A tale of two economies
Can Britain and Germany become more alike? That's the strange but important question that took me to Germany this week. You can see the results on the Ten O'Clock News tonight.
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As we know, the British - like the Americans - have been world-beating consumers for the past couple of decades. We consumed. And we borrowed.
Despite the folklore, the one didn't fund the other - most of the rise in borrowing over the past decade went into the housing market, not new shoes. But there's no argument that in the boom years, household saving collapsed.
British households saved only around 2% of their income in 2007 and 2008, and the numbers for the US are even worse (though our numbers are flattered by the fact that we measure them slightly differently). Exports weren't exactly a strong suit, either. We had a 3% of GDP current account deficit in 2007 - the US figure was 5.3%.
Coming out of this recession, we know that is something that needs to change. With consumers likely to be saving more and spending less, export-led growth is our main hope of a healthy rate of economic growth, especially if we are going to start reducing government borrowing.
The fall in the pound is supposed to help British firms do better abroad. At Wells & Young's brewery in Bedford, they sell 90% of their beer in the UK, but it's the export market that's been taking off in the past few years.
Their big new markets are Russia, where they sell good old-fashioned British Ale, and the US, where they sell more controversial concoctions like Chocolate Stout and Banana Bread Beer. (Well, I said they were controversial.)
But if British firms are going to export more, they're going to need more foreign demand - even from countries that are more used to exporting to us.
It may be too much to ask Germans to buy British beer. But Germany has been the mirror image of the UK the past few years, only more so. It had a whopping 8% of GDP current account surplus in 2007, and its household savings rate was nearly 11% at the peak of the global boom.
The saving and the exporting are related. If you don't have much of a home consumer market (and your labour market makes it costly to employ workers, especially unskilled workers), you will tend to focus on capital-intensive, export-oriented industries, competing on the basis of a relatively small, highly productive workforce.
This has long been a point of pride. As the German producer helping me with the piece, Kristina Block, told me, Germany likes to call itself the "exportweltmeister".
But it's not much fun being the exporting world champion during the first truly global recession since World War II.
I could see the impact at Hawe Hydraulik, a classic "mittelstand" company in Munich. Founded in 1949 and still family owned, it exports 60% of the hydraulic pumps it makes.
As a result, it's been hammered by the crisis. They started cutting hours back in March and now all of its workers are working a three-day week.
I spoke to Karl Haeusgen, grandson of one of the founders of the company. He told me that orders had fallen over 40% since the start of the year. In contrast to past downturns, demand in every single market was down (with the possible exception of China), so they couldn't offset losses in one region with gains in another.
More than 80% of Germany's economic growth between 2001 and 2007 was due to exports - and of the remaining 20% was largely investment in export-related industries. With the collapse in foreign demand, the IMF now forecasts the German economy will shrink by 6.2% this year - rather worse than the 4.2% fall expected in the UK.
I got to interview Karl-Theodor Freiherr zu Guttenberg, Germany's economy minister. I had to wait two hours for him in a rather unexciting VIP lounge at Munich Airport, but I think it was worth it.
He's tipped as a rising star in German politics and he is a fervent supporter of the market. Recently, he came out against his own government's decision to prop up the loss-making car-maker, Opel.
I asked him whether Germany needed to become a little more like the UK - more consumer-focused, and less vulnerable to the ups and downs of global demand. He wasn't very keen, to put it mildly. Hee said it would be "an absolute mistake" to move away from Germany's traditions.
Perhaps, I said, he would like Britain to stick to our tradition of buying German goods and running up big trade deficits? "With a big smile on my face, I would say yes", replied the minister.
I wasn't surprised by his reaction. Very few people inside Germany will come out against the great German exporting model. I spoke to one, the respected economist Hans-Werner Sinn, a professor at the University of Munich. But even he was fairly reserved on the subject. You can see why. Until this year, the model had served Germans well (at least if they were not one of the country's many unemployed unskilled workers).
Outside Germany, though, it's another matter. As I've said before - and that 8% of GDP current account surplus figure for 2007 makes clear - if you are worried about a return of large global imbalances coming out of this recession, it's not just China and its trade surpluses you have to worry about. Germany's addiction to exports is a problem as well.
Of course, it doesn't have to be Germany we export more to. But Britain and America are going to have to export more and spend less coming out of this crisis.
Yet, on the basis of my trip, I don't think there's much chance of Germany becoming more like Britain or America, despite the big hit they have taken in the past year.
That's a problem. Because one thing we do know - we can't all export our way out of recession. In effect, that's what the world's economies tried to do in the 1930s. Someone, somewhere, has to buy.
I'm 
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Some may say the the lack of individual savings was the right move as it minimized the losses individuals suffered in the financial system schemes of the recent past. With individuals accounts suffering losses of 20 - 30% on average, the more saved would have been the more lost. It is interesting that most exporters see a worldwide downturn in demand yet everyone continues to state that somehow this is not an impact on China, the economy with a large reliance on export. At least those who believe the Chinese. There is the conflict between the individual who had their savings stolen by a conspiracy of government and financial firms, and the government and financial firms who want everything to return as before. The "turn the other cheek" approach of government and finance, while the individual citizen is reflecting on the meaning of Jesus overturning the tables of the money lenders in the temple. You can run all your numbers, produce all your charts, pontificate about global economics and market forces all you want, but until some sense of faith is restored in both governments and financial institutions things will not advance as forecast by the dislocated academics and politicians. As Lenin onces said: "When the train of history goes around the bend, all the intellecutals fall off." The powerful are finding that their power comes from the powerless and they simply do not know how to communicate with their subjects and they are certainly unwilling to admit they stand on pillars of illusion. Western governments resemble 1900 China more than some future model we should all be interested in following..
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Stephanie wrote
"most of the rise in borrowing over the past decade went into the housing market"
Oh dear, Oh dear, Oh dear,
It has vanished then into asset price inflatuion NOT into building productive capacity! We have thus seen nothing for all of our borrowing. If only we had bought something we could use or make something with!
I remember the German Housing market: Second-hand houses cost less than new ones as they are, how do I put it, "Second-Hand"!
The Germans have not dug a huge hole and filled it with debt then... Like we did.
We have stocked up a huge level of latent and actual inflation and currency depreciation which is disastrous. The money men (The Banks that we 'love' so much!) have siphoned off our houses to no advantage to us, indeed to our huge disadvantage!
Why did we let this happen?
Why did you as a representative of an economical commentator not complain about this at the time?
It was, and still is, the hight of idiocy to see increasing house prices as a sign of something good - it is not, it is a terrible apocalyptic sign of national decline, and banking collapse!
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Can Germnay and Britain become more alike? This is a key question.
Perhaps Germany would be a bettter place if the inhabitants splashed out a bit more in the shops and perhaps Britain would be a better place if we relied a little less heavily on credit.
However the real shocker in this piece Stephanie is the predicted GDP hit on Germany this year - 6.2% in one year.....this is dangerously close to depression territory.
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The CZ and DE are alike in this - to weather the storm, companies and individuals are getting into debt. Debt like what the US and UK has. They have the unhealthy and inaccurate belief that in the foreseeable future there will be some 'recovery'... When debt levels rise to UK levels, they, we, will be in the same situation as the UK and US....
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"Coming out of this recession, we know that is something that needs to change. With consumers likely to be saving more and spending less, export-led growth is our main hope of a healthy rate of economic growth, especially if we are going to start reducing government borrowing."
Sounds good (like perpetual motion machines/free energy), but how's this going to happen given we're nearly 80% Service Sector and an ever less able to plan ahead population?
"I got to interview Karl-Theodor Freiherr zu Guttenberg, Germany's economy minister.....I asked him whether Germany needed to become a little more like the UK - more consumer-focused, and less vulnerable to the ups and downs of global demand. He wasn't very keen, to put it mildly. Hee said it would be "an absolute mistake" to move away from Germany's traditions."
I predict he may keep you waiting even longer next time Stephanie.
I'm not getting through... am I? I do mean well you know.
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If Germany is the export champion then the UK has been the import champion. Our trade deficit is legendary. That apart we have of course allowed the financial services sector to make money out of selling our companies off to overseas buyers and there has been little real investment in new companies capable of becoming export meisters in their own right. It's been the economic equivalent of the slow train crash.
There's little doubt that the Govt (especially the Treasury) and the City have let the UK down badly in the last three decades or so and certainly since the big bang... In fact you can track the growth of the trade deficit since the big bang and watch it get bigger and bigger.. At the time of the big bang it was modest but by 1997 it was £11bn.... Now it's probably incalcuable.
What we can be sure of is that when the economic recovery starts Germany will still have most if not all of its industry intact. We'll have a bunch of badly managed and crippled banks.
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This may or may not be relevant to the current topic but..
I just read the article 'Deflation Woes Return To Japan' and I stll can't understand why deflation is such a terrible thing. The only reason given is that in times of decreasing prices consumers put off making purchases in the expectation that they will be able to buy things cheaper in the future. I don't understand this, if you have to replace a broken fridge or washing machine or TV or whatever you have no control over what the price will be at the time you have to replace it. If prices are going up you buy now because you don't want to pay more in a months time. If prices are going down you buy now because it's 'cheap'. Surely in a deflationary economy even if wages are frozen you can still buy more stuff becuse prices are going down. Is it then a bad thing purely because Japanese companies can't make any money selling in their home market?
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#7 citygambler
Deflation is bad because it wipes out people's wealth eg houses, cars, earnings stream. It also prevents firms from expanding, and bearing in mind the ongoing contraction of firms and state corporations we badly need some expansion....otherwise how else will unemployment be reversed?
The economic situation is deteriorating badly again I fear.....
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I do find this almost infinitely depressing. "Someone, somewhere, has to buy". Do we *really* want to go back to buying things we don't need with money we haven't got? To me that is what much of our "growth" before this crunch was based on. It would also explain why unsecured credit had grown to an alarming level quite some time ago; go out and spend spend spend; never mind the facts that you don't need it because the one you've already got is perfectly servicable and that you haven't actually got the money to pay for it in your wallet or purse anyway.
A JJ commented we have an economy that is largely service - sector based and exports there result in overseas call centres. Too much of what has been bought over the last few years has had to be imported anyway, so just "buying" is not in and of itself a solution to anything other than ensuring that the Treasury has a healthy cash - flow from VAT receipts.
The concept of "growth" is such that it relies on a "feelgood factor" setting in when in fact a closer analysis of what underlies it really ought to result in deep discomfort.
Can anyone convince me that "Growth" is always good? I have not been able to convince myself, but then I am not an economist!
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If Karl-Theodor Freiherr zu Guttenberg is waiting for the UK/USA economy to be re financed he may be in for a long wait.For example German cars (BMW/Mercs/Porsche)tend to be in the upmarket sector and are usually bought by credit .Certainly for the next few years smaller cars are going to be in vogue and thus luxury brands are going to be badly hit.Its not just cars,with the Euro being strong quality "German" merchandise are going to be expensive and it will be the cheaper brands that will appear better value and easier to obtain.
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This is quite a provocative entry.
"With consumers likely to be saving more and spending less, export-led growth is our main hope of a healthy rate of economic growth"
Exporting what exactly? And to whom?
My apologies to various people who have asked essentially that question over the last few months, but it never gets an answer. Supposing I were a wealthy German who wanted to do his bit for global economic balance by buying British, what is on offer? Novelty beers apparently.
Since "export-led growth is our main hope of a healthy rate of economic growth", what is the government doing to make sure that happens? I'm not aware of anything. Perhaps that is just ignorance on my part, but I seem to be well aware of plenty that the government is doing to prop up incompetently run banks.
By the way, what happens after the exports don't materialise?
"Germany's addiction to exports is a problem as well."
Ah yes. Those wicked, wicked Germans with their naughty habit of designing and building high-quality, well-engineered products that people want to buy. It's just not playing the game is it. The next thing you know they'll have banks run by financially literate people; banks that make real profits by investing in real businesses. Good grief, where does it end?
"Yet, on the basis of my trip, I don't think there's much chance of Germany becoming more like Britain or America, despite the big hit they have taken in the past year."
