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What goes down...

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Stephanie Flanders | 12:52 UK time, Wednesday, 3 June 2009

Why is the pound rising? Because it went down before. Why might it go down in the future? Because it is rising now.

You may find that a somewhat vacuous explanation for the recent strength of the pound - which hit a seven-month high against the dollar and the yen earlier today and has also gained ground on the euro. But there is an argument buried in the banality. Also some good news for the UK.

Sterling pound and US dollar notes

Think back to the last three months of 2008, when the pound was falling like a stone. At that time the fear was that the world financial system might be falling off a cliff, leading to Japanese-style deflation for much of the world and/or a repeat of the Great Depression.

If you're an international investor facing that kind of economic storm, the chances are you're going to be reluctant to store your money in the UK. As we now know, the growth of the City made us acutely vulnerable to a crisis in the banking system. And with our high levels of debt, the economy would also suffer more than most from a bout of falling prices - by raising the real value of that debt, it would make the burden of that debt even greater than it already is.

Against that backdrop, investors needed plenty of persuading to invest in the UK. In other words, sterling assets have to offer something extra in return. Typically that might come in the form of higher official interest rates. But if you remember, rates were being slashed at the end of last year as well.

The best hope for a decent return from sterling assets was a future rise in the value of the pound. And the best reason to expect the pound to rise was it had fallen so far it could surely only go up.

Welcome to the "overshooting" theory of exchange rates. (Or a version of it, anyway. Its author, Rudi Dornbusch, might not recognise it.) Currencies have to go down a lot for people to expect them to go up.

If you don't like that theory - I have others. Economists are fantastically good at explaining currency movements - they can give you at least four for any particular change. What they're bad at is predicting them. Academic studies have found that complex economic models for forecasting exchange rates are precisely as reliable as tossing a coin.

The basic point is that currency movements - like most things in the markets - tend to be more focused on where we are going than we are now.

When we were heading for financial armageddon, sterling looked a poor bet. Now things look calmer, the UK starts to look like a safer home for investors' money, for all the reasons it looked scary before.

That's especially true when data such as the today's Purchasing Managers' Index for the service sector - and manufacturing data earlier in the week - point to a slightly faster return to growth than previously thought.

If investors now think the recovery will come sooner - perhaps sooner than in continental Europe - they might also conclude that interest rates will rise more quickly as well. That is probably also raising the attractions of sterling right now.

One conclusion we can tentatively draw from Sterling's mini-surge. Investors right now are not much bothered about a return to high inflation in the UK. As Martin Wolf argues in his column today, the recent rise in government bond yields suggests that inflation expectations are going back to normal levels. But there is little sign that investors expect inflation to take off.

If and when investors do start to worry about excess inflation in the UK - driven, perhaps, by concerns about the level of public debt - the pound could fall again. It depends
on what they expect to happen to interest rates in response. But yes, how far it could fall in the future will also depend on how far it's risen today.

Comments

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  • Comment number 1.

    Its not that stirling has gone up its the dollar that has gone down ,all relative fiat currencies are being debased by their respective central banks and the effects will be according to the relative oscilations of the dydle doe generated to stimulate demmand .

    Does one really need to wait 6-9 months to know if the dydle doe was up to the job of producing a bun in the oven ,especialy when its applied in the wrong place ?

  • Comment number 2.

    well Stephanie, you are at least right about the 'over-shooting' (including 'under-shooting'); we constantly see this tendency in our scarily unregulated global and UK economy - in the currency exchange rate, in house prices, the oil price, commodities etc etc

    this is no way to run an economy; it makes it difficult to plan for any kind of sensible investment, exacerbating the tendencies of capital to flee back and forth across borders etc

    in seeing the pound going up towards $1.75 you read lots of good things in about the UK, but I struggle to see this; surely what we are seeing is the steep decline of the US Dollar for all manner of reasons; and the euro declining a bit; the pound has not changed a whit against the Can $; what is the pound doing against a basket of currencies

    and the US $ and oil price pull in different directions of course, exaggerating fluctuations; the oil price should be delinked from the US$ and there should also be some move towards use of SDRs or a basket of currencies as the global reserve; we can't go back to gold! but we do need something more stable and also introduce various restrictions on speculators........... otherwise they continue to gain at everyone else's expense

  • Comment number 3.

    The reason the £ is rising - It is over valued by the currency dealers.City currency traders are as dumb as the Harvard MBA CEOS who are responsible for the bankrupting of the banks they drove into oblivion investing in debt.
    I stated in 2003 that the Euro was the safest currency and it would reach parity with the £ withing 5 years. Reason being all the work that I have done with my European clients - none of them had any loans/credit card debt and subprime mortgages. The Euro is not backed with Consumer debt/Student debt/pension blackholes and it has the best manufacturing base in the world unlike the Chinese who make rubbish and unsafe products and greedily backed the debt ridden dollar. The safest zone to be is the Euro Zone - The French don't give anyone under the age of 21 a credit card - I know because I have 3 French grandsons and a son-in-law who is the head of a French Manufacturing firm. We sold everything under Thatcher - and the Europeans own all our Utilities and Key Businesses.They can turn everything off tomorrow including the Cleaning Services of Westminster run by Veolia. Angela Merkel knows more about money values than the Bank of England and the City.

  • Comment number 4.

    If the pound goes up it's Hurray Foreign Investments are up !
    If the pound goes down it's Hurray Exports will be up !
    If it stays the same its Hurray the Markets are stable !

    - Whatever happens it's Hurray !
    Now call my cynical but there is something fishy going on here.
    The important thing seems to be getting to the Hurray bit.
    This I think is due to the faulty model economists use :
    In their model there is no profit (the big fault ! ) so I pay you 1p to make 1 widget every week and you buy the widget at the weekend for the 1p in your pocket. I use this 1p next week to pay you to make another widget and so the economy goes round and round for ever. But if you are not confident then you might not spend the 1p you might save it but then I will not have the 1p to pay you to make another widget next week so you will be un-employed and we will have a recession. So you go and read an article by an economist and they say Hurray and then you are confident again and the economy can get back to normal.
    Add profit into the mix to make the model more realistic and I pay you 1p to make a widget and at the Weekend you turn up at the shop to buy it and the price is 1.5p, as Ive added on some profit, and you cant afford it and we have an instant economic crisis and no matter how confident you are the economy is bust unless you get some extra money from somewhere. The problems of the world are mainly due to what we do for the getting some extra money from somewhere part. Economists dont help they just sit a round and shout Hurray at you whenever you come to them with a problem.
    There is a simple, safe easy way to solve the getting some extra money from somewhere part Its called NEFS Net Export Financial Simulation we dont need to be confident you just need the money.

  • Comment number 5.

    Isn't QE a wonderful thing?

    Recovery on way; surging stock-markets; rising currency; low inflation; rising consumer confidence; rising house prices; unemployment (oops, sorry, forget that one). Why don't we have QE permanently?

  • Comment number 6.

    It's natural that up and down movements occur around the mean trend.

    What doesn't over react (or under react for that matter) in this world?

    Only the theorised ideal market and stubborn politicians reach an equilibrium and stay there!

    The Euro has yet to take it's turn.

    Prepare for cheaper holidays to Europe again.

  • Comment number 7.

    This is just a temporary glitch,the pound is going to get hammered by the dollar in the months to come. The UK may have better news coming out at the moment than the USA ie House prices increasing etc.But the UK future borrowing is going to be horrendous,far greater than Darley's statement during the budget.When you start adding in the massive reduction in the people who are in the 40% tax bracket ,the tax avoidance of the 50% club plus the destruction of the profits of the financial industry.I have real concerns that the UK won't be able to meet its borrowing commitments in the next few years, as the projected tax revenues just won't come through.

  • Comment number 8.

    Yeah sounds plausible to me, GBP is rising because financial meltdown has been averted and global investors all want to pile into sterling as a prerequisite for getting the party started.

    But, why is it that they don´t want to pile into the US$ with equal vim and vigor?

    A couple of months ago the BBC were reporting every fresh decline in sterling as being great news for British exporters. Presumably the rise in sterling must be bad news for British exporters, but hey who cares about consistency, let´s move on, exports are so last season.

