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The future: Even more imbalanced

Stephanie Flanders | 18:12 UK time, Tuesday, 21 December 2010

The Bank of England's most consistently interesting economist had some bad news today for anyone worried about the problem of global imbalances. He thinks that those current-account imbalances are likely to get bigger, probably a lot bigger, in the next 10 to 20 years - and there may not be very much that anyone can do about it.

Andy Haldane, who runs the bank's financial stability division, has given some seminal speeches on the banking crisis over the past couple of years. In today's remarks at Chatham House he's branched out into international macroeconomics, to ask why global current-account deficits and surpluses grew so big in the lead-up to the crisis - and what is likely to happen to them in future.

His boss, Mervyn King has what you might call a keen interest in this issue. You'll remember that before last month's G20 summit in Seoul he warned that if the leaders didn't agree how to bring down these imbalances, "the next 12 months might be an even more difficult and dangerous period than the one we have been through." In the event, they agreed that they needed to agree, and that was about it. We'll probably see the same debate again next year, with China wanting a gradual path to lower Chinese savings rates and a stronger currency and America wanting more adjustment, more quickly.

The Seoul summit was disappointing, if not much of a surprise. But the message of Andy Haldane's speech is that even if the major economies were able to come with a "grand bargain" to resolve global imbalances, it might not make much of a difference.

Stepping back from the arguments in Seoul, he identifies some major long-term forces behind rising surpluses in the emerging market economies, and rising deficits in the West. Most of these trends will intensify in the next few decades - in other words, that the deficits and surpluses are going to get even bigger.

The speech is worth reading in full [311Kb PDF].

He starts by pointing out that the imbalances we have seen in the past few years are larger than any we have seen in the last 100 years, and they seem to have been driven by (a) more integrated global capital markets and (b) changes in national savings rates. The difference between what America invests as a nation, and what China and other emerging economies invest, is roughly the same as it always was. What's changed is that China and the rest are saving much more, and America and other deficit countries have been saving a bit less. With a more integrated global capital market, it's become easier for differences in national savings and investment rates to turn into different current-account positions.

Here's the question, as Haldane puts it: "Is the problem impatience in the West, or excessive patience in the East?" His answer is both - and neither.

Some say it is cultural differences: Asians have a "savings culture", maybe even a savings gene, whereas Americans have a deep cultural propensity to spend. But there isn’t much evidence of this. In one academic study, 68% of American students were willing to sacrifice a short-term pay-off, to get a larger long-term reward. The figure for Chinese students was 62%.

The two more important factors behind high Chinese savings rates are that Chinese companies retain profits, whereas American companies prefer to distribute them to shareholders, and Chinese households must save more of their income, to pay for their family's education, health and old age. As I pointed out in another post, the repressed Chinese financial system plays a big role here - giving companies no alternative way of raising funds to invest, and giving households such a bad return on their money, they have to save more and more of their income to keep up.

Switch to the US, and you can see that the American financial system has been all too efficient at getting financing to US companies - and US households - without anyone having to take the trouble to save. Housing equity withdrawal alone accounted for 4% of personal disposable income in the US in 2005, up from less than 2% in 2000. This rise was primarily due to poorer households getting greater access to finance: as Haldane says, "liberalisation fed impatience".

Intriguingly, Haldane thinks that rising income inequality in the US has also lowered the savings rate among poorer households, as families strive to "keep up with the Joneses". Among rich countries, it's striking that a higher level of income inequality seems to go with a larger current-account deficit. (see the chart below).


All of this is very interesting, you might say, but does it tell us anything about the future? The answer is yes - but perhaps not in the way you think. In talk of a "grand bargain", the focus has been on the level of real exchange rates (particularly China's) and long-term structural reforms, for example, developing a social safety net and a health system in China, to encourage households to put less of their income aside. Those things could be helpful, but they sound like small beer, relative to the deeper global trends that have taken current-account imbalances to such highs.

On this analysis, sweeping structural reform of the Chinese financial system would probably help more - especially if it made it easier for funding to flow to companies, and reduced the incentive for them to hang on to every yuan they can. However, that would involve the Chinese giving up control over the banking system. The current leadership will find it a lot harder to do that than to build a Chinese NHS.

And... even if they did both, Haldane argues that the combined effects of global capital market integration and demographic change are likely to make global current-account imbalances bigger, not smaller, in the years ahead.

First, emerging market economies are likely to get richer in the next few decades, and as they get richer they are likely to expand their external balance sheet - that is, to acquire more foreign assets. Assuming (and it is a big assumption) that the G7 economies maintain roughly the same ratio of foreign assets to GDP, Haldane reckons that the Brics would catch up with the G7, on this measure, by around 2035. By 2050, over half of all G20 external assets would belong to the Brics, compared with around 9% today. The US share would fall from 28% to 12% (see the chart below).


This may be an extreme case - for one thing, you'd expect the G7 countries to be increasing their stock of foreign assets, as a share of GDP, over this period (see my post from October). But, looking around the world, we are looking at a period of dramatic shifts in global financial power, and that could have some thorny consequences. As Haldane notes:

"If this path were to be even broadly followed, it would have implications for the scale of global imbalances, which will tend to rise as gross capital flows outpace GDP growth. It would have implications for financial stability, as the scale of gross capital surges (fuelling bubbles) and reversals (fuelling crises) increases. And it may also have implications for the dollar’s reserve currency status."


Second, there's our old friend, demography. As the chart above shows, there will be a rising proportion of "prime savers" in developing countries for at least another 20 years, while the share in the advanced countries continues to go down. Other things equal, that means savings in rich countries will continue to fall, while savings in emerging countries keep going up. The forecast is that demographics alone could increase India's savings rate by 10 percentage points of GDP by 2050. By that point, China could account for half of all global savings - the US, a mere 5%. If things are not so equal - the retirement age goes up in rich countries, perhaps, or the emerging market economies develop their welfare systems - that could slow down these trends, but it's unlikely to reverse them.

So where does all this leave us? I think it leaves the world facing a very difficult choice in the next few years, and it's not whether and how to revalue the Chinese currency. If Haldane is right, we either have to learn to live with large current-account imbalances, and all the destabilising swings in capital flows that go with them - or we have to stop having a fully integrated global capital market. It may really be that simple.


  • Comment number 1.

    At last someone is questioning the whole basis on which our economies are run. But the article seems to side step what the consequences are of

    " If Haldane is right, we either have to learn to live with large current-account imbalances, and all the destabilising swings in capital flows that go with them - or we have to stop having a fully integrated global capital market. It may really be that simple."

