EU Trade Deficit Hits Record High

DEFICIT GRAPH

Tumbling British exports and an increase in European imports means that the UK’s trade deficit with the EU hit an all time high of £23 billion between November and January.

The trade deficit – the value of exports minus the value of imports – is crucial for measuring British businesses overall performance overseas.

Meanwhile, British exports to the continent are at their lowest since 2009. Divided between the 28 EU member states you get an average gap of over £3 billion per each common market member. Merkel might not want a free trade agreement, but German businesses will… 

Buried away in the ONS’ official data is an increase in EU imports of £674 million in January, while British exports rose a paltry £12 million. This includes a massive £300 million import bung for the Netherlands, while flagging economies Italy and Spain were able to flog us £100 million worth of pasta and sangria each.

They need us more than we need them…

Squandermania: Roof Not Fixed

Yesterday global stock markets passed the technical point where the world is defined as being in a global bear market. It is likely that problems in financial markets will soon be reflected in the real economy, property transaction volumes are already tailing off in a way that suggests we are near to the top of a property bubble. George Osborne promised to fix the roof when the sun was shining, as the moment of truth arrives, has he?

The stand out success of the British economy has been job creation and falling unemployment. Welfare reform driving people back to work and flexible labour markets largely explain that phenomena. The public finances have not been re-balanced, according to the IMF the UK deficit gap is the worst in the G7 and among the worst in Europe. Worse than even Greece.

Osborne has missed every single deficit target he has set himself. He asked us to judge him on how well he tackled the deficit, well he missed his balanced budget target for 2015, he’ll miss his new adjusted target for 2016 and his overall balanced budget target for 2020. If the global economy derails the likely knock on effect will mean even higher deficits.

Despite all this Osborne indulges in squandermania, allowing him to wander the country in hi-viz and hard hats for photo opportunities that will be the pictorial backdrop for his premiership campaign. There are it is famously said two types of Chancellor; those that get out in time and those that don’t. Unfortunately for George, time has run out…

Danny Alexander Tapped For China Bank Role

china-bank-danny-alexander

Bloomberg’s Rob Hutton is reporting that Danny Alexander, the currently unemployed former Chief Secretary to the Treasury, is in the running to join China’s new Asian Infrastructure Investment Bank. The Treasury is said to be putting forward Alexander for a seat on the bank’s board. It is not yet, Guido understands, a done deal… 

Joining the Beijing-based bank’s board would be a lucrative reward for Alexander, of whom George Osborne recently said he had “a lot of time for and respect for Danny”. As well as his board fees it would open up a lucrative future career in high finance in booming Asia. Sir Danny has come a long way in the decade since he was a press officer for the Cairngorms National Park…

Varoufakis Mockingly Praises Osborne’s Faux Austerity

Rock star former Greek finance minister and self confessed “unapologetic Marxist” Yanis Varoufakis used his slot on Question Time last night to compliment George Osborne for not actually implementing austerity.

“I don’t believe that we need an alternative to austerity because austerity is not an option. And indeed, I’m going to give a compliment to George Osborne and to the Tory government, it’s going to create some consternation I think in the Tory party. He hasn’t really practiced austerity, he’s talked about austerity, he did a little bit of it and then it didn’t work. He killed off this nascent recovery after 2009 with the little bit of austerity he did and he stopped, and indeed I can assure you that in discussions I have with good friends of mine in the Tory party, they have been very supportive to us here in Greece and to me personally in our struggle to end austerity in Greece.”

Varoufakis is right, Osborne jacked up welfare spending by £28 billion during his first four years on the job and is still overspending by £2 billion a week. In office Varoufakis, a socialist Greek finance minister, was more of a deficit hawk than the Conservative British Chancellor, Osborne’s austerity is only rhetorical, he is currently running a higher deficit than Greece

Osborne Running Second Highest Deficit in OECD

ONS numbers out today show that public sector net borrowing was £9.4 billion in June,  so the government is overspending by a mere £2 billion-a-week. So much for austerity…

Treasury Questions – coming up this morning – will be a chance to ask the austerity Chancellor how he is doing on the deficit compared to other finance ministers:

Budget-deficits[1]