Yes it's a puzzle isn't it? Why would the ant want to become a grasshopper?
Some of the original entry makes a lot of sense, notably the observation that Britain needs to export more (actually lots more) - but having said that why not think through the consequences. If exports are so essential, why isn't that fact visible in the government's behaviour? Where is the support for exporters? As best I can tell the current government's top priority is to increase public spending. I have never heard a government representative talk about boosting exports.
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WE are becoming more like Germany already!! .... Unfortunately it's liable to be more like the Germany of 1923 than the Wirtschaftswunder version of the more recent past
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We can't all export ourselves out of the recession? What you seem to fail to recognise is that the UK (and the US) who relied on borrowing from foreigners are the oddballs in this world. You may export or you may not, but what you need to do is spending your time on producing things for domestic or foreign consumption. Economy is production, not gambling or selling houses to one another. Following your logic you could as well hail bank robbery as a highly profitable economic sector.
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Thanks Stephanie - good work. We are now starting to address some of the real issues, which countries like Germany have understood for years (nb Germany also appear to understand the current crisis better than our Government does, and they are tackling it in very different ways - e.g. they are not taking the 'easy option' and burdening future generations with huge debts)!
To survive in a global economy the UK will have to be far more innovate and create more products & services other countries need and actually want to buy (e.g. beyond trying to sell Germany beer!) ... because they add value, solve problems and offer new (and unique) ways to improve people's lives!
The UK cannot rely, and in fact really does not need, another credit fuelled consumer boom (e.g. based on more housing asset price inflation) and we need to avoid this happening (as it will only worsen our borrowing & trade deficits, and create even worse problems further down the line).
The answer is to stop focusing most of our time, energy and resources on 'gambling' (investment banking, house prices), 'banking' and other services that 'move money' or 'count money' (i.e. 'manipulating' wealth - activities which should arguably be taxed more from an ethical point of view), and focus them more on innovation and creating more products/services people value that we can export and which will actually bring in money (i.e. 'creating wealth' - which should arguably be taxed less).
But will anything like this happen any time soon? I don't think so - not until we have 'leaders' who are able to act responsibly and see beyond their own career/wallet (ie. who don't apply Poweromics*), or until things get so bad that apathy within the general public diminishes to a point where they decide to take responsibility for improving the situation themselves ...
David Clift, a Future 500 Leader
* Poweromics = People using position and power for their own personal gain, based on poor moral values, self interest and greed. http://poweromics.blogspot.com has more examples/information.
PS I agree with a number of comments already made, including 2, 6, 9 and 11 (nb I am one of those who, like yourself and many others, have raised this issue on a number of occasions - let's hope Stephanie goes further down this road now - please don't disappoint us now you've started Stephanie) ...
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We are dead in the water.....
We changed from Industry to Services, then started off-shoring our services and encouraging people to emigrate to do the jobs we don't want to do!!!! .... I do wonder who the hell we think we are sometimes..
At what point was life supposed to be easy?
Is there a plan?
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The calls for Germany to "export less" seem absurd to me.
Surely the reason for Germany's high export level is simply lack of competition? Presumably, if market mechanisms were functioning correctly companies in the UK and the US would step up to produce goods that are as or more desirable than their German counterparts. This would achieve the export balancing that is deemed so important.
That this does not happen is likely down to the cultural (social) and political (governmental) environments in the UK and US. These appear to have encouraged borrowing for consumption rather than for investment in exportable goods or services.
As several commentators have noted, the UK government is dumping money on banks and government spending. Yet investment and infrastructure to support the longer term goal of building a world class export base that can compete with countries such as Germany is simply not happening.
Sadly, I think that a significant part of the problem is the British cultural attitude to money. People seem much happier to borrow and sit round telling tales of how they got rich off property price rises than they are to actually work to create something of value.
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If you take all of the above to their logical conclusions, including the genetics/demographics stuff from JJ, you get to the point where you have to choose between a return to nationalism and protectionism, dissolution of globalisation and transnational entities, or a rapid move towards a single global world order, perhaps via a world of 4 or 5 supranational systems like EU,Asean,pan-America,Russia,African Union
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#2 "It has vanished then into asset price inflatuion NOT into building productive capacity! We have thus seen nothing for all of our borrowing. If only we had bought something we could use or make something with!"
Well said !! What a waste of public and private money !! This government is in it for party politics and not for the economic well-being of the nation !! The billions spent bailing dead duck banks could and should have been better spent developing new industries to improve the export situation !!
Trying to "save" the car industry is just more money down the toilet as car industries worldwide, ex-China, are also struggling and many of them are in far better positions than the British car industry !! Britain has hardly exported any cars in the only expanding car market in the world now (i.e. China) while all the other car makers are desperately trying to expand their market share there !!
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#3 "Perhaps Germany would be a bettter place if the inhabitants splashed out a bit more in the shops...."
The Germans *DO* splash out in their shops !! It's just that they'd probably splash out in their own supermarket chains like Aldi and Lidl !!
"However the real shocker in this piece Stephanie is the predicted GDP hit on Germany this year - 6.2% in one year.....this is dangerously close to depression territory."
6.2% less for Germany does *NOT* mean they are exporting less than they are importing. It just means that they are earning less in exports than is expected so a bit of belt tightening is needed !! 6.2% less for Britain will be an absolute disaster since Britain already exports less than it imports and its economy had been scraped to the bone !! Anything less will cut into the bone !!
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#8 "Deflation is bad because it wipes out people's wealth eg houses, cars, earnings stream. It also prevents firms from expanding, and bearing in mind the ongoing contraction of firms and state corporations we badly need some expansion....otherwise how else will unemployment be reversed?
The economic situation is deteriorating badly again I fear....."
The Japanese had their share of asset inflation bubble in the late 80s and early 90s !! Then the bubble burst and they spent 10+ years in stagflation while the asset levels equalised with real income !! Since the Japanese, like the Chinese, are genetically compelled savers and hoarders, any deflation in Japan is a GOOD THING !! Their real wealth automatically increase in relation to the rest of the world !!
Of course their companies and industries will suffer falling sales but, like all Japanese, they, too, will have their savings to fall back on !!
Quite unlike Britain where our last bit of family silver (or should that be gold) was flogged off for a song by our then "prudent" Chancellor to finance his political agenda. Now we have nothing left to fall back on !! Therefore, deflation for us will be a terrible and nasty thing, except for house price deflation which is actually a GOOD THING !!
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#9 I think Stephanie's "Someone, somewhere, has to buy" statement is targeted at foreign buyers, i.e. exports, rather than local buyers, i.e. local consumption or even unsold locally manufactured products like Vauxhall filling disused airfields will acres of brand new, unsold cars !!
I believe what she's trying to point out is that it's no good producing lots of products if they can't be sold abroad !! The days of gunboat economy are gone and foreigners cannot be *forced* to buy British products if they are not competitively priced !!
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#10 "Certainly for the next few years smaller cars are going to be in vogue and thus luxury brands are going to be badly hit.Its not just cars,with the Euro being strong quality "German" merchandise are going to be expensive and it will be the cheaper brands that will appear better value and easier to obtain."
Surprisingly, the recent Shanghai Auto Show tells the opposite tale and, I believe, that what the Germans are targeting !! And it's not just cars that the Germans are pushing there !!
VW is also a popular brand in India and India has a rising middle class with a greater disposable income !! Meanwhile, Britain flogs Jaguar Land Rover to the Indians !! While the Germans sell high quality eggs AND keep on selling more high quality eggs, Britain sells the hen and clucks about it !! SAD !!
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#11 "My apologies to various people who have asked essentially that question over the last few months, but it never gets an answer. Supposing I were a wealthy German who wanted to do his bit for global economic balance by buying British, what is on offer? Novelty beers apparently."
We could try exporting our lager-louts but I don't think the Germans are too keen on them !! :-)
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Despite the folklore, the one didn't fund the other - most of the rise in borrowing over the past decade went into the housing market, not new shoes.
Folklore is correct. Over Borrowing went from housing to new shoes,holidays etc.
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#17 "perhaps via a world of 4 or 5 supranational systems like EU,Asean,pan-America,Russia,African Union"
Well, Pan-America is not likely to exist since Canada and Mexico will strongly resist US incursions into their territory and Latin America generally detest the US.
ASEAN has already expanded to ASEAN + 3, the 3 being Japan, China and South Korea, while India, Pakistan, Bangladesh and the Central Asian states are trying to get a piece of that action too !!
Africa will be increasingly Balkanised into Muslim-influenced, European-influenced, Asian-influenced and "God, what a bloody mess", with the DRC and Zimbabwe heading the list in the 4th category !!
Russia will be its usual schizophrenic self, sometimes European and sometimes Asian, depending on what benefits it most !! Russia actually sends many athletes to the Asian Games as befits an "Asian nation" !!
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Addendum to #25 Meanwhile, the "Western" Eastern European states (from the Balts in the North to Hungary and Roumania in the South) will be more and more "Westernised" and the "Eastern" Eastern European states will fall more and more under Russian influence.
And the Muslim countries from Turkey onwards will form a block of their own with Israel sticking out like a sore thumb !!
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I think your report highlights cultural diferences between us & Germany that run very deep. Having had dealings with German businesses it is clear their business model is very different to ours. It is centred around designing and making the best product they can make for the price, in doing so they give the customer the value they are looking for.
Here we have the market traders school of business that reigns supreme the stack it high knock it out cheap school of business. Still we've got something the Germans haven't...we've got Gordon and Sir Alan. Hopefully between them they will create new world leading sustainable industries we so desperately need, maybe even provide the oportunities that our educational industry sold, at great personal debt, to the young people of this country. Second thoughts if those industries did ever take off the bulk of the jobs created would be shipped in or shipped out they won't be British jobs for British people will they?
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"Perhaps, I said, he would like Britain to stick to our tradition of buying German goods and running up big trade deficits? "With a big smile on my face, I would say yes", replied the minister."
This makes me laugh. Clearly this guy hasn't learnt anything.
Germany and China seem to think that because they are exporters and the US and UK are borrowers that makes them "better" and provides them with some sort of moral high ground.
Moral high ground doesn't go very far though when your GDP has just shrunk by 6% and all the people you leant money to to buy your exports decide to proxy default by printing money.
The real issue is that sooner or later gross economic imbalances need to resolve themselves and will cause pain in the process.
The key is to stop them building up in the first place, which requires all sides working together to come up with sensible constraints.
With attitudes like this history is doomed to repeat itself.
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"Despite the folklore, the one didn't fund the other - most of the rise in borrowing over the past decade went into the housing market, not new shoes. "
However, equity withdrawl by home owners was enable by increased house prices. Therefore, the borrowing did in a round about way fund a part (maybe a very large part) the spending binge.
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#28 The real issue behind the balancing of trade imo is mainly to do with exchange rates.
For the sake of argument: Can you imagine what level sterling would be trading if the UK was where shipping the volume of trade that China ships?...1GBP=$??...Look at a graph of the $ to Yuan over the last 5 years and apart from a few clicks it's been as flat as a mill pond,
The self regulating of trade balances that exchange rates movements are supposed to provide are being manipulated yet the social and financial costs to the UK remain huge. Still as long as imports remain cheap and we can all have two foreign holidays a year, who gives a fig!
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The US and UK are rejecting further stimuli because
a) They think the banks are safe enough for now
b) Anything above what the banks needed is going to debt repayment, which would accelerate deflation, not slow it
Deflation will of course continue, but the governments are now trying to work out more fundamental questions:
a) What will be the new reserve currency of the world, and how will we all get there
b) What regulations should be placed on finance institutions
c) How to put supranational and global regulations into place and whom should be trusted to enforce them and how
d) How to deal with/ utilise climate change
Clearly we have settled to a new status quo of slow deleveraging, with the risk of sudden explosions of currency turmoil, and ongoing deflation. It is also clear that the questions above are going to take a long, long time to address.
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UK PLC has NOTHING to OFFER EXCEPT SPIVS SELLING HOUSES WITH OTHER
PEOPLES MONEY.