    Does it mean that we cannot look forward to continued upward path in our prosperity?

  • Comment number 2.


    I know that this is the season of goodwill to all men and women but this whole piece is complete and utter rubbish.

    I accept that, if you merely concentrate upon capital flows then this argument may have some validity. However, if you look at the consequences for the wider (real) economy of increasing global inbalances then a very different (and perhaps frightening) picture emerges. Trade imbalances have reulted in the mess we currently face. If they grow, higher numbers become unemployed, more domestic firms close and the whole economy is in jeapordy.

    One day our political leaders will wake up to the fact that their first duty is to the wellbeing of their citizens. When they do, they will have to accept that continuing with free market economics is actually preventing them from doing so. If they do not do so then they will add heat to the military option.

    Financial markets led us into this mess and therefore concentration upon the failed thinking will only lead us all further into the mire. Your only saving grace lies in your last scentances:

    "Haldane is right, we either have to learn to live with large current-account imbalances, and all the destabilising swings in capital flows that go with them - or we have to stop having a fully integrated global capital market. It may really be that simple."

  • Comment number 3.

    Let us remember the cause. A corrupt political system, most parties included, that allowed the banking lobbyist to deflect concerns when something could have been done to prevent the crisis. The root cause is the corrupt political system and until the regulation of lobbyist and the influence of banking and big business is more controlled the future will only be more of the same. This is a repeat performance only bigger. Those responsible, the banks and financial industry and their political handmaidens have gotten off without punishment...even rewarded. As cuts in services and higher taxes are in place those who benefited most are freed from contributing to this massive problem they caused. They are the elephant in the room. Until the basic cause of the problem is corrected nothing done will prevent a repeat. This is about who represents the interest of the nation and the people and who represents the interest of the wealthy....classic divide that happens when these imbalances in power occur. The government is simply a tool of the powerful. Things will certainly be slow to improve as they are on the wrong path leading to a hole that they may never climb out of while the bankers and financial services will simply relocate to Asia. The governments committed the greatest betrayal of public trust in history and now wish to hang their hats on the solutions to the problems they caused...only politicians can be that cynical. To solve these matters one must first be honest about the problem and there is no honesty in this process. You, the citizen wants too much....they gave the bankers hundreds of billions to prove it and will strap you with taxes and force you to purchase services that were once governmental so you don't have the funds to over-spend again. Free markets....Capitalism...what a joke...only the truly naive can accept public funding of private debts as anything less than a robbery of the Treasury. Never do they refer to the causes. The Gods of Wealth have spoken and the wealthy shall not be held in vain...."please allow me to introduce myself........." Symphony for the Devil seems an appropriate anthem for the times.

  • Comment number 4.

    FDD I agree entirely, complete rubbish.

    The analysis that it's all down to savings rates and the availability of investment capital is completely gaga. The Chinese have taken over from the West as the manufacturers for the world, it's that simple. We have become wedded to the idea that we can borrow ever more because our real income and asset values in the future will grow much more than the rate of interest we will have to pay on the debt. (Effectively ponzi scheme money for nothing mentality). This of course was and is complete balderdash.

    The Chinese on the other hand still used to almost a subsistence lifestyle save when they have surplus (just like we did until a couple of generations ago).

    The whole money supply and financil services sector we have developed in the West is a very unfunny joke. How can individuals and companies make vast profits (and losses) from repackaging debt and gambling on asset price movements? This isn't productive in any way and goes way beyond creating an efficient market and service to industry and commerce.

    We have to get real about what is real and should be invested in. More state control over the markets as per China is what we will have to do to provide any kind of sustainable future for our country and our children. We have to learn to save and incest our savings, not over leverage our unknown future earnings.

  • Comment number 5.

    Of course I meant invest our savings! The location of the 'c' and 'v' are a menace for the two fingered typist.

  • Comment number 6.

    Interesting analysis,and if related to the history of China it makes sense.The high savings culture reflects the periodic famines which determined the lives of the chinese peasantry and turned them to communism.But as industrialisation proceeds so have wage demands and the growth of a cunsumer culture,already evident in urban areas like Shanghai,Beijing and Hong Kong.As the Chinese become richer they will save less and spend more on Rolex watches,Burberry coats,Rolls Royce motors and the imbalances will adjust.

    Abstraction,divorced from its historical context is bound to be deterministic because it is vacuous and cannot be challenged.Societies evolve and change,the China of 2050 will be different to the China of today as the ancient memories fade and new desires become operative.

    Meanwhile new ways of growing capital, likely to be resource led will develop in the west as people lose faith in the ability of governments to protect the economy, or of savings to keep their value. The individualism which produced silicon valley and the first industrial revolution will be a critical ingredient that will diffeentiate us from the post agrarian cultures of China and India.

    There are new materials like graphene on which we will be base new technologies and new ways of delivering services,there are the medical technologies following decoding of the genome, including gene therapy to cure congenital disease,Three things are critical for us to succeed:-Economic stability and growth,properly funded primary,secondary and tertiary education,and social cohesion for a consensus so this programme emerges.There are huge humanitarian and economic challenges in Africa and Asia:Climate change,conservation,hunger and poverty,premature death and disease.There is everything for us to play for.

  • Comment number 7.

    Ms Flander's wrote:
    'Here's the question, as Haldane puts it: "Is the problem impatience in the West, or excessive patience in the East?" His answer is both - and neither'


    Remind me what was once posted on this site:

    Is there any other profession where you get to be wrong most of the time and still be considered an expert?

    A good recipe for an omelette is:
    2 eggs
    50ml of milk
    Add salt and pepper to season

    A good recipe for economics is:
    200 grams of mathematics
    50ml of politics
    Add sugar to taste.

    ‘Economics’ is politically warped mathematics.

  • Comment number 8.

    China (and India) do not have to play the game according to the rules of the USA unlike every country previously. A trade war is not only inevitable but desirable provided it a 'cold war' ie where rules are negotiated and enforcement through sanctions helps to concentrate the minds of both sides. The theories of the 'free' market basis of international trade need to be binned - major global corporations did this long ago.

  • Comment number 9.

    Hi Steph,

    I always enjoy reading your blog, it always gets me thinking (not always sure I understand everything though). It seems that Mr Haldane thinks that the imbalances make sense (at least in part) due to demographics and conditions in different countries. So do we really need to worry about them?

