Bloomberg)

UK interest costs 'equal to entire Transport bill'

"The IMF singled out the UK as being at significant risk from the threat of rising debt interest costs as it absorbs the effects of the financial and economic crisis. It said that the proportion of UK taxes that will go towards financing the national debt will, in five years' time, be double what it was just before the onset of the crisis.It said: "Just the increase in interest spending in the United Kingdom is about twice annual outlays for environmental protection and is equivalent to annual spending on public transportation."

Tuesday, 3 November 2009

Billions of dollars in aid but nothing in return from Afghanistan

The Times
"If you are putting that much into a country — $38 billion (£23 billion) in aid since 2001 and $10 billion planned for 2010, according to the Congressional Research Service — you have a reason to ask for co-operation. ..."

Taxpayers hit for £28.7bn more amid banks break-up

"Taxpayers were hit for at least another £28.7 billion today as two state-backed lenders unveiled break-up plans on a seismic day for the UK banking sector.Royal Bank of Scotland and Lloyds Banking Group will have to shed more than 900 branches to ease European competition concerns over the vast state support given to them in the past year.The disposals - which could take up to four years - will put around 10 per cent of the UK retail banking market up for grabs for smaller players or new entrants."

Australia raises rates for second month

"Australia's central bank increased interest rates by a quarter point for the second month in a row as the recovery in the economy gains traction."

RBS & Lloyds: the cost to you

"According to experts at Fitch, this move will cut the total potential losses to the taxpayer by a half from £485bn or 30pc of GDP to£208bn or 14.4pc of GDP – though this assumes that everything in the APS is worthless. In July it said it expected the eventual net cost to be £41bn, but whether or not that should now be halved they are yet to calculate."

Bank of England Poised to Sustain Crisis Aid

"The U.K.'s top central banker, Mervyn King, faces a tough call at a pivotal meeting this week: Whether to continue showering money on Britain's troubled economy while other countries consider dialing back emergency relief measures.Many signs suggest Mr. King and officials on the Bank of England's interest-rate policy committee will expand their sweeping bailout of the economy. Growth prospects are dimmer for Britain than nations such as France, Germany and the U.S. The British economy, heavily dependent on the financial-services industry and fueled by high levels of consumer debt, is seen by some as acutely vulnerable to the aftershocks of the global crisis."

Gold Trades Near Record in Asia After IMF Sale, Dollar Decline

"Gold futures in India and Dubai surged to records today after the IMF said it sold 200 metric tons of bullion to the Reserve Bank of India for about $6.7 billion. The Washington- based lender agreed in September to sell 403.3 tons of gold as part of a plan to shore up its finances and lend at reduced rates to low-income countries."

Sunday, 1 November 2009

Labour's great bank sell-off could cost taxpayers another £40bnTreasury sources have told The Sunday Telegraph that the move will be announced to the

"The EU is demanding branches be carved out of Royal Bank of Scotland and Lloyds Banking Group that will be sold to new entrants and operate alongside a rejuvenated Northern Rock, creating three new banking players in an industry that was becoming dominated by a handful of high street names. ....The £40bn estimate is subject to change and will be finalised once the delicate negotiations with the EU are concluded in the coming 24 hours"
High street banks to be broken up (Telegraph)
"Treasury sources have told The Sunday Telegraph that the move will be announced to the House of Commons after the European Union made it clear that the state aid pumped into Lloyds Banking Group and RBS meant that they had to be reduced in size."

The slow-motion New Labour putsch that swept our nation away

Daily Mail
"This is the disclosure, by a New Labour apparatchik, Andrew Neather, of the real purpose of his party’s immigration policy.The Blairites’ aim was to undermine and get rid of traditional conservative British culture. They really did want to turn Britain into a foreign land. Mr Neather wrote an article praising immigration because it provided lots of cheap nannies and gardeners for funky Londoners like him.Apparently thinking nobody would notice, he then revealed that there had been ‘a driving political purpose: that mass immigration was the way that the UK Government was going to make the UK truly multicultural’."

Why is America gloomy when the news is good?

