Archive for the 'Economics' Category

George Osborne’s Conservative Conference Speech

As GO took to the stage, he left a dramatic 3 second pause to start. Was he lost for words? Would these words have any substance?

Our politicians are obsessed with the past as a slate to wipe our mistakes and Osborne’s speech started with the ‘failures’ of the current government as a checklist. But the use of statistics merely serves to illustrate that one can read, not that one has the cognitive skills to analyse the issues, design a strategy and implement a successful solution. This speech was directed to the party faithful and the biggest unscripted cheer was a reduction of quango specialists second guessing locally elected officials. I’ll believe that when I see it. The Conservatives invented this tactic in the eighties to counter free spending Labour councils.

But we wanted a message to the nation. The Shadow Chancellor reiterated policy statements made over the last year: a reduction in MPs numbers, a 5% cut in MPs pay, a pay ceiling equivalent to the PM’s salary, loss of child trusts to middle income families, retention of the 50% tax rate but nothing new and no tangible theme. There was no reference to the raising of VAT and this will come. Perhaps the fiscal task we face is too onerous to have an economic dream, but once the Augean stables have been cleansed, where is the ideology?

Osborne is often described as a lightweight (amongst many comments, some borne out of inverse class snobbery).  His detractors will have found little to add here in these 33 minutes but nor would his supporters.

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Tory Banks Policy

Abolish the FSA, Transfer powers to the BofE is the synopsis.

DC introduces Tory Bank Policy White Paper
DC introduces Tory Bank Policy White Paper

There is no doubt that the tripartite system failed. Too many macro decisions fell in the gaps in between and the idea of panic in the air over the three week period was palpable. The idea of a financial policy committee is a good macro decisioning tool and its position within the BofE seems a sensible one.

Overall, the Tory Bank Policy looks stable, however the devil will be in the detail. I would like to see an explanation of what the Treasury’s role in this will be in the future. Outsourcing financial overseeing should not lead to a dereliction of duty by the government of the day.

UK Public Spending – a business viewpoint

I am at the excellent Global Leader Summit being hosted by London Business School.

Among the many interesting topics is a discussion on the down turn and its perceived length. It’s clear through overt discussions that the UK public finances are being seen as a key (if not the key) to future growth. Jeremy Darroch of Sky in particular pointed to the extent which the UK public sector permeates the UK economy (a point which is almost saturation in some geographical areas). This view was expanded by Paul Polman of Unilever who also pointed to the need for increased saving by the consumers.

Public Spending is a tightrope which must be tightened but if pulled too tight will kill off any greenshoots of recovery (illusory or otherwise). It is therefore with regret that our government have sought to use the uncertain economic climate as an excuse for ‘smoke and mirrors’ speeches and not firm figures.

Bank of England Forecast

It’s clear that there are so many indicators that the BoE forecast is really just trying to stick the pin on the donkey.
A restriction of growth of 4.5% this year does seem on the dovish side but we shall see. Any upturn will surely be temporary as there needs to be an unwinding of our leveraged position by banks, businesses and households.

Political Diversion

The Fred Goodwin pension debacle says a lot about our government and where their minds are concentrated. Instead of a structured plan (not a spending spree), to combat our recession, they chase headlines in an attempt to deflect from their own inadequacies.

This was a glorious opportunity for tax cuts for the working classes, tax hikes for the highly paid, amalgamating the NIC into the tax system a removel of even more tax dodges and a simplication of the tax system overall, they spend their time briefing reporters.

Ever time Harriet H opens her mouth, she puts back the cause of the left and women in politics decades. Engage brain before lips please Harriet.

Bank of England Cuts Rate to 1.5%

The answer has to be why?

Will the 0.5% encourage business or mortgage lending any further? Will mortgage holders find their payments signicantly lower? Will credit card holders find their painful repayments eased. The link between monetary activity and bank lending is no more. A political gesture made by those without the tools, brains or balls to remedy the situation.

Balancing our budgets

I’ve edited a piece from John Maudlin which is US centric but with a few omissions, oh so relevant for the embattled UK taxpayer.

  • Shouldn’t the consumer, after decades of over-consumption, be allowed to digest the over-indebtedness and save, rather than be encouraged to take risk?
  • Shouldn’t companies, no matter what state they reside in from a political point of view, if run poorly, be allowed to fail or forced to restructure?
  • Should taxpayer money be used to make up for the mishaps at financial institutions or should we allow them to wallow in their own mistakes?
  • Shouldn’t free markets be free?
  • When did post war concensus near communism return our shores?
  • How do we choose who is rescued and who loses?
  • Shouldn’t we place blame on the politicians, bureaucrats and other “decision makers” and put skilled people in place that know how to run the businesses?
  • Is anyone else thinking that the blind attempt by the government to maintain mortgage lending at 2007 levels is sheer blind panic driven by political grandstanding or sheer ignorance of finance and economics.

    I noted that house prices are back at their long term levels. Good. However they are liable to fall further before returning to the norm if past experience is anything to go by. Even better. Mortgage holders and lenders need to learn that cheap money is not cheap forever and a primary property is a home not an asset!


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