THE UKS LOVE AFFAIR WITH PROPERTY HAS MADE US ONE OF THE MOST
UNCOMPETITIVE ECONOMIES IN THE WORLD.
SOON WE WILL ALL HAVE TO GROW UP AND EARN A LIVING BY WORKING FOR A
LIVING INSTEAD OF FREELOADING ON THE CHAINLETTER OF FALSE PROPERTY VALUES HELD UP BY AN ERRANT BANKING SYSTEM AND PATHETIC GOVERNMENT. . .
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The Germans seem content to be the makers of things rather than consumers of things. Fair enough. If they don't actually need the stuff they themselves make and consumers of the world don't want to buy them, then the simply truth is that German economy will contract.
But the thing is, things do break down and wear out, and we consumers do need new things every now and again, and when we do, we will buy quality stuff that available from the market. If Germany's industries are still up and running, they will compete very well, being good at making stuff. So the German strategy is simply to sit it out, hoping that people do need the stuff the make eventually, and recovery happens.
I think it is wrong to say Germans don't consume though. They buy cars, clothes, shoes just like all the rest of world. What they probably don't buy are the low quality, environmentally damaging pap that the UK and US consumers seem to like. I think we could all do without that type of consuming.
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alexander-curzon (#32) Doesn't anyone think it most odd that whilst there has been a deluge of property porn over recent years, largely marketed at females, we have chronic below replacement level fertility? This is very good evidence that this behaviour is completely detached from reality, as homes are nests. Below replacement level (2.1) fertility spells long-term economic disaster, and not just for a welfare state throuigh pension fund blight. A TFR of 1.1 halves the population in a generation, and 1.3 in 60 years. Some European counties are currently in that range (the UK is inflated to 1.8 by high South Asian immigration/fertility).
The last time this was done in Europe was during the Black Death when the European population halved.
Wake up girls...see the bigger picture or someone else will make you (see Taliban).
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#31 FrankSz You have a touching faith in the thought processes of others.
No one is rejecting a second stimulus. The US is all that counts, and those in power in the US have commenced a softening up process to gain passive public acceptance for a further stimulus.
Foreign holders of US debt are between a rock and hard place. In the end the US assumes that its 12 carrier battlegroups will force compliance with its demands.
Very few informed people think that US banks are "safe." Still to come is the meltdown in commercial property. Unemployment continues to rise - and is now at a (manipulated) level above the level assumed in the fabled stress tests. Estimates vary, but it is likely that US banks will shortly require about a further $300 billion of capital to offset these losses.
Expect another market collapse in the autumn, followed immediately by a panapoly of talking heads screeching on about the immediate need for further bailouts and a second stimulus.
It is the case that assset price deflation will accelerate, although commodity prices are likely to inflate rapidly. This leaves most people struggling to meet day to day living costs, and leaves the super rich well positioned to snap up hard assets at bargain basement prices.
It would be very surprising if governments are trying to work out answers to any of the questions that you think they are trying to work out. If they were then is it not likely that more attention would be paid to the revalations by Goldman Sachs - namely that its (allegedly stolen) source codes could be used to manipulate markets. Perhaps people may ask exactly why Goldman did not use this same source code to manipulate markets for its advantage. What exactly is it about Goldman that makes them so trustworthy, and what is it about others that makes them so untrustworthy. Relatively simple questions to pose - and relatively easy to reach conclusions based on the almost total absence of enquiry.
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Jaded Jean
Interesting POINT!!
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armagediontimes (#35) "What exactly is it about Goldman that makes them so trustworthy, and what is it about others that makes them so untrustworthy."
Is the answer that the USA is more likely to trust its own people (who it can prosecute if need be), than those of its enemies who don't worry about that? After all, 'the Taliban' aren't likely to respond to requests to give evidence to Congress for their 'IEDing', or be worried about a knock on the door from the FBI.
This has all got folk far more worked up than bird flu, global warming and half a dozen other terror-tactics in recent times, hasn't it? All of which is trivial relative to the alleged threat of nuclear destruction by the evil-empire (it was socialist!) from 1950-1989.
This 'credit crunch' really has got 'em where it hurts - i.e. in their pockets. It's good political activism. Yet in the midst of all this domestic economic carnage, we still have Brown and obama etc giving millions, if not billions, away in international aid and on rogue military campaigns in Afghanistan effectively to stop wife-beating, radicalism, opium growing and any other excuse other than saying it's to flank Iran abd protect Israel's interests, and just look at all the news coverage of Michael Jackson's death - what a national disaster ;-)
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#30
Exchange rates have something to do with it, but a large supply of labour willing to work for very low wages and a lack of regulation in the labour/manufacturing market (health and safety, environmental, workers rights etc) also has an effect in lowering prices.
The currency peg has obviously led to a proportion of the imbalance.
Of course when the US prints money to resolve this imbalance (which in some ways can be thought of as a delayed unwinding of the currency peg) the Chinese cry foul...as if it is all the fault of the US.
Shame that a few years ago the US/Europe didn't insist that if you want to be in the global marketplace you have to compete on level terms. That way the situation would have resolved gradually rather than as a crash.
Of course, the western goverments weren't going to do anything that stopped their people getting their hands on cheap trinkets...you don't win any votes that way.
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#34 JJ
(also note #36)
Population decline? Not a real problem as there seems to be millions of potential migrants (in Calais etc!).
The really big problem would be if the migrants no longer wanted to come!
(Migration was after all a major factor in the growth of both the USA and Australia to mention just a couple of countries.)
I don't see the potential to attract inwards migration declining any time soon as we have been very successful in selling English as an international language and this should provide a ready attraction for a few hundred years (until the whole World speaks English!) (Sorry, but I don't think everyone will want to speak any other language.) English is our insurance against terminal economic decline!
As risk factors go, a climate change rise in sea level if far more dangerous.
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Stephanie, of course you are right when you say "we can't all export our way out of recession.".
Part of the problem is that we now import many things that used to be made 'at home'. Older readers will remember the quaint campaign of 1968 "I'm backing Britain", urging people to favour British goods over those imported. Those days are long gone and very few products are exclusively made here anyway.
A global economy is not in itself a bad thing, but many of the goods we import are ridiculously cheap because they are made in conditions which would not be tolerated by workers in the West, in sweat shops and/or with child labour. How is it possible to buy a pair of jeans for three pounds in a supermarket? How could British manufacturers possibly compete with that?
Cheap imports means job exports - one type of export we could do without. There is nothing wrong with importing goods per se, but one suspects that the mega retail chains use their muscle to demand very low prices from overseas manufacturers on a take-it-or-leave-it basis. This type of economy is like a house of cards. As so-called 'third world' (I hate that term!) exporting countries grow economically, they will eventually put up prices as workers demand (rightfully) a better standard of living. But by then it will be too late. Britain will just be one big shopping centre with not a factory in sight.
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Interesting post and comments. Thanks. It just strikes me as an odd view that there are economic / social structures that make us prone to consume and serve and others prone to save and make. There was a time when we saved and made but then found our manufactures and inflexible labour markets uncompetitive. Arent we just shifting to find productive niches in a global economy. Germany will need to do the same. Italy's prowess at making consumer goods became uncompetitive against the Chinese. Germany might soon find that the Chinese and Indians become very good at making hydraulic pumps and clever stuff, using cheaper labour costs.We might find others getting better at retailing,accounting, legal and financial services.At which point we seek out a differing niche. These are processes of evolution, not prescription. There might even come a day when the Germans stop looking down their noses at providing services to others/themselves and look for differing productive opportunities.
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#37 Jadedjean. Unlikely to be the answer as the person alleged to have stolen the Goldman source code is also a US citizen domiciled in the US.
The US appears to have effective extradition procedures in place, both legal and extra judicial.
Not much is "given away" in international aid - quite a lot of it comes with strings attached, typically the obligation to buy weaponry, or to debt finance large projects.
No-one seems to know exactly what the military campaign in Afghanistan is all about. One thing it is not about is the supression of opium production. By the 2001 the Taliban had almost eradicated opium production. From 2007 onwards opium production reached record highs.
Radicalism and wife beating would not appear to be high on the agenda either. After all the same radical wife beaters were the recipients of some good ole Texas corporate hospitality back in 1997. I think you will find they were guests of UNOCAL. Apparently UNOCAl wanted to build a pipeline through Afghanistan to transit gas from Turkmenistan to Pakistan (and presumably beyond). So enamoured were they of the Taliban that they even persuaded a university in Nebraska to start a training course to teach Afghans how to lay gas pipelines.
Still I guess if you had experience of dealing with Turkmenbashy the Taliban probably appeared quite reasonable and sophisticated.
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That Germany and the UK both have economic problems whilst persuing very different economic models just proves that the system is indeed broken!
Both contries keep on and on about sustaining the global market when it is that very concept that is killing their domestic economies. The economists and internationalists have got it wrong. It was not protectionism that prolonged the 1930s Depression but the lack of sound domestic economic planning. Therefore until Germany and the UK take action to re-balance their own economies there will be no recovery from this mess. This will mean that the so-called free global market will have to be curtaled. The WTO has failed miserably.
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When the politicians talk of a 'global economy' it leads people to believe that all economies are more or less the same, and are run along broadly the same lines. This is of course rubbish. Our economy depends on ever rising house prices to provide the equity for banks to lend to consumers in order to fuel growth, how many other countries follow that model to the extent we do? Is it wise that so much of our 'bail out' cash is spent on providing mortgage backed securities, and funding the return of house price rises in general?
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John_from_Hendon (#39) "The really big problem would be if the migrants no longer wanted to come!
(Migration was after all a major factor in the growth of both the USA and Australia to mention just a couple of countries.)"
Is that a wind-up? How long do you think it will be beofre this economy is like the countries they are migrating from because of birth rates are generally negatively correrlated with IQ.
Why is that not a problem? The migrants which stay today (mainly in the SE) are coming from Africa and South Asia (Fratinni will ensure more of this). They don't contribute to the economy, in fact they become a burden on services and the state, and they also contribute to the crime rate. That in brief is what the evidence now shows. When migration contributed to the USAs and UKs growth it was driven by motivated people who had to struggle to make it there (bar the subversives perhaps which led to the Sedition and Aliens Act - note the 'terrorist' talk these days?). That is no longer the case, travel is easy, border controls lax, state benefits easy to blag etc. By 2050 the European population of the USA will be under half the national population and as ETS ('Amercia's Perfect Storm' 2007) point out, skills are declining. How will they compete. It's the same here, see Treasury report by Lord Leitch in 2006 and see PISA data 2000,2003, 2006 (HMG tried to fudge this).
As I have explained at length before, the correlation between skill level and productivity is very high, and we are importing and breeding large number of low skilled people.
How is that good? You really do need to think carefully about what I post. I may it look easy to read... but it isn't. You need to think about what I post.
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#45 Jadedjean. You write "travel is easy, border controls lax, state benefits easy to blag etc"
Everything is relative - human movement is vastly more complex, expensive, risky and time consuming than the movement of capital in the form of money. Money also picks up preferential tax treatment instantly, it does not need to queue up for hours in some benefit office to register itself.
Follow the money find the lie - it´s a pretty reliable indicator.
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#43 foredeckdave
You say "Both countries keep on and on about sustaining the global market when it is that very concept that is killing their domestic economies"
I don't think the global market is itself the problem. The idea that every country could ever produce everything it needs within its own borders is probably unrealistic. These days many goods are made from components from a number of countries - and this is not a bad thing. (I am slightly less certain about the 'benefits' of being able to buy Brussels Sprouts in July).
If all countries imported and exported from each other in more or less equal measure, the global economy would be working well. The reason our own economy is doing badly is that we have become flabby, unproductive and uncompetitive. We import almost everything and have very little to export in return. Indeed, our main export is now 'jobs'.
The system may give the appearance of working in the short-term while developing countries can continue to feed our insatiable appetite for cheap goods. But as those manufacturing countries grow economically, their production costs will inevitably rise. What will the West do then?
As we approach the creek, I suggest we start manufacturing paddles.