The Times
"They are fearful that a new banking crisis will emerge. They see an administration and a Congress that are spending America into such deep debt that the dollar will continue to decline, forcing the Fed to raise interest rates to prevent a collapse of the currency."

Labour’s secret scheme to build multicultural Britain

The Times
"Can the recent success of the British National party be explained by the misguided immigration policy of the government? That was the killer question from the floor during the notorious episode of Question Time 10 days ago. Four times it was put to Jack Straw, the justice secretary, and four times he avoided answering it. Until that evening I had thought Straw was a fairly decent sort of bloke, for a politician. No longer. In a man so central to the new Labour project, who has served in cabinet under Tony Blair and Gordon Brown, who has been home secretary and foreign secretary, evasion on such an important subject is shocking. ....Under these circumstances, Labour’s obvious gerrymandering by mass immigration — black and ethnic minority people are very likely to vote Labour — is perhaps the least of its crimes. ...But it is obvious that if you abandon any attempt to know whether a visitor has left, according to the rules of immigration, then you have given up control of your borders and what would also be a useful security measure. ....But the first thing to do is to expose the patronising lies, the seigneurial arrogance and the criminally foolish social engineering of the Blair-Brown regime; it does not deserve the name of Labour government."

Saturday, 31 October 2009

The grim reality is that America is not out of recession

"So the US economy actually expanded by only 0.9pc during the third quarter – a fact most newspaper reports ignored. What growth we did see resulted from a 3.4pc annualised rise in US consumption between July and September, which was in turn caused by a 22.3pc spike in spending on consumer durables.That increase, though, was largely driven – quite literally – by last-minute vehicle purchases under the soon-to-expire "cash for clunkers" scheme. The much-trumpeted rise in residential construction – the first in four years – was also dependent on a temporary tax credit for first-time buyers. In other words, this latest US growth spasm stemmed from one-off government "giveaways" – with the public only able to take advantage of such gimmicks by going deeper into debt."

Bank of England called on to increase QE

"The Bank of England has been urged to increase its quantitative easing (QE) programme to a total of £225bn – more than the gross domestic product of Greece. ...Malcolm Barr of JP Morgan said: "Our best guess is that the MPC will extend QE by a further £50bn next week while also cutting the interest paid on a portion of reserves to zero. With inflation rising sharply as we move into early 2010, and signs of recovery broadening, this move is likely to be the last."

Friday, 30 October 2009

Recovery fears return to haunt markets on eve of Hallowe'en

"US markets were spooked on the final trading day of October as investors questioned the real extent of the global economic turn-around, despite America's positive growth in the third-quarter."

Stocks swoon as worries about the economy return

Yahoo Finance
"A day after a euphoric rally pushed stocks up the largest amount in three months, on Friday investors fretted that strapped consumers won't be able to carry on a recovery in the economy that has been driven by government spending and companies boosting profits through cost-cuts. .....On the New York Mercantile Exchange, gold fell, while oil tumbled $2.38 to $77.49 a barrel."

Bank set to inject more cash into economy

Daily Mail
"The Bank of England is set to extend its quantitative easing programme next week in an effort to kickstart the UK economy out of recession.Shockingly bad third-quarter growth figures appear to have swung most economists to expect action from the Bank's monetary policy committee, which will disclose its decision next Thursday at midday."

Thursday, 29 October 2009

Tony 'the twister' Blair now wants a free ride on the Euro Express

"With the stench of destruction still hanging over Baghdad – two huge bombs killed another 153 people this week – Mr Blair's ongoing role as Middle East peace envoy defies even gallows humour. The day he took up the post, satire was bound, gagged, shot in the back of the head and dumped in a ditch.Having failed spectacularly in a task for which he was uniquely unsuited, he's gagging to switch gravy trains for a first-class seat on the Euro Express. Mandelson did it. So, too, the Kinnocks. Now Tone wants his turn."

