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Will business rescue us?

Robert Peston | 12:08 UK time, Wednesday, 23 December 2009

The great jolt to confidence caused by last autumn's banking crisis, and our collective uncertainty about what the future holds, has prompted vast numbers of us to endeavour to reduce our indebtedness.

As Stephanie has mentioned, official statistics indicate a sharp increase in the rate of saving by British households, after years in which we accumulated unprecedentedly large debts.

Suddenly that all-time record 175% (or so) ratio of household indebtedness to disposable income feels like a dreadful millstone.

Of course, thanks to the munificence of the Bank of England in slashing Bank Rate and creating £200bn of new money, it is not the interest payments that are bearing down on us, but the overall indebtedness.

The principal on the household debt (still greater than our GDP) may seem unbearable at a time when expectations for growth in our earnings and in the value of our assets have been very considerably diminished.

That said, it is not impossible that rising interest rates could at some point put a squeeze on consumers' capacity to spend, as the Bank of England has helpfully pointed out in its latest Financial Stability Report.

This shows that if inflation bubbled up and the Bank's Monetary Policy Committee felt obliged to increase interest rates to the levels of just a few years ago, households would be paying out eye-watering amounts of their earnings to service the interest on their debts (with Bank Rate at 5%, households on average would be allocating between 11% and 14% of their income to interest payments, which would be a very high proportion by all historical standards).

That said, and as the minutes published this morning of the last MPC's last meeting make clear, there's no great likelihood of Bank Rate rising sharply any time soon.

However bosses of retailers tell me that they are not expecting 2010 to be a return to boom times. And no-one should expect a great splurge of consumer spending to power us out of our economic torpor.

So what will be the source of the UK's economic recovery?

Well it's plainly not going to come from the public sector, with government indebtedness rising at an unsustainable rate and the main parties engaged in an argument about the scale and pace of spending cuts, not the inevitability of such cuts.

Any oomph would probably have to come from private-sector businesses, especially investment by them.

So just how likely is it that industry and services will be our salvation?

Well let's start with the anecdotal evidence.

As is my wont this time of year, I've asked a bunch of business leaders - in an informal way - what they expect from 2010.

None were preparing for a massive increase in demand for their stuff. And although they assumed that the recession was over in a technical sense, they did not expect the recovery to feel massively better for themselves or their staff than the depressed conditions of the past year or so.

On employment, they were not prepared to commit that there would not be further redundancies.

Some admitted that they had been "hoarding" labour, keeping people on in the hope of better times - but there could come a moment (perhaps early in the new year) when those hopes were dashed and there would have to be a further round of job losses.

As for investment, business leaders said they were behaving (unsurprisingly) rather like households: they would rather reduce indebtedness or accumulate cash, than make substantial financial commitments.

Those views are consistent with the Bank of England agents' survey [360 KB],
which describes the outlook for investment as flat. It paints a picture of businesses that plan investment increases being offset by those preparing for cuts, with small and medium size businesses tightening belts more than big ones.

That's not particularly cheering, coming - as the Bank points out - after a fall in investment spending in the UK which has been significantly greater than during past recessions.

For those of a pessimistic cast of mind, these trends are probably too reminiscent of the sustained falls in business investment that prevented Japan from growing for more than a decade.

And as in Japan, it is the hard numbers on lending to business that should probably be given greater weight than what business leaders actually say.

In Britain, the credit statistics are dire.

The annual rate of lending to business has been falling at an ever greater rate, month after month, to a decline of 7.6% in October (the last month for which figures are available).

This squeeze is a mixture of less credit being available, especially from non-British lenders, and of reduced demand for credit.

It is true that some businesses are choosing to issue bonds and new shares rather than borrow from banks. However the net overall supply of finance to business remains flat, even including the proceeds of those fund-raisings.

Also, certain really important sectors - notably manufacturing - have raised next to nothing from capital markets while also massively reducing their borrowing from banks.

There was a tiny glimmer of recovery in lending just by British banks to business reported for November by the British Bankers' Association.

However this figure may be a rogue, since it is skewed by a slightly odd bounce in borrowing by "real estate, renting and other business services", while manufacturers continue to borrow less.

My take on what's happening goes like this: stronger businesses are frequently choosing to save rather than spend; banks are refusing to provide new finance to weaker businesses: and the very weakest businesses are being kept on life support by banks which may not wish to endure the political and financial pain of putting too many of them into administration all at the same time.

As of now, an investment-led British economic revival does not look imminent.

Comments

Page 1 of 2

  • Comment number 1.

    Sorry, Robert but what was the point of the article? Desperate to find a glimpse of hope for recovery? You won't. I run a business myself and the goal for 2010 is not invest but to stay afloat by drastic cut of all sort of expenses, that's all.

    Nothing has been change therefore nothing will change.

  • Comment number 2.

    It is very difficult to invest in such chaotic times. I think it is very difficult to call what is going on with QE (which should be illegal since it is debasing the currency) potentially producing inflation of 70's esqe proportions and effectively taxing the working class.

    Please Cameron, get the asset prices down, public sector sorted and interest rates up again so we are not living in la la land.

  • Comment number 3.

    No it won't.

    The depression won't end until the banks begin to increase the amount of money in circulation by lending new money into existance.
    This won't happen until they've scrubbed all the doo doo off their balance sheets. This won't happen because the governement is printing them new money in the vain hope it will keep them alive long enough to come out of their comas. Which they won't because they haven't really admitted how badly they're hurt yet. In the meantime they're just going to keep limping along sucking up all the QE money and using it to inflate the next market bubble whislt still trying to pay themselves stupid amounts of money because of how clever they are and threatening to move to Switzerland everytime someone threatens to take it away from them.

    Can we end this nonsense once and for all?


    State bank please.

  • Comment number 4.

    A gloomy prognosis to match the weather conditions...

    What a shame that HMG don't seem to think the same way as Joe Public and businesses in the UK. The longer they leave it before they start to rein in spending and live within their means the worse (more expensive for all of us) it will be. As you rightly point out if/when interest rates rise it all becomes so much more painful if you are a borrower.
    For savers it's the opposite of course.

    Why does the government not seem able to grasp this fundamental point?

  • Comment number 5.

    There tends to be a concentration on the so called 'private sector' as the powerhouse for the economy.

    But what about the huge number of people working directly or indirectly for the state in the UK?

    There seems to be confusion about why the UK recovery is stalling. Here's a possible explanation. The next government (tories) have announced that they will be making tens of thousands of state funded workers redundant. No one knows who it whether it will be themself. Across public services, millions of people who could be spending are nervous and putting money away in case it is them that is redundant next year.

    Example: Only today the same effect was spread to universities - not part of the state, but funded by it. Thousands more people now nervous and cutting their spending.

    Are the tories doing this deliberately to stall recovery?

  • Comment number 6.

    The silver lining of this story is that those businesses which do choose to invest will have an advantage over those which don't, and will earn correspondingly high returns - if not in 2010 then in 2011.

    My business is certainly investing, both for the immediate future and developing new products for the long term.

    Actually I'm quite optimistic about economic recovery precisely because of QE, and the growing recognition among economists and policymakers that an aggressive monetary policy is needed to take over from fiscal stimulus over the next couple of years. Now I don't quite have Robert's influence over business expectations, but BBC News 24 did ask me to come onto their show yesterday to talk about this:

    http://www.knowingandmaking.com/2009/12/bbc-world-piece-this-morning.html

  • Comment number 7.

    Business won't rescue us, it will continue to screw us for as much as possible. Witness Talk Talk announcing that from 1st January 2010 their £6.49 essentials call package will increase to £6.99 including the VAT change. If it was only the VAT change being applied, that call package should only really increase to £6.63

    I noticed that when the VAT reduction was applied 12 months ago, the price of my call package was re-calculated to the exact penny. And generally speaking a £199 fridge continued to cost £199. Did you see any priced for £194.77..? I didn't...

    Big business, not just Talk Talk, is clearly profiteering from the VAT changes. They're as bad as the Bankers...

  • Comment number 8.

    ''My take on what's happening goes like this: stronger businesses are frequently choosing to save rather than spend; banks are refusing to provide new finance to weaker businesses: and the very weakest businesses are being kept on life support by banks which may not wish to endure the political and financial pain of putting too many of them into administration all at the same time.''

    A number of businesses are being kept alive to gradually work down their overdrafts. Simple as. They will be left to go to the wall at some point in all likelyhood if they do not repay. They are on a decline curve.

    I understand locally the situation is many businesses report muted activity, aka quiet. There are a handful that are doing well. It is a matter of polarity. Fragile, working down debt, quiet, a few doing well. There remains unemployment storing up in the system. There are opportunities clearly but many cannot take advantage as they are shackled. Whether the issue of unemployment being realised makes much odds to the economy is something for debate, because they are clearly not spending much. The big problem is public finance debt which was running at 20 Billion GBP for Nov 2009. This is unsustainable.

    I note elsewhere on the BBC site an economist says the UK public debt is not really all that bad, blah blah blah. Maybe. i dont find the argument convincing. The issue is the rate of growth, the acceleration of this debt.

  • Comment number 9.

    Asking around informally about the future? Try using Google Insight for Search to gauge the economic recovery or lack of it.

    Google Trends have been good at forecasting flu trends and is also pretty effective at showing the current state of the economy. One of my main industries is travel and using Google insight for core search terms in the UK - I can say that the travel industry in some sectors is still 10% down on this time last year. Even with all the main economists predicting UK coming out of recession last quarter the trends data predicted continued recession.