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I read an interesting thing recently about Scandinavian countries. It was saying that if you go there, one thing that you will notice is a tall, healthy, vital looking population. However, if you look at the statistics, on any given working day, 25% of the population is off work sick or undergoing rehabilitation (physiotherapy?). The statistics also show that as the number of people off sick rises, the population is also living longer, incidences of mortality declining and so on. It went on to say, tn contrast, if you look at Rwanda, with low life expectancy, people rife with malaria, hiv aids, and other weakening diseases, people work long hours 7 days a week, and being able to spend the amount of time off that Scandivanians can is unthinkable.
Those from Rwanda are adapted to their conditions - they will have many children because of infant mortality and to increase the probability of family survival. They rely on their children when they are old.
Those from Scandinavia have developed their means of production, healthcare systems, and so on, to the point where they simply don't need to work that much. While it is still taboo to work 3 or 4 days a week, they just take sick days.
Now what happens if you open the Scandinavian borders to the Rwandans? Suddenly you have a culture of people reproducing at very high rates, as that is the cultural norm, but the children are now surviving because they are taking advantage of healthcare systems more advanced than what they are used to. They will work hard, probably, undermining low-cost labour and causing unemployment in the native population. Pretty soon the natives will be unhappy because the Rwandans have displaced their jobs, and also undermined the culture of 'tolerated sick days'
In short, it would be like putting some kind of foreign algae or weed into a native pond. The results would be a festering disaster to that country, and that is what is actually happening in many places.
I am not advocating ultra-nationalism. But I think if a nation wants to remain a nation (which I don't necessarily support either), it needs to manage these things much more carefully. This is where things like demographic manipulation, social engineering, eugenics, and so on, will actually need to be properly considered and applied, and really it is just a matter of time before democracies start to put more effort in that direction.
And by the way, the USA is not an example of a country that has worked as a melting pot of immigration, it is a social disaster built on racial prejudice, white elitism and religious hate, has benefited from half a century of post WWII riches, and is about to blow apart at the seams.
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# 45 JadedJean
You say "birth rates are generally negatively correrlated with IQ"
I am not sure on what what you base this.
You say "we are importing and breeding large number of low skilled people"
Are you suggesting that some people are born 'low skilled' by virtue of their parents having been 'imported'? That is what what it sounds like you are saying...
"You need to think about what I post"
Perhaps you need to think about what you post.
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armagediontimes (#46) "Everything is relative"
To what exactly?
This is where you go wrong and end up lost in empty abstractions. The hard thing to do is to identify controlling variables.
I've highlighted what those are based on sound research, yet you're still not able to recognizse them.
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#50 Jadedjean- And from all those big words I fought you was an educated person.
The ease and movement of people is relative to the the ease and movement of capital (money). Money can move anywhere in the world in a matter of micro seconds - people cannot.
If you try and move all the money to a few select places then the people, from whom the money has been removed from, will likely follow. Albeit there will be a delay.
Just in case you are right, and the people whose money has been removed are not smart enough to understand the implications, then the US/UK and/or their proxies tends to follow up with easier to understand signals. These typically drop from 30,000 feet or so.
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#47 DistantTraveller,
I am not advocating a total end to international trade. As you say that is probably not realistic or desireable. However, the system that we have at present is really the major cause of our economic plight.
I disagree that we have become, "flabby, unproductive and uncompetitive.". We have become an importing nation because we have allowed the international market to become skewed and primarily focused upon labour costs. If Chinese firms faced the same labour costs and legislation (eg H&S) s a UK firm then I doubt that they would be any more productive. So why should we throw away all of the benefits that we have worked and faught for over centuries? We should impose tarrifs that account for the differentials. Because Indian workers may risk their lives for a bowl of rice does not mean that European workers have to revert to that level in the name of competitiveness. We cannot and should not continue on this crazy road in the hope that one day the Chinese, Indians and Brazillians might choose to match European levels of social investment.
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# 52 foredeckdave
"So why should we throw away all of the benefits that we have worked and faught for over centuries?"
I don't think we should throw away all the benefits, but it is an uncomfortable truth that if low price is the only issue for consumers, it is very hard for European workers to compete.
"Because Indian workers may risk their lives for a bowl of rice does not mean that European workers have to revert to that level in the name of competitiveness."
Agreed, but there is the dilemma. Most people would not approve of exploitation in this country, but turn a blind eye to cheap imported goods without asking how they are made. But supermarkets and high street chains will continue to import them as long as people will buy them.
I'm not sure that imposing tariffs as you suggest is the answer. This usually leads to reprisals and is a disincentive for trade. I would look for ways to encourage more manufacturing at home, possibly with tax breaks, less bureaucratic red tape and EU regulation - all of which cause prices to rise. At the moment, it is cheaper to import than it is to manufacture - and there is the problem.
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The fact that Germany has to date managed to withstand the labour cost differential with the east by focusing on technology and quality is neither here nor there. Hydraulic pumps - as mentioned in the article - are hydraulic pumps, and can be made anywhere, does anybody really think hydraulic pumps are difficult, its WW2 stuff, and you can buy and strip one down if you are that desperate, it used to be called making a chinese copy, I wonder why. Germany can huff and puff and posture but it will make no difference sooner or later their manufacturing base as they currently know it will go. It will be all the harder because they have held on so long. There has been next to no UK government strategy to deal with the manufacturing base here, it has almost been an irritation whilst there was the belief a financial sector or property would be an answer. The message from history is that when a resource or capability is destroyed it never returns, further that there is the embaressment of the living extinct where a population group has dropped to the level where it cannot function anymore and much of manufacture has dropped to that level. If you really want to know what is what in a technology sector try talking to a technologist or an engineer not a business manager or politian, both groups seem to believe that management is the answer. Unfortunately you have to have something to manage. Their approach is the one that results in banks being given money in the belief this will enable all. The technologist or engineer will tell you what technology or engineering capability is needed. If you have no technology edge on no labour cost edge what on earth makes you think you can win in the long term. Meanwhile the world and his wife can turn up at our universities in competition with our own kids and then trot off home at an equivalent eduction level, let alone the education they can get at home. Just exactly what competitive edge is there here, and BTW if there is one you will find somebody only to willing to sell it off cheap as a consultancy service. Meanwhile the main strategy - love the banks with money has resulted in business loans thast cost more than a credit card charge when the base rate is 0.5 percent. Almost everybody is looking the wrong way on this economic problem.
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47. DistantTraveller
''As we approach the creek, I suggest we start manufacturing paddles.''
Suggest you start with the canoe mate. : )
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#52 Foredeckdave - Don´t worry the protectionism and trade wars that you yearn for are on their way. As the old saying goes: "Be careful what you wish for, it may come true"
#53 DistantTraveller. So "most people would not approve of exploitation in this country" Pray tell, what country are you referring to?
#54 Glanafon. Ah Yes the living extinct. Was there not a film "The Night of the Living Dead" - didn´t the living dead try to kill or eat the normal people? Have you seen what is happening in the banking sector these past weeks?
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For some time now I have been saying that (and providing links to) the evidence from authorities (e.g. ETS, UK Treasury, OECD/PISA) on both sides of the Atlantic who have been monitoring this aspect of the workforce points to a marked deterioration in the USA's and UK's (if not Europe's) population 'skills' with grave implication for their economies.
Oddly, when this has been pointed out to those allegedly interested in the economy, the response has just been one of denial, outrage, or worse still, to exacerbate the problem by implementing policies which actually serve to increase the rate of the problem (via low-skilled immigration or more higher education which further reduces the birth rate amongst the brighter half of the population).
Doesn't this strike anyone as remotely odd? To export materials one has to produce goods, and unless one has able people, that just doesn't happen. Look around the world for what should be obvious evidence. This governmnet may talk of the Knowledge Economy, but there is one big problem there..............
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#56 armagediontimes. It's not a question of what I wish for. As this depression grinds on it will slowly but surely become more obvious that national economies are just that - national.
#53 DistantTraveller. But when imports of non-essential goods are tarrifed then there is no price advantage. The consumer will then change their purchasing decisions to other factors such as quality.
You quote the usual argument about tarrifs being a disincentive to trade. However, look at China. Now tell me just what and at what levels they buy things from Europe? So where is the disincentive of the tarrif? Now, that argument may have more validity when you consider trade with the USA. Perhaps it is now time that the USA learnt that its economic power is not what it used to be.
In terms of the UK, the proposal would only have a beneficial effect if the tarrif was imposed on a pan-European basis.
#54 glanfon. Nice to see you back Mon! But you've got the argument the wrong way around.
#57 JadedJean As usual you are just wrong
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56 Arm n leg times
Ahh yes. You could be right. But the living extinct have no idea they are extinct. Whereas the living dead and the living have some idea there is a problem, presumably. At least the living should.
Banks. Hmm, great stunt really. Sprinkle magic dust on dull property say its made of something wonderful. Oh dear the rain has washed the magic dust away. Loads a debt. Get your customers via the government to bail, have interest rates crash to next to zero and then charge double figure interest rates to those who cannot afford not to have access to credit. And HMG meanwhile talks of the problem that money is not entering the economy, well it is but a double figure interest rate skim is being taken along the way, so what do you expect. Taking twice from the customer it seems to me. And can anybody really believe that HMG are in control or have any answer.
I havent been monitoring the mad bank game recently. I can tell you that the swing in consumer price preference is interesting. Looking around - Custom goods, ie specialist stuff you cant get easily and is seen as important by the consumer appears holding up with only a slight reduction in volume. There is a marked step down in the price ceiling many people will not go beyond and some low price sectors which we are not involved with have simply suffered very substantial drops in volume. It makes no difference here that I can see because volumes are fine and if we ever have the situation change we expect to float to suit but very few businesses have that flexibility, so I expect many many business failures before the year end. They just will not be able to downsize and regroup and ditch overhead and the supply chain is too long and slow for the necessary response time period. Can't see any consumer uplift until it is clear we are at the bottom and Brown has gone. Psychological problem at this stage I suggest. Double dip, ha ha, more like a staircase unless they are careful. Banannas in pyjamas are coming down the stairs. But never mind better give Mr Burpy the bank an bit more cash in the autumn. It will all be over by Xmas, oh sorry that was meant to be Xmas 2008 was it not. Funny wasnt - It will be all over by Xmas - what they said at the start of WW1. I still havent worked out what all the guff about thickos has to do with the fact the Far East will work for a pittance and the result is a collapse in manufacture in Europe and job losses, and it hasnt finished yet.
You seem positively perky at the moment, are you taking the optimism pills. : )
fdd @ 52 - Artifical trade intervention will not help. I get your drift but the differentials are too big. If you think there is free trade at the moment go on the US Customs site and take a look at what goes on there if you want to export, or take a look on HMG Customs and look at import tarrifs, excepting 'internal' EU trades. Enjoy the Sun, hurricane season later in the year isnt it. ; )
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58 fdd
Dave how can economies be national when money is international and can flow cross boundary at the click of a mouse. And the financial sector here which has been made important still has to operate in that international scenario. The tide moves on all beaches not just one, as Canute found out. We still have Canute when we need Noah, and Canute knows nowt about boat building, he's the guy who sits in a chair on the beach. And this particular Canute is still saying the Milky Bars are on me, except there our Milky Bars, he gets them from us. Just enjoy the Sun. : )
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This blog just shows the extent of the British loss of sense for economic reality. It is clearly centered on the view that a life on debt approach, without doing any sort of productive work is a completely normal and viable one and that high-skill work, production, innovation and especially export are sort-of unhealthy and abnormal. I think Germany has only been selected as an economic foe example here, because of the historic ethnic disliking of Germans that has sticked with the British culture since the World War era. All of this is proof of the level of panic that seems have taken hold on the friends of the financial bubble. It seems they start to realise that despite all their green-shoot propaganda their party is over once and for all.
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# Various Glanafon - You do make me laugh, and you are almost on the money. But things are worse than you think.
I worked on a job in the UK in the late 1990´s - all the hydraulic punps kept breaking (I kid you not). Massive consequential losses, no one able to fix the problem and hence more huge losses. In places where all the "thickos" live I never had any problems with hydraulic punps.