    Why even mention the fact that everyone is engaged in competitive currency devaluations? and that such a policy is bound to result in gyrations of specific currencies when measured against other currencies that are also being simultaneously debaed.

    Better by far to pretend that we don´t understand what is going on than to run any risk of acknowledging the truth.

  • Comment number 9.

    #7

    The dollar is doomed.

  • Comment number 10.

    The QE'errs running the central banks act like faireground managers that have to keeep pumping the rears of eachothers bouncy cAAA'stles [behind the scenes]to prevent automatic deflecation and the colapse of shavings vehicle stocking fillers sold to pension funds promicing index linked returns to those that will believe anything now that they no longer believe in God , allowing the real money to be sighphoned off by the AAA's owls in the form of poorformance bonuses and yayachts to be sailed away for a year and a day to ,the low lieing land where the bung tree grows and fellow piggywigs stand with their [st]rings on the end of eachothers noses

  • Comment number 11.

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

  • Comment number 12.

    Come on, everyone knows the pound had risen on the back of increased world demand for British exports..........

    Our highly profitable exports will easily pay off all the bad debts of the British banking and insurance system.

    Britain is about to boom again; this time for all the right reasons.
    We're about to become world leader in robotics, biotech, nanotech, stem cell research, nutraceuticals, renewable energies, cybernetics and gaming.

    Buy into it now, while you still can.......

  • Comment number 13.

    9. At 2:34pm on 03 Jun 2009, FrankSz wrote:
    #7

    The dollar is doomed.

    Time will tell, but I disagree . I would back the dollar against the Euro any day.

  • Comment number 14.

    It's not that the pound is attractive as many have mentioned. It's that the dollar is about to be savaged by the Chinese (over the next 5 years anyway so they are not too badly affected). So the dollar is in trouble in the medium term. The Euro is only starting to face the pressure we had 6 months ago. US 1.5years ago, UK 6 months ago, Europe,Asia and Emerging Markets recently. It's their turn.
    UK coming out of recession. OPEN YOUR EYES!! The US are still in recession, why would we get out first?
    Asia, or at least China out first? OPN YOUR EYES! They are spending a fortune buying commodities and giving money away to generate domestic demand. Commodity prices go up and sentiment improves. The West remain sceptical and buy little. China start running out of a desire to spend when the West won't help. Things fall back again in 2010.
    Sort out the banks. Zombie banks don't lend. Let them go under in an orderly manner and get governments to start lending directly to people and small businesses.
    Investigate the real causes and affects Stephanie.

  • Comment number 15.

    Stephanie,

    Doesnt this indicate that investors might be regaining some appetite for riskier currencies other than the dollar reserve and sterling looks as good as any at this stage.

  • Comment number 16.

    Stephanie,

    I see The Times is reporting that bank lending to non financial corporations collapsed in April and that overseas investors were dominant sellers of gilts to the BoE - two indicators that QE is impaired. To what extent are gilt acquisitions by BoE in the secondary market providing liquidity for new acquisitions of gilt issuance by the Debt Management Office. Could you find out? How much are the gilt market makers ( ? Barclays and RBS included) making in commissions from the APF and DMO operations ? Can we have some stats?

  • Comment number 17.

    #8 Armagediontimes

    If you care to read the blog, you would find the answer to your question: USD is a safe haven in troubled times, when signs of recovery are seen, investors leave USD for higher return currencies.

    A couple of months ago, you were blogging that the fall of the pund was proof that the UK economy was ruined. Where's your consistency now?

    Or is it just that the last few weeks' of news don't fit nicely with your preferred view that we are experiencing the end of the world as we know it?

  • Comment number 18.

    Well this takes the biscuit for daftest editorial of the month so far. It's nothing to do with fundementals-was oil worth $147 a barrel? NO. Is the pound worth $1.64? Probably not but the traders say it is (for the moment) so it is. Nothing more, nothing less.

  • Comment number 19.

    Armegediontimes

    Thank's for a great post. You should have written the editorial.

  • Comment number 20.

    Perhaps it has something to do with the fact that other countries have now gone into quantititive easing too. The US and EU for instance. This will be devaluing their currencies at the same time as our own so where can you find parity in that.

    I find it interesting from a tourist point of view that both the Malaysian and Australian dollars are becoming stronger against these western currencies. Could this be because they are not yet into printing fresh air money.

    Also what happens mow the Chinese are also printing money to keep their currency from rising. Sounds like there could be a messy outcome at the end of the day. Another lull before another storm I guess.

  • Comment number 21.

    So sterling has jumped quickly from US$1.45 to US$1.60 plus. The idea that this is due to the strength of sterling is an assumption. In my view when sterling was over US$1.90 it was way too high. What is the optimal exchange rate for sterling or any other currency for that matter?

    What we should be concerned about is the instability that has made this jump possible. What are the markets looking at? One suggestion is that they have seen what is happening in the USA: GM bust, Chrysler bust and the economy still tanking. In my view the markets are seeing the effect the downturn has had on the supply economies such as Germany and Japan and have had second thoughts since the end of last year. They have to put their money somewhere and perhaps they think the UK is a safer bet.

    This brings us back nicely to how does the government handle its GBP224 billion pound deficit for this year? Are the markets pricing in a general election, a Tory victory and butchery in the public sector? Are the markets looking to invest in inflation proofed UK government debt? These are not even assumptions but guesses.

    I feel like the guy in Belfast back in 1969 who said that if you are not confused then you don't know what is going on. We all know what happened there next.

  • Comment number 22.

    #17 GHBRich What signs of recovery would be apprarent to you then? The accelerating meltdown of the British political system, the bankruptcy of General Motors, (remember "what is good for General Motors is good for the United States") the rise in oil prices contemporaneously with a decline in demand for oil, or maybe the "unexpected" upward revision of US April job losses.

    Or how about the largely unreported US bank stress tests that assumed an unemployment rate of 8.9% compared with an expected unemployment rate of 9.2% as of end May.

    Or maybe you take comfort from the fact that BBVA are so confident that the recession is over that they are offering staff 5 year sabbaticals. Does LDV vans indicate some form of economic recovery?

    Maybe you are taking comfort from the fact that bond rates are rising notwithstanding QE, and that Bernanke is warning of fresh risks to system stability caused by budget defecits. Perhaps the ending of the BP final salary pènsion scheme is indicative of economic recovery.

    Still house prices in the UK are allegedly rising, so that should be good news for all those interested in volunteering for a bit part in the new serfdom.

    All main currencies are in the process of collapse - the US$ and the GBP as a consequence of deliberate policy actions, and the Euro as a consequence of inbuilt systemic problems.

    Meltdown is coming - and self delusion will not save you.

  • Comment number 23.

    "Academic studies have found that complex economic models for forecasting exchange rates are precisely as reliable as tossing a coin."

    Like so much else sadly, there appears to be little respect for academic studies amongst commentators here. Why is that?

  • Comment number 24.

    LibertarianKurt.

    "Rothbard blamed much of what he disliked on meddling women. In the mid-1800s, a "legion of Yankee women" who were "not fettered by the responsibilities" of household work "imposed" voting rights for women on the nation. Later, Jewish women, after raising funds from "top Jewish financiers", agitated for child labor laws, Rothbard adds with evident disgust. The "dominant tradition" of all these activist women, he suggests, is lesbianism."

    The SPLC Complaining about the Austrian School guru Murray Rothband (to some this is a bit like Satan criticing Beelezebub).

  • Comment number 25.

    The pound has gone up because the oil price has come off it's previous lows.

  • Comment number 26.

    Here's the scoop on the USD:

    The price of oil goes up when the USD goes down. This is because a lot or most oil is priced in dollars. The price of oil going up does not necessarily mean the USD must go down though - as demonstrated by last year's commodity bubble.

    The current price of oil in dollars is not high enough to fund exploration and development of new fields. OPEC use their dollars to buy American military hardware, run USD current account surpluses ( which have been the norm up until recently and fairly safe - though most suppliers like China are diversifying rapidly), and pay for companies and contractors to develop more fields.