    Use the tools providing real time search for consumer goods and look at the real current situation of the economy. It's not good. Expect flat growth or 0.1% growth at most for the next set of GDP.

  • Comment number 10.

    "the very weakest businesses are being kept on life support by banks" haha You got to be joking!! Banks helping anyone but themselvels you must be deluded or on a different planet.
    I've known business we work with have cash flow problems but have valuable assets, been sunk by banks so they can get there hands on these assets bundled them up as toxic debt so "we" pay for them to sit on these assets until they raise in value before off loading them at a huge profit at somepoint in the future.

  • Comment number 11.

    "So what will be the source of the UK's economic recovery?

    Well it's plainly not going to come from the public sector, with government indebtedness rising at an unsustainable rate and the main parties engaged in an argument about the scale and pace of spending cuts, not the inevitability of such cuts."

    If this is really the case and gov cuts back too quickly then we are in real trouble and heading for a double dip recession - isn't the gov supposed to prop up demand when the private sector doesn't ( well thats what Keynes & Paul Krugman would say - I think?)

    Maybe there are ways around this - ie cutting public sector wages rather than cutting jobs. As if jobs are cut this which will just add to benefit claims and reduce demand even further.

    For me there have got to be tax rises on land etc (eg mansion tax) to support public spending rather than cutting back so much. Alternatively the gov may just inflate their way out of the problem - if inflation was at 10% that might get people spending!!!!!


    Looking forward I believe we need to have measure of debt adjusted growth for the economy otherwise in the good times 'growth' is just extra debt that consumers and the government are taking on. In the boom times that seems good but eventually it has to be paid back!!!

    As well as gov't debt according to the OECD UK households owe debt on average of 180% of net disposable income.

    This compares to German - 98%, French - 100%, US - 130%

    So we are certainly in trouble in the UK as we have to pay off these debts before we can think about spending again.

    Theres a good article on this in the Times today

    http://business.timesonline.co.uk/tol/business/economics/article6965784.ece

  • Comment number 12.

    I would certainly not risk investing money at present. It is likely the Tories will win the next election, immediately try to cut the deficit by sacking thousands, and send the economy into a tail spin depression like the 1930s. They have no understanding of how economics works, just like the Tories of the 1930s.

  • Comment number 13.

    Firstly - Merry Christmas RP. I hope you have a pleasant break if indeed one is planned. Many thanks for your efforts over the past year.

    As to the most recent article/blog...

    'As of now, an investment-led British economic revival does not look imminent.'

    I have to say-I really can't say i'm surprised. That statement seems akin to staring down the road saying we're not sure if there's something coming towards us...when there's a huge lorry right behind us.

    I don't like this suggestion but feel the real economy is some way off the 'other' economy, the one you write (and we talk) about. Further recession, double dip if you like, is almost inevitable. The squeeze on the public sector, credit, taxes, employment, national debt etc all indicate that we're some way from being anywhere near where we'd want to be- vague as that is, as far away as it feels.

    How the FTSE can be where it is is just astonishing to me. QE ending will be like a drug addict trying to go cold turkey. Confusing, painful, uncertain, embarassing and incredibly difficult in the short term...but perhaps saving us from even harder times in the longer term.

    Expecting anything other than a flat line 2010 is presumptive, and even that will be a result. A bit of stability please, my fear is there's worse to come- but i'm heartened that you aren't talking us into that place. (Not yet anyway.)

  • Comment number 14.

    Will business rescue us?

    No.

    Why: because all the Bank of England is doing is to re-inflate the busted bubbles of the run up to this recession. They just don't get it!

  • Comment number 15.

    Everyone should watch the Zeitgeist Addendum on you tube it gives a great deal of insight into the failures of the monetary system and why it's unlikely that this recession will be over any time soon.

  • Comment number 16.

    Why would any self respecting lender lend money at the present zilch interest rates to businesses that are probably going to fail anyway ? Banks and Building societies are after all still in the business of making profits, not philanthropy. Investors will also not invest in financial institutions if the interest rates are not giving a decent return, and those whose spending power relies on the interest income from invested money have considerably less to spend, so the high st suffers. It is a vicious circle and as long as the government sees retaining votes as more important than putting the economy right we will stay in recession. Keeping mortgage interest at an artificial low means mortgage holders have more drinking money, but those seeking a mortgage have no chance unless they have a decent deposit, which probably is as it should be. Meanwhile the savers who oil the wheels get no return on savings and probably see no point in saving to subsidise those who don't.

  • Comment number 17.

    Robert,
    I had expected to see you with a book out for christmas -
    Britain - my part in it's downfall -

  • Comment number 18.

    Swings and Roundabouts Robert.... the artificial levels of inflation and interest rates do provide short term benefits for some.... but the flip side is that the Real level of debt normally decreases over the years, in port by repayment and in part by erosion from inflation.....

    In recent years many people have opted for interest only on the basis that when the original loan needs repaying it will be ‘worth’ a lot less that it was originally – it won’t!
    One way or another we end up repaying the same amount in Real Terms!

  • Comment number 19.

    I suppose the implication is, if business can't save us, should it be given state help, (a la bank bailouts?) But where would the cash for such state help actually come from?

    At the moment we're still in recession, but all the guessing is that we're not really, not any more - but only just not? But it's difficult to see any attempts at re-flating the economy are having much success, even at creating another debt-fuelled bubble.

    Seems we're holed below the waterline and are flailing around trying to stay afloat, but that the water's still rising?

    Thing is if Business won't do the trick and public spending can go no higher, then what, a Conservative Government? Come off it!

  • Comment number 20.

    "My take on what's happening goes like this: stronger businesses are frequently choosing to save rather than spend; banks are refusing to provide new finance to weaker businesses: and the very weakest businesses are being kept on life support by banks which may not wish to endure the political and financial pain of putting too many of them into administration all at the same time."

    That is true. We despirately need to inflate away the value of our currency. Holding cash not be nearly as attractive if inflation was 10%. Paying back all those loans would be an awfull lot easier if we just inflated their value away...

    Happy Christmas Everyone!

  • Comment number 21.

    What will the MPC do if there is a run on the pound? Let it go into free fall because their remit is inflation not management of the economy? They would be brushed aside and interest rates would be fixed by HMG to stabilise the pound. Interest rates mean many would not be able to service the debts as well as the current issue of meeting the repayment schedules. We are at a tipping point where not much would put the economy into a medium term declining spiral (helix?). Time to trash the MPC and for politicians to take responsibility for the management of the economy.

  • Comment number 22.

    Mr Peston wrote: Will business rescue us?
    Well I for one hope so, because if it doesn’t there is no rescue.

    However given that a proportion of business is engaged by government, and government intends to slash its expenditure, then we’ve probably not hit the bottom yet.

    If you really wanted to promote a business rescue, what would you do?
    Well if you got rid of a lot of the red tape and bureaucracy, that’d be a start.

    But what’s missing at the moment is hope for the future.
    Hope that this time things will be different.

    Hope that that we’re not going to simply follow the same destructive path of another credit bonanza followed by another bust.

    But hope seems thin on the ground at the moment, because those that caused the economic collapse, the repossessions, the destitution and misery are all still there, just waiting for the same opportunity to do it again.

    Again I say the same thing:
    Unless we (the state) have the primary control of the creation of money, then we (the state), will be at the mercy of those who do.

    We need a State Bank.

  • Comment number 23.

    My take is that we are still very much in a position of needing to correct the economy before we can talk of reflating. When i was young ( which wasn't too long ago) the wise advice was that, "other than your house, if you cannot afford it cash, you cannot afford it". Once you had your house you had the feeling of starting out and frankly any old furniture people were going to throw out you were happy to have. In recent years, couples buying their first place seem to need the house to be refurbished and all furniture and fittings to be new, irrespective that it is all on debt. I really feel debt levels and the amount of income spent on interest ends up putting a strain on new homeowners or for that matter people who continue to borrow against equity. Without trying to answer the question of how much of the blame is ours in taking out the debt or how much is the banks and retailers who provide the debt and create this need, imo the sensible thing is for the economy to return to the old ways

    Will businesses invest, no not until the demand is there and there is still space capacity, with modern technolgy investment can take effect in weeks or months, there is no need to gamble on when future relation may actually happen. In fairnes it is not business role to consider the wider economic and social decisions of their actions. It needs to be the government who can put to constructive use the vast under utilisation of resourse to enhance the country's infrustructure for the future.

    Anyway enough waffle from me, merry christmas to all bloggers and RP. reading everybody's strong opinions has been great

  • Comment number 24.

    Dempster wrote:
    Unless we (the state) have the primary control of the creation of money, then we (the state), will be at the mercy of those who do.
    We need a State Bank.
    --------------------

    Dempster, four American presidents tried that, all but one ended up assassinated.

  • Comment number 25.

    I vote for the last sentence as "Understatement of 2009".

  • Comment number 26.

    25. At 5:01pm on 23 Dec 2009, Chamfort wrote:
    'I vote for the last sentence as "Understatement of 2009"'

    Seconded.

  • Comment number 27.

    #24 plamski

    Very well put and nicely sums up the whole problem.

    Serfs are us.

  • Comment number 28.

    Andrew Jackson, the one that survived the assassination attack on him, when asked about his lifetime achievement, he allegedly answered: I killed the Bank!

    Abraham Lincoln, who did get assassinated, said: I have two great enemies, the Southern Army in front of me, and the financial institutions in the rear. Of the two, the one in my rear is my greatest foe.

  • Comment number 29.

    Please would you do a programme in which you tell us just how the bankers make their vast profits?

    Banks don't make anything, so where does it all come from?