Of the OECD’s industrialised nations only Japan currently has a worse deficit, financially chastened Portugal, Italy, Greece and Spain are currently showing more fiscal discipline than the Chancellor. George’s illusion is permitted by the financial markets because of a combination of QE (money priniting) and the fact that Osborne talks a good book when it comes to austerity. Though the rhetoric can sometimes fail him when he’s questioned by the likes of Kay Burley

Building HS2 on £50 billion of borrowed money, renewing Trident on borrowed money, borrowing billions to subsidise EU competitors, borrowing billions that end up aiding third world dictator’s offshore bank accounts… It all mounts up…

Investors Dumping Mirror Shares

tm

After the higher than they hoped damages awarded to Mirror phone hacking victims last week the struggling newspaper group admitted that “costs of settling claims is likely to be higher than previously anticipated we are increasing our provision to deal with matters arising from phone hacking by £16 million. This is in addition to the £12 million provided in 2014.” So the Mirror group has gone from denying that there was any hacking at all, to putting aside £12 million and now more than doubling the provision to £28 million…  

City investors are still worried that this is nowhere near enough and that the final figure will be nearer £100 million, the shares have been trading down since the ruling with £30 million knocked off the capitalisation this week. There is some question as to if the company will be able to pay a dividend…

Forgotten the deficit, George?

imf-deficit-uk

Remember that the core mission of the coalition in 2010 was to deal with the deficit? We were repeatedly warned by George Osborne that after Gordon Brown’s financial splurge, Britain risked having a bigger deficit than Greece. After 5 years of Osborne’s deficit cutting rhetoric, Britain really does have a deficit that is bigger than Greece’s, in fact as a proportion of GDP the IMF expects the UK deficit to be quadruple that of Greece [chart above]. Next year the IMF expects Greece to be in surplus, the IMF does not expect this government to ever run a surplus… 

In this context is it really sensible for Osborne to be promising a Keynesian splurge on infrastructure? Where is the value-for-borrowed-money in HS2, which will save businessman half-an-hour on the London to Birmingham trip? £50 billion is a big chunk of the deficit.

Some may argue that the deficit is big enough to look after itself. We still have Quantitative Easing to unwind, the international economic outlook is not secure and the government is already overspending by £87 billion-a-year – adding £1,000 to the national debt for every man, woman and child in the land. If the British economy is doing as well as the Chancellor claims, he should be living up to his rhetoric and focusing on paying down the debt by running a surplus, rather than outspending Gordon Brown in his pomp. It has come to something when a socialist Greek finance minister is more of a deficit hawk than a Conservative British Chancellor…

See also: George Osborne Skewered By Kay Burley On Deficit Failure

Relative Values: Lies, Damn Lies and Statistics

OSBORNE-NELSON

The spat between George Osborne and Fraser Nelson over whether or not the deficit has been halved is very much a Westminster bubble affair of little consequence to anyone outside SW1. Interested voters who even understand the difference between the deficit and the debt know that the government’s target to balance the budget in 2015 has been missed by £100 billion or so. As Jonathan Portes over at the Keynesian redoubt of the National Institute of Economic and Social Research gleefully points out, George Osborne has succeeded in implementing the Darling plan, which his own Financial Secretary to the Treasury condemned, for being endorsed only by The Guardian. The Chancellor deserves a degree of Fraser’s ridicule for only managing to execute the very Plan B that Osborne himself once ridiculed as ruinous.

The Tories are arguing, whilst simultaneously carrying the goalposts, that they have managed to halve the deficit in relative terms, relative to GDP. Professional economists seem to think that is a fair method of measuring the deficit. So how are they doing, in relative terms, on other key indicators?

The national debt relative to GDP is up, from 78.4% under Gordon Brown in 2010 to 90.6% last year. It is still rising, which is in the government’s own self-defined terms a big economic failure.

The Tories like to boast that employment is higher now than ever before, as indeed it was every year under the last Labour government, because the population grows. The unemployment rate is relative to the population. That is down impressively from 8% to 6% thanks to IDS, better still the youth unemployment and long term unemployment rates are also down. A trump card in the economic argument.

