Skip to main content

Doom and other financial hiccups

I notice that, as Sterling hits a new low against the Euro, that Ambrose Evans Pritchard is now predicting 1929 is the benchmark to measure the likely fallout of the credit crunch.

Now, I am starting to think that Ambrose is beginning to sound like the boy who cried wolf a bit. I do not underestimate the scale of the emerging problems- as I have said before, the scale is truly enormous. However Evans Pritchard continues to add in his view that the Euro will collapse and much of the European Union with it. In fact, I think that the fall of the British Pound is a good thing- it helps make British products more competitive in selling into the European market. As for the US- the fall in the Dollar is already helping to correct the dramatic financial imbalances that have emerged over the past decade. This does not mean that either the US or the UK will escape recession, but neither does it mean that the problems are of the same order of the Japanese deflation of the past decade and a half (and even if they did, the Japanese are not exactly starving on the streets).

Yet again it is the mono-mania of the anti-Europeans that is removing all sense of perspective. There are problems, but these are not black and white issues- and the shades of grey can still leave plenty of room for very positive outcomes too.

Many will greet 2008 with pessimism, I do not- I am realistic about the positives and the negatives. I am not blind to the faults of the Eurozone, but neither do I ignore the advantages. As the Euro continues to climb against Sterling, we are hearing precisely the same predictions of doom as we heard when it was falling- and the ups and downs of currency markets are very poor indicators of fundamental prosperity.

Comments

Popular posts from this blog

Concert and Blues

Tallinn is full tonight... Big concerts on at the Song field The Weeknd and Bonnie Tyler (!). The place is buzzing and some sixty thousand concert goers have booked every bed for thirty miles around Tallinn. It should be a busy high summer, but it isn´t. Tourism is down sharply overall. Only 70 cruise ships calling this season, versus over 300 before Ukraine. Since no one goes to St Pete, demand has fallen, and of course people think that Estonia is not safe. We are tired. The economy is still under big pressure, and the fall of tourism is a significant part of that. The credit rating for Estonia has been downgraded as the government struggles with spending. The summer has been a little gloomy, and soon the long and slow autumn will drift into the dark of the year. Yesterday I met with more refugees: the usual horrible stories, the usual tears. I try to make myself immune, but I can´t. These people are wounded in spirit, carrying their grief in a terrible cradling. I try to project hop

Media misdirection

In the small print of the UK budget we find that the Chancellor of the Exchequer (the British Finance Minister) has allocated a further 15 billion Pounds to the funding for the UK track and trace system. This means that the cost of the UK´s track and trace system is now 37 billion Pounds.  That is approximately €43 billion or US$51 billion, which is to say that it is amount of money greater than the national GDP of over 110 countries, or if you prefer, it is roughly the same number as the combined GDP of the 34 smallest economies of the planet.  As at December 2020, 70% of the contracts for the track and trace system were awarded by the Conservative government without a competitive tender being made . The program is overseen by Dido Harding , who is not only a Conservative Life Peer, but the wife of a Conservative MP, John Penrose, and a contemporary of David Cameron and Boris Johnson at Oxford. Many of these untendered contracts have been given to companies that seem to have no notewo

KamiKwasi brings an end to the illusion of Tory economic competence

After a long time, Politics seems to be getting interesting again, so I thought it might be time to restart my blog. With regard to this weeks mini budget, as with all budgets, there are two aspects: the economic and the political. The economic rationale for this package is questionable at best. The problems of the UK economy are structural. Productivity and investment are weak, infrastructure is under-invested and decaying. Small businesses are going to the wall and despite entrepreneurship being relatively strong in Britain, self-employment is increasingly unattractive. Red tape since Brexit has led to a significant fall in exports and the damage has been disproportionately on small businesses. Literally none of these problems are being addressed by this package. Even if the package were to stimulate some kind of short term consumption-led growth boom, this is unlikely to be sustainable, not least because what is being added on the fiscal side will be need to be offset, to a great de