    I suggest that they are very good at extortion, and the obscene bonuses are paid to their employees who are the best at doing just that -- extorting it from the rest of the population, who, let's face it, is just a mass of ignorant, trusting sheep.

    I also suggest that the government knew exactly what they were, and still are, up to, and supports them absolutely

    Money is actually nothing more than someone else's debt -- doesn't it say that on every banknote -- "promise to pay the bearer etc", and the whole world economy is no more than a giant "Ponzi" scheme which, if China and the Arabs don't help, will soon blow up in our faces – the fuse has been lit already,

    Why do we have it "in for" the recipients of the obscene bonuses? They are no greedier than most people -- they merely happen to be good at doing their master's bidding, and extorting vast payments from them for doing it.

    My dog is very greedy, and is always looking for more – surely a good trait – I use its’ greed to help train it. If I give it tit-bits other than as a reward for a specific action, my dog gets fat, and anarchy reigns. The fat and anarchy are MY fault, NOT the dog’s.

    Doctors, most CEOs, and many public “servants” are grossly overpaid (my opinion). But I don’t blame them – I blame the weak, unaccountable wimps who were incapable of striking a tough deal – after all they don’t have to personally foot the bill – they are “all-right-Jack”

    Why don't we get at those who do the negotiating, or, more relevant, those who allowed such a flawed system to exist? Were our rulers economically illiterate, or did they deliberately want to perpetuate the "Ponzi"?

    If the latter, why? The next election?? Their pensions are safe

    If only the British population knew just how they were being fleeced, not just by the bankers, but by their co-conspirators, the government.

  • Comment number 30.

    24. At 5:01pm on 23 Dec 2009, plamski wrote:
    Dempster wrote:
    'Unless we (the state) have the primary control of the creation of money, then we (the state), will be at the mercy of those who do. We need a State Bank'
    'Dempster, four American presidents tried that, all but one ended up assassinated'

    Yes, but then how many have died in Afghanistan, in any event I'd do it.

  • Comment number 31.

    @ 21 "Time to trash the MPC and for politicians to take responsibility for the management of the economy."

    Politicians used to have overall responsibility for interest-rate setting before the MPC existed. That was even more of a disaster! Then Labour came along and created the "Tri-partite" system we have today. Stupidly, Labour believed the Banking Supervision element of the new system should be taken away from the Bank of England and given to the FSA! Labour's belief was that the B of E need only have interest rate setting powers and should not have their focus on this aspect muddied by anything else.

    It was reported in the Press at the time (1998) as not being a sensible thing to do, but the presumption was that you did not need Bank of England-like expertise to achieve banking supervision. All you needed was a committee to check whether the banks were "behaving" themselves.

    What the FSA totally failed to understand was the extent to which banks would "pour resources," (i.e gamble) into derivatives and so-called casino-like trading, at the expense of the boring (traditional) banking lines of business, current accounts, savings, ordinary lending, etc. Even when they were warned long ago, but on record in 2006 - the FSA chose to (deliberately?) ignore the warnings!

    So, instead of taking powers away from the MPC, the MPC should have given MORE powers. At least the B of E had a history of bothering to do the work, (which the FSA did not) and fire warning shots across the bows of the banks. I remember Robin Leigh-Pemberton doing just this in 1988, warning banks then of lending too much to the property sector. Someone should have been doing this in 2006, even prior to 2006, but by then the Bank of England had been stripped of its powers to do so and felt it's professional position meant it had to remain tight-lipped, just like a typically good banker would - it's in their blood!

    But yes, ultimately, the responsibility for this mess (for the causes of UK bank bailout etc) lies right at the feet of Gordon Brown. He does not deserve to survive the next Gen. Election because of this. The Tripartite system is a bad joke - but it still exists to this day. To abolish it would mean hurting Gordon Brown's pride. Until he goes that is in the way.

  • Comment number 32.

    29. At 5:42pm on 23 Dec 2009, oap_john wrote:
    If only the British population knew just how they were being fleeced, not just by the bankers, but by their co-conspirators, the government.
    ----------------------------------------------------
    The government are not co-conspirators. They are lapdogs.

  • Comment number 33.

    Dempster

    We do have a state bank - the BoE - the rest of the banks are franchise holders just like McDonalds restaurants.

    The problem actually is the state. A truly independent BoE would not have created this problem, since it would not have a hooky target of CPI given to it by Gordon Brown for inflation. It should have cranked interest rates 2001-7 and then there would not be this mess.

    A 'state bank' would never be allowed to fail and would do the bidding of politicians.

  • Comment number 34.

    gruad999 wrote:
    We do have a state bank - the BoE - the rest of the banks are franchise holders just like McDonalds restaurants.
    ---------------

    The Bank of England, despite its name is NOT a state bank. I wish more people would not get fooled by the name. Although it was nationalised in 1946, the BoE has always been in reality and acted as a private bank because of its independent status.

  • Comment number 35.

    33. At 6:15pm on 23 Dec 2009, gruad999 wrote:
    'A 'state bank' would never be allowed to fail and would do the bidding of politicians'

    Well perhaps it would, but surely that's better than simply having private banks do their own bidding thus causing an economic collapse.





  • Comment number 36.

    I cannot see much point in these ramblings. Why not go back to your roots and concentrate on real news and analysis. It must be hard at the moment with not much happening before the holidays.
    Lets see you breaking new stuff again.

  • Comment number 37.

    Will business rescue us – NO! – Not as things stand.
    The main issue which is frequently overlooked regarding the 2010 outlook for the British economy is that the UK has a ‘double deficit whammy’ to deal with of as includes both sovereign UK debt AND a huge trade deficit.
    Increasingly, the UK's heavy demand on imports of all kinds and in all the important sectors e.g. food, fuel; raw materials will be a drag on the economy as the UK is reactionary to the global economy.
    The fact that the UK still has QE means that the UK economy is in serious recession or even depression and that some 'double dip' is now inevitable since even if QE lifts the UK economy GDP momentarily out of 'recession', in the absence of a real recovery, the moment that the QE is removed the UK will be back in recession and this will be a major blow to confidence.
    The UK, can I think, recover economically and fairly quickly and with a better internal economic structure if the right things are done:
    1) Apply a strict spending test for all - every penny of public spending using qualitative tests for spending such as ensuring British jobs for British workers.
    Stop all negative public spending on the basis of a comprehensive spending test for all spending test. The government needs to remember that not only the government can spend our money for us.
    If the government does not 'spend' our money for us - believe it or not some of us are quite capable of spending it ourselves - and many of us will buy British without being 'nanny stated' to do it.
    The big government argument is nonsense – Joe Public is far more efficient at spending money than our government. The problem is that the UK is sucking in too many imports whoever is spending – and until this is put right, the UK cannot ‘recover’ economically to anything like what we have seen in recent years. The countries which now have growth have strong export capability of high demand goods services and raw materials – Is this fact or fiction – Am I making this up?
    3) Eliminate UK income tax and NI's for those earning less than £15K pa and give the low paid a level playing field to compete against tax dodgers and the black market. This would allow the HMRC to go after 'bigger fish'. At the same time scrap the minimum wage and end unnecessary bureaucracy. Increase VAT selectively on e.g. 4x4's and make those who go into hospital drunk pay for their healthcare and problems caused.
    We need to 'tax the problems' more in the UK - This is a major issue that needs putting right as the low paid need their taxes removing completely - that's right ...completely removed.
    I understand that UK taxes are the one thing that the EU and other global trade strangulation agreements cannot influence in the UK - the UK has full control over UK taxation - that is the area that economic policy needs to focus on.
    4) Align government public spending /benefits to concentrate on British job creation
    5) Tax negative UK bank trading/bonuses heavily or out of existence.
    6) Ensure that any bank in the UK concentrates their lending and activities on eliminating UK unemployment and cutting UK imports.
    7) End UK Council tax as about more than half the UK adult population pays nothing directly towards UK local government finance even though this is the sector of the population that generates most of the costs. Replace it with a sensible community charge based on the National ID card that allows access for government public services and benefits using modern technology.
    8) Buy British - we're killing the UK by buying foreign imports even though some of them may be better and cheaper Yes - that is true. We need a new standard or kite mark to show what UK products and services have a disproportionately positive effect on the internal British economy in terms of multiplier, resales, employment etc.
    Our government makes little or really nil effort to stimulate those sectors of the economy that are stimulating for the regions, unemployment black spots etc whereas globally some countries put all of their effort into doing this - and they do not even need a policy to do this - this is all instinctive - most of China, Japan, Korea, Australia, Germany, Canada show how to do this. Our government has no idea or interest in our domestic internal economy as in a time of global weak demand we need a stronger internal economy.
    I know that many will laugh at this last point - but just wait until the world economy does picks up and see what happens to UK oil, energy and just about all import prices - this will hold back the UK's recovery as we'll need possibly the highest medium term interest rates the UK has ever seen to control inflation. Crucially, this will kill off any major recovery in UK construction/housing which is not a bad thing as the UK is over-populated and everything in terms of public and private infra-structure is creaking under the strain of increasing population.
    9) Build British version of Trident, Nuclear power stations, ships aircraft carriers etc - why is there no confidence by government in British industry - Do we really believe that we have to rely on all foreign knowledge/construction now for just about every major UK project?
    10) Direct most UK bank lending to those projects that will benefit the UK – if it is not very good for the UK internal export capability then do not allow the banks to lend a penny. Draconian, but this why the UK is drifting – the banks are not working for us – the UK – they’re just working for themselves.
    I know that most MP’s will think of a hundred reasons why none of this can be done by them – that’s another problem. Britain can do this – all of it or part it ... if it chooses – irrespective of what the EU says or thinks – the reason being is that Britain is at war – and during war time – extraordinary measures are appropriate.
    If most if not all of these things can be done quickly - I think that the UK will be 'buzzing' in around two years time and I do not think that general heavy income tax rises are necessary to achieve this harmonisation of government fiscal and related policy.
    It's a question of priorities, radical thinking, policies and action and putting Britain first.
    We have a choice either to help ourselves, or stagnate - and watch the living standards for 75% of the UK population deteriorate significantly
    Let's look on the bright side - I think that a change of government in 2010 can really lift UK business and general economic confidence and that is our best thing to look forward to next year.
    Gordon Brown, Blair and this Labour government’s legacy I think will be that much and significant political and economic change was forced on the UK after many years of government abuse and bad economic management.
    2010 should be the year when the ‘penny drops’ for many to realise what needs to be done – we can buzz like a bee or we can stagnate and carry on whining with a ‘no idea, big spending, big government’.