UK left behind as the United States climbs out of recession

"The figures coincided with statistics showing that a key measure of the flow of money around the British economy has shrunk to the lowest level on record. The Bank of England said that an adjusted measure of M4 fell by 0.9pc in September, resulting in an annual fall of 1.7pc – the worst since comparable statistics began.The fall is of particular concern since the Bank had hoped that its £175bn quantitative easing (QE) programme would have pushed up money growth and economic expansion."

Britain out in the cold as US exits recession

The Times
"Gordon Brown is facing growing embarrassment over Britain’s recovery after it became the world’s only major economy still in recession as America returned to growth in the third quarter. ...Britain, the world’s sixth largest economy according to the World Bank, was widely expected to have recovered in the third quarter.However, shock figures, released last week, showed that the UK economy contracted between July and September, leaving the country battling the longest recession on record."

US emerges from recession

"The US economy has emerged from its deepest slump since the Second World War, new figures showed today. ....The return to growth in the last quarter was driven by a rise in consumer spending and a blitz of stimulus measures by the Government. While acknowledging that the economy has rebounded, experts are divided on how strong the recovery will be. Some reckon there is a significant risk that the economy will fall back into recession."

Wednesday, 28 October 2009

Norway becomes first European country to raise interest rates

"Norway has become the first country in Europe to raise interest rates since the start of the financial crisis as its economy recovers from a shallow downturn."

Norway becomes first European country to raise interest rates since financial crisis (Daily Mail)
"Norway, which has a population of 4.8million, is not a member of the European Union, and has escaped the financial crisis largely unscathed thanks to vast oil revenues, which it invests in a sovereign wealth fund worth $420billion."

FTSE 100 falls 2.3pc as recovery concerns weigh on shares

"Shares dropped sharply in London on Wednesday amid growing concerns that both the UK and the US could suffer a relapse into economic gloom."

Tuesday, 27 October 2009

Deflation fears as Eurozone and US credit contracts

"Bank lending to firms and households in the eurozone has fallen for the first time, raising fears of an economic relapse and a slide into deflation next year. ...Otmar Issing, the ECB's former chief economist, told an Open Europe forum in London that policymakers are entering treacherous waters. "Nobody can be sure that we have a self-sustaining recovery. The challenges facing the ECB are tremendous," he said."

Monday, 26 October 2009

Is the Treasury running out of ammo to save the economy?

"Nevertheless, these numbers present a dilemma for policymakers. If the economy continues to shrink, or fails to recover, what are the necessary "next steps"? What is left in the policymakers' arsenal?As things stand, the answer is "not much". Interest rates are already remarkably low. Both Labour and the Conservatives accept that the budget deficit cannot continue to grow. That, then, leaves so-called quantitative easing, whereby the Bank of England buys gilts (government IOUs) in the market. ..Quantitative easing is very imprecise. Knowing whether or not it is proving successful is tricky: its effectiveness depends on faith as much as pure economic reason. ...First, QE works merely by boosting people's expectations. ....(Second)In other words, QE enables borrowers to bypass the banking system entirely. ....Third, and most obviously, it works because foreign investors are losing faith in the UK economy, can hear the hum of the printing press in the background and choose, in their droves, to sell the pound,....."

Report warns how the rise of the quango 'costs each family £3,640 a year'

Daily Mail
"The Government says there are around 800. But a comprehensive survey by the Taxpayers' Alliance campaign group has identified 1,152. ......Today's report says they now employ more than 534,000 people and are riddled with problems of cronyism and accountability.Last year, the Government at Westminster funded 960 bodies to the tune of £82billion, while the Scottish Executive spent £7.3billion on 146 organisations.The Welsh Assembly spent £1billion on 37 bodies, while nine organisations cost the Northern Ireland executive £700million."

Footling measures are of no use when dealing with public sector debt

"Last week saw further evidence of the dire state of the public finances. Borrowing came in at almost £15bn for September alone and nearly £80bn for the financial year so far."

