‘UK gloom risks clouding real picture’

THAT’S not my headline, incidentally, but the FT’s.

Any politician who dares suggest that the country isn’t doomed (particularly if he or she’s a minister) gets pilloried for a fool. But since I am not a minister, and since I’m used to being pilloried, can I recommend this article, which paints a fairly balanced, though still depressing, picture of our economic prospects. 

Nevertheless, it contains this interesting, previously overlooked morsel:

Economists expect household disposable income to grow this year at 1.4 per cent, twice last year’s level and almost 50 times faster than in 2007.

Although investors demand higher yields on government debt than in Germany, they are more willing to hold UK government and corporate paper than they were in October. The trade position is improving and with oil prices falling, a fiscal stimulus and substantial state support for banking, Britain is about to enjoy the most powerful fillip the economy has seen.

I accept the argument made in a previous thread that it’s not always fair to accuse someone of “talking down the economy” just because he points out an unwelcome fact. Similarly, it’s absurd that anyone who suggests the UK is not going bankrupt and that we will, at some point, emerge from the other side of the downturn, is an out-of-touch, demented loon.
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25 Comments

Filed under Economy, Media

25 responses to “‘UK gloom risks clouding real picture’

  1. Simon

    “Economists expect household disposable income to grow this year at 1.4 per cent, twice last year’s level and almost 50 times faster than in 2007″

    I assume this is because of lower interest rates, and inflation.

    However, with unemployment rising so quickly, and predicted to top 3 million before things start to get better, I for one wont be spending any of my disposable income on a new 50” plasma TV or a new car.

  2. mark howard

    I applaud any attempt to look on the bright side.

    Positive thinking is as brave and necessary in the crisis as was bearish realism during the boom.

    But the FT falls into the trap of assuming without question that it is essential for taxpayers to take on the debts of our insolvent banks.

    I share a different view:

    “The banks and their cheerleaders among politicians and commentators wrongly think that banks are the economy. They warn that bankruptcy would present a huge systemic risk.”

    http://www.russiatoday.com/business/news/36229

    “Western politicians who want bankers to apologise for their role in the financial crisis are Wall Street’s equivalent of Lenin’s “useful idiots”.

    More important than saying sorry, the banks have not even owned up to how much money they lost, how they lost it and where it went.”

    Since the banks have not revealed the extend of their losses, the FT can’t make a credible case that their losses are insufficient to threaten the UK’s sovereign debt rating.

  3. richard

    I think what grates is the disparity between the insanely hopeful and upbeat projections from the treasury and the woeful and doom-laden projections in the press.

    The difference is that we expect the papers to exaggerate and we look to the government to give us the unvarnished truth instead of a different pack of lies.

  4. Sergeant Plodder

    Whoops! There goes another £1/2 billion!

    http://www.timesonline.co.uk/tol/sport/olympics/london_2012/article5565216.ece

    Peanuts, really, I guess.

    This, however, is seriously scary

  5. But it’s being gloomy that provides a vital security blanket for a large section of the British public to cling onto. If people didn’t like gloom the Daily Mail, Express, Telegraph, Independent etc. wouldn’t sell and John Humphrys would be out of a job. Our dismal weather doesn’t help.

    There are good evolutionary reasons for humanity’s love of dismal stories and its desire to see bad times around the corner. Our potential forebears who were too optimistic all got eaten by bears and the like. Mind you those who were too pessimistic never left the cave and starved to death. But today we have meals on wheels…

  6. Sergeant Plodder

    Sadly, Alastair Darling’s implicit admission that he did not know the date of the end of the ban oon short selling makes it hard to believe that this lot have the slightest idea what to do about the predicament they have got us into it.

    I’m a layman WRT economics, but I was aware that the ban was time-limited with a specific date for its end. It turns out that this is – and has been since the ban was instituted – on the FSA website.

    So – I knew this, the Chancellor Of The Exchequer didn’t, and was so incensed he complained in public about it.

    Is the guy up to the job? I mean, this is no less than crass.

  7. Sergeant Plodder

    And just before I have to buzz off … mind how you go … and here follows an alternative view regarding debt-fuelled bingeing as “sound” economics, from Ludwig von Mises.

    He posits two outcomes from such an approach. Which do YOU think will happen here in the UK?

    Human Action (1949)

    “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as final and total catastrophe of the currency system involved.”