    Here are the options:
    a) Oil goes up due to some kind of worldwide economic recovery and USD is unaffected, even strengthens. Likelihood in the near future? About zero
    b) The USD falls and oil prices go up, allowing Mid-East SWFs, firms, states to go about buying cheaper US contractors and hardware. Likelihood? Increasing - especially as confidence in USD crumbles
    c) OPEC get fed up with an unsustainable status quo, too low oil prices, try to cut production - realise that prices rise but quantities sold drop - and eventually just decouple from the USD. The USD as a consequence plummets. Likelihood? Increasing as time goes by and SWFs diversify portfolios

    Any other options I missed?

  • Comment number 27.

    Sterling has risen against USD and now all the mainstrean economists and media pundits are leaping out of their chairs claiming that inflation is going to go away and the only way is up from now on.

    Not so fast! Sterling isn't rising - it's just falling less quickly now in relation to certain other currencies, that's all. Inflation isn't going to go away - it's happening now with QE - we just haven't seen the effects of it yet.

    "Academic studies have found that complex economic models for forecasting exchange rates are precisely as reliable as tossing a coin."

    That's because complex mathematical models are next to useless when it comes to forecasting ANY economic events.

  • Comment number 28.

    Because the governments have no real plan and the financial services don't want to change or be regulated the strategy is to be optimistic. That is it. In the US, UK and Australia they all say the same thing. The concept is that if they can wait it out, things will improve and no one will want to talk about why it happened in the first place. The real question is: Why should the citizens believe that things will be better if no correction of the problem has taken place, no one has been held accountable for the incompetence and everyone has been taken care of except the people who actually lost money, but of course there is no real money anymore just digital debits and credits and only the banks and investment houses have a functioning "escape" key.

  • Comment number 29.

    'I DON'T BELIEEEEVE IT..'

    LibertarianKurt (#27) "That's because complex mathematical models are next to useless when it comes to forecasting ANY economic events."

    What do you expect from free-market (anarchistic) economics?

    What's more than a bit odd is that anyone ever took seriously (other than to try to round them up and lock them up as Germany did in the 1930s) a group of people which actively promotes what's explicitly anti-empiricist and anti-statist! They used to call such people subverive anarchists. They should all get ASBOs and be forced to wear blue hats or something! This lot pretty much admits that they're NPD/ASPD and yet still nobody locks them up! Some of them even get Nobel Prizes or Oscars for it! ;-)

  • Comment number 30.

    UK STERLING WILL BE LIKE THE TALE OF HUMPTY DUMPTY WITH A DOSE OF WASHED

    OUT GILTS TO SEND IT CRASHING ALL THE WAY TO CRASH GORDON @ under the

    railway arches.

    PSBR AT CRAZY LEVELS OF GDP WILL SOON SEE TO THAT. .

  • Comment number 31.

    #13

    What's your response to #26?

  • Comment number 32.

    Here is a straw in the wind.

    Today I was told that National Savings have doubled some of their interest rates.

    The rise on interest rates has started. That market will force rates higher no matter what the BoE does and this will protect Sterling just a bit, but because of the BoE's reluctance to understand that they must put in place the interest rates for a sound economy and sound money BEFORE these conditions can exist Sterling will languish.

    MMG (Mervyn Must Go)

  • Comment number 33.

    #29 "(anarchistic) economics"

    Hardly, central banks, the FSA not exactly an unfettered freemarket is it,

    of course its anarchistic and totally devoid of regulation isn't it?

  • Comment number 34.

    Well having read all of the above it seems like some ideas are a bit right, others maybe more right, but the real truth is nobody knows.

    The whole issue is just too complex. Perhaps the N. Irish quote by stanillic was about as close as we will get to a true answer. For sure, sterling's X rate is no true reflector of the health or otherwise of the UK economy. Neither is it a comparative reflector with the health of other economies (getting better/worse, faster/slower). That's probably what it should be and what business would expect. But it is no longer the truth.

    As has been highlighted, OPECs dilema on price/production has a major impact on the $. I suspect (though I have no evidence) that there is growing panic in China - what is the 'internal development' costing them, how much have they lost on export trade, how much is it costing them to keep the Yuan down, what about the value of their $ holdings, etc. etc. Then we have the panic of private wealth - tax havens cracking open, fewer 'safe' homes, leading to short-term decision making and higher levels of liquidity. On top of that, nobody knows what is really happening to the US economy.

    Then we have the financial sector itself. Apart from 'fiddleing' the retuns on toxic assets, where did Morgan Stanley etc actually make their 1stQ profit? There is a strong likelyhood that they were playing the commodity/money markets through the backdoor. How many other banks worldwide have/are doing the same? Fianlly, we have the currency traders/speculators themselves. Just like the FTSE short-sellers, these guys and gals don't give a damn. To them its just another spread bet!

    On top of all of that we have the morass of sophisticated models fed by Information Technology. Now there's a missnoma if there ever was one. We are drowining in a sea of data but the one thing we have very little of is INFORMATION.

    So the £ goes up and then it goes down. It's only afterwards that we can speculate as to why it happened and then we will never know the truth.

  • Comment number 35.

    Shouldn't QE be devaluing the Pound. This Improvement is artificial and toxic prepare for further falls soon.

  • Comment number 36.

    "The basic point is that currency movements - like most things in the markets - tend to be more focused on where we are going than we are now.

    When we were heading for financial armageddon, sterling looked a poor bet. Now things look calmer, the UK starts to look like a safer home for investors' money, for all the reasons it looked scary before."

    What I think you fail to account for is that for the traders and the fund managers the absolutely key objective is to achieve a high transaction volume. Critical to this is the need to diminish the importance of medium/long term factors in investment decisions, and to force into the minds of the principals (those who actually OWN the currency assets) the idea that the only rational way to hold currency is to participate in the buying/selling circus in which price movements are driven far more by copy-cat sentiment than by any matters of real substance. The interests of the agents is well looked after by high levels of price turbulence, because this only adds to the mystique that the currency market is something only a real expert can understand, and the fiction that above-trend gains are more or less guaranteed if only one employs the right expert.

    This is a very good article that looks into the growth of financial services activity over the last 40 years:-

    https://www.prospect-magazine.co.uk/article_details.php?id=10443

  • Comment number 37.

    John_from_Hendon # 32

    John, we're hardly going to get sound money from the inflationist BoE and its partner in crime the government, are we? If you should ever get your wish (MMG), he can take the Old "Bag" Lady with him as well!

  • Comment number 38.

    36 Great link ,very interesting article. May be in hindsight we should of let the whole financial system collapse and start again.The concern I have is that future bail outs will be required by the tax player ,the precedent is now set.I can't see the regulators keeping on top of the market.

  • Comment number 39.

    31 at your request.

    a)Better than zero,suggest quite likely.
    b)How are you measuring v Euro ? Relatively dollar won't drop against Euro,will strengthen.
    c)OPEC won't cut production if anything production will increase in next 12 months,to capture higher values.
    d)Certainty that another scenario will occur that is not a,b or c. .That is how real life works.

  • Comment number 40.

    #37. LibertarianKurt

    Lib, my concern is more that the old bag lady will go, but Mervyn King will stay! When it has been his gutless supine inactivity that let, even drove forward, the credit boom to get out of hand, when he and his fellow travellers knew, or should have known, that this regulatory policy management was insane! He and the tripartite management men should be sacked NOW!

  • Comment number 41.

    "But yes, how far it could fall in the future will also depend on how far it's risen today."

    It also depends on how much profit-taking has gone on before the fall. Another influencing factor will be how much the speculators are willing to push down the Sterling in hopes of getting returns on its movements !! Short term fluctuations in any currency are usually independent on any long term financial news. They are, for most parts, speculative moves.

    If the quid moves up and *STAYS UP* for the better part of a year, then we may have reasons to rejoice. Until then, we just look at any speculations going on and hope to bet the right way. Many a currency trader have reasons to rue betting the wrong way !!

    As for forecasting exchange rates, the toss of a coin gives us a 1 in 2 change of being right. Economic models have a track record of less than 1 in 10 !! As proof, I need only to point out that none of these mighty wizards of economics forecasted the current recession !! Perhaps Mystic Meg could make a fortune renting out her crystal ball to these economic wizards !! Now *THAT's* a worthwhile British export !! Maximum income for minimum resources and costs !!