The outrageous truth slips out: Labour cynically plotted to transform the entire make-up of Britain without telling us

Daily Mail
"...After all, a deliberate policy of mass immigration would have amounted to nothing less than an attempt to change the very make-up of this country without telling the electorate.There could not have been a more grave abuse of the entire democratic process. Now, however, we learn that this is exactly what did happen. The Labour government has been engaged upon a deliberate and secret policy of national cultural sabotage. ...But the most shattering revelation was that this policy of mass immigration was not introduced to produce nannies or cleaners for the likes of Neather. It was to destroy Britain's identity and transform it into a multicultural society where British attributes would have no greater status than any other country's.

Labour 'deliberately let migrants in to make Britain more multicultural and so Tories could be accused of racism'

Daily Mail
"..Former Labour minister Frank Field said: 'I am speechless at the idea that people thought they could socially engineer a nation on this basis.' ....Jack Straw last night dismissed Mr Neather's claims as untrue. ....However, Labour's former welfare minister Mr Field, co-chairman of the cross-party Group for Balanced Migration, said a 'beam of truth' had been shone on the immigration issue.'It is so dangerous that I cannot believe anybody even contemplated this course of action,' he said.'I can't believe anybody could have been this stupid. All along anyone who raised questions was told they must be racist."

Sunday, 25 October 2009

Gordon Brown has that sinking 1970s feeling

The Times
"It feels grim. Britain was supposed to have said goodbye to the cycle of boom and bust and to have left behind damaging and disruptive industrial relations. Both have returned. Labour has taken us back to the 1970s in the crisis it has created for the public finances and it is taking us back to the industrial anarchy of that era. That is why people are heartily fed up with this government. And they are right."

'Dishonest' Blair and Straw accused over secret plan for multicultural UK

Daily Mail
"Jack Straw and Tony Blair 'dishonestly' concealed a plan to allow in more immigrants and make Britain more multi-cultural because they feared a public backlash if it was made public, it has been claimed."
So now we know what many had long suspected - that the Blair Government deliberately set out to encourage large-scale immigration in a conscious but unacknowledged attempt to transform our society.

Saturday, 24 October 2009

Ever-Present Surveillance Rankles the British Public

New York Times
"It has become commonplace to call Britain a “surveillance society,” a place where security cameras lurk at every corner, giant databases keep track of intimate personal details and the government has extraordinary powers to intrude into citizens’ lives."

Where have all the green shoots gone?

"If the UK’s continued slide is particularly depressing, neither Europe as a whole nor the US can yet boast of unambiguously good economic news. True, Germany and France both grew by a modest 0.3 per cent in the second quarter, and one must hope this has continued in the third. But the strength of the euro risks snuffing out the spark of increased net exports that helped reignite economic activity."

Britain's economy is still dangerously fragile

"What these figures illustrate is just how fragile our economy remains. Output from manufacturing, construction and services is still well below trend. The economy is no longer contracting at the terrifying rate of earlier this year. But there has been no strong rebound to growth. And there is little prospect of one either. The British economy has contracted by about 6 per cent since the middle of last year. Getting back to the levels of employment and output to which we have grown accustomed will be a long and arduous journey."

Longest recession ever puts Britain seventh behind Italy in world economy table

Daily Mail
"Today's figures mean the UK has fallen behind Italy for the first time since the 1990s to become the world's seventh biggest economy.Italy's economic output in the third quarter of this year was £350 billion, compared to Britain's £347.5 billion, according to analysis by Citigroup".

Britain is still in recession: the emergency measures propping up the economy

"Britain is now officially in its worst recession in modern history after new figures showed that the economy unexpectedly shrank last quarter. ... looks at the emergency measures still in place."

Friday, 23 October 2009

UK economy overtaken by Italy

"Britain's economy has been overtaken by Italy for the first time in a decade and a half, after official figures showed that the UK is now in the longest recession in recorded history....In 1987, the first time Italy overtook Britain’s economy, the landmark moment was dubbed “Il Sorpasso” and prompted wild celebrations in the streets of Rome. The UK then regained its prominence in the mid-1990s, and by 2000 its economy was some 35 per cent bigger than Italy’s."