  8. Quoting Mises should be reason enough to ignore anything else one might have to say – it’s a bit like Goodwin’s Law.

  9. Johnny Norfolk

    Again Tom, you and many parts of the left leaning media are refusing to accept the realality of the situation.
    It is as bad as anything I have seen in my lifetime.

    If we are going to start to make the long haul out of it, we need to assess the situation with openess and honesty.

    Labour needs to cut spending just like Mrs Thatcher had to.
    This tells the world we understand how bad it is and are doing something about it, not making matters worse by just borrowing more than we need to.

    You have believed your own properganda that was designed to win elections. This will not now do. and Tom the sooner you understand just what a mess you have made just like every other Labour government the better for all of us.

  10. richard

    @ labourmatters

    re: Godwin’s Law – http://en.wikipedia.org/wiki/Godwin's_Law

    Mises was Austrian and a vegetarian. Hitler was Austrian and a vegetarian, hence anyone who quotes Mises is worse than Hitler.

  11. Simon

    Labourmatters, you’re right of course. Let’s not quote someone who speaks common sense. Instead lets just paraphrase Gordon Brown.

    “I am responsible when things are going well, it’s someone elses fault, when things go bad.”

  12. Brian

    labourmatters –

    Mises merely looked at the economic system under the rational eyes of the classic method as employed by Adam Smith.

    I challenge you to beat his opinions without resorting to game theory and as a matter of opinion; I do not believe anyone in the Labour party either understands classic or friedmann economics, let alone game theory.

  13. madasafish

    Tom’s argument contains the fatal words (and the inherent flaw) “economists expect”.

    Since most economists did not forecast this recession (apart from Bottle and Nourini) , nor its intensity, basing an argument on what economists suggest is like asking an O level student to produce the country’s budget.

    Most economists are a complete waste of space. To quote them is the mark of ignoranceof how terribly wrong they are.

  14. Brian

    madasafish,

    Economists can be right, if the government doesn’t decide to remove house price inflation from the inflation index. Then again argumentatively the economists should have factored this in without the treasuries help.

    A rolling error of 5-10% year on year inflation for 10 years will store up significant problems.

  15. ladytizzy

    What’s this about Spain losing it’s Triple A status – and the UK is next?

    Independent Insurance was also rated a Triple A and it went bust a few years ago – reckon we need to go back to bartering. HRMC will then need to employ a heck of lot of people – sorted.

  16. Sergeant Plodder

    Well, it certainly looks as though what he posits will be put to the test; all will be revealed in the fullness of time.

    Regardless, I am of the mind that Laurel & Hardy have not a clue what they are doing, but they would seem to be doing a good job of collapsing the economy.

    While Brown talks of creating new jobs, people are being laid off left right and centre. More people on benefits. More people with no cash spare to spend our way out of the recession. Those who have any spare at the end of the month are – understandably, sense at last – paying off debts. More people with no cash to spend our way out of the recession. No tax cuts (unlike the USA), and don’t trot out VAT, as it will have been the best off who would have profited most from that – moronic – giveaway of £12 billion. Indirect tax, you see. Labour stands for fairness, you see.

    Hold on tight.

  17. Listen up, people. I have a reputation for being fairly tolerant of anti-Labour comments. However, I may become less so if all you do is trot out the party line without adding anything to the debate.

    You have been warned.

  18. David P

    Hopefully among these ‘green shoots’ we will, as a half-decent nation, regain a little personal responsibility and accept that, as with so many of the problems all countries are currently facing, there is something that every individual can do to help.

    The first comment regarding disposable income immediately assumed that this related to a ‘50inch plasma TV or new car’. This betrays the proliferation of a standard of living that would have been impossible perhaps even as little as a decade ago and it is the assumption that this standard – the mass consumption of goods and services – is a basic right rather than the hard earned privilege that in reality it is.

    Obviously the availability of credit and finance made all this possible but just because you are just about able to afford the newest, shiniest thing on the market, that will surely fill the void in your life, doesn’t mean you should rush out and sign your life away – you still have the choice, the option of personal financial responsibility.

    Liquidity will return to the markets but it must not return in its previous form. It is too easy to lay the blame for our current predicament solely at the feet of the financial institutions that are now struggling to survive*. They have their hands out at the moment in desperate need of capital to get back on an even keel – the last time (the time before the last time, really) they had their hands out they were stuffed with cash and we were only then too keen to snap them off at the wrist.