I invested in a business in the UK - thought I was pretty smart, and had it all worked out. Now all the bloody payers of invoices are going bankrupt. All I´ve got is a room full of paper from every kind of administrator you have ever heard of telling me of all the steps they are taking to liquidate the business(es) and how "no certainty can be given as to either timing or the ultimate payout to any creditors." - or something like that.
May as well wait to collect any cash that will be paid, and then move on.
Took another look at the UK a couple of weeks ago, with my progeny who has never lived there. He could only stay for a few days, something about the place being dangerous and depressing.
I ignored the depresssion and the danger and looked at house prices. You guys are having a laugh.
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glanny,
The fault this time is the fixation with money - as though it was an end in itself. I'm rich because I have got X £s/$/Euros/Yen. In fact you are not rich because you need then to exchange those £/$/Euros/Yen for the things you need to survive. Money is really only a convenient exchange mechanism - a flexible facsimilie of non-flexible wealth.
That real wealth lies in an economy. The summation of interactions within a given space. For better or worse that space has come to be defined by national boundaries. As no country has the resources within its boundaries to meet all of its wants and needs then we have the concept of international trade. In economic theory we control that trade (at a basic level) by the Theory of Economic Advantage. However, as the balance of these trades has become skewed the theory no longer works. This is purely because of the above mentioned focusing upon money rather than wealth.
There are no manufactures out of China or India that are vital to the continued existance of Western nations. The only competitve advantage they have is cost. Remove that advantage and then you have the possibility of true competition on a level playing field. Costs are only about money. We should be focusing upon profit and that profit has to be the health, prosperity and general wellbeing of the national economy. Carry on as we are and the only conclusion will be poverty for all Western economies.
In order for the West to achieve this level playing field, they have to act in concert. Prices will rise, but then so will employment as we begin to relaunch general manufacturing. It matters not to the consumer that prices will rise provided that they have incomes to support it.
So, who would be the real losers? Well China and India are examples but they can re-focus their economies in the light of the new reality. The international money men for sure - but they are the same idiots who got us here in the firt place.
Would the rich lose? Well pobably not. They too would move their wealth back to take advantage of the new opprtunities in the West.
This really is not a Canute situation. It is more the overdue recognition that the Emperors new clothes aren't real.
As for enjoying the sun - well it's now mixed with a little rain and the odd tropical wave but the temperature is still 31c. Sad thing is it's now only weeks rather than months before we have to wend our way back to the UK!
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#57
Well not really - in the CZ we don't have that problem. Even the Vietnamese minority group, which has been here since the communist era, has low fertility rates. The Vietnamese are fine. The Roma gypsies are by and large a problem here, as they are usually criminals and behave like trash. On the whole though, they leave at at least the same rate as they reproduce. Why? Because they believe they can beg or claim benefits better in other countries, such as the UK. They also get feedback that crime is better organised and with more opportunity in the UK.
What distinguishes the UK from the CZ, in my opinion, is the prevalence of US-origin ideology. Ideas such as feminism and political correctness, are outright rejected here as lunacy. There is a debate going on for example at the moment about teacher-student rights, and what kind of punishments are appropriate at school. There are one or two pro-US-policy extremists who want to hand all power to the student, but they are in the minority, while others point to knife crime, violence, and the reduction in quality of teachers in UK schools of evidence why 'politically correct teaching' is a failure.
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FrankSz (#64) Interesting post, thanks for that. In my view, nearly all the econimics 'improvememts' in life we have seen since the late 1970s can be attributed to advances in ICT costs not changes in political systems, and as I've said before, I suspect (but lack direct knowledge of the views of these populations so will be interested to read more of your evidence based views on this) East and Central Eurpope has suffered through the collapse of communism looking at the CZ and other TFR figures (which I take to be one of the most important measures of population fitness.
In the UK, violent (knife and gun) crime is alarmingly a disproprortionately Black male youth inner-city gang issue, although I suspect this is all about ability/skills/behaviours, not race per se, race is just useful as an epidemiological 'gene barrier' (assortive mating). The British Black TFR is not high, and whilst the the Muslim's is above replacement level, the latter group is not, despite all the talk of 'terrorism', over-represented in crime, they are in fact, generally speaking, moral, family people, just not much better in terms of mean ability than the British Black Caribbean group, and I'm not sure how that's ever going to change (which is bad for their own economic prognosis and social welfare given the relative population changes, in the South East especially). Germany handles immigration more sensibly as I understand it, with guest workers and permits etc. Britain has been subverted, tere is no other word for it.
People are going to have to start facing up to the reality of this and stop looking at it all in terms of 'racism', as this has nothing to do with it. It's just a matter of classification and focus upon human diversity. One of the least problematic groups in this respect is the British Chinese and British Jewish community, which share joint first position in our state education system (closely followed by British Indians), although the problem with able minority elites is that they can easily become nepotistic and predatory on weaker others, in effect turning class conflict into ethnic conflict. The Chinese in the UK (and USA) have done a remarkably good job at avoiding this (as have the British Indians), which is why they are so widely regarded as a model group. Recent Parliamentary inquiries into crime and race have begun to look into all of this rationally, thankfully, although sadly, the general public has not. Finally, the TFR in the White British lower part of the ability distribution is also higher than the upper half, which is clearly also a problem. As I say, it's basically not a racial issue, but all about disposition and cognitive abilities and their distributions. A stable community needs balance.
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62 Arm n Leg
Don't know what to say. Sounds like my experience in early 90s. People wanting stuff but unable to pay. Sorry to hear. Can understand your offspring, who I am sure you have wised up, not being enamoured.
UK house prices - No functioning market. Repos, absolutely rock bottom sold at 2002 prices. Fantasy prices from some. Trading across the market at the same level by equity rich and thats it from what I can see. 1+million with neg equity, so neg equity setting prices - think I said it would. Northern Rock back with 125 percent mortgages to let some chosen people move, stress tested, sanity testing needed I would say. They keep talking things up, but each no show after a talk up will just send things down further. Some small scale building conversion going on because they have cash from previous deals and don't know what else to do. Small one and two man band jobbing builders doing okay, have very low overheads. A section of the public still have money and are better off due to low interest rates. Dysfuntional so same policy has wildly different effects. Embedded in Japanese experience.
Fdd 63 Dave, your not in the game of actually selling stuff, you have too many theories. V Simple. Stuff put on table. If attractive enough will get people looking. If price is right will sell. Price established by buyer not seller. If price no good to seller then seller ceases to function. You have to supply something somebody is prepared to make themselves poorer so they can buy it. For many businesses - Suddenly volumes have dropped. Suddenly consumer has halved price prepared to pay form some inventory. I have monitored several selling platforms and it is in that region. There is no point in stating more 'accurate' figures they are inherrently inaccurate and a grab sample. Some stuff has simply ceased to move. A conventional business simply cannot cope, it cannot halve its operation overnight. Look at the automakers, and it is easier the bigger you are, you have more to cut and still retain function. So do you think they are functioning soundly or just trying to survive. Nope, there is an extinction process going on for many and if HMG know it then they dare not say it. The High Street will be a shell because the only way to meet the price set by the consumer is via very low overheads, the internet. The direct outcome from that is low tax revenues to local govmnt, and HMRC, landlords in trouble etc etc. The goose is already cooked. The most consistent characteristic is the underestimation of the situation and fruit loop graphs showing a marked ramp up tomorrow. The same graph keeps appearing with the uplift just inching along the axis. They are stuck in a loop and in denial, a establishment groundhog day. To return to the High Street. I went in two different outlets of two major chains yesterday. In both they were not busy. In both I was repeatedly - repeatedly - approached and asked what could be done to help, could they carry something for me or this and that. It was almost hilarious. These outfits used to say with a grunt - if its not on the shelf we dont have it and turn and walk away a short time ago. They are now after every penny and the prices do not support this sort of silver service so it cannot last. It is a sign of desperation. It is now widespread.
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#62. armagediontimes wrote:
"...looked at house prices. You guys are having a laugh."
Alas no, so called 'sane' economists argue that the way we will recover from this depression is by inflating house prices (again) and then letting people borrow against these inflated prices for current spending...
(These so called economists are, of course, idiots, but they are given considerable air time on and in the media.)
Now, come on, someone argue that the only way we will recover is by inflating house prices... I dare you...
(I would add that there is a particular unpleasant place in the circles of monetary hell reserved for you and your kind!)
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#55 glanafon
"Suggest you start with the canoe mate. :)"
Good point! We are up the creek without a canoe or paddle!
#56 armagediontimes
"Pray tell, what country are you referring to?"
When I wrote (#53) "Most people would not approve of exploitation in this country", I should have said "within Europe". My intended point was that we happily buy cheap imported goods (eg from India) without enquiring about the working conditions of those who made them - but would not put up with similar working conditions ourselves.
And yet, sometimes poor working conditions can be found even within Europe, as discovered by the BBC in Manchester:
http://news.bbc.co.uk/1/hi/uk/7824291.stm
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John_from_Hendon (#67) "Now, come on, someone argue that the only way we will recover is by inflating house prices... I dare you..."
As I have said before, what perpetuates, i.e reinforces this venal notion is a tacit assumption which is peddled everywhere, often by people who don't know that they are doing so, and is central to almost all economic thinking in the Liberal-Democracies. This is the Enlightment's equalitarian myth. Once one accepts that this myth as being true, the notion that market-forces can be a benign, if not a benevolent, force in shaping 'value' and economic growth, all makes rational sense. The sad fact is, however, that it is radically false.
The material in these two links will demand very difficult and painful thought for most readers. I can not emphasise how much painstaking research is behind them, and how at odds with the populist view they are. Yet they are what the science shows. We are in mass denial, and the recent debt-slavery/venal predatory lending (see the Madoff scam and early vs late feers funds) is sadly symptomatic of how groups (classes), often unwittingly, operate to look after their own interests at the expense of others. This used to be euphemised as 'class war'. Zinoviev (much to John Reed's dismay), translated this as 'Holy War' (Jihad), at Baku in 1920.
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erratum (#69) 'feeder funds'
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#58 foredeckdave
"You quote the usual argument about tarrifs being a disincentive to trade. However, look at China. Now tell me just what and at what levels they buy things from Europe? "
According to one report, the UK exports quite a lot to China - 5 billion dollars worth in 2008, expected to rise to 10 billion by 2010.
See WalesOnline
It's worth noting that Scotch Whisky alone accounts for 44 million pounds a year.
http://news.bbc.co.uk/1/hi/scotland/7993413.stm
I think the problem with attempting to apply tariffs, even limited to 'non-essential goods' as you mention, is that they would not necessarily reciprocate in the same way. Any exports to China would be considered 'essential' to the European based manufacturers.
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re: 69 Jaded Jean
I'm not sure what relevance the first link has to the points brought up by John From Hendon, it appears to only address what the author believes is the suppression of politcaly unacceptable views on race and intelligence by the scientific 'establishment'. The whole thing would be interesting if only IQ was a real measure of intelligence, or if someone could define 'intelligence' precisely enough so that genuine empirical research could be done in this area.
Interestingly, in 'Freakonomics', Dubner and Levitt showed that the propensity of Black parents in the US to give their children outlandish christian names IS a barrier to economic progress in every area apart from sport and entertainment..but that has nothing to do with IQ tests or genetic 'intelligence' and everything to do with social conditioning.
You are obviously an erudite person, but intellectualism is not a trait nowadays that gets you as far as it used to. What matters is the ability to bend people to your will by force of personality (lying) or by shrewd manipulation of the media and markets (insider information) There aren't many academics with any influence over how the world is run, other than in the Faculty of Economics at Harvard.
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We're selling ourselves far too short here.
British investment rates in our future growth are greater than they appear: we have a more sustainable birth rate and invest more in our chidren's education at school and University levels. Both sorts of savings are treated as current spending and don't count as investment. Yet those higher spends on our future generation might account for some of the apparently lower savings rates in the UK.
Moreover, British workers save far more than Germans do in our respective pension schemes. Arguably our pension contributions are some form of savings rate? They certainly are an investment of sorts.