    In some ways, Brown's mess will do the UK some favours as we all wrestle with what needs to be done! Britain is currently paralysed by big government/EU/ global trade policies/treaties/initiatives as to why we can't or should not do X, Y or Z to get out of difficulty.

    Waiting for a global receovery is very dangerous for the UK as a global recovery in times of very scarce international resources does not necessarily bring overall good news for the UK economy. The UK is not any more an 'international economic driver' and the sooner we change course to become one, so much the better.

    Buzz or stagnate! Stagnate or buzz! We need someone with guts and all of the other attributes to lead us out of the current mess!

  • Comment number 38.

    # 34. At 6:22pm on 23 Dec 2009, plamski wrote:

    gruad999 wrote:
    We do have a state bank - the BoE - the rest of the banks are franchise holders just like McDonalds restaurants.
    ---------------

    The Bank of England, despite its name is NOT a state bank. I wish more people would not get fooled by the name. Although it was nationalised in 1946, the BoE has always been in reality and acted as a private bank because of its independent status.

    >>>>>>>>>>>>>>>>>>

    BoE is an extension of HM Treasury and without a proper remit and regulatory control. King is told what to do by No 11 Downing St apart from interest rate setting but is still influenced by No 11. Do you think that QE was King's idea?


  • Comment number 39.

    37. At 7:51pm on 23 Dec 2009, nautonier wrote:
    'We need someone with guts and all of the other attributes to lead us out of the current mess!'

    I agree, but who?

    That for me is one of the main issues..........who?


  • Comment number 40.

    #16 kaybraes

    Banks aren't making money on loans so they are not lending.
    I have no idea where they are getting the money from to pay their staff.
    Perhaps they are just drawing down on their capital and hoping for a rainy day.
    Or more likely lending to themselves knowing that the taxpayer will step in if things get out of hand.

    Meanwhile we have an election looming and the government needs to feed a feel good factor. Banks cannot be cajoled into lending so the government is just going to give money away.

    Check out http://www.onenortheast.co.uk/jeremie/index.cfm

    "jeremie" looks to be stepping in where banks fear to tread.
    Is this the new economy? Governments just throwing money away in order to stimulate a dead economy?

    Is this the beginning of a de-facto state bank?
    I think they are merely underpinning the housing market.
    And by forcing up house prices ruining what is left of UK manufacturing.

    When will the Tulips start to flower?
    Perhaps the banks will invest in them.

  • Comment number 41.

    38. At 8:06pm on 23 Dec 2009, nautonier wrote:
    'Do you think that QE was King's idea?'

    I Do.

    I reckon the DMO consulted the Gilt Edge Market Makers and found there was not the demand for £200 billion in UK fixed interest gilts this year.

    Therefore the Government’s stuck it can no longer pay its bills.

    They then turned to Mr King to bail them out, and QE avoiding section 104.1 of the Maastricht treaty was his solution.

    He warned them it was risky, and they needed to bring expenditure under control.

    The Government agreed to do this.

    And Mr King foolishly believed them.



  • Comment number 42.

    39. At 8:09pm on 23 Dec 2009, Dempster wrote:

    37. At 7:51pm on 23 Dec 2009, nautonier wrote:
    'We need someone with guts and all of the other attributes to lead us out of the current mess!'

    I agree, but who?

    That for me is one of the main issues..........who?

    >>>>>>>>>>>>>>>>>>>>>>>

    Despite being branded a cynical critic I am optimistic and think that someone will probably emerge in the New Year with quite a strong plan for the UK - I don't care who they are or what political party they are from so long as we can see that they have serious and ambitious plan to tackle the main problems under discussion and also those problems that are all too frequently ignored.

    I agree that I don't see who it is or where they are to come from - I'd like to see someone in Labour to say to Brown stand aside and let me have a go as this would put the other parties under pressure to produce otherwise we might just get more of the same next year and after the general election...

    James Purnell probably moved too soon and its difficult to see anyone with the bottle or ability in the Labour Party to do what is needed - naming names is like the kiss of death for them - so we'll just have to wait and see.

    I think that many in the Labour party would like to see the back of Brown also, but don't feel able/ are unable in terms of ability/basic courage to do anything. So we'll have to look elsewhere.

    Waiting for China ? to save us is not an option in my book!

  • Comment number 43.

    41. At 8:25pm on 23 Dec 2009, Dempster wrote:

    38. At 8:06pm on 23 Dec 2009, nautonier wrote:
    'Do you think that QE was King's idea?'

    I Do.

    I reckon the DMO consulted the Gilt Edge Market Makers and found there was not the demand for £200 billion in UK fixed interest gilts this year.

    >>>>>>>>>>>>>>>>>>>

    My speculation is that the QE idea came through the Treasury from the EU now that it seems that Greece has been practising QE for two plus years - which puts them in major debt before Northern Rock or Lehman - which means the EU knew more about the sovereign debt and credit crunch crisis looming in far flung parts of the Eurozone.

    We'll probably never know who is right on this one as no one in government will admit to anything!

  • Comment number 44.

    i'm tired i'm tired i'm not the working kind
    but i can't stop
    I've got to work all day
    and you can't give me a raise of pay
    then he would say to me you don't seem to be the working kind
    i'm not the working kind not at all

  • Comment number 45.

    http://news.bbc.co.uk/1/hi/business/8415703.stm

    'The credit ratings agencies are very concerned, but I think [this concern] is misplaced '
    Gerard Lyons, chief economist, Standard Chartered

    >>>>>

    BBC
    >>>>>>

    But are the UK's debt levels really that bad when compared with other leading developed economies?
    The chart below will tell you that, in fact, the UK has the lowest level of debt of all the leading developed economies of the world. Its 68.7% of GDP compares favourably with the US (84.8%), Italy (115.8%) and Japan (218.6%) in particular.

    >>>>>>>>>>>>>>>>>

    Obviously, Japan's debt level is enormous compared to the UK as a percentage of GDP but the Japanese have amazing innovative technology and export trade that the UK does not have. If the debt levels and balance of trade deficit of the UK is also compared with that of these other countries and the extent to which our economy has been dependent on banking and debt fueled real estate then Britain's trade is put into better perspective.

    If we're reliant on these so called experts to feed us daily financial 'spin' then its no wonder we're in such a mess!

    It's the big picture that matters and not just selective statistical spin!

  • Comment number 46.

    Surely business is the "only" long term way out recession?
    We need to creat real wealth make/add value/export wealth is the only thing that can pay for our vast service sector,if we have less business we must have alot less service industry to balance the books.
    The banks have lived on the real wealth created by Business.
    This country is built on industry in the days when we needed to import nothing and exported quality goods "made in England" all around the world.
    Towns were built around mills/industry which have virtually all gone now but the towns are still there and more populated than ever??.. they used to make the best goods in the world this is when Britan really was great...around 100 years ago if you wanted a padlock anywhere in the world it was made in one place ...just outside Birmingham.
    Business Built Britains wealth.
    The wealth is running out along with the business....
    Someone stated earlier today we "need to by british" but what is there to buy when we virtually make nothing anymore? "buy british" should have been preached 30 years ago and we may still have a motorcycle/car etc. industry.
    Like suckers we all bought into the cheap import copy/goods they looked ok but did not last 5 minutes, they re-invested there con money in there businesses now they rule the world in manufacturing and have created real wealth which is passed on through the country.
    We will lose the "Great" out of Britan never mide our credit rating un-less we get business up and running again at the moment I am just keeping my head down until the bombs stop dropping.
    We can not compete with China as it is difficult to get a work force that will work for a £1 an hour although it may come to this in the future.
    Forget about the banks there is no point having a banking system if there is no wealth being created....save the businesses not the banks!

    I know little about economics or politics (or spelling) but a little about business,started when I was 8 and I have lasted alot of years to date although I have never known things as hard as they are at the moment,business has to be looked after and be the centre point of all future goverment plans this is the only way we can creat real wealth and be Great again,
    What can we make? most of us are educated,skillful people.

    Answers on a postcard.
    Christmas Greetings.

  • Comment number 47.

    I have run my own business for 18 years and I'm lucky enough thats it's recession proof. What infuriates me is the lack of business knowledge among our MP's, I have no influence over how my hard earned money is spent by this Government, and for the first time in thirty years I really don't want to give my vote to any political party. That probably scares me the most! I do however have faith in some of the exteremely high calibre business people we have in this country, my beleif is that they will be our saviour through this mess as unlike our MP's, we business people hate failure as we are measured by our success....

  • Comment number 48.

    Re 37

    I think you are right in many points, but can I suggest a different tack?