    *having said that, they are mostly responsible and hopefully they will undergo such a process of re-regulation that it will make their eyes water.

  19. ani

    Ha! About time you slapped down the doom-mongs.
    Brian Hughes – so true.
    I reckon that Rapunzel and I are hoping you’ll be less lenient on that new blog Tom.

    “While Brown talks of creating new jobs, people are being laid off left right and centre”
    Well duh! At least we are trying to re-skill and direct people INTO jobs and secure their homes, but obviously dummies commenting here prefer the Tory ideology of doing sweet fanny adams – twice – and sitting on their thumbs!
    Je ne regret rien – as the public were stuffed – that’s the Tory way. Not ours.

  20. Rapunzel

    Is there no way of forwarding comments, like you can with jokey e-mails? The Daily Mail likes comments like the ones you get on here. They even give them scores. Anything mentioning Nuliebour, or ZanuLab gets hundreds of points. Or you send them to Iain Dale.

    Anyone who posts a comment on conhome that is even slightly “off message”, even if said comment is well argued and courteous, is told in no uncertain terms to:

    ” **** off, you don’t belong here, you pathetic little troll. Go away and leave this site to us intelligent, thoughtful grown ups who are right about everything and will happily bully anyone who disagrees with us.”

    Or something along those lines.

    Could that work for you?

  21. Rapunzel

    ani: “I reckon that Rapunzel and I are hoping you’ll be less lenient on that new blog Tom.”

    I agree to a point, but have always admired Tom for letting so many anti Labour comments through. As he says, it is okay when people are at least putting forward a reasoned argument, but any party line gets tedious when it’s day in, day out.

    I mentioned gloom on a post the other day. That’s all people want at the moment. Woe betide anyone who tries to look on the bright side. So Margaret Beckett got slammed on The Daily Politics yesterday because she had answered a question by saying that there was evidence, from some quarters, that there had been an increase in enquiries for homes in estate agents. Wow! Naive, crass, insensitive!

    I want someone to offer hope. I want to hear the good stories, even if they are few and far between at the moment. I want the many people who are not suffering in this downturn, and yes, there will be plenty, to count their blessings. I want people to stop valuing “things” and start valuing life and the beauty around us. I want the media to listen when there is good news to impart, and not to move on, or scoff. I want politicians to stop the incessant point scoring, and look for common ground and ways of helping those who are most affected.

    Sorry!! This has turned into a bit of a rant.

    Don’t want much, do I!

  22. madasafish

    I’m not particularly suffering. Earning a living is less easy and opportunities to make money fewer.. but I’m a rarity.

    And without wishing to be gloomy, this downturn is just 7 months old and will last at least 30 months in my view, so any hope of things getting better soon are in my view a sure sign of a lack of understanding of how bad things are.

    I have worked through all the Major downturns in the past 40 years and agree with A Darling this is the worst (he said since WW2.. I’m not THAT old).

    The worst I saw was 1972-74, three day weeks etc. That was BAD. So far apart from car workers few people are experiencing short time and layoffs.

    Well Nr Darlking then contradicted his statement about worst for 60 years by his PBR which said recovery Q3 2009.

    I wish it were true. Unfortunately there is not a snowball’s chance of that happening. I reckon mid 2010 at the earliest.

    And we’ll have had Bank rescue Mark 5 or 6 by then. With declining asset prices and falling GDP Banks are going to have increasing levels of Bad Debts.. Will they be as bad as the Treasury has estimated? As the Treasury appaears to have issued no public estimates, I have no idea. I suspect another £300 to £500 billion. Which means the UK’s National Debt will treble to £1.5 trillion by 2012. (Mr Darling said rather less).

    I hope I’m wrong.

  23. richard

    Another rather amusing quote from Osborne. I can only assume that Central Office have hired him a better speechwriter recently.

    Apparently Gordon’s “Plan B” is to move the deckchairs over to the other side of the boat…

  24. ani

    Richard.

    Grief! if that’s classed as ‘amusing’….

  25. Sergeant Plodder

    @Ani,

    So, are you saying that the public are not being stuffed at the moment? You care not a fig about the amount of your money being poured into the banks? That Brown can switch from free market pioneer to old school socialist in the flash of a crisis? And then pretend that that was what he always has been?

    How fortunate you are, to be so happy with such circumstances.

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