  • Comment number 42.

    In the week before Lehman's failed, the dollar strenthened by about 10 cents, if I remember correctly.

    I thought at the time it was odd. As an ordinary mrsbloggs13c2, none of the obvious things seemed to have happened. I was a comparitive innocent bystander.

    Of course, later, when I became nerdily interested, I became certain it was a wave of money making the dash for the nice safe dollar at a still pretty good price. It might even have been Lehman's money, I don't know.

    Lets face it if you'd bought assets priced in pounds that were beginning to fall in value(or you thought they might) you wouldn't be daft enough to lose money on the currency transactions too would you. Buy lots of dollars with your pounds and take a punt on the dollar strengthening but in the meantime stick your cash in T-bills cos' you'll get your money back.

    Now, of course, if you bought assets priced in dollars with dollars priced say at $1.75 per pound (the price around that time), you might make some money by selling those assets and buying pounds or assets in pounds if you did it before the dollar hits $1.75 again. And as your
    T-bills are maturing around now and its safer to stick your head above the investment parapet its time to move on.

    So, Idon't think its got anything to do with green shoots or a new dawn or spring. I think its all to do with the equivalent of the japanese housewife and her corporate equivalents deciding to make hay while the sun shines.

    I am yet to come up with the unified theory of dust and money.


  • Comment number 43.

    #2 "we can't go back to gold!"

    Damn right !! Especially when there are so many Somali Pirates running around pirating ships that might carry them !! :-)

  • Comment number 44.

    #14 "The West remain sceptical and buy little. China start running out of a desire to spend when the West won't help"

    https://news.bbc.co.uk/1/hi/business/8080349.stm

    Err, hello ?? Chinese not spending ?? Or the West desperately unwilling to sell their last family silver ??

  • Comment number 45.

    No.36. ExcellenceFirst

    Financial Services grew like house prices, ie on borrowed money.

    They call it "leverage" or "gearing", to make it sound respectable.
    At their peak, hedge funds were levered over 20 times. Currently, they can only get 3 times leverage on assets, but this will likely increase in the future.....

    There's nothing like an asset bubble to make life interesting.

  • Comment number 46.

    #39 - Thanks for the response. Ok I see our difference - you assume global recovery in near future. I don't. Even so - global recovery will probably mean retreat from USD and move to risk.

  • Comment number 47.

    #36 "and the fiction that above-trend gains are more or less guaranteed if only one employs the right expert."

    The battle cry of a Ponzi salesman !!

  • Comment number 48.

    #42 and others

    "Of course, later, when I became nerdily interested, I became certain it was a wave of money making the dash for the nice safe dollar at a still pretty good price. It might even have been Lehman's money, I don't know. "

    Somewhere is an ft.com article by Soros written I think towards end of last year, beginning of this one. He was actively managing funds and having some problems, until, I think he said, he realised that USD was up not entirely because of a flight to safety, but because (if I paraphrase correctly) "dollar obligations could not or would not be rolled over"....

  • Comment number 49.

    Comment 45 : Mr Tweedy

    I'm not quite sure if you're suggesting that the largely irrelevant ballooning of Financial Services (FS) would have been nipped in the bud if access to borrowed funds had been more difficult to obtain. My own feeling is FS growth has its roots more deeply embedded than merely as an opportunistic reaction to easy money.

    I think that what has happened is that ever-increasing efficiencies in making necessities has led to fewer and fewer people being required to participate in these processes. The reaction of some of the surplus people has been to embark upon careers in production of desirable non-essentials, both goods and services, although in many cases demand has had to be expensively manufactured for this production. This career choice doesn't hold very strong chances of good incomes.

    More financially attractive, I think, though perhaps less ethical, has been the decision by other surplus people to follow the path of inserting themselves into the production process as faux-necessities, so cashing in on the efficiency improvements that would otherwise find their way to the consumer. Financial Services, for all it's protestations otherwise, is, I'd hazard a guess, 90% made up of such unproductive necessities. It's all these unnecessary add-ons that make home-produced goods/services so hideously and uncompetitively expensive, and make the idea of export-led growth so tantalisingly out of reach.

    There's no doubt that how to deal with becoming more efficient is as key a problem as any that we have. In my opinion, we're failing to recognise this if we continue to kid ourselves that encouraging faux-necessity is a smart way out of this difficulty.

  • Comment number 50.

    The US government is busy trying to reassure Treasury bond holders, especially China that it will not monetize its debt, that is print money to pay for it thereby devaluing it. Meanwhile in the back room, it is printing money like crazy. Problem, it isn't printing it nearly fast enough. To get out of the depression, it will have to print enough money to get back to where the financial world thought it was before the perceived dollar value in non dollar denominated assets collapsed. The good news is that unlike the great depression, the base of these assets were real, they are mostly houses people can buy which will one day be lived in and used. Therefore they have intrinsic value. The assets that were wiped out during the depression of the 1930s were merely shares of stock, ownership in companies that did go away and so those assets became worthless. My hunch is that the US government has to print somewhere between 5 and 11 trillion dollars, maybe more. During such a crisis, all conventional notions about the relative strength of different currencies vis a vis one another goes out the window. Prior to the great depression, the US had a strong government balance sheet with a large surplus and a surplus in its balance of trade. The US dollar was strong. None of this which on the face of it seemed like good news meant anything. Conventional notions of economics are invariably badly flawed. Most econimists learn from the same wrong theories of economics, hence the depression we are in was caused by factors they never even saw coming and clearly didn't understand. For the most part, they advocated the very policies that made this depression inevitable because of their flawed understanding. In the US, huge corporations sought to make money through hairbrained schemes such as mergers and acquisitions and tricky investment ploys. None of this created any real wealth, in fact it mostly destroyed it. Daimler was suposed to have been brilliant by acquiring Chrysler. Instead it was a fiasco for them. Likewise, the merger of the very real company Time Warner whose assets included movie and TV studios, publishing houses, films, magazines, TV shows that were syndicated worth on paper 100 billion with the trash company AOL whose assets consisted of a list of people with internet access accounts paying $29.95 a month and could switch to an alternate provider to save $5 a month on a moment's notice but had a value on paper of $180 billion on paper. It had to be the dumbest merger I ever saw. Meanwhile tricky accounting schemes like Enron's hid vast losses from its shareholders while obvious fraud at Worldcom went unnoticed for years. In the three years it was examined, its books showed according to official accounts an 11 billion dollar discrepency, the result of the obvious fraud of calling expenses capital investments skewing not only the company's net worth but making it appear far more efficient and well run to the credit and investment markets than it was. But this didn't take into account the 50 billion in assets it had on its books listed as "good will" nor the fact that many of its facilities were worthless and never used after they'd been built, nor the fact that 98% of its installed fiber optic was redundant and not used, nor the fact that it had no access to the critical "last mile" to most of its customers' premises but had to buy it from others who did. On the other hand, real wealth such as investment in R&D and in plant and facilities to manufacture or hiring talent to create new and improve existing products went neglected for decades. Now the US finds itself with delapidated physical infrastructure across the board, not nearly enough engineers or scientists, and a corporate culture that still places far more value on incompetent redundant management than on the people who actually produce real wealth, the workers themselves. It also seems to lack the political will to change by for example cutting back on all of its giveaway budgets and policies it can no longer afford such as foreign aid, benefits for illegal aliens, and free trade with countries where the typical wage is $2 a day and there are no costs for dealing with air and water pollution or criminal negligence related to worker safety or defective products. Unless and until this changes, it won't really matter what the currency exchange rate is. The world's largest economy will be too preoccupied paying mortgage bills, taxes, utility bills, gasoline bills, and for food to worry about buying manufactured imports at any price. Shoud the economy show signs of recovery and the government raise taxes to pay for all of the deficits it is creating so that it can destroy the newly minted money, it will go right back into a depression. The world had better realize, it can't get its money back from Uncle Sam because Uncle sam is flat broke and in a deep financial hole. Twenty cents on the dollar is better than nothing. At least that's what the government told bond holders who owned GM bonds. They didn't buy it but then then they had a choice.

  • Comment number 51.