    Essentially I believe we need to have a cross party charter, a business plan for the UK.

    Clearly the only way for the UK and its citizens to prosper is to export more than we import: there is no other way. None. The business plan needs to state this, and then everything else will fall out from it. It needs to be cross party, so no party can change it at will, and against it, all governments will be judged.

    We need to end this 5 year cycle of government spin and have a rolling 20 year plan against which everything is measured. Once you write the (simple) business plan, everything becomes easy to plan and monitor. Without it, we are all just weeing in the wind...

    Businesses go under due to long and short term lack of focus on what they should be doing. Countries are no different.

  • Comment number 49.

    OK folks here's a couple of clues as to what the future holds..

    Old Clunking Fist and his chum Milliband the younger spend months frightening our children with climate change adverts and storm off to Copenhagen to save the planet. Whilst there the great man himself tells us that Grande Britania will be creating hundreds of thousands of green jobs.

    Back here it is noticed that one of the great man's chums a former energy minister called Malcolm Wicks has written a report about energy security that points out that the once Great Britain invests a lot, lot, lot less than its competitors in energy R&D and that it hasn't got much of an energy industry base anyway...

    Then, just as the Copenhagen binge starts the World Wildlife Fund issues a report comparing 27 countries in terms of their sales of clean tech products and services. Sadly the once Great Britain comes 20th well behind all those that matter.

    Even worse... just as the great one comes back some unhelpful outfit that looks at who is investing in what says that Norway is second in the league of European investors in clean tech.. Germany is first of course and the once Great Britain doesn't even make the top ten. Well the list was only made up of ten countries so perhaps that's why...

    Got the picture.....?

  • Comment number 50.

    Yes! I agree andcCould be the first question in the televised leaders' debate - What would you do and why?

    Followed by:

    What (if anything) is there common agreement on? What (if anything) will all three parties sign up to?

    All sounds a bit 'pie in the sky' for our politicians - I think that we shall see some negative electioneering coming our way very soon.

  • Comment number 51.

    12. At 2:25pm on 23 Dec 2009, Geoff wrote:

    "[Today's Tories] have no understanding of how economics works, just like the Tories of the 1930s."

    Care to substantiate that accusation Geoff? Perhaps based on some reasoned argument?

    You do realise that when governments borrow money, it has to be paid back, don't you? And that if they borrow money, and then spend it (where there is a net reduction in capital i.e. useful stuff or means of producing useful stuff) instead of investing it well (where there is a net increase in capital), they then have to sell something (taxpayers' labour) to repay it. Is buying equity in banks, which according to the IMF still have massive losses to recognise, a good investment? Is giving money to people to destroy old cars which still work a good investment?

    What I find amazing is that the mainstream media and government talk as though we can just sit and wait for the recovery to arrive, at which point we'll pay back the debts we're now incurring (currently running at about 350 pounds per person per month - just think of your current account dropping at that rate); in the meantime we just keep getting further into debt to try to keep unemployment from getting too high.

    That approach is fundamentally flawed. The reason we're where we are is that we're consuming more than we produce, and unless we change something dramatically, that's just going to continue. Recovery won't come until we start producing more than we consume, which means we need to start reorganising ourselves to consume less and/or produce more. That means letting consistently loss-making organisations and people be bankrupted (unless someone voluntarily agrees to support them financially). That will of course lead to short-term unemployment. But then the good organisations which produce more than they consume can expand and start employing people to do useful things.

    As it is, the failure to deal with the fact that we're consuming more than we produce by hiding it through borrowing against the UK's current AAA rating to maintain short-term cash flow is just going to lead to even more pain down the road.

    There's a refusal to acknowledge that massive losses have already occurred. Someone has to pay. I'd rather see the people who made the bad decisions, such as bank shareholders, pay. But the current approach is to try to hide the losses by growing the economy and sucking a proportion of that growth into paying off the last set of losses. It's not going to work, because continually consuming more than you produce is unsustainable, and as Evan Davis once elegantly stated, something which is unsustainable won't be sustained.

  • Comment number 52.

    15. At 2:35pm on 23 Dec 2009, NutitanicPassenger wrote:

    "Everyone should watch the Zeitgeist Addendum on you tube it gives a great deal of insight into the failures of the monetary system and why it's unlikely that this recession will be over any time soon."

    I'd caution people against Zeitgeist Addendum's take on debt money and fractional reserve banking. It's fundamentally misleading. I should know - I was misled by it for months, and had to read a lot and think very hard before I understood it.

    For example, it claims that borrowing money into existence is inherently inflationary. That would be true if the money was simply spent on consumption - there's more money and less useful stuff around. But if it is used to create something of greater value than the amount borrowed, then it's actually deflationary, since the ratio of useful stuff to money has now increased.

    There's also a claim that the existence of interest means that the amount of money has to increase exponentially in perpetuity. This is also incorrect, because it assumes that banks never spend any of the interest accumulated. In fact they spend all of it in the long run - they pay their employees, they buy goods and services, they pay dividends to their shareholders, and they pay when they write off bad loans.

    I now consider debt money with fractional reserve lending to be an extremely ingenious and good system, as long as it is run with integrity e.g. not underwriting the losses of private banks with taxpayers' money. The only argument which I think I can see against the system in its present form is that the total amount of "broad money"[*] (essentially bank deposits plus cash) available in the system appears to be limited to a multiple (albeit a large one) of the national debt, so growth in the private sector requires a corresponding growth of the public sector. This is because the central bank will generally only create "narrow money"[*] in exchange for government bonds, on the grounds that they are considered to be the only secure debts. I'd rather see less prescription about the collateral that central banks take in exchange for loans to banks, and more insistence on being required not to make losses, which is what is important. After all, I'm not convinced that the Bank of England won't lose money on all the QE-purchased gilts, which will mean that taxpayers will have to pay the difference.

    [*] I think this is appropriate terminology here, but it's a bit complicated because there are various measures of money supply - M0, M1, etc.

  • Comment number 53.

    29. At 5:42pm on 23 Dec 2009, oap_john wrote:

    "Please would you do a programme in which you tell us just how the bankers make their vast profits?

    Banks don't make anything, so where does it all come from?"

    A bank provides a service of introducing borrowers to lenders, and takes a cut of the interest paid by the borrower to the lender. It saves the borrowers and lenders the costly effort of having to find each other. A bank also provides an insurance service: if a borrower fails to repay, the bank still has to repay the lender from the shareholders' capital.

  • Comment number 54.

    Don't get me wrong though - a bank can massively increase its reported profits in the short term by making lots of bad loans to people who can't afford to repay them. By claiming that they're actually good loans, their balance sheet looks great, so they can pay massive bonuses and dividends all round. When the borrowers finally fail to make their repayments, the bank can make up the difference by running to the government and persuading the chancellor to give it lots of taxpayers' money.

  • Comment number 55.


    For every £1 debt repaid to the bank, £1 of the banks assets are destroyed. For every £1 paid into a savings account, £1 of liabilities against the bank is created.

    At current rates, some of us are nett debtors and some of us are nett savers, If we all (government,business and personal) maintain income and cut expenditure by say 8%, debtors will be able to cut debt by 8%, savers can increase savings by 8% and nett banking assets will shrink by 16%

    How long will it take for the assets to match the liabilities and the bank disappears into a puff of smoke ?

  • Comment number 56.

    # 53 striped-pad3

    It's much simpler than that.


    ‘The bank hath benefit on the interest on all monies which it creates out
    of nothing’
    The Bank of England’s Royal Charter, 1698.

    ‘The process by which banks create money is so simple that the mind
    is repelled. Where something so important is involved, a deeper mystery
    seems only decent...’
    John Kenneth Galbraith


  • Comment number 57.


    I had to check to see if it was April already. Will business pull the economy out of recovery?

    Well, first of all businesses need people spending money. Ultimately that means consumers spending money. But consumers don't have any money, they're up to their eyeballs in debt that can't be rolled over any more, so they're having to repay debt.

    Just for good measure businesses are soon to be taxed more just to employ people. So if any jobs were borderline they will be lost. And if a business was borderline needing an extra person chances are they'll get by without them for a while longer. So that means fewer jobs, which means less money in consumers' pockets, which means less consumer spending, which means less money for businesses.

    But if I might borrow Robert's comment and say "Let's be clear". For as long as we import more than we export we run a deficit. For as long as we have public sector borrowing as a matter of routine rather than exception we run a debt. Sooner or later the debt must be repaid, or the currency devalued (an implicit default) or an explicit default where we refuse to pay.

    The debt can't be repaid, it's too big. So we can look forward to public services being slashed while taxes rise until politicians realise this, followed by hyperinflation as they devalue the pound so it can be repaid.

  • Comment number 58.

    'Bob Diamond sells £5m of Barclays shares'

    http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6874707/Bob-Diamond-sells-5m-of-Barclays-shares.html

    What impeccable timing, just before the Xmas holiday period.

    Do not judge them by what they say...but what they do.The pumping is over, now comes the dumping.

    SSSSSSSSSSSSSSEEEEEEEEEEEEEEEEEEEEEEEEEELLLLLLLLLLLLLLLLLLLLLLLLLLLLL!!!!

  • Comment number 59.

    Robert,

    Can you explain why, when RBS is being propped up by the tax payer, they are offering free bus travel to the public in Aberdeen, Glasgow and Edinburgh on Hogmanay?

    Surely the prudent thing to do would be to pay down debt rather than offer a social service?

    www.rbs.co.uk/hogmanay

  • Comment number 60.