    If these groups were in the same country (maybe different social groups, genders and/or ages) I don't think we would worry about the imbalances so much. In this case we would worry more based on individual circumstances (pensioners not having enough savings, excessive credit, etc.) rather than the headline figure of saving or borrowing.

    Given that the circumstances seem to be here to stay (and imbalances seem to be a a permanent feature) surely we should worry less about the fact that they exist and worry more about people saving for pensions and things like that?

    I guess what I'm saying is - I've forgotten why we were worried about the imbalances in the first place!

  • Comment number 10.

    #9 Fred,

    "I guess what I'm saying is - I've forgotten why we were worried about the imbalances in the first place!"

    Let me jog your memory. Imbalances need to be paid for somewhere along the line. When you've got no more cash and maxes-out your credit card how are you going to pay?

    As for the domestic imbalances, that has already happened. People are loseing jobs, low interest rates plus inflation make savings worthless, the housing market needs to tank yet the bankers pay £billion in bonuses. Do you think that this can be sustained?

  • Comment number 11.

    Global imbalances helped create our bubble economy in the last decade (because the idiots at the BoE were blind or deliberately deaf!)

    We need to decide on policy choices to combat the loss of the G7 dominant position: to my analysis it would seem that the best action for us to take is the re-build our own manufacturing capability and to make things the rest of the world wants to buy. The UK's greatest asset is its skilled workforce and its biggest liability is it international banking. We need to play to our strengths. And by the way to help re-develop our manufacturing base we need the biggest (protected) home market we can get - hence join the Euro ASAP.

  • Comment number 12.

    Seem to have been a lot of know-alls here today. If only the world economy was in the hands of these guys we (a) would never have had the recent recession and (b) would never have one again in the future.

  • Comment number 13.

    Do the chinese sit down and over their rice bowls say: "hey, Ling, I think we'd better review our savings ratio, don't you?"

    Or do the few remaining Detroit car workers discuss over a beer whether their pension funds should reduce or increase their investments in BRICs?

    As the consumers, savers and productive workforce of the global economy, their actions and decisions are much more prosaic.

    The way that economists present issues like savings ratios as CAUSES in the global economy is laughable - they are very much tertary EFFECTS of primary influences, not causal factors influencing trends.

    The root cause of the global trade imbalances is the deregulation of trade and massive exploitation of repressed, low paid workforces in countries like China where totalitarian governments go into unholy alliances with multinational companies to entrench their control and wealth, whilst then dumping the goods and services into the developed economies where they are paid for by increasing mountains of debt - and the welfare costs of unemployment and under-employment are also loaded on to the taxpayer.

    The endless wriggling by libertarian economists and politicians to avoid facing up to the insoluable contradictions of laissez faire trade are what lead to these babblings about "savings ratios" and "grand bargains" as if they are the causes, not the effects.

    Ultimately if the Chinese end up buying up the majority of western assets, they will see them turn to dust as they are only valuable in a vibrant economy, which is rapidly becoming a thing of the past in the developed countries lke the USA - take a look at Irish commercial property or the delusion of Dubai to see what happens.

    The only way to create jobs in the west, rebalance trade and start reducing the debt mountain is to curb imports, promote domestic production and recast the banking system to deliver investment in the domestic economy - the libertarian experiment in globalisation has failed and economists need to stop wasting our time by constantly producing another set of chicken entrails to examine.

    The idea that UK production can compete with the slave wage, no-welfare, polluting and dangerous industrial environment in China with its rigged foreign exchange rate is a complete delusion - we can't - and so import controls are the only option.

    This change will happen whether we decide to take control of our own destiny and manage it, or if we sit back and wait for the world economy to hit the buffers, which it will inevitably do when it is no longer possible to run the printing presses anymore, bail out the banks again and again or fund the deficit mountains - or all three at once.

    Therefore the only remaining question is whether you are an anarchist - you choose to stand back and let the whole system collapse and see what emerges from the ashes - or whether you are prepared to square up and defend your community, nation and community and act now to prevent the chaos and suffering that will result otherwise.

    For the UK with our go-it-alone currency, our rising debt levels and massive trade imbalance, the Irish experience could be a mild version of what we will face if and when there is a really big "market correction" - this may be the point at which we finally realise at a personal level what the problem really is - and what the solutions might be.

    I note today's public borrowing figures show an "unexpected" rise in HMG borrowing - unexpected by those who are part of this self-delusion of the true nature of our economic problems - but totally predictable to the rest of us....

  • Comment number 14.

    I agree, the one way street is a difficult but crucial issue.
    But there is a trade-off.
    China is going to have to spend some of its dollars and that can be used to boost the US economy and other debtor economies the Chinese have foreign reserve holdings of, even though China will be taking greater control of those economiew, investment is still investment.
    The other factor is that China does not wish to either realistically revalue its currency nor does it wish to suppress its exports, nor does it wish to dramatically increase its imports.
    So if wee want to continue then China will have to accept a pan-western QE stimulus which will have the downside of potentially devaluing their holdings, but will increase the flow of exports from China and would probably work out still in China's favour.
    I call it Quantitative Release.If Euro,USD, Sterling and Yen all did it together it might only impact on the BRICS CURRENCIES.
    It is quite Gordonbrownian, but I wonder, could the Coalition have the intelligence and courage to pursue it?

  • Comment number 15.

    Richard Bunning: "Therefore the only remaining question is whether you are an anarchist - you choose to stand back and let the whole system collapse and see what emerges from the ashes - or whether you are prepared to square up and defend your community, nation and community and act now to prevent the chaos and suffering that will result otherwise."

    Good post. The thing that I often see here is the idea that people need to mobilise, and that getting out to protests will shift the government's perspective. I can see why that is attractive, but surely the overwhelming majority of Brits are hell-bent on buying Chinese manufactured tat? If even 1M people got onto the streets to protest about trade issues, 30M that same day bought a product that contained something made in China. Money talks, and until we vote with our wallets will anyone listen? And buying non-Chinese becomes ever more of a sacrifice during times of high inflation.

    I think most anarchists use mobile phones, buy food in plastic containers and use computers. All contain many components made in China. In the West we are usually happy to meet our commitments so long as it doesn't impact us in any way. Witness the fall in pollution during the recession but during the boom times we only agree to buy plastic bags from M&S to assuage our guilt.

    I guess I'm wondering if all the people winging about China are willing to accept the cost of rejecting her? So far I think the majority are not keen. If so, how can we square the distributed nature of capitalism that makes "rational" clouds of individuals so easy to "divide and conquer"? I think the answer is a well educated population - so I'm worried! Sorry, a bit nihilistic.