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

  • Comment number 52.

    And to add to the above, I would also warn about further problems resulting from default on consumer credit, which are on their way. People have to realise that we are in a no-return situation of deleveraging from 30 years of exponential credit growth. This is just going to keep going on like this for years, and years.

  • Comment number 53.

    THE BOTTOM LINE

    One of the problems with much of our behaviour is that it's largely conditioned avoidance, which is reinforced through negative reinforcement (i.e relief from fear of, or actual exposure to, aversive stimulation). This means that we are prone to establish ever more elaborate forms of what's effectively insurance, in order to protect ourselves against what may never be. We call this 'thinking and planning ahead', some even call it rationality - the problem is, this rationality is Normally Distributed and unequal between groups and nations ;-).

  • Comment number 54.

    If the pound is rising against other currencies then how will that help our own much publisised export led recovery? Also this must also mean that the price of imported goods will fall in the shops month on month? isn't that deflation?!!

  • Comment number 55.

    LONDON (Reuters) - British stocks are set to benefit from their defensive status once the current stock market surge has run its course, reversing outperformance by more cyclical continental Europe.

  • Comment number 56.

    #50 marcusaureliusII that's an excellent summary of the current mess and IMO you are absolutely correct about the blinkered, wrong-thinking of economists as a group

    the Chinese are presumably buying Hummer simply to make the point that they can now buy something that is seen as a fundamentally America-defining brand; it says a lot in many ways

    so the politicians who deny that the Tiannamen Square massacre even happened are effectively having the BATON PASSED TO THEM by a failed generation of western politicians; interesting times indeed!

  • Comment number 57.

    #50 marcusaureliusII

    "My hunch is that the US government has to print somewhere between 5 and 11 trillion dollars, maybe more"

    They may print it, but if they distribute the printed money in the way that the Bank of England distributes it then money will only go into the top tier of banks and no further.

    I am also doubtful about your estimate of 5-11 trillion. My reasoning revolves around AIG. If AIG is bailed out with this printed money will they not need to recover their losses and potential losses on credit default swaps etc. first - last week a I saw a figure of 500 trillion for that alone.

    One of the terrible errors of the central bankers who are trying this quantitative easing is to do so through massively 'bankrupt' banks. The first thing there organisations will do is to refill their own coffers before they lend anything to anybody else.

    Basically this is just tinkering for that sake of their personal friends, ONLY.

    MMG (Mervyn Must Go)

  • Comment number 58.

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

  • Comment number 59.

    John_from_Hendon (#57) "MMG (Mervyn Must Go)"

    You're still at it. We don't have an effective state anymore - we have develoved it, sold it off, dergulated it call it what you like. It isn't King's or the FSA's fault. The reason why China is going to do so well isn't just that they now have smarter people (lots more than we do) but because they have a system which is in control, i.e. where government has something to govern amd govern through. We don't. Until we do (and we don't even have any serious candidate parties anymore), nothing can get any better because there's no means for anyone to take control. That's free-market Liberal-Democracy, and you've said that the alternative isn't acceptable to you. Perhaps you need to think this deceptively simple point through and not react with rage at the truth of it being pointed out?

  • Comment number 60.

    #59 "The reason why China is going to do so well isn't just that they now have smarter people (lots more than we do) but because they have a system which is in control, i.e. where government has something to govern amd govern through."

    The Singaporeans call it "Guided Democracy" !! And very well guided it is, too !! Through the hands of two generations of the Lee family now !! The Kims of North Korea must be really jealous since they, too, have passed the power through the hands of two generations and look at the mess they are in !! The South Koreans just play musical chairs amongst a small handful of powerful Chaebol families. And the Japanese pass the baton on through the ranks of their Liberal Democratic Party that is probably more right-wing than Genghis Khan !!

  • Comment number 61.

    Postscript (#59) Or if you do want to rage, rage at those who deceptively sold desolving the state as 'freedom', just as they misled many that the only reason that they couldn't benefit from a university (or further education) was because they had been deprived of this by others. Intensional Natural Language is egregiously distorted by anarchists ruthlessly pursuing debt-slaves.

  • Comment number 62.

    JadedJean # 59

    No, youre still at it! Always blaming "market failure" and twisting the truth to suit your statist beliefs. This has nothing to do with China having smarter people and a highly centralised system of control which regulates all economic activity. Over the last 25 years, especially since 1997, China has been gradually moving away from a rigidly socialist planned economy to a more capitalist market oriented one. It's not perfect by any means, but at least they are moving in the right direction.

    On the other hand, governments in the Western "Democracies" - especially UK - are moving the other way: increasing state control of economic life by regulating everything that moves (or doesn't), nationalising banks, enlarging (obscenely) the public sector payroll, abrogating personal liberties through the introduction of I.D. cards and constructing a national DNA database of largely innocent people, hounding law abiding citizens with a myriad of unwarranted laws and despicable stealth, green, carbon and bin taxes, fines, penalties and seizures.

    When this crisis deepens (and it will!), then we will see how vicious the state will become towards its individual citizens when it imposes price, wage and currency controls, rationing, curfews and eventually martial law.

    JJ, take your nose out of the Bell Curve book, your head out of your backside and wake up and smell the coffee!

  • Comment number 63.

    LibertarianKurt (#62) You appear to have no grasp (or experience) of government. To govern you need command and accoutability structures. The PRC still has its Democratic-Centralist structures and the Means of Production are in still in state hands. It is a One-Party system. You are being misled by very trivial changes which they see as part of the Stalinist system. You're not seeing what's important. In the UK we have lost most of what we had in the 1970s. That is, we have largely lost the state without many people fully appreciating just how far it's been lost. This is why I say that they are naive when they appeal for HMG to do something now that the free-market has run into trouble.

    You, like many others, just don't understand, probably from lack of practical experience I suspect.

  • Comment number 64.

    LibertarianKurt (#62) " UK - are moving the other way: increasing state control of economic life by regulating everything that moves (or doesn't), nationalising banks,

    Name a nationalised bank. There isn't one.

    "enlarging (obscenely) the public sector payroll,

    They have been largely privatised or turned into agencies, and are staffed by low skilled people to make that easier.

    "abrogating personal liberties through the introduction of I.D. cards and constructing a national DNA database of largely innocent people, hounding law abiding citizens with a myriad of unwarranted laws and despicable stealth, green, carbon and bin taxes, fines, penalties and seizures."

    Rubbish. You're sounding like an adolescent anarchist. We have rising crime and open borders. Nobody knows who is really entitled to health care, educaton etc under the current system. ID cards are just like passports or bank cards for welfare services etc. DNA profiling would be a good way to ID people. Everything you want will just cause more chaos.

  • Comment number 65.

    I wish we had lost the state as it certainly takes a huge bite from my wallet every month and gives me nothing in return. In a year I expect VAT to be 25%.

    That apart I am looking forward to the reshaping of the British state to fit the now austere British pocket. I bet our political class mess that one up as well.

    As for China the ruling elite and the people at large share a horror of chaos; which on the one hand can be too much government (Gang of Four) and on the other too many governments (warlords). We possess no such sense of a civilised equilibrium.

  • Comment number 66.

    stanilic (#65) "I wish we had lost the state as it certainly takes a huge bite from my wallet every month and gives me nothing in return."

    Think about that. It's the latter part of the sentence which is down to there no longer being an effectively accountable infrastructre and those in the Public Sector no longer being resepcted, carefully selected, people who are proud of the work they do. Just look at all the Public Sector fiascos littering the press over the last few decades and especially since New Labour took control. They are anarchists. Is it just so they can slot 10 Regional Assemblies/Development Agencies + Scotland, Wales and NI/Eire into the EU as NUTs of 6m each?

  • Comment number 67.

    Jean sweetie,

    What do you mean by `anarchists'?

    I very much doubt if anarchists join the Civil Service or even local government. There might be some at the BBC but only in the creative roles. There might be some teachers and academics on the public pay roll who claim to be anarchists but given the source of their salary funding they would have to be hyprocrites as well.

    I do agree though with the sentiment you expressed; which just goes to show there is a first time for everything.

  • Comment number 68.

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

  • Comment number 69.

