2nd Quarter Growth 0.2%

[beorhthelm]

This is not entirely true is it? We simply do not play the game as well other nations.

i'm sure theres more to it, and not playing the game well is the broader point. however, a couple of commentries about the train deal made alot of this, Siemens where able to have substantially cheaper funding over the lifetime of the project, leading to undercutting all rival bids. there was an underlying point directing blame at the Labour government for this, but im sure the whitehall mandarin didnt do so for political reasons, and that rather ignores the general UK approach to these things, going for the cheapest at all cost and sticking to all the rules - back to how to play the game.

which is interesting and ironic as so many come to the UK and the City for our financial consultancy and expertise at finding novel ways of doing deals.

 

[Seagull over Canaryland]

I am only an armchair economist but am rapidly becoming fed up with the coalition. They were right to take decisive action to try to arrest the structural deficit but seem to be doing so in such a ruthless manner without making obvious moves to support manufacturing which would help growth and retain or even create new jobs, create wealth and in turn generate precious income from taxes. I would feel much more optimistic if the cut backs in the public sector were being offset by investments into manufacturing.

Not that the Labour lot have much to offer. Ed Balls' mantra really makes me wince with that glint in his eye when he seems to delight in scare mongering and talking down the economy while failing to offer any policy. The country needs him to talk up the economy. He is a busted flush having been Brown's right hand man and architect of the mess we are in. His wife Yvette Cooper isn't much better with her MumsNet soundbite style of opportunistic politics. If we had a credible opposition then the coalition might be more effectively held to account.

Given how precarious the economy is and now being only a gnats from negative growth / recession does make Govt decisions not to invest in UK manufacturing seem narrow minded. France and Germany don't hesitate to support their domestic manufacturing. Three opportunities come to mind where we could have invested in world class businesses:

Sheffield Forgemasters
Bombardier Trains (Canadian but (used to) employ loads in Derby)
Lotus Cars - they have been asking for assistance so they can create 1200 jobs instead they lost and now have redundancies.

I guess there are other examples out there that could use help however once our manufacturing base and associated skilled labour has been lost we will become cemented as a third world economy. Get a grip Cameron & Osborne.

 

[withdeanwombat]

It's Gordon Brown wot dunnit.

 

[Don Quixote]

They have so many excuses, soon the excuses will run out. Osbourne doesn't know what he is doing.

 

[Don Quixote]

It's Gordon Brown wot dunnit.

I didn't realise he was the chancellor. You can't think about the past anymore, it is deluded to do so. Look at the figures, Osbourne has lost it.

 

[blue2]

View attachment 26911

this is the Tory policy

 

[The Antikythera Mechanism]

this is the Tory policy

Actually that is the Labour policy

 

[Pavilionaire]

The Office Of Tax Simplification was 1 year old last week. What has it done in that time? A lot of meetings, a few draft initiatives but basically f*** all. We're in economic hardship NOW, we'd need to feel the benefit of a simpler, flatter tax system NOW.

You can bet your life changes WILL be made - albeit watered down - in 2013 and 2014, i.e. 5 years too late. If the Tories weren't so piss poor in opposition they could have got this up and running a lot earlier.

 

[Storer 68]

China
China Projected To Accumulate More Wealth Than The U.S.
Posted by DavidJuly 25, 2011China’s savings rate is one of the largest in the world even in dollar terms. Chinese tend to save a higher proportion of their incomes due to the lack of social safety nets such as healthcare, social security and other state-provided benefits.

From a recent IMF report on China:

On account of its large annual saving, China is projected to contribute more than 1/3rd of global net wealth accumulation between 2010 and 2015 (measured as net investment plus increase in net foreign assets). China’s allocation of this new wealth should have increasingly important, if gradual, implications for domestic and global financial markets.



What will the impact of this saving on asset prices?

Due to capital controls and an undervalued currency, among other factors one of the major impact of China’s large savings would be asset price inflation both in the domestic economy and in foreign markets.

As of May this year China holds $1.1 Trillion of U.S. debt according to U.S. Department of the Treasury, making China the largest holder of U.S. debt.

U.S. Debt position:

As the world’s largest debtor country, the U.S. currently owes $14.3 Trillion in debt to both Americans and foreigners. However despite $4.5 Trillion held by foreign countries including the $1.1 Trillion held by China, the vast majority of the U.S. debt held is the American public.

The U.S. Congress is trying to reach a deal to raise the $14.3 trillion debt ceiling before the government runs out of cash by August 2.

 

[Mr C Gull]

You still haven't told me how to measure the 'true' value of a currency...

Don't start an 'evidence' game, you didn't use any 'evidence' either and as has been suggested the figures are notoriously suspect. Most of these arguments are from acreditted academic papers which I will find and link to you

Yes, there are capital inflows. A country with such high rates of investment will inevitably NEED capital inflows. China has huge reserves piling up. Longer term the trade balance of all the Western Economies show that we are indebted to the global economy... we do not have the cash to invest. Dissimilarly, china is a lender to the global economy and this is likely to continue. Residents in China are going to become increasingly wealthy and there is a lot of them.