  • Comment number 16.

    re #7
    Economics is about choices and, possibly, the consequences of those choices,
    Politics is actually about making those choices and, probably, clearing up the mess.

    A Happy Christmas to all posters, wannabe Economists and Stephanie.

    From the EconomiCist ...

    Hey! Let's be truly joyful out there, today, tomorrow ... for a whole week!

  • Comment number 17.


    Very good posts and right on the money.

    Just consider some macro-economic likelihoods though that will dwarf other economic factors, namely how much the whole globalisation of trade is dependant upon cheap energy and the disposible income this enables for the population to be consumers of all manner of 'stuff'.

    Oil is now $90 a barrel. Opec is still convincing the world it has loads of spare capacity (6 million barrels per day they currently say now), however, this is unaudited. Even at todays high prices they have been unable to reach their peak production of seven or eight years ago and the giant fields of Saudi and Kuwait are past peak and in production decline. The world's largest oil exporter currently is Russia and they too are down from the volumes they could produce four years ago. We are scrabbling around for oil anywhere it can be found (Canadian Tar sands, deepwater offshore, Arctic wilderness) but these will never replace the losses from the giant fields of the Gulf and Russia declining.

    Couple with this the desire and demand for energy in emerging nations. China alone is doubling the amount of oil it requires every decade (currently 9 million barrels per day). Any child can see when they choose to look that these are fundamental economic problems that will force revolutionary change upon our economies yet nobody in government or the mainstream media gives it more than the occasional passing comment.

    In the 2011 to 2014 timeframe the mainstream will wake up to the reality of our energy predicament. It would be better if we did this now albeit already much too late to avoid huge lifestyle and economic negative impacts. However, better late than never and better now than in two or three years time when the hole we will be in will be even bigger.

    Sorry to sound like the grinch. Make merry this Christmas and then roll up the sleeves and confront the hazards of 2011 and beyond.

  • Comment number 18.

    Imbalances matter because eventually you get to the stage where all your income is paying off the interest on the debt. You therefore cannot service any more (even if you do not get your interest rates raised, as would be likely). At this point you are stuffed and will be on subsistence forever more.

  • Comment number 19.

    One minor issue is that the BRIC countries and more importantly China need the west as much if not more because we make up so much of its market. If the US shut up shop then China would be hurt possibly fatally in its current state. As I have said many time in the past China needs to grow its economy in double digits just to stand still for it has massive infrastructure programs that it must continue with for it has a lack of basic resources. Power and water being at the forefront but there are many more. There is also the fact that all the BRIC nations are suffering from a inflationary wave and a property bubble which in all is forecast to burst in the not too distant future. India is in a similar position but just add food to their list. Russia has to invest billions bringing up to standard its industries if it is going to be able to maximise the benefits from its natural resources and the same can be said for Brazil. So not all is rosy in the garden and the markets are already looking for the next rising stars. Lets face it the markets show little if any loyalty to any nation they just follow the money.

  • Comment number 20.

    An extremely interesting article and a timely speech by Mr Haldane. It may well be the first major indication that the World Trade Organization is in for some overhaul. Personally I have always had reservations about the whole concept of World Trade and think the logical outcome of the idea is what we are experiencing now.
    To suggest that China should follow the financial systems of the West is a bit much, don't you think.

  • Comment number 21.

    "Ernst & Young sued in US over Lehman collapse"

    Now there's a thing and it would be interesting to see how much the other big four benefited from the collapse. For they had hundreds in picking over the corpse and in fact they are still there making a living off the rotting flesh.

  • Comment number 22.

    These big brains failed to predict the current economic cock up, while all around them binged on credit.
    So thinking 10 or 20 years ahead is "Mission Impossible," but I suppose it earns someone an income from speech making.
    The world is an uncertain place, the earth beneath our feet is unstable. The human race might not even be here to worry about global imbalances when Yellowstone blows or a meteor hits us, unlike guessed at economic predictions ... both are scientific certainties.

    Merrry Christmas to one and all in this new Ice Age.

  • Comment number 23.

    Paul Krugman blog 15 September 2010: "First, real appreciation leads, other things equal, to a larger current account deficit, which has a contractionary effect on demand. Up to a point, this can be offset by cutting domestic interest rates. But if it’s big enough, it can push the emerging markets into their own liquidity traps. In effect, the OECD can export its liquidity trap to the developing world via capital flows. This doesn’t seem to be happening now, but it’s something to watch for. Second, we can have the global savings glut II: the revenge of the North. Robin Wells and I have argued that the original GSG, driven largely by developing country surpluses, was probably the main initial driver of the North Atlantic housing bubble; might the new version, driven by depressed demand in the North, produce comparable trouble in developing countries? Interesting stuff — and more pleasant to think about than US politics..."
    With regards to Mr Haldane, Barry Supple years ago called this type of thinking 'declinism', and J M Keynes said 'in the long run...'. And here we all are.

  • Comment number 24.

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

  • Comment number 25.

    The problem whne you start this imbalance talk is that the numbers are so unsatisfactory in terms of accuracy.Balance of payments figures are perhaps the most inaccurate numbers we get. I saw an article pointing out this problem just over a week ago.
    "If you look at the analysis you see that in October the United States had a trade deficit of some US $25.5 billion with China. If you look at the Chinese figures released on Saturday you see that in November China exported some US$26.456 billion worth of goods to the US (you may already be spotting the problem) and imported some US $9.732 billion leading to a trade surplus with the US of US $16.724 billion! So a growing Chinese economy with an improving balance of trade is reporting a smaller trade surplus that what America thinks she has."
    So who is right and more importantly can we have any faith in conclusions based on such numbers?

  • Comment number 26.

    #25 Richard35,

    The numbers are what they are - inexact indicators. The only way that they make any sense is to follow the trends and then look around you.

    Try buying a UK made tv or even an everyday pair of shoes and ask yourself why that is. Then ask yourself why they are pitched at the prices that they currently are and are the really 'cheap'. Then take a look at the UK's biggest containerised export -it's fresh air! Then try telling yourself that it's only a staistical anomelie.

  • Comment number 27.

    I like Andy Haldane and think he talks a lot of sense, with a bit of luck he will be the next Governor.

  • Comment number 28.

    If you have a moment, we'd like to make contact with you re this piece and some others where we have been doing similar work.

    Bob McKee, Chief Economist
    David Roche, President
    Independent Strategy

  • Comment number 29.

    As usual mainstream economists fail to grasp what's really going on because they try to measure everything with market prices.
    This is like measuring with a piece of elastic.