    Lib (#68 etc.) and Stan (#67. etc.)

    If JJ did not exist - how would the rest of us know we were sane!

    I cannot accept JJ's pessimistic nihilism - I prefer optimism! (That should give JJ the opportunity to let us all know the intellectual roots of nihilism and optimism!!!)

  • Comment number 70.

    # 68

    Muzzled again! You got off lightly JJ!

    ;)

  • Comment number 71.

    Absolutely god dammit! The Chinese buying Hummer is just a drop in the ocean! Has anyone noticed how come Barclays seems to be immune to this crisis?? Has anyone noticed how come the Chinese have RAPED Europe from behind VIA Barclays as it's investment ..erm...arm?

  • Comment number 72.

    By the way. I read this on another BBC article:

    "He wrote: "I now believe your continued leadership makes a Conservative victory more, not less likely. That would be disastrous for our country."
    He added: "I am therefore calling on you to stand aside to give our party a fighting chance of winning. As such I am resigning from government." "

    As someone who looks at the UK from the outside, I must say:
    a) Nonsense
    b) It doesn't matter who is in power really. At least Brown knows his stuff. I really wouldn't allow anyone to benefit politically - the culprits are the bankers et al

  • Comment number 73.

    stanilic (#67) What do you mean by `anarchists'?

    Hayek was an anarchist. The Austrian School are anarchists. Thatcher and Blair were anarchists. Anarchists are libertarians - they push the free-market and deregulation. They weaken the state. That hate statism.

    "I very much doubt if anarchists join the Civil Service or even local government."

    You are wrong. Civil Servants are Vogons. They have no choice but to implement the polcies of the elected government (they squeal a bit, but they have no choice in the end). Since Thatcher took office I can assure you that Civil Servants have been taking apart the UK state and putting themselves out of work for decades. Departments became Agencies and they were staffed with poor people to weaken them. More senior Civil Servants took up positons in the Private Sector or Third Sector to save their skins. This goes back years. Trust me on this.

    "There might be some at the BBC but only in the creative roles."

    You do not understand what anarchism is.

    "There might be some teachers and academics on the public pay roll who claim to be anarchists but given the source of their salary funding they would have to be hyprocrites as well."

    This has nothing to do with intent We are not talking about Rik from the Young Ones here!

    "I do agree though with the sentiment you expressed; which just goes to show there is a first time for everything."

    You'd better take seriously the rest of what I have been saying, because it is all sadly true. I just make it sound ironic.

  • Comment number 74.

    FrankSz # 72

    "the culprits are the bankers et al"

    Yes, the central bankers (MMG as John would say) and those bunch of crooks in government. However, you've hit the nail when you said that it matters not who's in power: one bunch of crooks move out and a different bunch move in! Here come the new "bosses", same as the old "bosses". And we won't get fooled again?

  • Comment number 75.

    John_from_Hendon (#69) "If JJ did not exist - how would the rest of us know we were sane!"

    Ah, but John you are just showing how inexperienced politically naive you are. What I am saying is perfectly sane. I just know what has been going on better than you do. I'm not prepared to say why, but I do. Follow up what I have been saying, and you may see why I am right.

    "I cannot accept JJ's pessimistic nihilism - I prefer optimism!"

    Then you won't grasp what is going on. I am describing what has been happening in the UK for at least 30 years. You're just going to have to trust me on this. It may be depressing for you and others, but my account is accurate. Perhaps I know something here that you do not?
    Perhaps I know something that you don't want to know? You must look for the means for implementation, not just the desire to have something implemented. It's the former which has been eroded by anarchists over 30 years in pursuit of a) asset stripping the state and b) the free-market - (possibly the absorbtion of a fragmented UK into the EU?).

    To see this reversed would require you to embrace statism, e.g. classic Old Labour National Socialism circa 1945.

  • Comment number 76.

    LibertarianKurt (#74) It is my assessment that you have no first-hand practical experience of government. Do you know who, de facto, governs the UK (to the extent that this is still possible)? It's the Civil Service.

  • Comment number 77.

    JadedJean # 76

    "It is my assessment that you have no first-hand practical experience of government."

    Guess what? You're wrong again, but that's another story.

    ;)

    As for the Civil "Service"? Well, this was the implicit point being made at # 74: The faces of the political crooks may change; however, the bureaucratic machinery of the state expands daily taking great delight in screwing up the lives of the people it is supposedly meant to serve.

  • Comment number 78.

    #76 jj

    I do not presume to answer on behalf of LK but it would appear, from the occasional rail against civil servants and their pensions, that many anti-statists here at least have an inkling of who is to blame. JJ, you may well have scientific evidence that these servants are of lower intelligence compared to their forebears of the 1970s. If so, please would you publish it alongside their names, addresses and posts so that we can all become more enlightened.

    There appears to be much confusion about the meaning of anarchy, its relationship with freedom and its manifestation. In many respects, JJ is correct in asserting that our society is more anarchic than it used to be and, further, that the folk at the top of the heap have, in general, taken advantage of this for personal gain. What is not so clear is how this exploitation is any different in so-called liberal states than under more statist regimes such as PRC etc. The argument of the libertarians/anarchists is anarchy/freedom for all, not just a chosen few. This seems to be missed by those who support statist coercion.

    Despite the clear and present failure of the amorphous anarcho-statist system there remains, amongst the general public, a desire to retain the coercive mechanism of the state for the masses albeit with an extension of regulation to rein in some of the now-manifest excesses at the top. This desire is manifest in all the pleadings we see for self-acclaimed deserving causes ranging from the eco-frinedly through the save-the-dinosaur lobby. Conversely, few openly promote the old style man-from-the-ministry knows best form of statism. At base the choice is clear: any form of statism will be abused by those in power.

    As far as the daily value of the pound goes, I care not provided that in the medium term it falls relative to my 1847 silver groat.

  • Comment number 79.

    JFH #57

    It's not often that I agree with you but this time I think you are "spot on." The mistake the US government made with American banks was assuming that if they had sufficient capital, they would continue lending it to worthy private borrowers at a competitive rate. They didn't. The government expected that by bailing out the banks that were it trouble, it would bail out the economy as well because the bank failures were at the root of the rest of the economy's problem. They were wrong. What the government should have done instead was to have competed with the banks at a slightly higher interest rate. For example, if a reasonable business loan was 6% and a business couldn't get a loan from a bank for a sound business investment, the government should have offerd it a loan at say 6 1/2% or 7%. This would have forced the banks to lend money or if they didn't have any, to go broke. These banks should have gone broke by and large owing to their reckless business practices, shareholders having abrogated their responsibility to elect only directors who knew how to properly run a business. And then what? Well the government would have continued to be the bank of last resort printing whatever money was needed until new private banks without these liabilities were chartered and took the business back.

    The notion that printing money will damage the economy is a false one. The economy was already damaged by reckless lending to uncreditworthy borrowers including the most unworthy borrower of them all, the United States government itself. Printing or not printing money will only determine who feels the most pain in the recovery process. Printing money will hurt the foolish lenders whose returns will be sharply negative.

    This has not been a failure of capitalism, it worked just as it should until the government stepped in. The problem is that in the bust part of the business cycle, especially a very sharp one, the social upheaval as the failed businesses go under and the economy waits for new capital to be formed and the economy to recover is intollerable. It is far too disruptive of too many lives. What dogmatic capitalists forget is that the economy exists and is only allowed to function because it serves the greater social good. For that reason, it must be subject to regulation that will not allow such wild swings to occur. That may inhibit profit on the upside but it will prevent personal disasters we are now witnessing on a massive scale on the down side. This was the lesson of the 1920s and its aftermath in the depression of the 1930s the US government forgot and Alan Greenspan didn't understand. It's a lesson we are being forced to learn all over again. Thinking about how human minds work, in about 80 years if the human race is still around much as it is, it will likely happen again.

  • Comment number 80.

    LibertarianKurt (#77) "the bureaucratic machinery of the state expands daily taking great delight in screwing up the lives of the people it is supposedly meant to serve."