If the Germans are really so clever, how come their economy is shrinking so much faster than ours? And how come their government debts are higher and unfunded pension liabilities so much greater than ours?
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citygambler (#72) A point made heuristically: Here are a few links on domestic criminal justice policy over the years. Our prisons have doubled in population since the early 90s. The crime rate has increased steadily since after WWII. Note the violent crime rate today, and the problems in our schools (feeders of our CJS). See Murray here, and consider what was said in evidence here but which was effectively ignored. Yet, within the decade, there was a) complete resructuring of Probation and Prisons under NOMS (also a disaster), and b) The Home Office was declared dysfunctional.
I'm not spelling this out, but here's what's happening in Afgahnistan.
Can you see any connections? I suspect not.
Whilst we deregulate and embrace anarchism, others resist having our Liberal-Demcoracy thrust upon them as 'freedom', yet some don't see why. Look at European out birth rates. When you say you can't see the relevance, just how long/hard do you look? To see relevance requires cognitive work, yet most folk today expect to be spoon-fed. What might this be indicative of if not 'inflation'?
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#71 DistantTraveller, Sorry mate but that is just peanuts for the first figure and speculation for the second. Now balance that against the level of UK imports from China. Then add the restraints placed upon Uk investors in China in comparison to the 'open door' situation here. Leaving things as they are in the hope of some future natural balancing is just a no brainner!
#66 galnafon. When I get back we'll have to share a pint - you really sound fed up! I accept that I am not presently in the 'loop'. However, it does allow me to take a helicopter view of what is actually going on.
It will take time but the death of globalisation will come about. It was never a realistic long term policy in the first place - and yes I have been saying that for YEARS.
As for prices, the man in the street does not care what the price is provided that he has the means to meet it. When I was a lad you could buy 4 Blackjacks or Fruit Salads for 1d (we still had farthings so you could buy 1 if you wished!). Nowadays they probably cost 1p each. The amount is NOT the real criteria it is the satisfaction derived from the expenditure. Therefore, we need to employ our economic resources in the best way to meet the needs of all of the economy - not just the desires of the bankers.
I honestly believe that we will see a major technological breakthrough before the end of this depresion. Until that happens we need to re-build our true economic strength and that cannot be achieved via cost related imports. That holds true for the whole of Europe - the Yanks may take a little longer to realise it.
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citygambler (#72) "The whole thing would be interesting if only IQ was a real measure of intelligence, or if someone could define 'intelligence' precisely enough so that genuine empirical research could be done in this area."
It doesn't matter what we call it. 'It' correlates hightly with US High School SATs, UK Secondary School SATs, OECD PISA results, and international measures across the world. They all say the same thing.
"Interestingly, in 'Freakonomics', Dubner and Levitt showed that the propensity of Black parents in the US to give their children outlandish christian names IS a barrier to economic progress in every area apart from sport and entertainment..but that has nothing to do with IQ tests or genetic 'intelligence' and everything to do with social conditioning."
I really wish it was 'social conditioning'. If it was, we could do something about this mess via education, therapy, and correctional programmes (i.e. schools, clinics and prisons).
We can't.
That's the empirical (i.e evidence based) fact.
'Social conditioning' doesn't make much, if any difference alas. We now now this.
That's why I'm saying what I am saying here (over and over and over............again....i.e. because so many people like yourself have been educated to believe falsehoods not based on the evidence). Education etc is a process of selection.
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I think some of this 'competitive nations ' talk is a bit out of date; a kind of cast back to a previous era in History that has now gone.
It is a 'one world' global system now...China and India have as much to gain in not seeing the USA plunge into any deeper recession as the USA population.
The whole 'competitive' side of things just seems old fashioned..... anyway 'in the 21st century' weren't we supposed to be freed from work ----and the drudgery of it by the fruits of human inventiveness..?
Okay...what went wrong then??
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#65
I could go on and on and on about such things. You really have to just go and live in a post Soviet place for a while and see for yourself. Here are a few examples:
- Even after the revolution, and perhaps still today in some more remote corners of the country, it was the generally held view that if you were a woman then you had until the age of about 24 to get married and start a family before your opporunity was lost. This view passed away almost by agreement - there was a collective shirking of traditional values and people cast themselves into new ways of living
- Up until the revolution, accommodation was assured. You were given property by the state, albeit on a waiting list.
- After the revolution, accomodation was a serious social problem. A catastrophe that ruined many a young life. The number of times I met literally perfect young women, desperate to find any kind of partner, in the hope they might finally be able to leave home, enjoy some freedom, start a family, anything...
- Here bureacuracy is a problem even today. If the wife has more than one child, she will have significant problems getting things done, as she will more than likely be traipsing around state offices fairly frequently with a pram or two
- When the communists got into power, they basically kicked out the competents and replaced them with ideologues. This meant that incompetents ended up designing a lot of the process and structures in place to day. Even today the old infrastructure hinders women with prams, the old, the incapicated, because the communists simply forgot to address accessibility -- you can't even get onto some metro stations or into some office buildings because the only way in is via several flights of stairs for example. In the past it might have been less of a problem because the tradition is/was that people would help overcome these annoyances with physical assistance. Today that is less so.
In short - after the revolution, the incentive to have kids really dropped. People wanted their freedom - those who could or wanted to travelled, those who couldn't or didn't want to could not get hold of accomodation for themselves. It is only a recent thing that mortgages came in (say since 2000) and as a result there are babies everywhere all of a sudden. Should the government get more stuff online on the web, I'd expect even more babies.
Personally I think this baby boom is over - this export driven economy is going to have to wean itself off just like Germany (we are mostly automotive exports too). In the meantime it's deflation and unemployment galore, which is naturally going hand in hand with divorce, strife, broken dreams and broken homes...
It's a fairly conservative place all in all - people aren't so extreme as in the UK. There are plusses and minusses to that - here the music, humour and general spirit isn't as interesting, but then you can have a whole spectrum of people from different ranks of society livinng in one old state housing block and not experience anything but cordial politeness. Almost as England might once have been in the '50s
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But you know, I keep coming to the same conclusions with all of this - there's one endgame, and it's an energy revolution, but with two possible paths to it - one is via a dissolution of nations, an absorption into larger organisations, the end of the USD, more global unity and so on, the other is a return to protectionist nationalism and probably war....
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e2toe4 (#77) Let's hope you're right.
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#74 Jadedjean. A partial explanation for the rise in prison population must be the introduction of some 3,500 new criminal offences since 1997.
In terms of the Taliban, why should an ordinary Afghan be expected to behave differently than UNOCAL?
#75 foredeckdave. There is an old saying: "Know thine enemy" Globalisation, in the terms that you seem to understand it, has no intention of gently going into that long goodnight. If you want to see its end then you will need to fight, just as its adherents will surely fight.
#79 FrankSz. There is only one outcome, and that outcome has nothing to do with the dissolution of nations.
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#69 and #70 JadedJean wrote:
John_from_Hendon (#67) "Now, come on, someone argue that the only way we will recover is by inflating house prices... I dare you..."
Your response is both interminable and irrelevant as it does not address the question asked.
Sorry but, I feel quite justified in logic to be like the poetry professor with the rubber stamp! ('WRONG')
Please present an economic arguement that supports the contention the the economy can only recover if house prices are allowed to rise without limit - that is the question and not that which you chose to answer, or wander around.
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Re: Jaded Jean (76)
"It doesn't matter what we call it. 'It' correlates hightly with US High School SATs, UK Secondary School SATs, OECD PISA results, and international measures across the world. They all say the same thing".
They may all say the same thing, which is that some people are better at memorising facts than others,and although memorisation is one component of the somewhat nebulous concept of intelligence it is far from being the only one. For example, unless you are a genius Quadratic Equations are only solvable unless you have been shown worked examples of the method, if you can't remember if the bits in brackets or outside are done first then they are still tough to solve. If you say to me the 'Eleven Plus' was a measure of intelligence I would say that nobody ever took the eleven plus blind, we were all coached to get through it and those who couldn't get through it simply couldn't remember how to answer the questions or were confronted with vocabulary that was outside of their personal experience.
Wilful ignorance on the other hand is a different matter, and it may well be that in certain socio-economic and racial classes the pursuit of knowledge and education is not seen as the great emancipating force that it used to be. 'Knowledge' and 'Intelligence' however are not necessarily the same things.
I find it hard to discern exactly WHAT it is you keep trying to say, forgive me if this is wrong, but behind the opaqueness of your remarks there seems to be some kind of apocalyptic vision of a future world where 'The West' has been taken over by non-caucasian groups of various religious and political leanings that are not to your taste..
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#82 John_from_Hendon. Maybe you should read some Joseph Heller.
Western governments have literally bet the ranch on reinflating the housing bubble through its multiplicity of stimulus packages. If this doesn´t work then the western economic model is down the drain.
If the housing bubble can be reinflated then the western economies will have proven that perpetual motion really does exist. No-one in the west will ever need to work again as the Asians will always and forever provide for all our material needs and any time they want paying for their services we can simply print some money.
Those are the choices: (i) A massive and total failure of the monetary and economic system, or; (ii) conclusive proof of the existence of magic, and a future whereby everyone can have anything they want merely by expressing their desire to have something.
The third alternative contemplates ending the experiment early and sitting back (for one last time) and marvelling at the technological miracle embedded in each of the 12 US Carrier battlegroups.
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75 fddavey
I'm fed up of being right most of the time. Now one of my highly qualified kids is emigrating, offered a golden hello to emigrate but turned it down to get a better job elsewhere over there, had enough of the UK. This government is not telling half the story with the public finances the worst is yet to come. And an entire young generation is going to end up in the doldrums.
Suddenly there is talk that the economy has dropped 9 percent from where is should have been. Yet the public sector steams on in growth so there is massive loss occurring in the private sector. There is nothing obvious as a future growth area. I can't believe this bozo government could be as bad as they are. I mean if you inported the Taliban to screw the economy they couldnt do a better job.
Nobody in the public sector, and I know a few, seem to have much idea of what is in store. There is a difference between hearing and understanding it would seem, seen it before. If the private sector is screwed then very shortly the public sector is screwed. What was it Napoleon said - Britain was a nation of shopkeepers - and now we are due to have no shops left. And still nobody in HMG can answer how the labour cost differential with the East is answered. I can tell you - it can only be answered by being minimal with overhead, more flexible, smarter, but looking around realistically how many businesses do you think know how to even start thinking like that. How will HMG cope with lower revenues that will result. It is just a war game and you can sit down and play out the likely outcomes. Nope they have screwed it and this is the new landscape for some time. What we do here is fine, it is structured for this environment, it makes very little difference to us we still have strong growth. In some respects the growth is a problem.
But never mind like one of those weather thingys on the wall one figure will go in and the other pop out. Time for Labour to go in and Conservatives to come out, just the mechanism is a bit sticky and will need a good kick at the GE. So the whole cycle will start again.
I keep telling you decline is decline, and growth is growth, and stability is simply a transient in between the two states, it does not exist in its own right. As there has been decline and there is no stability yet the transfer to growth is not due. That means most people are trapped in decline. As Arm n Leg offspring noted on his visit to the UK this leads to a depressing and dangerous environment. I at times feel I an visiting a mental hospital when I go into town with people acting a in bizarre manners as though some weird pantomime will save them. Questionaires about standards of service, investment in outlets in the belief this will make a difference, idle staff snuggling up and offering to carry your shopping or get a basket. None of this is focused on the balance between provision and service and profit, it tells you that they cannot react in a business targeted way, they are indulging in filling time up. I have seen this behaviour before, in businesses in terminal decline, behind closed doors as it were. I have never seen it everywhere you look. And you can only conclude they are waiting for the uplift HMG is repeatedly promsing will shortly arrive to save them. I'm not holding my breath I think this - with maybe a smidging more - is the environment.
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It has been said that a typical 'English' night out involves driving to town in your Japanese car, getting drunk on German lager or Russian spirits, settling your stomach with an Indian take away, then going home to an American film.