Obviously this whole debate is hypothetical, but there are laws against inward investment by residents which would not have to be removed if we were to move to a freely-floating currency. This must be remembered.

However, according to your perspective the currency is hugely overvalued so if all of this were to take place (i.e. the currency became freely floating) then you said China would lose its competitive advantage... as such, vast sways of money wouldn't necessarily want to enter the country? A lot of capital inflow is already taking place, whilst it is restricted it is not nearly as restricted as capital outflows.

But I really would love you to answer what the true value of a currency is.

Also, your point about 'zero interest rates' is ABSOLUTELY ridiculous and actually contradictory in relation to the 'debt burdens' ... debt is only a burden because you have to pay back more, someone is lending you this money... hence there is a return to be had. Moreover, returns can be made on the stock market etc etc. Cash Accounts are not the only for of investment and most likely a Chinese residents wouldnt be allowed to hold one anyway.

Sorry for more edit, I just keep finding more things wrong with your post.

Remember, the US economy is still much much larger than the Chinese economy (trying to find the exact proportion but I swear I read it was 4 times as big or something in the Economist.

Economies experiencing growth firstly do not all have large worries about hyperinflation, cf Eastern Europe, and even China and India etc are not close AT ALL to the technical definition of hyperinflation. Doubt-digit inflation is to be expected and whilst worrying, doesn't seem to be that destabilising yet. Britain experiences similar level as we industrialised and grew.

I'm slightly lost as to the point you are trying to argue/raise here, rather than making any point you are flipping around subjects and para-phrasing me. I dont really want a personal slanging match so i'll try to clarify the points i was trying to make and then perhaps we can agree to disagree:


*I stated there would be headwinds on the chinese economy in the SHORT TO MEDIUM TERM, i argued that the renimbi was over-valued, a point you seem to agree before the diatribe started. I was also trying to make the point that contrary to popular media/consensus i was of the OPINION that all was not quite as rosy as it seems in China.

In your response you then go off on a tangent talking about doing away with all captial controls, which in reality is not the same as letting the Renimbi appreciate to something near fair value slowly and in a controlled manner, something that the authorities will have/are doing slowly- rather than being some crazy off the wall idea, it is a very commonly held consensus that the Renimbi is over-valued on any recognised basis, the exact amount is obviously a point of conjecture- i dont profess to be a rates strategist and in light of this being a restricted market its kind of immaterial anyway.

You continue on your tangent talking about selling Renimbi and a net captial outflows. I made the point that FX wise, if capital restrictions were completely done away with (which they wont) there would be a net capital inflow, by mentioning interest rates i was trying to elude to the possibility of a massive carry trade (any all hypothetical anyway)

Stock wise again you'd be likely to see a large influx of money from the people queuing up to get money onshore, this would outway any mythical desire you talk about in your response, this is obviously just my opinion but i dont think its going against the tide too much to suggest this.

Bonds wise- are you suggesting that Chinese investors would like to invest in Corps, where yields are at an all time low? Or perhaps they'd be falling over themselves to invest in AAA rated securities like Treasuries....

So some of the points you make about where we may be in the long term have value, but in your eagerness to jump around all over the place and try to shoot me down you have neglected to take any notice of the very first point i made, which is that i was talking about the SHORT-MEDIUM term.

 

[Leekbrookgull]

Alot of well balanced points,however can we come up with some simple ideas to try to kick start the economy ? For me VAT almost across the board is a loser at 20% reduce fuel back to 15% or even lower.

 

[APACHE]

A start would be for the Gov. to buy only British and to hell with the rules of the EU, other countries break the rules when it suits. Also get the banks, which we own, to lend the money needed for business but then again Palaise might get in Europe . NO HOPE.

 

[beorhthelm]

Alot of well balanced points,however can we come up with some simple ideas to try to kick start the economy ?

as Pavillionaire says, a bonfire of regulation and slashing of business taxes. not necessarily cutting the overall tax rate, but cutting the number of different taxes and levies. beyond their revenue to the exchequer, they cost money and time to administrate and ensure compliance, money and time that could be more productively spent. the tax code guidance has gone from a couple of inch thick manuals to some ridiculous amount measured in several feet, its simply not healthy for an economy.

 

[Pavilionaire]

If they did away with National Insurance and integrated it into income tax then they could redeploy some of the staff to advice new businesses on what government funding is available for funding apprenticeships and the recruiting of staff.

It's a struggle to find out what funding can be accessed. Even then once you've found out, applying for it is time-consuming and daunting. And how about a tax break for taking on employees or creating jobs, i.e. 200% tax relief on recruitment costs?

These are the sorts of issues all parties are failing to address. Maybe if the government asked business why they're reluctant to recruit that might be the beginning of a turnaround.