Longest recession on record grips UK

"And it shows the UK lagging behind other major economies such as France and Germany, which both emerged from recession in the second quarter of the year. ....But the pound sagged against the dollar and euro on the hugely disappointing figure as markets bet on more support for the economy from the Bank of England with an extension of the QE programme to as much as £250 billion.Economists warned of a potential deflation risk and said it could take at least six years to make up the output gap left by the recession."

SIR ANDREW GREEN: We must halt this conspiracy of silence over our immigration crisis

Daily Mail
"They are the last estimates that will be made public before the election - and they make grim reading. Mass immigration, which has been encouraged by Labour's policy of open borders, has already brought three million immigrants to Britain since it came to power in 1997.These projections confirm that immigration is driving our population to new heights. If nothing is done, we will have an extra 10million people within 25 years - and nearly 70 per cent of them as a result of new immigration."

This recession just became a depression

"The GDP fall, as you may have seen elsewhere, means that this is now the longest technical recession since at least 1955 (and most probably since the 1930s, though the ONS doesn’t have figures on this) at six quarters, or a year and a half, long. The late 1970s/early 1980s slump was deeper, but was not a long uninterrupted period of economic output falls. ......It shatters any delusions that Britain is “well placed” to withstand the recession".

Britain is still mired in recession, latest numbers show

UK economy shrinks in third quarter

"From a peak in the first quarter of 2008 the economy has now contracted by 6 per cent, the Office for National Statistics reported. The recession has now lasted for six quarters, the longest downturn since the Second World War. The size of the recession is now on a par with that of 1979-81."

The debt crisis of 1976 offers a vision of the blood, sweat and tears facing David Cameron

"Whether he relies on a sofa or a full Cabinet, a star chamber or even a focus group, the one lesson Mr Cameron can draw from 1976 is the one about leadership. Ultimate responsibility rests with the prime minister. What awaits him if he wins next year is an exhausting, ultimately solitary test of political will and stamina that, like Callaghan before him, could leave him feeling deathly before his first term is up."

Britain is still in recession: decline continues

"Britain hopes of escaping recession were dashed today after figures showed that the economy is stuck in its worst recession on record. ..."The worst thing is that every single component of gross domestic product that was published did not rise," said George Buckley, an economist at Deutsche Bank. "It's a bad number."

Thursday, 22 October 2009

Recession and unemployment: the worst is yet to come

The Times
"To date, the decline in GDP we have seen is similar to that of the recession of 1979-81, when GDP fell by 6 per cent. Unemployment surged from 1.4 million to 2.5 million people. The recession of 1990-91 saw a fall in GDP of only 2.5 per cent but a 700,000 increase in the unemployed. .....The performance of the public finances during this recession has been shocking, deteriorating by about £130 billion a year. Adjusting for differences in the scale of the economy suggests that government borrowing increased by £38 billion in the 1979-81 recession and by £53 billion in the 1990-91 recession. Much of the worsening is related to the collapse in taxes from the financial and housing sectors, which had proved to be particularly important sources of revenues to the Exchequer. ....From the perspective of unemployment, the worst is probably still to come. As the UK recovered from the recession of 1979-81, unemployment continued to rise, peaking at 3.3 million people in 1984. It was not until 2000 that the unemployment rate finally returned to its 1979 level.

Brown spurns King call to put brakes on the casino bankers

Daily Mail
"Gordon Brown and Alistair Darling launched a war of words with the Governor of the Bank of England yesterday, sparking claims of chaos at the heart of the Government's economic policy.The Prime Minister and Chancellor slapped down Mervyn King after he called for ministers to break up the banks or risk a financial crisis 'even worse' than the credit crunch."

Mervyn King is right - the economy is changing and we're blindfolded, without a map

"Mr King raised two issues: first, we are missing an opportunity to overhaul the structure of the banking system; second, we have yet to work out how we will run our economy in the future. ......So, the argument goes, casino and utility should be separated. That this is a problem, and that something needs to be done about it, is hardly new. Such was the idea that underpinned America's Glass-Steagall Act of 1933, which split investment banks from their main street counterparts, until it was repealed during the Clinton administration. It was one of the key issues raised in a report written for Gordon Brown by the industry expert Don Cruickshank, back in 2000 – and conveniently ignored."