    To be able to grasp what is going on a model is required that uses values (Marx's socially necessary labour).
    Prices (exchange-values) need also to be included, because prices move around values - there's good reason to believe that prices are above values & a correction will occur (QE is just postponing the inevitable).

    I have a good job (luckily compared to many).
    However, I would be more than happy to spend a year building this values model, if there are any takers out there willing to pay for it.

  • Comment number 30.

    There are winners and losers with global trade ... Britian is now a net loser

    Britain is still in medium and long term decline because the stimulus efforts and credit bubbles are a political gimmick to allow some to stay in political power ... and this has all proved unaffordable and has near ruined our economy and national finances.

    Until the UK learns how to deal with the global economy with capital flows, trade, imports, rebalancing, energy policy etc ... guess what!!!

    Remember that all major Chinese capital investment both domestic and overseas is strictly controlled by the communist dictatorship as part of their own internal economic strategy ... and they're outwitting the free market nutters in the west at every turn.

    Strategy pays and wins ... that is why Britain needs a strategy and countries like Japan need a new one.

  • Comment number 31.

    #25 As #26 says the numbers represent a trend, but the most significant problem I can spot is that one set of figures is for Oct and the other is for Nov. It is certainly possible that you have a 33 % fluctuation over different time scales.

  • Comment number 32.

    6. At 8:29pm on 21 Dec 2010, bryhers wrote:

    "As the Chinese become richer they will save less and spend more on Rolex watches,Burberry coats,Rolls Royce motors and the imbalances will adjust."

    Nice story - but shame it didn't work for Japan.

    There is no reason why the Chinese should do an about turn on their traditional behaviour (and certainly not quickly). The Chinese value education and we're busy preventing access to it - who do you think will be 'running the world' in 10 years time if this is a sign of things to come?

    Our only hope (well the only one offered by an impotent Government) is that we devalue our currency and all take wage cuts in an effort to undercut the opposition.

    This is bourne out by the policies of Government.

  • Comment number 33.

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

  • Comment number 34.

    But surely all this says is that almost all assets in the West are vastly over valued and that no economy can continue to expand forever unless we can colonise space.
    This is why the market was flooded with overvalued paper because there is no base of asset's that back up the market, no gold that backs up paper money. The West cannot produce cheaper than those that pay less and ignore pollution and safety- it may not be fair but it is true. While the UK wears a hair shirt over Carbon pollution China builds a coal fired power station a month, in one year more than the whole electrical power generation in the UK. The whole Western economy looks like a pyramid selling scam but oil is running out and there is nothing to go into the bottom of the triangle. If the UK does not get some really competitive energy in the next ten years no politicians promise about anything will be worth a farthing and in the USA a red cent or is that a plugged nickel.

  • Comment number 35.

    'It may really be that simple.'

    It is that simple. The structures put in place are not designed to cope with the shift in demography and the in growth expectations of the typical citizen of the west. This is nothing new, warnings have been in place for decades.

    It would appear the public have to learn the hard way. The political system in the UK where pandering to lobby groups and block common interest votes does not help reform. So it has to get worse not better.

    Environmental pressures, commodity supply pressure, peak oil will all apply further pressure to the idea that the avergae citizen can aspire to live like an Eygptian pharoah.

  • Comment number 36.

    Yesterday's UK borrowing figures show just how far the country is from being out of the water. Equally, if the tax cuts in the US fail to stimulate jobs growth, the Administration has very few remaining options to stimulate the economy. With many people still under-allocated in emerging markets, it would be wrong to dismiss their charms just yet.

  • Comment number 37.

    12 lacplesis37

    Theres nothing smart about reading or a reading fringe opinion which often is discounted at the time because it doesnt suit short term profit taking. The key points leading to this have been pointed out for decades. If you introduce medicine and welfare people live longer. It is no good leaving stuff to work its own way out. Try googling the 'tragedy of commons' written in the 60s. Unfortunately fringe issues become mainstream in time.

  • Comment number 38.

    34 Freedomknight

    Yup and thats before you start tallying up the carbon from concrete structures (5 percent humanities carbon output comes from concrete) being put up left right and centre - or the 3 Gorges dam.

    Goods imported have to have a carbon tax.

  • Comment number 39.

    Carbon phobia is now a bit like the millennium bug that never was expensive,boring waste of time........ it's now a dead duck so drop it, no-one cares about carbon anymore.
    Naughties End of the world clapboard claptrap.

    Scientifically it's hogwash and notice no mention of global warming anywhere now we are freezing and snowbound...... it's now called climate change to escape the obvious fact that it was all baloney.

  • Comment number 40.

    and how wasteful it really is to cut expenditure ....
    accountancy costs,
    unemployment benefit,
    massive redundancy payments,
    pensions boosts,
    lease terminations with penalty clauses and dilapidations,
    consultancy fees,
    expensive contracting out of services newly dicovered not to be so expendable after all,
    u-turn poilicy changes ......
    and pork barrels for Torydem constituencies.

  • Comment number 41.

    Evidently our illustrious hostess has gone completely bananas.

  • Comment number 42.

    Iran is revolting because their petrol is going up up from 10 cents a litre to 40 cents a litre.

    Meanwhile in Mugland we're paying 2 dollars a litre.
    And it is going to get worse.
    We are paying a stupidly large amount of carbon tax, already, yet we are a miserably, horribly cold country .Petrol costs should be halved to make our economy competitive.

    Let all the carbon maniacs turn off their central heating and freeze themselves to death.It would do us all a favour and would reduce global warming.

    I am fed up with eco-tyranny.

    As a new religion it is deadly boring and it is ruining our economy.
    Our power bills are already horrendous , and now we are supposed to pointlessly recapture the carbon we are burning ........gimme a break!

  • Comment number 43.

    The reason why consumerism exists in the USA is because the US defaulted on gold convertibility and then later decided to pay down a government deficit, forcing foreign dollars recirculating into the USA through the private sector.

    Inequality follows, but that was also condoned by the free market nutters that thrive on this stuff in the US too.

    In a godverdamnung nutshell. Mzzzzz Flanders needs to unkoolaid her thought processes methinks.

  • Comment number 44.


    Oh, speaking of recirculating dollars, eurodollars and et al, I don't think Western Europe's little attempt at raising the status quo ante zombie is really working either. Austerity is a failed resuscitation.

    Let's move on. How about forgetting the USD and DOING SOMETHING NEW???? For crying out loud.