    Did you notice the Home Office being split in two not long ago because it was 'dysfunctional'? Why was that? If you look closley at what has happened over the years the structures have been broken down, power has been devolved downwards and Agencies have been created en route to privatising them. ou do not know what has been going under the influence of neo-liberalism/anarchism or else, you just hope to furher this destructive trend by making out the opposite of what has been happening is in fcat the case. You are either ignorant of the facts, or you are aiding and abetting the process. Maybe the process has a benign agenda viz membership of the EU but it certainly isn't in the interest of the UK qua nation state.

    My point to John_from_Hendon (who usually writes sense, but not on this matter), is that what he would like to see be implemented will be almost impossible to implement because the infrastructure is no longer there. Just look at the efficacy of the FSA and its staffing for one key example. A cleverly constructed sinecure. If one looks across the Departments (e.g. Probation) and to others Regulators/Inspectorates, it's the same story. The Lords had to battle over amalgamation of Home Office inspectorates as new Labour tried to combine them all. This 'sabotage' under the guise of 'efficiency' even went as far as the Armed Forces which has new legislation which affects the Chain of Command and Rules of Engagement you may recall. Large parts of the Civil Service have been effectively put out to private contract with inevitable consequences for staffing, morale and service delivery.

    Whatever you think you are right about, you are wrong if you think the UK state is not in recession. ;-)

  • Comment number 81.

    "The mistake the US government made with American banks was assuming that if they had sufficient capital, they would continue lending it to worthy private borrowers at a competitive rate. They didn't."

    Yes this is very true. Steve Keen identified this and explicated it very well in his "Roving Cavaliers of Credit" article:
    https://www.debtdeflation.com/blogs/2009/01/31/therovingcavaliersofcredit/

    ...basically that the tail of consumer demand for credit wags the dog.

  • Comment number 82.

    rwolff (#78) This is really very simple, but it is predatory, as there's money locked up in the state through earlier public investment through taxes in the purchase of the means of production and associated infrastructure - it's like hidden oil locked up in the state. Hence the phrase 'selling off the family silver' That's all Thatcher and Blair did. Look to who funded them, look to the failed police investigation. Think back to when Thatcher/Joseph took office. Think about their relationship with the Civil Service. Did they want it strengethened or did they want it weakened? Politically, Conservativsm is anarchistic. It rolls back the state in favour of free-enterprise (look who funds the party) and light-regulation (ideally, none at all - i.e. the free-market aka anarchism - look up the explicit agenda of the Austrian School if you don't believe me - Hayek was Thatcher's guru - and remember, they were refugees from 1930s Germany). The only thing these anarchists beefed up was crime legislation as they expected crime to rise as the state was rolled back. Since the 80s, the prison population has doubled. Look at the behaviour of youth in our inner city communities and schools.

  • Comment number 83.

    #69 "If JJ did not exist - how would the rest of us know we were sane!"

    I like your reasoning !! If there is no "bitter", how can we know what "sweet" is ?? The exception that proves the rule !!

  • Comment number 84.

    #71 "Has anyone noticed how come the Chinese have RAPED Europe from behind VIA Barclays as it's investment ..erm...arm?"

    Eh ?? Come again ?? Barclays has very little Chinese investments or involvements. It is more of a Middle Eastern influenced bank !! If it was HSBC now, then I could agree with you !! HSBC, as its original name suggest, is very much a Chinese influenced bank !! The bulk of its wealth comes from wherever there are Chinese, including those of the Chinese Diaspora (i.e. Overseas Chinese) !!

    Whilst Barclays was flogging its soul to the Qatari and Abu Dhabi governments (i.e. their royal families), HSBC raised funds from the world's Chinese communities !!

  • Comment number 85.

    #78 "As far as the daily value of the pound goes, I care not provided that in the medium term it falls relative to my 1847 silver groat."

    You have a silver groat ?? Bite it to make sure its real silver !! I've not heard of a groat coin but I'm willing to accept that they may have been produced by someone somewhere !! :-)

    Me, I use an old American saying - In God we trust; all others pay cash !!

  • Comment number 86.

    ishkandar (#83) #69 "If JJ did not exist - how would the rest of us know we were sane!"

    I like your reasoning !! If there is no "bitter", how can we know what "sweet" is ?? The exception that proves the rule !!


    What you need to try to take on board is that the current problems are largely a function of most people not grasping what's been going on. The electorates on both side sof the Atlantic are largely pawns in this game. That's the way Liberal-Democracy works and why the franchise has been ever more extended to people who can't grasp what's going on. Just remember, ability like height is Normally Distributed and its largely genetic. How is nearly half the population going to university and why more females than males given this (pattern shows up at 7, 11, 14 and 15 too and the relatively conservative range of the female distribution has been known for decades - what do females study, what do males study - watch BBC etc NEWS what do you notice?) Here are two hints that you may be naively be missing something important. Science just means knowing remember. It's just the most reliable system we have for knowing.

    This has been a hegemonic 'game' played at the top of the curve i.e. by the so-called 'cognitive elite. Most people therefore don't understand/believe it's true, as it's largely alien to them - though they like to think otherwise. You're probably not going to like this if/when you see this.

  • Comment number 87.

    No.82 JadedJean

    In short, your proposition is based on the idea that "anarchic" liberals asset strip the state, by appropriating the means of production into their own private ownership. They then charge the state for their consultancy services.

    They control the mass population through enticing them into a life of debt. The debt is taken on by the public in order to buy products, and the products themselves are aimed at exploiting the basic human instincts for sex (pornography, plastic surgery, fashion, cosmetics), food (eating at expensive restaurants, buying more food than is good for us, celebrity chefs), possession of assets (houses, contemporary art, cars), desire for social inclusion (designer clothes, football season tickets, sport as an industry), etc....

    De-regulation allows all this predation to flourish, as the state provides little protection for the public. The mass population is encouraged to indulge itself, in the name of freedom. An increase in crime and mental illness occurs, as a significant minority of the mass population cannot cope with the pressures exerted on their basic instincts by the psychological tricks used in marketing the products, and the general breakdown in discipline which comes about from liberal non-intervention and over-indulgence.

    The theory seems a bit far fetched.

  • Comment number 88.

    MrTweedy (#87) "The theory seems a bit far fetched."

    What can one expect? I'm mad you know ;-)

  • Comment number 89.

    I wish our state did not think it has the means of producing leaflets about swine flu or how to manage the credit crunch or letters from the NHS Trust to see if we are still registered with our GP that we keep using and uses the NHS computer systems or council magazines and sticker (yes stickers promoting the borough)

    Do the various arms of our state have no idea that its borrowed money that's paying for this ludicrous expenditure

    OK some one will say well its borrowed money that will pay for the various benefits for those that might become unemployed but actually we could pay for a probation officer or social worker or street cleaner instead.

  • Comment number 90.

    88 Mr Tweedy

    At the risk of surprising many, I basically agree with the proposition you outline and attribute to jj and would state albeit rather clumsily that it is far from being far-fetched. I believe it does not contradict economic theories either of the left (Marx/Engels) or the right (monetarism) and can be supported by events of the past 30, if not 175 years.
    It's the concomitant hat-tipping in the general direction of discredited historical nonsense like the Protocols of the Elders of Zion, the use of cognoscenti/in-group language and concepts plus the idea that Civil Servants "aint wot they used to be guvnor" that I find impossible to take seriously.

  • Comment number 91.

    This article ties in with the discussion:

    https://www.marketoracle.co.uk/Article11110.html



  • Comment number 92.

    No.90. ThorntonHeathen

    I have no appetite for racial or religious discrimination. JadedJean will say I'm a victim of the Nazi Guilt Complex.

    If Jewish business is better organised than everyone else, then it sets the standard that everyone else must match. Gentiles must simply raise their game and compete.

  • Comment number 93.

    mrsbloggs13c2 (#89) "I wish our state did not think it has the means of producing leaflets about swine flu or how to manage the credit crunch or letters from the NHS Trust to see if we are still registered with our GP that we keep using and uses the NHS computer systems or council magazines and sticker (yes stickers promoting the borough)"

    Garbage In Garbage Out ;-). It's New Labour's Pizza Model of Government:- Low on nutritional value, high on carbs and all sorts of other unhealthy rubbish for the people.