Wednesday, 21 October 2009

Why banks need to be boring again

Daily Mail
"Mr King made it clear that he regards the damage rendered by the bankers worldwide as unconscionable.It has resulted in the loss of 6million jobs in the U.S., 2.5million in the euro area and 2.5million in Britain.The £1trillion of assistance provided by Britain to its ailing banks has contributed to a rapidly rising national debt which will have a terrible impact on the public finances for a generation."

How to manage the gigantic financial cuckoo in our nest

"According to the IMF, writedowns on UK bank assets are going to be $604bn, against $814bn for the eurozone and $1,025bn for the US. Yet the US economy is roughly six times as large as the UK’s. The UK’s cuckoos are too big. Regulation must take these differences into account."

Is Labour setting us up for the next crisis? King thinks so

"Yet, there is no doubting the intellectual appeal of Mr King's ideas. The problem he addresses is that of banks whose trading and international activities have reached a size which dwarfs the capacity of national governments to underwrite them."
Mervyn King: bail-outs created 'biggest moral hazard in history'

Cowardice on immigration has allowed the BNP to flourish

"Statistics don't usually set the blood racing. But here are a few, published yesterday by the Office for National Statistics, that might shake you. In the next 20 years, the population of the UK will rise from 61 million to 70 million – and then go on rising. The bulk of that growth will be due to immigration, which will have added seven million – seven cities the size of Birmingham – to our population by 2034. In the next 10 years alone the British population will rise by four million."

Mervyn King: 'Never has so much money been owed by so few to so many'

"Mervyn King described the £1 trillion of support given to banks by the taxpayer as "breathtaking" and "unsustainable". He said: "To paraphrase a great wartime leader, never in the field of financial endeavour has so much money been owed by so few to so many. And, one might add, so far with little real reform." Mr King argued that banks took huge risks because they knew they would be bailed out and because they were seen as "too big to fail". He called for sweeping reforms to the way they are supervised."

Tuesday, 20 October 2009

Euro at $1.50 is 'disaster' for Europe

"France has given its clearest indication to date that the surging euro is a threat to Europe's fragile recovery and will not be tolerated for much longer. ...What concerns European policymakers most is the lockstep rise against China's yuan. Beijing has clamped the yuan firmly to the weak dollar for over a year, quietly benefiting from the export advantages. It accumulated $68bn (£41bn) in reserves in September alone as a side-effect of holding down the currency. Fresh reserves are mostly being invested in eurozone bonds, pushing the euro higher."

Home Office has lost track of 40,000 rejected migrants

The Times
"The Home Office has lost track of tens of thousands of migrants who were refused extensions to their visas more than six years ago, it emerged today. ....The Agency is currently working its way through a backlog of between 400,000 - 450,000 old asylum cases and is now preparing to start work on the 40,000 backlog of old immigration cases. ...Ms Homer said most of the files related to cases dating back before 2003 and were immigrants who have been refused an extension to their visa allowing them to remain in the UK."

Record in public sector borrowing

"The UK's public sector net borrowing reached £14.8bn last month - a high for September, official figures have shown. ....Net borrowing for the six months of the financial year so far now stands at £76.2bn - the worst figure for the April-to-September period on record.
The government expects borrowing to hit £175bn this year. Its overall debt now stands at £824.8bn, or 59% of GDP.That includes about £142bn as a result of banking bail-outs.Economists had expected borrowing to come in at £15.3bn in September.The figures raise speculation that the government may have to revise its forecasts on borrowing."
UK government borrowing hits record £77bn (Telegraph)
"Public borrowing in Britain ballooned to a record £77.3bn in first six months of the financial year - the highest half-yearly figure since the end of the Second World War."
Public borrowing soars to worst level on record (The Times)
"Just to meet interest payments on its mounting debt pile, the Government paid out £5.9 billion - 43 per cent more than the same month last year and the highest monthly payout on record."