    17,500 business have gone bust in this reccession more than in the 1990's and 1980's. Interest rates are only low for people saving and homeowners credit card interest often above 25% are ridiculous and should be cut if we want increased spending and economic growth. The banks are making more money from the reccession than anyone. People are saving because they are scared they will loose there jobs,. Economist and the IMF and banks only have their own interest in mind not that of the people of this country. Personal debt has tripled under this government the economist are making a fortune by bankrupting everyone.

  • Comment number 61.

    #5 jon112uk

    You have got it right. I thought Osbourne's speech at the Tory conference was very irresponsible, and typically New Labour are now trying to prove that anything the Tories can do they can do better. The recently announced cuts in higher education are unnecessary and just plain crazy. If symbolic cuts must be made for political reasons, the totally unproductive investment in the Afghan war would be a much better target.

    The government must continue to borrow and spend until the private sector feels it has rebuilt its capital base sufficiently to take over and consumer confidence returns. The government could use the financing system used during the two World wars. The money can be borrowed from the Bank of England via QE at effectively 0% interest rate or from the private sector at a very low rate.

    While there is still plenty of slack in the system, inflation should remain low and there should be no problem with Sterling. Once the economy recovers, the deficit will automatically decrease, and that will be the time to make any necessary adjustments to the current deficit. The accumulated deficit will not need to be reduced immediately, if ever.


  • Comment number 62.

    There's no chance of any kind of economic recovery until the banks stop robbing businesses and individuals with crazy rates of interest and rip-off fees and instead start lending - responsibly - at reasonable rates linked to base rate instead of profiteering. Caledonian Comment

  • Comment number 63.

    Human nature has clicked in. And this recession will last for years now, With 'experts' warning about debt and firms paying off loans what do we all expect? It will get better soon?
    MY prediction for next year. I still wont get work, so will more people as jobs will be lost.
    The BBC will be attacked, just because of the election
    Private Eye will be attacked.....
    And people will moan about the amount of shops closing down. But not about the Poundshops opening up
    And the Spanish banks will not have any more cash and close 75% of the branches "to save money".

    Unhappy New Year to all

  • Comment number 64.

    ...to sum it all up then, another wave of reality is about to hit. Will it be the last?

  • Comment number 65.

    How does retail spending help the economy? All it seems to do is encourage more imports and inflate retail rents,iIt doesn't seem to me to add anything productive to the economy. Surely the only long-term answer to the UK economy is to encourage more production for internal or external consumption? We can't exist as a nation of consumers and cafe goers?

  • Comment number 66.

    how long until the recession becomes a depression ??? cant be far away now

  • Comment number 67.

    52. At 01:38am on 24 Dec 2009, striped-pad3 wrote:

    'For example, it claims that borrowing money into existence is inherently inflationary. That would be true if the money was simply spent on consumption - there's more money and less useful stuff around. But if it is used to create something of greater value than the amount borrowed, then it's actually deflationary, since the ratio of useful stuff to money has now increased.'



    Did you notice the upsurge in asset prices during the boom, especially during the peak years when the banks were lending to everyone and their dog? When house prices were going crazy. That's inflation.

    Lending money into existance is inhertinately inflationary. If you're increasing the amount of money in circulation, you're creating inflation.

    Or is it ok for me to start up that money printing machine I've got under my bed again as long as I only promise to spend the cash it makes on really useful things?

  • Comment number 68.

    I have not bothered with this blog for ages as it all seems so pointless. We have all been stuffed, especially those of us who knew the meaning of prudence, to such an extent that it is difficult to convey any form of hope for our children, or for the future of this country. I am not sure whether I will be bothering to vote next year after the continuing revelations regarding the expences scandal and have become bored with the whole affair. What happened to the likes of Alexander Curzon and Guy Croft; - did they become bored as well, or did they suffer the fate of Dr Kelly?

  • Comment number 69.

    67. At 12:32pm on 24 Dec 2009, warwick wrote:

    "Did you notice the upsurge in asset prices during the boom, especially during the peak years when the banks were lending to everyone and their dog? When house prices were going crazy. That's inflation."

    Yes, I did notice. How could you not? But that's because the money that was created was used to consume, instead of to create something that didn't already exist. It just bought something that was already there - houses. If the house was built to order, you could argue that there was some production as a direct result of the consumption, but with house prices at the level they were, it's extremely implausible to say that the value of the house built was worth the amount paid. So you're right - that period was insanely inflationary.

    "Lending money into existance is inhertinately inflationary. If you're increasing the amount of money in circulation, you're creating inflation."

    Not if the money is used to create something that didn't exist before. For example, if a farmer doesn't have his own combine harvester, he can borrow money to hire someone to harvest his crops. In that case, he consumes by buying a service, but there is now more real wealth in the world - the harvested grain. The price of grain will drop as a result, so that's deflation.

    "Or is it ok for me to start up that money printing machine I've got under my bed again as long as I only promise to spend the cash it makes on really useful things?"

    First, printing your own money is inherently inflationary, because it doesn't get borrowed into existence, with the understanding that it will be destroyed later when the debt is repaid. Instead it just dilutes the value of existing money. It's just as if the Bank of England were to say that it was going to keep gilts in perpetuity, instead of requiring the government to repay them. (I think I saw that the Bank of Japan was doing this). Then it is real money printing, like Weimar.

    But let's assume instead that the extra money cranked out comes from a bank, in exchange for a promise to repay it (with interest). Then it's not simply a matter of whether you spend it on useful things; it's whether the direct result of your consumption is even greater production e.g. R&D or hiring people who can help you to produce something useful that you couldn't do by yourself (deflationary); or whether the amount of useful stuff produced as a result of your consumption is less than that consumed e.g. going on holiday (inflationary).

  • Comment number 70.

    Having lived through recessions since the 1930's it is going exactly the way it always goes, provided the incumbent government keeps its nerve. The only difference this time is that the message to the banks is so contradictory that it no wonder they dont know if they are coming or going. They are told on the one hand that they have to build their Tier One Capital Ratio level while at the same time lend out money at 2007/08 levels (2007/08 was a time when a loan would have been given to a monkey to hire more organ grinders).

    Analysts talk about the end of the recession as if it can be measured purely in terms of growth in GDP. One day we are in the cart and the next day we are not. Typical economic nonsense. The technical measurement is the easy (and largely meaningless) bit and has very little to do with the real state of our economy of de-stocking and restocking, unemployment and re-employment and all the other factors that go to make up the business cycle.

    It has little to do with the public sector. other than the fact that the ratio of percentage of GDP spent on that sector seems to be way out of kilter historically. High 30s low 40s it should be rather than what I assume is currently pushing 50%?

    I think the first sign of a real turnaround will come with a dramatic increase in M&A activity as the firms that will win in the next decade look to grow by acquisition rather than organically, which you can't do if the banks wont lend to you. There is said to be a wall of money out there and it will be interesting to see if is there for acquisitions. ac

  • Comment number 71.

    56. At 02:39am on 24 Dec 2009, BobRocket wrote:

    "‘The bank hath benefit on the interest on all monies which it creates out
    of nothing’
    The Bank of England’s Royal Charter, 1698."

    Someone was asking about the retail banks, rather than central banks, so that's what I was addressing.

    A central bank charging interest is somewhat harder to justify. As you say, it doesn't need to borrow in order to lend - it just creates the money, so it doesn't provide an introduction service. And it typically doesn't take any credit risk, in that it requires collateral (gilts) in exchange for lending, so if the borrower defaults, it simply sells the collateral to make up the difference.

    One important reason for a central bank charging interest is that it reduces the competitive advantage that governments and banks have over the rest of the economy. If the Bank of England were to lend the government money at zero interest, it would effectively be a subsidy to the government. It could use that to take over lots of functions which could be performed more efficiently in the private sector, where borrowing requires interest payments. As it is, the special role of government in its ability to tax allows it to borrow cheaply, which allows it to take over activities which the private sector could do more efficiently (economically speaking).

  • Comment number 72.

    70. At 2:27pm on 24 Dec 2009, majorroadaheadagain2 wrote:

    "I think the first sign of a real turnaround will come with a dramatic increase in M&A activity"

    I don't have as much experience as you, but I was led to believe that M&A activity typically increases massively just _before_ a recession. Companies borrow to grow because the interest rates are so low - it's much easier than doing real work.

    It certainly seemed to be the case before the dot com crash e.g. MCI-WorldCom, AOL-Time Warner, Price Waterhouse Coopers, etc. There was a lot of M&A activity leading up to 2008 too. I don't think there was much around 2002-3.

    I think that the first sign of a turnaround will be a dramatic reduction in indebtedness, via repayment or default, and a massive reduction in activities which consume much more wealth than they create. That will create conditions in which borrowing to invest can start again. I don't think it's going to be pretty.

  • Comment number 73.

    66. At 12:29pm on 24 Dec 2009, AqualungCumbria wrote:

    "how long until the recession becomes a depression ??? cant be far away now"

    I think it's already started. I don't know where the reports of lots of pre-Christmas shopping have come from, but Reading town centre's been pretty quiet in recent weeks. Yesterday was the first day I've noticed my local town centre being busier than normal.

    There are lots of Christmas trees still lying around at the local garden centres - I think people aren't buying them for 45 pounds each.

  • Comment number 74.

    Striped-pad3

    I agree with what you have said, except that this time it looks as if interest rates are going to stay low for several years to come as we come out of the recession. No sign of inflation, and a total change of attitude from risk is good to total risk aversion. Yet the usual suspects who can get their hands on money and know that some quality assets are dirt cheap on a historic basis will be getting itchy feet. That, allied with the counter of your excellent analysis in your last para will make for bewildering times. But those firms you categorise as consuming much more wealth than they create will, and should alwsys, go under, recession or not.