Per capita GDP was, as Danny Blanchflower and Ed Balls kept pointing out sombrely with smirks on their faces, falling. We were getting, on average, poorer. According to World Bank figures, the answer to Reagan’s famous question for voters “Are you better off than you were four years ago?” is a “yes”, just about. After inflation voters are on average 1.8% better off now than they were in 2010.*

Quantitative Easing on a scary scale has rigged other economic indicators like inflation and interest rates whilst pumping up asset prices. Great if you already owned financial assets or prime London property…

It seems a long-time since The Spectator was eulogising George Osborne as “the true Tory leader“, the enmity towards the Treasury from the Speccie is near constant nowadays. Guido notes that in a Tory leadership election it is almost certain that the magazine will back Boris, a former editor, against Osborne…

*Although for higher income earners – the income bracket usually well disposed towards voting Conservative – Osborne’s Guardianista pleasing fetishising of the Gini coefficient will mean they are probably worse off. Only a genius political strategist like Osborne would bash his core vote hardest.

The World Will End If You Vote UKIP

First it was value of your home that would plummet if you vote UKIP, and now it’s the markets that will crash should a small coastal town return the same MP the have had for the last four years:

“UKIP gains are changing the political landscape in Britain and these shifts have wider effects than shaking-up British politics; they are likely to spark short-term volatility in financial markets,” claims someone called Nigel Green, who claims to be the founder and chief executive of the deVere Group.

What a load of old bollocks. And a sneak peek of the nonsense that will be peddled if we ever get that referendum…

Labour’s Chutzpah Over Market Rigging

Alex Belardinelli, the marauding SpAd for Ed Balls, is up early this morning tweeting about the Forex Fixing scandal;

According to the Bank of England the scandal dates back to 2006, the LIBOR scandal dates back to 2005, when Belardinelli’s master Ed Balls was Economic Secretary to the Treasury. In other words it happened under Labour’s watch – specifically under Brown and Balls – and was only uncovered under Osborne’s watch. You have got to admire Belardinelli’s chutzpah..

UPDATE:  Neglected to record that the Parliamentary Adviser to the Economic Secretary to the Treasury at the time of the market rigging was… Alex Belardinelli.

CEBR Predicting London Led House Price Drop in 2015

cebr-house-price

CEBR’s Douglas McWilliams says “the London housing market is being hit by a double whammy of reduced domestic and overseas demand. Sterling appreciation since the start of 2013 means that London property is no longer as attractive an investment as it was a few years ago. In addition, fears of a future mansion tax are eroding the UK’s international safe haven status. This will bring down prices at the top end of the capital’s housing market.” House price apocalypse? Not really, the forecast 2.6% drop will be a pause for breath before the demographics reassert themselves…

SKETCH: Professor Krugman, Where’s the Shark?

Paul Krugman, the Nobel-prize-winning economist is in Oxford until mid-June as the Sanjaya Lall Visiting Professor in Development and Business.

The liberal Princeton/NY Times professor just delivered his inaugural lecture asking the question (the almost-rhetorical question) Do We Face Secular Stagnation?

It follows on from his books The Age of Diminished Expectation, the Return of Depression Economics and articles like Is Capitalism Too Productive? The Myth of Asia’s Miracle and – suggested title – What Are You Laughing At, Can’t You See the State We’re In?

His proposition is that the glory days are behind us, that each recession has been harder to get out of than the last, that we will have extended periods of low-to-no growth, and that under-employment will create “dreary lives” for large numbers of people – because politicians will not listen to him and his $300bn job-creation schemes.

If Labour can get him onto a stage with Ed Miliband, the election will be in the bag. For the Tories.

He talked about the impulses to “austerity” saying that it’s as though governments want to engineer a gratuitous recession in order to have a pre-election year boom, “like the Government has done here” (cosy laughter from the full-to-overflow hall).

Small, bearded, charming, Prof Krugman looks like the oceanographer in Jaws. Remember, that clever fellow, expert in his field, ran up and down the beach warning the pleasure-seekers there was a giant shark out there waiting to devour them.

Continue reading

Even Labour MPs See Falling Unemployment, Economy Growing

comres-expectations

As the economy grows, Labour’s poll lead disappears…

UPDATE:  Note the 4% of Tories who think unemployment and economic growth are going to get worse are more pessimistic than their LibDem colleagues.

 

IMF Contemplating Mass Expropriation in €-Zone

IMF-exproriation

Christine Lagarde the French chief of the IMF narrowly escaped being charged recently. Her candidacy’s main cheerleader for the IMF was George Osborne, Guido had his doubts at the time. The IMF is searching for a solution for debt laden European states to stop the €uro collapsing. Stop spending more than you tax is considered naive – how will the ruling elites get re-elected if they stop bribing the electorate with their own children’s money? Option 6 in the IMF’s discussion paper on the subject is brutally straight-forward. The final act of financial repression is to steal from everyone who has savings with a 10% wealth tax.