    Now Sir Alan's going to be a Tzar life will improve overnight - note the great rush to the Cabinet door (except for those loyal to the Knesset)?

  • Comment number 94.

    #90 ...plus the idea that Civil Servants "aint wot they used to be guvnor"

    Well, Civil Servants have never been civil nor servile in all of known history except to their "betters", i.e. slimy, crawling creatures !! Their Modus Opernadi is that of Pocket Hitlers. It is just that in the last few decades, they have used Political Correctness as their weapon of choice and their powers have been greatly increased !!

    The Sir Humphreys of this world so epitomises Civil Servants !! And, although it was only a comedy programme, Yes Minister strikes home so accurately now when we look at our current bunch in government. They show the same level of (in)competence as that on the small screen !!

    It is not a matter of party politics, it is a matter of sheer incompetence and it is now underlined by the calls from within the Labour Party itself for the current government to go before the Labour Party is destroyed in an act of self-immolation !! Not to put too fine a point on it but the Labour rank and file are revolting !! :-)

    Meanwhile, the Civil Service gets bigger and bigger and getting out of hand !! Public spending, especially in the IT, is now an international joke and all overseen by jobsworths whose only defence of their failures is "lessons have been learnt" !! Billions paid for them to learn their lessons ?? Why ?? If they were that incompetent, why were they in charge in the first case ??

    Singapore has a small, lean and mean Civil Service and it is one of the most efficient that I have met !! Perhaps we could copy them and save the country billions in public spending !!

  • Comment number 95.

    ThorntonHeathen (#90) "historical nonsense like the Protocols of the Elders of Zion"

    Except it isn't historical nonsense at all. Teh above may well have been 'plagiarised' from much earlier battles on the same issue in Napoleonic times, but so is much else that we believe, we just don't see it as such. Are any of your ideas truly yours? Is your language?

    This is all about European 'settlements' and group politics. There is a very long history to this. The Tzar knew he was under threat from anarchists from the Pale of Settlement. You should read what very senior people in the British goverment and military had to say in the early C20th (if not late C19th - see Moving Here for some Foreign Office material). See Martin Gilbert of all people for some of the history.

    Have you not grasped what Jewish Bolshevism and the Communist International which resulted in WWII (and which was being purged by Stalin in the 1930s?) was? History may not be quite what you think. Was Stalin really 'surprised' in June 1941? Why did Hitler's armies turn South instead of going into Moscow? Who won WWII ideologically? Who ended up controlling Eastern and Central Europe? Was it not National Socialism?

    I agree with MrTweedy that it's a matter of legitimate group competition but this should be made more open and transparent, but it's not. That is what needs to change. The facts about diversity in 'g' and Personality (and with it genetic and clinical disorders) are just empirical facts.

    Discrimination lies at the heart of all intelligent behaviour. Blind yourself to that and you inhibit intelligent behaviour. There are those who do just that for hegmonic/political advantage.

  • Comment number 96.

    ishkandar (#94) "Well, Civil Servants have never been civil nor servile in all of known history except to their "betters", i.e. slimy, crawling creatures !! Their Modus Opernadi is that of Pocket Hitlers. It is just that in the last few decades, they have used Political Correctness as their weapon of choice and their powers have been greatly increased !!"

    False. In the past they very strictly followed and enforced Civil Service Code. Yes, it was top down. It was nobbled by recruitment oif Press Officers in the 80s and got worse in the 90s. Note the creation of Agencies and NGOs. Remember the Howard-Paxman interview? Political Correctness has been used to undermine the Civil Service. One clear example (see some of the workforce publications) is how recruitment targets across departments were to reflect local ethnic proportions in the population. This ignored the fact that there are marked differences in the mean abilities across ethnic groups as well as marked variations in the distribution of these populations (e.g. London). This takes us back to the Leitch Review from the Treasury in 2006 i.e. skills and the economy. It should make you think of the ETS video and report too.

    I said this was simple, but you'll need to follow what I've been linking to. This has all been engineered by clever people. No 'conspiracy' - it's all done legally.

  • Comment number 97.

    ishkandar (#94) "Meanwhile, the Civil Service gets bigger and bigger and getting out of hand !! Public spending, especially in the IT, is now an international joke and all overseen by jobsworths whose only defence of their failures is "lessons have been learnt" !! Billions paid for them to learn their lessons ?? Why ??"

    You still don't get it do you? It's done to break up the Civil Service/Public Sector and justify doing so in the eyes of the electorate which basically funds it. People are being induced to pull the rug from under their own feet. Most don't see this. It will cost them dear. It is costing them dear already, or at least, it will cost their progeny if they have any.

    That's the Liberal-Democratic (anarchistic/Trotsyite) way. This is not Old Labour you know. Why do you think Stalin ejected Trotsky in the late 1920s? Why did he [Unsuitable/Broken URL removed by Moderator]purge his supporters in the 1930s?

    You are a victim of anarchistic propaganda I suspect. Singapore is a tiny island Liberal-Democracy, but it has major TFR/differential fertility problems like other Liberal-Democracies. Their eugenic policies to address this failed. Singapore is surrounded by high TFR muslim states and has a growing Muslim population and a falling Chinese population. :-(

  • Comment number 98.

    MrTweedy (#92) "Gentiles must simply raise their game and compete."

    By building a Stalinist state like the PRC. They are gentiles (as was Stalin). It is also what the British Civil Service was under Old Labour of course. The Mensheviks modelled on Old Labour. Stalin twigged in the 1920s, hence the oustings of the original Bolsheviks. Stalinist USSR was really just a big Old (1945) Labour without an oppositon (see the Webb's book). In 1945 the USSR was a friend of both Britain and the Roosevelt's USA. Hayek was not popular. Thatcher changed that, along with sex and drugs and rock n roll.

  • Comment number 99.

    No.98. JadedJean

    I'm afraid I'm just a bit wishy washy, in that I'd settle for the mid-way point between state control and free market anarchism. I'd settle for a score draw.

    Personally, I think the British nationalised industries of the past were a bit of an old goat, as the government could never manage and control them properly. They were uncompetitive, unproductive and lost money hand-over-fist, as the likes of Germany, Japan and Korea overtook Britain. Hence, Mr Healey having to write to the IMF for financial assistance. (He's now a Lord, but one of those made up unelected types of Lords - he's not a proper Lord, you know). Mrs Thatcher then had to implement harsh electic shock medicine, to attempt to make Britain competitive in the world. This treatment went too far, and we now need to scale back from our current free market anarchy.

    I think utilities should be publicly owned, as long as the workers don't go on strike and hold the country to ransom, and as long as the Civil Service manage them correctly.....
    The same could apply to the Royal Mail, the trains, and maybe housebuilding. The argument being that necessities must be provided as cheaply and efficiently as possible, and the private sector doesn't always seem to do this very well (housing and commodities bubbles or something).

    (Forgive my use of intensional language).

  • Comment number 100.

    JJ 73

    That is the first time I have heard of an anarcho-Vogon. Now I understand what Ford Prefect meant! No wonder we have so many roads.

    Back in his early days Hayek was an anarchist, so was I when I met him but my anarchism belonged to Kropotkin. He was a lovely man with a delightful twinkle in his eye who treated this young man with a gentle respect which was so unlike other professors I had met. Yes, I was disarmed by this right-wing monster! There was some validity in his arguments but they reflected his times and not mine so I stored them away for future reference.

    Then along came Keith Joseph who you would call an anarchist but he was actually a high Tory. Interesting contrast. He was only borrowing Hayek as a means to outflank the etatist left, as Robert Conquest calls them, whom you no doubt would not call anarchists.

    So we gradually strip aside what you do or do not believe. How strong a state do you feel is necessary? I would prefer a small one because it would be efficient and cheap to run: a bit like my taste in cars.

    If you prefer a strong state, how do you intend to legitimise and manage it? In my view the inclusive social democratic model as practised in the UK seems to go bust periodically and has overstayed its welcome. We can't afford it. Neither can we afford the self-interested bureaucracy so favoured in Europe. So what are we going to end up with?

    How about something cheap that works? It doesn't require a philosophy or much paperwork, just goodwill and integrity all round. Sounds a bit anarchistic to me but.....

 

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