    The likes of Branson and Tesco are already sniffing around the banks and hoping to pick up some bargains, and people like Philip Green will not need too much reminding of the fact that M&S is not far north of the price he was offering for the company six or seven years ago. But this time it will be wholly based on quality judgements, which, with a lot of shares at 1999 levels, wont need a genius to lead the picking.

  • Comment number 75.

    Retailing is quite a large employer with reasonable tax revenues but otherwise generally does little for the UK regional and national economy as most of the large retailers have massive foreign investment/ channel much of their 'profits' overseas.

    Local shops are different they are generally good for the local economy unless owned by non doms/'visitors' who then - send much of their 'profits' overseas.

    In my locality all of the shops look fairly quiet and less busy even than last year.

    The government have been lying in making us think that retailing is something good for the economy overall - the shops are full of imported goods and the sale of which has killed off millions of British manufacturing and related jobs, for British workers. In reality the UK is just at the low profit end of the supply chain where profit margins have been good in recent years due easy access/availability of personal credit but the profit margins are now slimmer

    We have to look at UK retailing as 'something marvellous' as we have very little else.

    Another issue is the rise in personal savings that some economic pundits make a big issue of (incorrectly in my view as not an accurate reflection of the bulk of the working population) - this is largely in respect of about 25% or so of the population who are actually better off during the last 12 months as fortunate to have secure jobs and may well fairly large mortgages and the decrease in interest rates as meant that they can save relatively large amounts as their mortgage payments have fallen dramatically.

    Its all 'spin' to make us think everything is OK or even improving - Can you believe the spin?

    The Japanese laugh when they hear about foreigners ranting on about the current Japanese domestic debt levels as generally the Japanese all pull together and are confident about making things that the rest of the world want to buy in large quantities.

    In other words sovereign debt is not so serious if the rest of a nation's economy, its structure and the socio-economic political structure of a country is strong - its not all about boring, elementary statistical commentary for 'over- paid', 'over-estimated', 'over-heard' city analysts and economic pundits churning out the same old GDP funny money and other nonsense figures.

    Its the big picture that matters.

  • Comment number 76.

    Reading all of these comments and Robert's blog it all looks pretty dire...and it has to be said that the macroeconomics of 2007-9 were difficult....but looking at the people I know ....it is a mixed picture.

    Everyone who is doing ok is keeping schtum....there is a sensitivity now that was missing in the boom years and that is not a bad thing.

    So we all know the bad news of UK Doomland....but what is happening in Schtumland?

    NEWS FROM SCHTUMLAND:
    Remembering that the real estate crash was part of the recent sorry story, the property and rental markets have actually bounced back in 2009.
    There are new consumer mortgages out there and at reasonable rates.
    And the new buy-to-letters are back, having snapped up bargains offering really great returns.And that is not bad news, it brings affordable rental housing to many, many people.
    But millions have benefitted from cheaper mortgages, millions have curbed their appetite for credit cards,and millions are sitting tight waiting to move upwards, downwards or whatever in the housing market.
    Millions have done well this year on the stock market,compared to last year.
    The prospect of UK joining the Euro, is looking a lot nearer than ever.
    CAR SCRAPPAGE:I bought a new car this year for the first time in 6 years and it was a blooming bargain....last year it would have cost 50% more....and because of that I could buy it rather than take out a loan on it...OK admittrdly there was no loan to be had...but because I do not have HP I can budget better and spend more this year than last.
    NEW CARS WERE ACTUALLY CHEAPER THAN SECONDHAND AT ONE POINT!

    SANTA IS A BUSY MAN THIS YEAR!
    My wife has been shopping like mad....maybe a bit too much but not like the skint affair of last year when I really thought it was curtains.
    For many the bank shares crash was a disaster, but for others, the internet shares crash of the millennium was worse and we resolved not to be so exposed to the stock market.
    With his redundancy money,my brother has set up a new business and it is going well.One sister has a new job in her old company and the other has managed to go part-time and study because of the fall in her mortgage.
    People have had babies after waiting for a couple of years , people are getting married, divorced , forming new careers.
    Two new restaurants in my street are doing really well.
    An art shop is booming and little bookshops are quietly looking forward to more business now Borders have gone.
    The old Woolworths are now occupied by a new business.
    A new play centre has opened and it is mobbed.
    The Vets are expanding into fancy new premises.
    The good thing about next year is that it is a new year,and no two years are ever the same....sure it has been tough, but UK is still a dynamic exciting place to be......
    There I was wandering around that mall at midnight last night looking at all the food that was being served,the new cars all waiting for parking spaces, queues for jewellery and gadgets,and people all dressed up and looking good.... in one of the worst and poorest areas in the UK..... and it was busy, safe and cheery......I did not see a single person buying a sackcloth or suicide stationery.
    I have had loads of Christmas cards this year and there is not a single gloomy message in any of them ...."WE HAVE SURVIVED!" they announce!
    I have a feeling that life is going to turn out a lot better than most of the bloggers think it will!
    There is a very good prospect of a bounce in 2010 as there has to be one!
    Life goes on!
    Look at the pound....it has actually improved over the year from $1.30 to$1.60 and from a 99p Euro to an 89p Euro....which for all the doom about our creditworthiness actually says quite a lot about UK plc bouncing back from the troughs of last year.
    And in the middle of this downturn we have such fantastically low interest rates, which has been an act of pure inspiration and yet nobody is giving credit to this government for keeping us out of the utter disaster that would have been inflicted on the country by a different regime
    ....WE WILL NOT MISS THEM UNTIL THEY HAVE GONE.
    The BoE managed to put £200 billion into the economy with NO INFLATION AT ALL....which is a marvellous achievement.
    And let's stop comparing ourselves to the Indians and the Chinese and the Germans.The first two are desperate to be like us,and Germany's strength comes from surviving a fifteen year slump we avoided.....15 years ago they earned twice what we do and now we earn more.
    We are not only post-industrial, we are one of the first countries to go post-financial services-reliant.
    We are the new Post-Crunchies.
    Of course the crunch was bad, the boom before it was amazing.....and so will the next one be ....
    Remember reading about the End of History in 1992?
    Remember reading about the end to property booms in 1991?
    Everything goes round and round and round.

    Merry Xmas from Schtumland!

  • Comment number 77.

    I am a Director of a commercial finance company, we pretty much deal with every lender in the market.In the past 10 days we have submitted 150 unsecured loan enquiries to varying lenders 1 has been accepted from this.This indicates banks are not lending.Commercial lending represents 95% of our business model,I recently wrote to 10 Downing street regarding the reason why banks are not lending they referred me to the treasury.I wrote to the treasury and have had a response in December which beggars belief, it basically says that th government had taken a commercial decision to lend the RBS and other banks funding however it had no powers to say how the banks should use the money and the government has been working with the banks to advise.
    Put simply the tax payers money has been given away...... with no recoarse.

  • Comment number 78.

    #77 Aaron

    Are you trying to arrange loans to businesses?
    If you are then without government backing banks won't be interested.

    If you are trying to arrange loans for big business then you might get a nibble since the possible rewards could be worth the risk.

    I reckon your market has been reduced to government backed gambling.

  • Comment number 79.

    16 Kaybraes

    You exhibit a fundamental lack of understanding of the lie that is banking.

    ‘Why would any self respecting lender lend money at the present zilch interest rates to businesses that are probably going to fail anyway ?’

    They MAKE the money up from thin air For goodness sakes!!

    See

    • 15. At 2:35pm on 23 Dec 2009, NutitanicPassenger wrote:
    Everyone should watch the Zeitgeist Addendum on you tube it gives a great deal of insight into the failures of the monetary system and why it's unlikely that this recession will be over any time soon.


    For details.....

  • Comment number 80.

    Onward-ho

    An interesting kaleidoscope of how Britain can look, And in my view it is good to be as positive as possible where the doom-mongers paint everything black.

    I am not a doom-monger by nature but for all the rhetoric the Government put out about how things are I can't help remembering that one million children in this country are still living in poverty. After twelve years of a Labour Government. And unemployment among those of the age to which my nine grandchildren are fast approaching is at an appalling level. When someone in the age 18-24 leaves education and can't get a job at all, let alone one to which they thought their education was leading, we are almost certainly looking at young people some of whom may never get the work bug or ethic.

    There, and I said I wasn't a doom monger. And it's Christmas - the Germans have already exchanged their presents as they do on Christmas Eve. Funny old world.

  • Comment number 81.

    People in places like Chad and Sudan live in poverty!

  • Comment number 82.

    NOSIDA

    I agree entirely. But people who live in Chad and Sudan live in busted and corrupt countries where people live in total and abject misery. For the whole of their lives, with no hope except for the crusts that wealthy countries try to give them but which aid is usually circumvented by their corrupt leaders into their own pockets.

    It is worse than what we would describe as poverty, yet it is just as bad in my view to live in a relatively wealthy country like this, with millions of people who profess to be caring and liberal in their attitudes (and are) and yet by the official world definition of poverty one million of our children live in it. While our former Labour PM gets 160K for an evening engagement. More in a few hours than Frank Lampard earns in a week.... Or almost the same as the current PM gets in a year. Or a pensioner gets in thirty years.

    I am sounding like a socialist, which I am not, but there are so-called socialists out there who are letting it happen. I am sorry if it is a bit sad on Christmas Eve but it bothers me.

  • Comment number 83.

    > So what will be the source of the UK's economic recovery?

    In rip-off Britain, the business routine was to rip-off
    customers to the maximum extent possible. Greed and
    inefficiency ruled.