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Having just read Ambrose Evans' weekly piece in the Sunday Telegraph about the state of the Euro zone...one of the more alert financial jouro's....I am again of the view that we are back in seriously troubled waters.
Forget about green shoots for the moment ladies and gentlemen it looks as if the credit crunch has finally been acknowledged by EuroLand. Germany is in a deep malaise now, as is Spain, Greece Ireland and a host of other major economies. Britain is having to borrow (=print) each month an amount roughly equivalent to the ENTIRE public sector wage bill.
Unless there is a plan to cut public sector wages by at least 25% across the European Union this autumn the whole Eurozone will enter a downward spiral......driving the major economies into a long depression.
Cameron has his boot pretty well hovering above Brown's throat. He
could sort things out for Britain right now if he would just stop pussyfooting around.
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#87 iceland_express
I have not read the article you quote but the only surprise for me is that it has taken so long for for Europe as a whole to finally realise that it has the biggest problem on is hands since WW2. However, I do not agree with your (and probably Evans') conclusion that it can be solved by draconian cuts in public sector wages. That may make the Current Account look better in the short term and appease myopics like Cameron but it does not solve the fundemental problem.
Europe has to re-enegise itself. It is large enough and diverse enough to see itself through this global malaise but only if it (1) looks after itself and (2)acts as a union. If we look at the fundementals of Europe as a whole, it can feed itself and has the manufacturing capability to produce nearly all of its requirements. It is therefore essential that it de-couples itself from globalisation.
The first priority of the national goverments is to look after the wellbeing of their populations. It is clear that the governments of the member states are individually failing in their attempts to do that - as witnessed by the rising levels of unemployment. None of the states is big enough to overcome the problems by itself. However, in union with each other it is possible without the inveitable collapse predicted by armagediontimes.
So don't cut. Unite!
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#85 glanafon,
Sorry to make you even more miserable mate! I do undertand the points that you are making and they are in some degree true. Decline has become endemic. I believe that this is because we have little leaders who cannot think beyond the here and now - both politicians and big business leaders. They fail to see that what people need is hope.
So Obama thinks the world has been saved from economic collapse but has no idea and no policy for making it better! A US CNN poll today showed that 65% of US respondants thought that he should get his backside back to the US and do something about their domestic employment crisis. The global fiancial system is busted and it won't be repaired anytime soon. the Warren Buffets of his world are as dead as the dinosaurs - they just don't know it yet!
I don't usually use religious metaphors but I will on this occassion. God helps those who help themselves! So let's start helpig ourselves by re-energising ourselves, putting people back to work and giving them hope for the future. I can only see that happening on a pan-European basis. Let China and the USA take care of themselves. Sounds dramatic? Well it is, but if we don't do it soon then the spiral will continue downwards until we end up with only 1 option - a military one. Now that is a scenario I certainly don't want!
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armagediontimes (#81) "#74 Jadedjean. A partial explanation for the rise in prison population must be the introduction of some 3,500 new criminal offences since 1997."
Desperate to argue still? This is not a level playing field. You might think so, except that the crime rate has been increasing steadily since the end of WWII, the doubling of the prison population since the early 90s has been due to expansion of the longer sentence population, and the vast majority of custodial sentences being under a year. Since 1997 great efforts have been made to reduce the number of custodial sentenecs (especialy short term), which is why I provided the links. The evidence (inluding behaviour in school age boys which is where it starts, peaking at 19) all points to more offending behaviour, i.e a breakdown of social order, which is exactly what one would expect in our liberal-democratic/anarchistic society. It's even worse in the USA.
I have said why, but perhaps you think you know better?
Here's Ahmadinejad in June at the SCO, albeit with a pro Russia tilt.
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#30 "Look at a graph of the $ to Yuan over the last 5 years and apart from a few clicks it's been as flat as a mill pond,"
Considering that the Yuan has increased in value by about 15%, compared to a basket of currencies, over that same 5 years, your mill pond must be gravity defying !! In the same 5 years, the USD has also fallen in value !!
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#35 "Perhaps people may ask exactly why Goldman did not use this same source code to manipulate markets for its advantage."
Ans what makes you think they haven't ?? :-)
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citygambler (#83) "I find it hard to discern exactly WHAT it is you keep trying to say, forgive me if this is wrong,..."
No, I won't forgive you, as like so many, you keep appealing to non existent criteria to refute what's now well established, internationally corroborated and of major concern to politicians in the USA and EU. You are bleating what ill-informed 'liberals' bleat. It's just that peoiple like yourself often don't know that and think they're saying something with a basis. Our politicians are not being as up front about all this as they should be, for both political and economic reasons.
You need to look into the sources I've been providing (ETS, OECD/PISA, Murray, Herrnstein, Leitch Report, the nature of the predatory lending and scamming) instead of confidently thinking that you know what you're talking about. You, like many others, have been misled by anarchists who have no interest in truth. This is about classes (groups) not race. Antiracism (like anti-sexism) is abused politically to distract people from what is really going on, which is all about classes.
Look into which group makes itself the hardest to classify.
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#39 "The really big problem would be if the migrants no longer wanted to come!"
Actually, the real problem is not a matter of migrants but *what sort of migrants* !! Hard-working, tax contributive migrants are always welcome !! Black marketeers and dole scroungers are *not* !!
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#41 "Germany might soon find that the Chinese and Indians become very good at making hydraulic pumps and clever stuff, using cheaper labour costs."
The Chinese are already "very good at making hydraulic pumps and clever stuff" to such an extent that their workers are demanding higher and higher wages !! Therefore, many factories in Southern China have shut shop and moved to cheaper countries like Vietnam, Cambodia and Indonesia. This gives rise the the "Shock !! Horror !!" stories of 20 million unemployed in Southern China and predictions of massive unrest by gutter journalists desperate for *any* story and those unrests have not happened !!
What is almost *never* reported about are the higher tech factories that are slowly but surely conquering the higher tech markets !! Try looking into the innards of your PC or mobile phone or digital camera and see if you can identify where most of them come from and where they are all finally assembled !! There isn't a single Made-in-Britain digital camera to date, all the British high tech to the contrary !! Japanese, yes; South Koreans, yes; Chinese, yes; Britain, no !!
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John_from_Hendon (#52) "Your response is both interminable and irrelevant as it does not address the question asked...
Please present an economic arguement that supports the contention the the economy can only recover if house prices are allowed to rise without limit - that is the question and not that which you chose to answer, or wander around."
That is your question, it is not the question. Your entire framework is ill-conceived. Let me explain why:
I have persistently tried to get you to see why your question is poorly framed, highlighting how and why it leads you to expect solutions from politicians (or their MPC appointees etc) who are in fact in no position to deliver what you demand of them given the system they work within. But you don't listen. In this respect you are like so many others posting here who demand arguments whilst what is needed is description and analysis within the constraints of the prevailing system. See my criticism of LibertarianKurt and his Austrian School transcendentalism (synthetic a priorism).
What you demand has nothing to do with logic (given the anarchistic system which prevails, as anyone can see who has looked at or even read a sumamry of the recent Green Paper), it's just rhetoric appealing to some fantasy despots. What you wnat require is a benign dictatorship, and we don't have one. You are appealing to mythical entities/powers.
The fact that you don't see your own assumptions (dogmas) is why you don't see what's relevant from what is not. That is, you dismiss what challenges your tacit assumptions because you have not objectively isolated your own assumptions from which your conclusions logically flow. Logic by itself is blind.
To sum up, your core assumptions (the system you think exists out there) are false and this is why you don't see what I'm telling you as relevant.
people don't like having their core assumptions exposed as ill-founded, but this is what's usually the basis if error, not logic. We have an anti-statist party in government. Sadly, the two other main parties are variants of the same liberal-democratic ideology. The only party which is different is the BNP and look how they all treat that - and it's not because of their alleged racism, it's because they are Strasserists, and that has been the bogeyman since WWII. If you want to see egregious propaganda at it's most effective, try to distill Strasser's policies from the vilification and smearing of those policies since, as tose doing so make McBride and Draper look like choir-boys (this is not an endorsement of the BNP, but see Brons).
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#42 "Still I guess if you had experience of dealing with Turkmenbashy the Taliban probably appeared quite reasonable and sophisticated."
At the very least, the Taliban haven't renamed the days of the week and the months of the year after themselves and their family !! :-)
Meanwhile other radical wife-beaters from that region are very welcome to shop in New York, London or Paris !! Gold and Platinum credit cards are most welcome !! The "Western" service industries probably extend to the world's oldest profession, too !!
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#47 "As we approach the creek, I suggest we start manufacturing paddles."
Not much good having lots and lots of paddles if you haven't got a single canoe !! Perhaps we need some canoe-makers, too !! A balanced economic view will be soooooo much more preferable to the "let's keep Vauxhall producing despite zillions of unsold cars because we have so many voters there" view !!
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Here's an important development
http://news.bbc.co.uk/2/hi/asia-pacific/8147059.stm
While here is some important news regarding their policy wrt to dollar investments:
http://www.bloomberg.com/apps/news?pid=20601068&sid=acmzAQiv_eQI
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#48 "Now what happens if you open the Scandinavian borders to the Rwandans? "
Come back, Halfdan the Black !! You can stop vik-ing because your cousins are all here now !! :-)
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#55 glanafon, Damn, you beat me to it !! :-)
Still, it was a nice day down by the beach. All those sights to see, especially when the weather was hot.....
Mind you, some sights are best left unseen; 'nuff said !!
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#58 "However, look at China. Now tell me just what and at what levels they buy things from Europe?"
Shedloads of Mercs and Beemers ?? The world's fastest mag-lev train system ?? Oops, sorry, they are all German products, so they don't count !! Don't see them hankering after a Vauxhall, do you ?? Of course, they still buy loads and loads of Dyson vacuum cleaners but, then again, Dyson make them in Malaysia these days !!
Since Britain does *NOT* make *ANY* vacuum cleaners, we could tariff them all to hell !! I'm sure Crash Gordon will love this idea !! It'll refill his coffers faster than he could dream of !! Meanwhile, the Brits can go back to dragging their carpets out into the garden, if they have one, and beating the hell out of them using an (imported) rattan carpet beater !!
I can just see this winning votes for old Crash Gordon, especially in his marginal constituencies !!
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#96. JadedJean wrote:
"(#52) "Your response is both interminable and irrelevant as it does not address the question asked.."
I repeat my posting #52, and note that if you were one on my students I would have to mark you paper "WRONG".
When you are asked a question and then declare your intention to respond to it, then answer it and not something else!
You clearly have a weird agenda that pervades everything that you write (as must be obvious to everyone).
You must live in this World not some off planet universe inhabited by you alone. Your response to my question is lacks sanity or rationality!
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#59 "Funny wasnt - It will be all over by Xmas - what they said at the start of WW1."
They said that for the Boer War, too !!
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#62 "Took another look at the UK a couple of weeks ago, with my progeny who has never lived there. He could only stay for a few days, something about the place being dangerous and depressing."
Interesting !! I took my progeny, who had never really looked at life from the standpoint of earning a living elsewhere before, to Singapore last year and now I hear no end of "moving to Singapore and getting a job there" !! The pay is better there and the place is very safe even if you are staggering home at the hours that vampires are considering going to bed !! The only knife crimes are when the cook seriously botches up the meat for dinner !!
That's what I keep hearing anyway !!
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#102
"of course, they still buy loads and loads of Dyson vacuum cleaners but, then again, Dyson make them in Malaysia these days !!"
That's just it - China, Japan and so on, they do a hell of a lot of importing. Just that they settle in dollars. Pretty damn soon the Asean+X free trade agreements and the ability to settle in Yuan will put a very strong downward pressure on the USD...
If Japan's opposition get in, then we'll see much less in the way of USD bond purchases too...
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#63 "We should be focusing upon profit and that profit has to be the health, prosperity and general wellbeing of the national economy. Carry on as we are and the only conclusion will be poverty for all Western economies.
In order for the West to achieve this level playing field, they have to act in concert. Prices will rise, but then so will employment as we begin to relaunch general manufacturing. It matters not to the consumer that prices will rise provided that they have incomes to support it."