    Witness the Euro, our rising star, this christmas day - 3 wise kings are no doubt off to change their gold, francs and Mercs for a couple of brand spanking new Eurobonds....ah the future is the sweet smell of Swiss cheese, Audis, autobahns, croissants, strong coffee, good wine, cured pork, loose Slavic women and skiing lessons, all state subsidised of course.

  • Comment number 45.

    Sometimes I feel a good rant coming on ......

    I hate the orthodoxy of blamimng booms for crunches, but I have to admit it is not sensible to allow people to nearly bankrupt themselves buying rubbish.I have to ringfence of mortgages for this as I think mortgages are worth overstretching for.

    And apropos of nothing I was a former Green voter and now loathe their fundamentalism and intolerance.
    The earth is a sparkler ........ it has gone bright and hot and will fizzle out.No matter what.
    Quite how or when is really not that important in the long run of things.
    So greenies, get out more, enjoy the sunshine, take a plane trip to Tenerife, buy a Porsche 4x4 if you have the dosh. Take your mum or your girlfriend out for a spin.You might as well before it is banned by the next lot of eco-maniacs, your girlfriend chucks you or your mum gets dementia.

    And as for the credit crunch.........


    Maybe we should ban credit insurance, as it encourages default.
    But let's treat credit cards and pointless loans like we do tobacco and alcohol , and have it banned for under 21s and calculate allowable liability as a small percentage of income.
    Ban them from the internet.
    Give people something else to do on their computers than endlessly shop for daft things they do not need.
    I have 2 opinions about this.Bling is good for the general economy but bad for the personal economy.But being cheered up is important too and can trigger positive changes.There is an optimal balance.
    Sometimes I think tally ho away we go and other times I think WHOA!

    Let's stop forcefeeding credit to zombies watching daytime tv.
    Make personal loans limited to a percentage of disposable income.
    Stop 2nd credit card acquisition.
    Publish research on whether zero interest credit card offers reduce or increase indebtedness and if so ban them.
    Publish the demographics of loans and the marketing tactics and credit problems encountered by young people and how the working classes and uneducated are preyed upon by credit marketing techniques.
    Let's have more programmes about how to buy a decent car for a few hundred quid, how to tart up a house for buttons, how to get out of debt ,and how to find work.How to set up a tiny but profitable and low -risk business.How to pay off an overdraft.
    Let's send defaulters to credit schools.
    Have internet games where you have a budget to manage and can make dummy purchases and take out dummy loans and see what happens to your finances.

    Maybe a tax on stupid credit cards and other personal loans is also a good idea.
    Let's ban silly loan mailshots and ban any advert with Carol Vordemann.
    Publish research about what happens to people taking out roll-into-one loans and show independent market research findings of consumers after they have taken out PCP carloans for years and own nothing and owe everything.
    Print these findings onto the loan agreement that has to be signed.
    Rather like a health warning for addictive credit products.

    Supermarket loans look like paving the way for an explosion in credit loans the way that they increased alcohol purchasing hours and number of days open.
    Ban valuable cash being spent on stupid ringtone credit agreements .etc.
    Now we taxed 3G, HOW COME WE DON'T TAX SATELLITE, HD, and 3D?
    A Murdoch tax would be quite lucrative as he is a sitting duck for one.

    Let's have a Facebook tax, an Amazon tax, a Twitter tax , an internet gambling tax, a porn tax and a special tax for IPADS AND IPODS AND IPHONES .....A CONCEITED TAX.

    Let's have a curtailment of tv roulette and make internet gambling service providers unlicensed criminals if the gambling is peddled to the under 21s or those with a gambling problem.Ditto internet poker.
    Let's ban stupid loan mailshots and telly adverts with Carol Vordemann.
    Just as cheap and freely available booze increased lager louts, so overly attractive credit products cause credit louts.

    But I think housing is different, because the money is not being used to buy a consumable depreciating and unsellable asset, it encourages debt repayment and capital appreciation.
    And let's look at house prices. If they get too high they come down anyway,eventually and have done so .Then they go up again. We do not need to double the pain of those with big mortgages by sticking our nose into somebody else's private loan agreement and torturing them.
    I'm not talking about loansharks but about this endless reptition of the interest rate cycle .Leave us where we are.The world has not ended.
    The cure kills more than the illness.

    I look out the window and what do I see?
    Yes, snow and ice and we all think it is rotten for the economy.

    Well not for my wife, she has been shopping like a trooper.
    Comparing this and that, buying boots and hats.
    Car showrooms are sold out of 4x4s til the summer!
    Service garages are mobbed with broken down cars.
    Hotels in cities have been mobbed.
    Sledges, hats, heating bills, salt , shovels, car socks, taxis,
    coats, curtains, funerals is an ill wind blowing no-one any good.

    I am actually thinking the economy is not going to be as badly affected as we thought.


    In the snowy weather should we not be giving 4x4 ownwers a tax-break ?.....
    We made it into work, we gave people lifts, we didn't cancel appointments, our kids got into school as did the neighbours kids, so are we really so bad?
    We did not have to burn our engines all night because we were not stuck in the snow.We did not drive home again.
    And Chelsea tractors do not have to commute as far as Milton Keynes Fiestas commuting to Swindon do however, and burn up more carbon than the Sloanies ever did.
    It was all the 2wd Beamers and Mercs which cluttered the streets wants one now and many owners are desperate to get rid of them and buy a 4x4.Mostly foreign made except for Landrovers and Honda CRVs.

    Merry Xmas.

  • Comment number 46.

    Interesting article Stephanie.

    I have always wondered why our exchange rate stayed so strong considering our persistent trade deficit. As you point out the only way this can happen is if the demand for our currency comes from elsewhere and this 'elsewhere' is (or has been up to now) has been in order to purchase UK assets ranging from football clubs to companies to property.

    This has no doubt help to maintain our standard of living as has the easy access to private debt. Both of these factors may well be at a turning point and you have to ask how we will fare in the future. I mean what's left in the closet?

    The answer, as many posters have been screaming at this blog since day one, is to start making stuff again and to build up employee skills and to get people working. A little austerity may be no bad thing for the British character if it is for the right reasons but successive politicians and the mainstream economists who advise them honestly do not have a clue what is going on and our making sure we are leading the race to the bottom.

    The VAT rise next week is a perfect example. To use one of Dempsters' phrases How, in God's name can you raise taxes when there is no significant recovery in output and unemployment is rising. It displays a complete lack of understanding of basic macro-economics and what makes it worse is that it is supported by the Governor of the Bank of England.

  • Comment number 47.