    The hard-reset button has been pressed. Efficient businesses that
    respond to real economics by charging realistic prices
    will prosper, while the wasteful, rip-off merchants
    and parasitical middlemen (bankers in particular) go broke.

    We're on the right track to a sustainable recovery, with far
    less "socially useless" services and more real work.

  • Comment number 84.

    What a daft question,only businees can.
    Only people like Gordon think that pouring money into the public sector and beating up the private business sector will help.
    Add NI increases to business costs and dish out fat bonuses to the civil service!
    Create as many regulations that you can think of to make us less competitive, Ms Harman and Mr Balls!
    We are truely in the madhouse.


  • Comment number 85.

    Merry Christmas Mr Brown,

    I hope that next year you will be retired like me, and we can enjoy a drink together in our local working men's club.

  • Comment number 86.

    Striped-pad3,

    Wote,

    ‘There's also a claim that the existence of interest means that the amount of money has to increase exponentially in perpetuity. This is also incorrect, because it assumes that banks never spend any of the interest accumulated. In fact they spend all of it in the long run - they pay their employees, they buy goods and services, they pay dividends to their shareholders, and they pay when they write off bad loans.

    Sp3, this is incorrect. When debt is paid off or defaulted on, the initial capital is destroyed. And herein lies the fundamental problem with the fractional reserve banking system.

  • Comment number 87.

    69. striped-pad3.

    Well since most of the money lent into existance was being used to buy things that already existed, housing stock, and in an economy that has smashed its manufacturing base and replied heavy on 'service industries' then I fail to see how FRB can be anything but inflationary.

    And looking at how much the pound has devalued in the past century whislt the money supply has grown, I'd say pretty much all of that extra money being created out of thin air isn't being used to create much wealth at all, just redistubute it.

    You can give me another text book answer if you like about the supposed benifits of a Fractional Resevre System that by its very nature is fraudulent and deceptive, but I'm with the likes of Murray Rothbard on this and the Austrian School of Economics so your arguements don't wash.

  • Comment number 88.

    How about taking back EVERY job lost to off-shoring in the service and manufacturing sectors? Perhaps one or two muillion jobs, ten of billions in salary and billion in indrect taxes and more from the cascading benefit to the local economy and more taxes.

  • Comment number 89.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 90.

    88. At 4:57pm on 26 Dec 2009, puzzling wrote:
    How about taking back EVERY job lost to off-shoring in the service and manufacturing sectors? Perhaps one or two muillion jobs, ten of billions in salary and billion in indrect taxes and more from the cascading benefit to the local economy and more taxes.

    -----------
    Sounds good, but as Patricia Hewitt, when she was at the then DTI, around 2000, actually had a grant for some £500 advertised on the DTI website to encourage outsourcing, I suspect there is some benefit to the Government such that they prefer it to reducing the number of unemployed.

  • Comment number 91.

    I share your take, with one caveat. The banks are not being public-spirited in showing weaker businesses forbearance. The security underlying those loans has suffered devaluation which, in turn, hits the banks' balance sheets. The elephant in the room for the banks is that they have over £1 trillion loan-assets to be refinanced by them over the next 5 years as the public guarantor is withdrawn on their short-term finance. If they write-off loans they need more capital. Enforced sales could hit them harder in their own liquidity trap. Business understands this. They are working out ways to do without the banks for the next 5-10 years.

    The banks' auditors will have a say in when they pull the plug on vulnerabe customers who might be looking for third-time rollovers on their loans in 2010.

  • Comment number 92.

    One in Ten (*)
    I am the one in ten / A number on a list / I am the one in ten / Even though I don't exist / Nobody Knows me / Even though I'm always there ...
    (*)=UB40

    Many Rivers To Cross (**)
    (**)=J.Cliff

  • Comment number 93.

    76. At 4:22pm on 24 Dec 2009, onward-ho wrote:

    Reading all of these comments and Robert's blog it all looks pretty dire...and it has to be said that the macroeconomics of 2007-9 were difficult....but looking at the people I know ....it is a mixed picture.

    Everyone who is doing ok is keeping schtum....there is a sensitivity now that was missing in the boom years and that is not a bad thing.

    So we all know the bad news of UK Doomland....but what is happening in Schtumland?

    NEWS FROM SCHTUMLAND:

    >>>>>>>>>>>>>>>>>>>

    The question for those in Sctumland like the 'millionaire EU expense sleaze Kinnockios', MP's, non doms and the like - the question is for this favoured 20-25% sector of the population who have actually prospered during the last 24 months - Is who are they and who do/will they vote for (assuming they are legally entitled to vote in ageneral election)?

    Will they vote for 'Sctumdog Trillionaire' or are we going to get proper political change next year?

  • Comment number 94.

    Straight To The Head Pt3 (Roots)
    Time get so hard that
    Rat A Cut Bottle (*)
    It's a situation that
    The poor men can't tackle
    Time get so hard
    That man can't get work
    It's a situation that
    The poor men can't handle

    (*)=Lion Youth

  • Comment number 95.

    The Conservatives will in all probability introduce more severe cuts but this does not necessarily mean dire consequences particularly if they can get employers and employees to opt for pay cuts rather than dismissals.

    In that situation industry and commerce can remain competitive, workers keep their skills honed, production can be ramped up when needed, government benefit payments are not increased and expenditure generally is reduced.Keeping people in employment has many advantages, one of which is that it has the support of the unions.

    As a nation we have been overpaid and have been overspending for years and we need to rein them both in.We need to accept that in future we will have to live more frugally and have a more responsible attitude towards our personal finances.

    This is likely to be more acceptable when the public see government ministers and business leaders taking genuine big cuts in pay for the sake of the nation.

    The value of our money is determined by the relationship between prices and our income.It is possible to be on a low income and be getting better value than if you were on a higher income.

  • Comment number 96.

    #95 newshounduk

    The steelworkers at Redcar are having their last Christmas at work.
    Just how competitive do they have to get to stay at work?

    Their competition is on the Indian sub continent.

    Their raw materials is the same as the Indians. Iron ore from Brazil, coal from the same place. So the choice for the Redcar steel worker is bleak. Dole or pittance wages. Pittance wages go a lot further if the rest of the country is on pittance wages. Perhaps they should go to India. No safety regulations. Lower wages. Oh and no developed economy - no bankers.

    The only way for the UK to remain competitive is to shrug off the biggest drain on the economy. Bankers.

    Will the Blue party be suggesting this?

    There is another way though. Spread banking services everywhere. Start off with the call centres. Then back office. Then as those economies get the banking bug they will become developed. Just like Spain did post 1975.

    What will be left of the UK economy though?

    I'm thinking real hard to conjure something up that will survive.

  • Comment number 97.

    Redcar has been closed down because its owner can build a more modern blast furnace in Gujarat and not have to buy carbon credits into the bargain.

    This is just a portion of the problem: British manufacturing industry has been sold down the river by the regulatory bureaucracy of G.Brown Esq. that has loaded additional and unnecessary cost onto marginally profitable businesses just able to keep their head above water. This load is now strangling existing business and discouraging the creation of new businesses.

    Investment in new business is not just flat; it is probably non-existent except for those onto a dead-cert and I very much doubt if there are many of those. Let's face it: would you voluntarily wish to start a new business right now? Uncertain prospects, flat demand with horrendous public sector cuts pending?

    The simple truth is that the current government has bet the farm on a sharp V-shaped recession and it hasn't happened. The reason why it did not happen is that the bust was way too big for even the massed ranks of the taxpayer to absorb. All of our wealth has been swallowed by the debt hole created by the banks and this hole is now very likely to pull the social-democratic model of society and government down with it. This is the legacy of G.Brown Esq.: the end of social-democracy in Britain.

    I will shed no tears for what I have always viewed as fantasy. However, the moral and intellectual adjustment is going to have to be horrendous. The big state is finished and must be replaced with something wholly smaller and far more effective. Is the country up to it? Or are we going to be left struggling for another generation as the self-styled middle classes slowly adjust to the fact that to be middle class requires that you have cash and not debt as your principle currency.

    The eventual salvation of our country is going to have to come from the fields, factories and workshops as we find work in making things that other people will buy, feed our population ourselves and be sufficiently flexible in our attitudes to deliver what our customers require. To my mind the island which is Taiwan is a good model. We would be foolish to ignore it.

    However, having said that this will mean that the UK faces up to the harsh reality that should have been faced in 1945. We are not a first rank country any more. The empire has gone and the banks have now wrecked whatever was left over. Our first priority now has to be to feed the people and find them all value-adding work. To fail to do so and to continue to pursue fantasies will only lead to yet further catastrophes.

    There is now way out of this recession and the coming slump without change: this change will be uncomfortable and hurtful. Please God it will not become tragic but as usual I suggest we all plan for the worst.

  • Comment number 98.

    The post-Christmas sales will save the economy ... judging by the intensive reporting of these sales from the BBC. Pathetic!
    http://news.bbc.co.uk/1/hi/business/8431514.stm

  • Comment number 99.

    Does macro or any economics actually matter anymore?

    The sales are full of tat manufactured abroad.
    Does it actually matter where the tat is made?
    Perhaps all that matters is that we sell the tat to each other, ourselves.
    When will the multinational purveyors of tat move in to finish us off?

    Perhaps money is the ultimate in tat?

  • Comment number 100.

    #98

    Be in no doubt that Christmas spending will raise the economy into `growth' territory. This will be trumpeted far and wide as a success for government policies. An election in March will then be forthcoming. We will then slip back into recession from February onwards.

 

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