This is a very localised view of the global economy !! You are focused mainly on local production for local consumption !! How, pray tell, will you fund the raw material imports to feed the local manufacturing ?? If you "insist" on other countries buying what you produce regardless of any pricing competitiveness, then you are reverting to gunboat economy !! That's exactly what someone accused the Septics and their battlegroups of !!
China and India and many of the Eastern countries have shifted their efforts to sell to Africans and the Latin Americans long before this credit crunch. They had realised the dangers of relying too much on the Western economies for their exports !!
With those countries, they have bilateral trade whereas with the Western countries they have unilateral trade !! The latest mess with Rio Tinto is yet another example of this unilateral nonsense !!
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John_from_Hendon (#103) "You clearly have a weird agenda that pervades everything that you write (as must be obvious to everyone).
You must live in this World not some off planet universe inhabited by you alone. Your response to my question is lacks sanity or rationality!"
Your questions are naive. My 'weird agenda' (clearly alien to you through lack of comprehension, call it neophobia) is to try and get the likes of you to grasp what's really driving these economic problems, to try to stop closet autocrats like yourself who don't appear to have any grasp of how liberal-democratic governments work in practice, appealing to magic entities, and most of all, to point out the folly of demanding that Central Bank interest rates go up to above 5% (as the retail banks whould then just hike it even higher to borrowers and people are already going out of business/losing their homes - next stop rocketing crime/riots), even if they had the ability to do so given the European/USA/if not global economic lock-in, anti-protectionism. Instead of thinking you're corresponding with students, I suggest you do a little research into what I'm teaching you here, or are you beyond learning?
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#71 "I think the problem with attempting to apply tariffs, even limited to 'non-essential goods' as you mention, is that they would not necessarily reciprocate in the same way. Any exports to China would be considered 'essential' to the European based manufacturers."
But would the Chinese consider them to be "essential" !! Whiskey will certainly be taxed and tariffed as "luxuary" goods !! What other *essential* goods do Britain export to China ??
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#73 "If the Germans are really so clever, how come their economy is shrinking so much faster than ours?"
Because they start at a far higher level !!
"And how come their government debts are higher and unfunded pension liabilities so much greater than ours?"
Because they don't/can't fiddle/hide/spin their numbers as our government does !!
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#77 "The whole 'competitive' side of things just seems old fashioned..... anyway 'in the 21st century' weren't we supposed to be freed from work ----and the drudgery of it by the fruits of human inventiveness..?
Okay...what went wrong then??"
We tried contemplating our navels but found too much lint and fluff in them ?? :-)
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#78 "Even today the old infrastructure hinders women with prams, the old, the incapicated, because the communists simply forgot to address accessibility -- you can't even get onto some metro stations or into some office buildings because the only way in is via several flights of stairs for example."
There are *NO* old and/or infirmed in any Communist paradise !! Therefore, they are not allowed for !! :-)
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#83 "If you say to me the 'Eleven Plus' was a measure of intelligence I would say that nobody ever took the eleven plus blind, we were all coached to get through it and those who couldn't get through it simply couldn't remember how to answer the questions or were confronted with vocabulary that was outside of their personal experience.
Wilful ignorance on the other hand is a different matter, and it may well be that in certain socio-economic and racial classes the pursuit of knowledge and education is not seen as the great emancipating force that it used to be. 'Knowledge' and 'Intelligence' however are not necessarily the same things."
He who knows not and knows he knows not,
He's a child, teach him.
He who knows not and knows not he knows not,
He's a fool, shun him.
- Omar Khayyam !!
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#84 "Maybe you should read some Joseph Heller."
Damned if you do and damned if you don't - Catch 22
I was going to use another word more appropriate to the tale but that will get my comment censored !! :-)
"(ii) conclusive proof of the existence of magic,"
Of course it does !! Harry Potter and the Half-blood Prince is coming to a cinema near you soon !! Conclusive proof !! ;-)
"The third alternative contemplates ending the experiment early and sitting back (for one last time) and marvelling at the technological miracle embedded in each of the 12 US Carrier battlegroups."
Until they run aground on some reef because the helmsman was partaking of high grade Colombian marching powder !! :-)
Now, *THAT'S* a unilateral trade if ever there was one !! Next thing you know, they'll flog those battlegroups to the Medellin cartels for more marching powders !!
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#86 "It has been said that a typical 'English' night out involves driving to town in your Japanese car, getting drunk on German lager or Russian spirits, settling your stomach with an Indian take away, then going home to an American film."
And maybe an Eastern European lass somewhere between the lager and the takeaway !! :-)
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#90 Jadedjean. I am neither desperate and nor am I arguing. I merely pointed out that if you create in excess of 3,500 new criminal offences then you must, as a consequence, create additional criminals.
Given your expertise in the field of IQ - is it not likely that the average Afghan and the average UNOCAL executive will have different IQ levels? If it is the case, and we know that Afghan citizens and UNOCAL respond to the Taliban in broadly the same way, then perhaps IQ is not telling us very much about why people would seek the approval of the Taliban.
Some of the stuff you write has some merit - but it only deals with symptoms, not the cause of the disease. Think "money" and more will be revealed.
Those in control want high crime rates, they want high crime rates beacuse they believe that they can make money through increased crime. Look at who makes all the money from the US industrial/prison complex.
Sure if you import a load of people from a war zone then they are likely to commit a lot of crimes. This is obvious - there maybe a lot of complicated reasons as to why this is the case, but the outcome is obvious. But, hey you get cheap labour. Even if they will not all work it´s not a problem - they have to consume things and this makes it look as though GDP is rising.
If you smash the family unit then you will also increase crime. But, hey smashing families means more households, and more households means more consumption. You also increase the labour force by forcing both mothers and fathers out to work. This increases the demand for things like child care, and increases employment which increases consumption which increases GDP.
Then you have the long term benefits. If parents do not look after their children than their children are unlikely to want to look after their parents when they are old. Hey presto you have more economic growth.
The virtous circle is completed by locking up all the criminals you have created and imported and they provide the raw material for the development of an industrial/prison complex.
But there are even more benefits - insurance premiums rise, there is more asset destruction and hence more asset acquisition, and more jobs are created in "security." "Ordinary" people become more afraid of the society in which they live. They therefore tend to keep their heads down and lead compliant lives of passive consumers.
Money is the way, there is only money, and money is the answer to all questions.
Very few people are interested in what you have to say, because there are no obvious connections to money. Think "Money" and you will have more success.
No-one is interested in lowering crime rates, because more money can be made from high crime rates.
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Stephanie, no time to whine, take a deep breath and keep racing. It is competition after all, and Germay is (in total) in a much better shape.
My analogy would be that Franz has studied hard and made his homework, but the other kids in the class have spent the night at the movies instead. So the promised trip to the zoo has been cancelled for the whole class, and poor Franz got neither the zoo nor the movies. Stephanie's advice to the chap is to stop being a conehead and drift with the flow. I guess, he'll do better than that.
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ishkandar (#113) Some kids mature/develop slower/faster than others, so in that sense it was a bit unfair to make so much dependent on tests at 11, but life is unfair alas. Efforts are now being made to deal with some of this as many will know. Still, the best predictor of KS3/4 results is KS2 results (along with other CVA variables) and KS2/KS3 levels correlate 0.7 or so with the NFER CAT2/3 (The USA CogAT anglicized) and critics elsewhere should try telling experienced (competent) teachers that these measures weren't useful or predictive. The National Curriculum/SATs was a good idea. It's a shame this government made such a mess of education along with the economy and population and....
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Addendum (#108) As I understand it, the credit glut ove rthe last decade has been down to securitization whereby risk was spread and dumped on insuspecting others (much as Madoff's scheme did in helping his earlier investors profit with double figure annual returns at the expense of later feeder fund dupes' capital). Without securitization, the loans for risky domestic and commercial property 'investments', luxury service business ventures and much else besides just wouldn't have been made, so once that wheeze was removed, banks stopped lending and people started going into negatve equity and their businesses started drying up, the economy contracting etc. Putting interest rates up when the banks could not securitize anymore could only accelerate that process - where was the money going to come from to pay the interest? What is the USA and UK producing today? Manufacturing has been moved to the Far East where labour costs are low has it not? When most people think of manufacturing they think of a) males and b) creativity - the UK/USA has been a) feminized and b) dumbed down. Think of the attitude to science and engineering. Look to the media.... technology is played down, it's 'geeky', so is logic/research..... it's 'boring'... What's popular has to be 'fun'. Engineering and research is very hard work. Seen the degrees chosen and the numbers doing science A levels?
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ishkandar,
My goodness you have been busy! Is it raining there or have you nothing better to do today :)
Question: If the Chinese have it all sawn-up and are so advanced why don'y you go there? BTW you could do us all a favour and take JJ with you - but that may be unfair on you.
Sounds nasty (and I apologise for that) but, it that same defeatest tone that so nearly gave germany victory in WW2. It wasn't right then and it isn't right now.
Europe is big enough to look after itself if it has the will. By protecting itself it does not mean the end of international trade but it does give the possibility for millions of Europeans to go back to work!
John_from_Hendon says follow the money, whilst John does ask some very good questions on this occassion I believe he's wrong. Forget the money. Concentrate upon upon the true economic wealth (value if you wish). On a pan-European basis we have the majority of the natural resources and human resources to sustain ourselves and compete on an international basis - assuming that oil will soon be replaced as the major energy source.
So we either accept the future as the new Africa (because the Chinese are so good at what they do) or we wake up and DO something about it.
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#119
That would be a kind of short sighted version of it...the credit expansion's exponential curve began in 1971 when Nixon shut down the gold window. Since then, dollars have been backed by the belief that the US will continue to grow and that they will be needed to purchase oil.
This was because those countries like China and Saudi could only feasibly reinvest their dollars back in the USA, by buying T-bonds, etc, in the hope that in so doing, they would create further demand for their own exports, and avoid appreciating their own currencies by converting from USD to domestic. Countries like Saudi and China found themselves locked in a spiral with the USA, where the US could print more dollars, and they would just reinvest them back. This encouraged agreements like the OPEC oil prop, limiting oil purchases to USD, in order to keep the value of those current account surpluses in USD high.
This also caused great pressure on the USA to keep the opportunities for reinvestment of dollars there open. This resulted in a culture of 'growth', where everything from Enron to Freddie Mac were encouraged to produce growth statistics. This is what led to the need for securitisations. These SPVs like Fannie Mae were just offloading risk from the banks, so that banks could lend more, and assets would appear to grow.
In short the USD as world reserve currency has been a giant Ponzi scheme, and it is coming to its end. The Bretton Woods establishment, with the IMF and World Bank acting in favour of the US and the USD, has come to an end. This is the magnitude and seriousness of the financial crisis. It is the end of an era. Shame that the BBC economics journalists are not able to tell it for what it really is...
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JJ
Read this:
http://www.amazon.com/Dollar-Crisis-Consequences-Revised-Updated/dp/0470821701/ref=sr_1_1?ie=UTF8&s=books&qid=1247504227&sr=8-1
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#91
You don't seem to be aware that the bulk of China's exports are priced in USD hence the currency peg, comparing it to a basket of currencies (that you have done) is missing the point.
#121 nail hammer head
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I have just spent nearly a year in Germany, and I would say we need to become much more like them economically.
Saying you should inflate your economy with debt to a German provokes the same kind of reaction to asking them to put their hand in a meat grinder, they remember all too well what happened in the 1930's with hyperinflation and it's legacy.
I laughed when BBC news said Germany and France were not keen on Gordon's master plan to use quantative easing to get out of this mess.
Germany has many small shops and business producing quality products and I saw few empty shops, whereas in the UK they are everywhere. German property is also comparatively cheap which helps a lot, paying most of your salary or business profits in rent or mortgage does not make for a healthy economy.
When I left in April the shops were doing brisk business, and most shops were advertising for staff, yet we continually get fed propaganda thet they are doing worse than us.
If a millionaire has a 10% drop in earnings it's bad but not fatal, however if someone on benefits has a 5% drop in dole money it's a disaster.
The UK is definitely on benefits economically speaking.
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