You have been warned now – just like Cypriot political insiders were – don’t keep any capital in €urozone banks. The IMF argues that the element of surprise is essential for the success of a capital levy…

Brown’s Favourite Economist David Blanchflower Wrong Again Economist Who Advised Brown To Privatise, Ronald Coase R.I.P.

Yet another installment in the series of David Blanchflower’s Terrible Tips. The former Prime Mentalist’s favourite former appointee to the Bank of England’s Monetary Policy Committee got his faulty crystal ball out again at the end of March, predicting growth for the year of 0.2%. In April he said that a triple dip remains a real prospect. In May he nearly fell over laughing at the suggestion a recovery was in sight. He regularly predicted rising unemployment, when it fell. So did he fare any better this time round?

Well this week the OECD doubled its outlook for UK growth to 1.5%, now the OECD expects Britain to even outstrip Germany and France over 2013. What’s more, in the last quarter, the UK grew at an annualised healthy 4.5%, with growth across all sectors. The fastest for decades. Even Ed Balls now admits we are on the road to recovery…

Ronald Coase Obituary

David Blanchflower is a poor excuse for an economist, compared to Ronald Coase, who sadly died on September 2nd aged 102. The Nobel prize winner enjoys nowhere near as much fame as media-savvy left-wing economists like Blanchflower. Coase should be more famous because it was his idea originally to sell off radio spectrum rights, a policy idea which led to Gordon Brown raising £22.5 billion from the privatisation of the 3G spectrum. The greatest one-day privatisation ever seen in Britain, carried out by a socialist. That was genius… 

AP Changes Password

One hacked tweet yesterday and the DOW plunges 100 points, only to regain it all in a matter of minutes. The AP twitter account has been restored this afternoon, the offending tweet deleted, and normality returns to the markets…

Talking Balls

It was less than fifteen minutes after the GDP news was announced before Balls’ people started calling for more borrowing and spending on the back of the news:

Two hours later they have has managed to scramble together a line:

“A one-off boost from the Olympics is welcome. But it is no substitute for a plan to secure and sustain the strong recovery that Britain desperately needs if we are to create jobs, get the deficit down and make people better off.”

Balls chooses to simply ignore the ONS stating that it only 0.2 of the 1% change was down to the Olympics.

Funny how abnormalities are only considered when the growth is positive.

+++ GDP UP 1% +++ Above Expectations, GDP Flat Year-on-Year

David Blanchflower’s Terrible Tips

Whenever Gordon Brown’s favourite former appointee to the Bank of England’s Monetary Policy Committee, David Blanchflower, makes a prediction, it’s probably a safe bet to expect the exact opposite to come true. Back in 2009 the out-of-luck economist looked into his evidently faulty crystal ball and predicted that unemployment would top 5 million if the Tories came into power. As of yesterday it stands at 2.53 million and falling. David is very nearly 100% wrong – quite a wide margin of error.

He forecast that unemployment would surge past 3 million to 3.4 million in 2010. It peaked at 2.5 million in 2010.

On Tuesday Blanchflower was at it again, wagering that the new set of unemployment figures would bring bad news:

Lo and behold once again the opposite happened, with unemployment dropping by 50,000 to below 8%. Keep trying David, you might get one right eventually…

Mugabenomics: Inflation in UK Higher than in Zimbabwe

Remember when Vince Cable warned that Quantitative Easing (QE) was “Mugabenomics”? Vince flip-flopped on that even before he joined the coalition. Guido remembers when George Osborne said “Printing money is the last resort of desperate governments when all other policies have failed.” In government Osborne has overseen the printing of more money than any other Chancellor in British history.[…] Read the rest

+ READ MORE +

Seen Elsewhere



Tip offs: 020 7193 4041
team@Order-order.com

Quote of the Day

The Daily Mirror has heard that at the shadow cabinet meeting, Nick Brown lost his train of thought so John McDonnell handed over a piece of paper to help out.

Brown: “You’re really helpful“.

McDonnell: “Yes I am. But it would be great if somebody could tell Skwawkbox that“.

 

Sponsors

Guidogram: Sign up

Subscribe to the most succinct 7 days a week daily email read by thousands of Westminster insiders.