    It's quite amusing the number of people shouting down this article, while broadly agreeing with everything that was said, presumably because Steph isn't baying for rivers of blood in the streets.

  • Comment number 48.

    #39 onward-ho wrote:

    Carbon phobia is now a bit like the millennium bug that never was expensive,boring waste of time........ it's now a dead duck so drop it, no-one cares about carbon anymore.
    Naughties End of the world clapboard claptrap.

    Scientifically it's hogwash and notice no mention of global warming anywhere now we are freezing and snowbound...... it's now called climate change to escape the obvious fact that it was all baloney.'

    onward-ho, I enjoy your usually wildly upbeat posts
    (and I usually disagree with the contents).

    You hit the nail right on the head with that one.

  • Comment number 49.

    39. At 10:17pm on 22 Dec 2010, onward-ho wrote:
    I am just waiting for the so called experts to tell us this has been the warmest December on records, Oh sorry the coldest now we have found climate change rather than global warming.

  • Comment number 50.

    Once again several of you are mixing up climate and weather.

    I don't think anyone will ever settle this argument about change.

    On another note more relevant to Stephanie's article:

  • Comment number 51.

    From another blog, I was pointed at this website.

    It is well worth looking at and will only take a couple of minutes to read. It shows the relationship between the government and non government sectors for the US. I wish the UK ONS would publish data in this form [If they do, I have yet to find it].

    In the UK, the government policy is to reduce the deficit, [and many would like to see it actually go into surplus]. This graph shows what will happen. The non-government sector will have to reduce its net saving; debt will not be paid of and industry will go into into decline and recession. The only way for us in the non-government sector to reduce our debt is if the government runs a deficit. As exports are unlikely to exceed imports, there is nowhere else for the money to come from.

    This is a matter of simple accounting. Its not up for debate.

    The policy and direction that the direction in which the various sectors are then driven can be debated. You can go for austerity - effect will be a downturn in the economy and IMHO recession. Or you can try to give the non-government sector a chance to pay off its debts and get a better balanced economy after the debt binge of the last 10-20 years.

    Austerity will not, in my view, allow for a better balanced economy to evolve. The latter approach at least has some potential to do it.

  • Comment number 52.

    The problems of imbalance are on the national level in the West, our rich are far too rich in relation to our poor. This is the imbalance which must be addressed by the West.

    The International imbalances between the G7 and the G(rest) should be allowed to converge over time so that a country with a population of 50 million has a total national income of 1/10 that of a country with a population of 500 million.

    Natural resources should be considered the property of G(all)

    I'm pretty sure the Chinese/BRI are happy with that and they have expressed (repeatedly) their willingness to support our economies in that type of goal.

    Target date for completion 2050 (mainly because if I'm lucky I might see it :)

    Only the greed of the Western leaders stands in the way.
    (I recommend a short sharp chinese solution to that particular problem)

  • Comment number 53.

    #50 Kit

    I understand climate is made up of total weather events over time,
    I also understand CO2 levels rise after climate temperature rise, not before, CO2 rise is an effect not a cause.

    It is handy in diverting attention from the real pollutants such as mercury from gold production (not too much CO2 though), PCB pollution from electronics (not too much CO2 though), hormone pollution from pharma (not too much CO2 though), plastic waste pollution in the seas from petro chem (not too much CO2 though).

    It is dirty business that is killing us and the planet not CO2 and dirty business will fight dirty to keep doing it and they are happy to let CO2 be a distraction.

  • Comment number 54.

    2. At 7:00pm on 21 Dec 2010, foredeckdave wrote:

    One day our political leaders will wake up to the fact that their first duty is to the wellbeing of their citizens. When they do, they will have to accept that continuing with free market economics is actually preventing them from doing so. If they do not do so then they will add heat to the military option.


    This point is is totally irrelevant as far as the UK economy is concerned. All our problems are our own making.

    The UK has done nothing to re-balance over the past 40 years. The banking sector has grown out of control and the people bought-off with faux booms and bubble, and they were stupid enough to really think it could go on for ever.

    The only big surplus country in this part of the globe is Germany and if re-classify Germany as Greater Germany by including the rest of the EUROZone the surplus goes away.

    Free market / free trade is a 'flawed beast' but a lot better than any system involving the heavy hand of the state. So any attempt to fix the game via tariffs would be a definite own goal.

  • Comment number 55.

    45. At 00:41am on 23 Dec 2010, onward-ho wrote:
    Sometimes I feel a good rant coming on ......


    Well it was certainly long.

  • Comment number 56.

    30. At 1:34pm on 22 Dec 2010, nautonier wrote:
    There are winners and losers with global trade ... Britian is now a net loser


    True. But why.

    Not the fault of cheap labour overseas. Entirely our fault for devaluing education, investment and R&D.

    This country has become a 'net loser' because for far too long it has been run by The Chaps for The Chaps.

    Wake up.

  • Comment number 57.

    3. At 7:16pm on 21 Dec 2010, ghostofsichuan wrote:
    Let us remember the cause. A corrupt.............


    Yes. Thats about it.

    They will overreach themselves and pay the consequences.

    It terms of quality and integrity and ideas and leadership we do not have any sort of Political Class. Nothing.

    Civil disobedience, riots, crime and tax evasion will be the only growth industries in the medium term.

  • Comment number 58.

    39. At 10:17pm on 22 Dec 2010, onward-ho

    48. At 09:07am on 23 Dec 2010, BobRocket

    Yeah right. Whatever you want to think, or not think as the case may be. Pollution doesnt exist, There is no problem. There are also no micro particulates in the air affecting cloud formation and precipitation. There are no dead sea zones. Biospheres are not vulnerable. etc etc. The effect of CO2 has been proofed in the lab in energy transmission chamber tests.

    BTW the weather has nothing to do with it - the UK is on the same lattitude as Seattle just kept usually a whole lot warmer due to the Gulf Stream. The current cold weather relates to jet streams moving out of position - south, which has also been the reason we have had wet summers, jet streams moving south, it looks to be becoming the norm. PS Some even suggest the Ethiopian famine and subsequent droughts relate to industrial pollution affecting weather patterns. But nevermind.


  • Comment number 59.

    54 TheComingStorm

    Yup. The Wests problems are largely made by the West. But it is convenient to blame Johnny Foreigner even when he or she are paid a pittance and effective slavery exists in some cases - even in the wonderful BRICs we are supposed to wish to emulate.

  • Comment number 60.

    45 Nurse! Nurse!

  • Comment number 61.

    What have we got that anyone wants to buy? ......the main thing is our country and being a part of it.

    Let's sell UK citizenship for a quarter of a million pounds to anyone from anywhere and if we get five hundred thousand new citizens that's £125 bln to sort out our deficit, the housing market would be sorted and the banks afloat with cash.
    There would be lots of clever business people and professionals and lots of bright kids.
    Let's make ours the passport of convenience.


  • Comment number 62.

    61. At 2:04pm on 23 Dec 2010, onward-ho wrote:
    A good idea, but very few of them would stay

  • Comment number 63.

    Happily, there is nothing new about this scenario of imbalance of trade throughout history.

    But, the new and unique main complication is the 'investment' arms of major banks, the bond markets and tax-payer bail-outs of these financial 'institutions'?

    No doubt, we will be the last to know about the next 'crisis'? Can we safely assume that the Bank of England is softening us up for an interest rate rise in 2011 to contain inflation?

    Nothing like history repeating itself under a Conservative government? No, we don't have a political bias - all we care about is keeping our jobs and meeting our mortgage, Council Tax bill, heating and electricity bills plus 5% VAT; car repairs/MOT, petrol costs to get to work and home again - 20% VAT to come.

    Oh yes, food bills and basic telephone and internet charges plus 20% VAT in January. Luxuries like basic dental treatment. Don't get us started!

  • Comment number 64.

    45 Onward-Ho wrote:

    "But I think housing is different, because the money is not being used to buy a consumable depreciating and unsellable asset, it encourages debt repayment and capital appreciation.
    And let's look at house prices. If they get too high they come down anyway,eventually and have done so .Then they go up again."

    I'll bet you still believe in Santa Claus and the Easter bunny. I wish I had such blind, naieve optimism mate.

    Merry Christmas anyway.

  • Comment number 65.

    See/ Listen to this Link....

    Is it true that 25 individuals in New York are going to make as much money as 658000...Yes SIX HUNDRED AND FIFTY EIGHT THOUSAND Teachers.

    I honestly cannot believe this or if it is true then there is something far wrong with Wall Street.......The City is probably similar......Questions ought to be asked....Why not ask the PM.?

  • Comment number 66.


    "If Haldane is right, we either have to learn to live with large current-account imbalances, and all the destabilising swings in capital flows that go with them - or we have to stop having a fully integrated global capital market. It may really be that simple."

    Wow,really difficult choice there Stephanie.

    1930`s era Germany found a way to prosper outside the "global capital market".

    And here in blighty we refused to let German cruise ships filled with ordinary German workers dock here,out of embarrassment at the way we exploited our own workers.

    What did your business school teach you about that Stephanie?

    Just what is it that`s so good about this "global capital market" then Stephanie?

    It`s an economic impoverishment machine really isn`t it Stephanie?

  • Comment number 67.

    Following my previous posts on 'cruel and unususal for savers' I see that there is widespread ignorance (of technical economic understanding) on the relationship between VAT and import tariffs ... particularly for those countries, like the UK, as being 'net importers'; I see the 70's having some relevance to the current UK position although in the 1930's most of the UK's productive sector and supply chains from Empire were intact.
    One of the main differences between the 1970's and what we have now is the further damage done to the UK productive/manufacturing/primary agricultural sector ... as demonstrated by continued mismanagement of the UK economy by both main political parties.
    The main issue for the UK which has upward pressure on inflation and damaging consequences for all of the UK economy is the massive blanket import tariff ... called VAT and which is very destructive to the UK particularly.
    If one tracks back along the BOE/MPC 'inflation management fiasco' ... you will see that UK inflation is more sensitive to VAT than anything else. I read the FT ... you would think that the ft knows something about money ... but hardly ever a detailed analysis/mention on VAT viz-a-viz the British economy and the unique circumstances of Britain.
    All those who argue against carefully targeted and balanced import tariffs need to get some basic lessons in economics as including the MPC/BOE/HM Teasury and special govt advisors ... as singularly, it is the idiotic blanket application of VAT against the background of the UK's ever increasing higher cost base ... which is holding back our UK domestic economy.
    VAT is the most hideous tax ever invented and its increase next month will ensure that UK interest rates rise next year and this is not the govt's fault as such ... it is the idiotic advice that they're receiving from the Whitehall economics tax mad culture.
    The danger now to the UK is that 2011 interest rates will rise and inflation will rise and the result will still be near zero growth rate for savers and in real terms will be damaging to all and sundry ... particularly if the ECB keeps inflation and Euro interest rates below those in the UK ... the UK is going backwards again.
    The UK must reduce VAT below 17.5% and make up the difference and use much more targeted import tariffs if it is to avoid a much weaker economy going forward. Reducing VAT would give UK consumers more spending power and the choice to avoid higher costs items by buying British. This would give a massive boost to the British economy ... probably the biggest we've seen in living memory ... but can still, if necessary, be tax neutral on what we have now!
    Comparison with the 1970's and 1930's is always of interest but it is what is happening right under our noses ... that is important.
    China is helping prop the Euro with bond purchases why ... because European VAT as paid by the consumer and not by the importer - enables the Chinese to push trillions of GBP value goods on the EU every year.
    Hopefully, even the BBC may consider VAT in some considerable detail, at some stage, as currently it is killing our UK economy.
    If UK VAT is significantly lowered and counter-weight import tariffs brought into effect quickly:
    1) inflation can be brought down immediately
    2) interest rates will not have to go up as much or as quickly
    3) The £ GBP should remain stable in excahange terms and risk
    4) UK govt will not have to raise incomes taxes and face a higher defict and debt
    5) items 1-4 can easily run the UK into trouble with the bond markets again - so lowering VAT and using targeted import tariffs is now vital to the economic performance of the UK
    6) GDP so what ... Britain had solid GDP figures when the UK economy was on the verge of a debt crash in 2008/9 and so keep harping on about GDP is not so important
    The mis-application of VAT to the UK economy is a matter of immense ignorance and incompetence as we've seen recently with Darling and Brown et al.
    An extra ... 20% ... on nearly everything we buy irrespective of where it was made and what effect buying it has on the UK economy?
    Think about it! All down to the mis-application of VAT! The only possible justification for having any VAT at all is that our UK government keeps spending money which the UK taxpayer cannot afford.
    'Its the VAT .. stupid'! Scrap or heavily reduce VAT and get a proper hold of UK trade and imports and the UK will to some extent automatically rebalance as both UK and global consumers create additional demand for British goods and services... and the UK/ most will do a lot better.


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