A (weak and fragile) recovery II

Looks like I'll be first again! :)
You can't buy your way out of recession caused by excessive spending.

Way out of this recession requires new means - tax incentives for new industries, like renewable energies, nuclear Reactors that run on depleted uranium, new affordable houses. Things like that.

Listening to the 6 o'clock news on BBC R4

Recovery - recovery recovery recovery!

What a load of rubbish!

https://news.bbc.co.uk/1/hi/business/8538293.stm

See the bizarre negative growth reversal in 2009 - fudged by heavy government /stimulus 'funny money' - its extarordinary for an economy to bounce like that and the truth is that the real economy is not recovering this is the act of a desparate government having created its own GDP market camouflage as the false top slice to the growth statistics.

Bent accounting - that's all it is - to confuse the electorate - government sponsored brainwashing!

Stephanie

Can you clear this up please.

In the preliminary estimate for Q4 2009 the Chained volume indices was 100.7 What is that indices now? As you explained in your earlier blog the previous figures had been revised down.

And quantitative easing seems remarkably successful at stoking up inflation, I thought the worry was deflation. Are we heading for stagflation?

plamski - Don't be silly, they don't won't to build any houses because it might mean that prices fall. The UK economy is a Ponzi scheme is based on ever rising house prices. It's doomed, but they'll take the country down before the admit it. Prepare for yet more QE, schemes to prop up the housing market, inflation, a run on the pound etc. They need to change direction but they havent't got the guts.

This is a quote from a recent article I read that provides a rare contrary opinion to the brainwashing we get from mainstream news:

"Britain has cut interest rates, pumped up government spending, printed money like crazy, and nationalized almost half the banking industry. Just about everything possible has been done to encourage consumption. The results have been miserable. The economy is flat on its back, unemployment is rising, the pound is sinking, and the bond markets are bracketing the country with Greece and Portugal in the category marked “bankruptcy imminent.” What’s needed is a total change of direction. Get the deficit under control. Raise interest rates to restore confidence in the pound, and reward saving. Cut taxes to stimulate enterprise and investment".

Stephanie,
Please start calling it for what it is - a Depression.

The developed world is massively deleveraging after historically unprecedented levels of public and private debt have been accumulated.

It is like a bath full of water but with the plug pulled out. You can carry on pouring water (QE) in but it is draining out faster. Businesses are paying down debts (if they can), consumers are saving not spending.

This is what happens in depressions.

Banks aren't lending money, because there is NO DEMAND and unlike China, the Government can't force them to lend to people who don't want to borrow.
Recovery will only begin when debt has been paid down and asset prices have reached a realistic bottom. This process HAS NOT EVEN STARTED, due to the insane Keynesian policies being pursued by Governments.

These Governments are now defaulting (currency devaluation and inflation are the same as default).

I pray that these defaults do not lead to social unrest, but history teaches us that they usually do.

We would all be better of if the institutions of State and the Media started reporting the truth (harsh as it is) so we can guard against the inevitable build up of aggression that occurs during financial hardship.

Don't be fooled: GDP was actually revised down

The government keep changing the previous quarterly results to hide the real truth aided and abbetted by the BBC.

For those interested in a more profound and philosophical discussion let me divert you to Adam Curtis's latest blog entry. I'm afraid Stephanie's blog is nothing more than an echo of this governments propaganda.

THE ECONOMISTS' NEW CLOTHES
https://bbc.kongjiang.org/www.bbc.co.uk/blogs/adamcurtis/

Just the opening paragraph

"It is astonishing that everything about the credit crisis is still discussed in the technical terms of economics. Although, as most commentators agree, almost all economists failed to predict the financial crisis that swept through the western economies in 2008 - we still slavishly discuss and analyse it in their technical terms."

What's that I hear?

Inflation hiding in the figures.......oh how surprsing....

At least Steph you've pointed it out but again it will be lost in the message as all the focus (wrongly) will be on the 0.3% GDP growth without any qualification.

(And just why will the electorate be ignorant of this? Well a good question for the BBC to answer).

A number of us have argued previously that stagflation similar to the 70s seemed a higher probability.

The growing evidence appears to be bearing this out......

We are all so angry on these blogs, blameing everybody for the mess we're in, desperate to draw a conclusion, hoping for a way out.

Unfortunately, we're all British. History shows that we moan and whinge, but it's not until the 11th hour that we actually do something. We also like to be led by strong leaders.

On this basis, we've got many years of whinging ahead of us, I reckon til at least a year after the 2012 Olympics, when we'll suddenly realise that we've hit the credit limit on our country Barclaycard.

In the meantime, I suggest we all focus on immaterial things, get your head straight, cos there's no way you can make a spot of difference to what's comming.

Gosh I'm in an optimistic mode today.

Come on Stephanie, Edmund Conway got it right and you actually alluded to it in your first blog on the subject. All the figures have been revised and we are back we here we were when the figure of 0.1% growth was announced (actually £133bn less).
It's bad enough the ONS spinning lies don't join in.

This recession can present a real opportunity to clean up the UKs economy.

It is clear that big government hasn't worked and a leaner fitter UK economy driven by clear incentives for private enterprise and investment in technology, smart manufacturing and education is what is needed not just to boost GDP but to sustain its future.

Our reliance on Financial Services, driven by all recent governments, has excluded those who make real things or achieve real goals.

There will be austerity for at least the next few years, its what comes after that which will now be meaningful, is it a return to a reliance on The City and the overblown housing market or a UK full of the grand projects of a motivated private sector.

Cheap money, stimulus and people addressing spending needs that cannot be avioded, does not an economy make. Until the banks are both regulated and taxed to pay for their sins, if offered as an alternative to jail time the bankers will accept, and relief is given to the middle class nothing will change. Fudging numbers and professing progress when there is none is a fine political dodge but it does not impress the average citizen facing day to day obligations, but of course this has never been about the average citizens...it has all been about the banks.

In one word, then, Stagflation. This is what Britain went through in the 1970s. Now which party was mismanaging our economy in those days, I wonder?

#5. Recovery will only begin when debt has been paid down and asset prices have reached a realistic bottom. This process HAS NOT EVEN STARTED, due to the insane Keynesian policies being pursued by Governments.

I think history will show its Mervyn King and his gang that took the wrong choices about QE. Even the other day in his progress report he used the stabilising and rising of house/asset prices as a mark of policies working.

Yet he knows that its the housing bubble and their supposed asset values that have detached from reality. If house prices had continued to fall through the last 12 months, they would probably be at some sort of bottom now, and maybe we could be confident that sometime this year any growth was based on a correctly reset asset value.

Instead, because these assets are a large part of the already destroyed RBS/HBOS bank balances, he has felt obligated to try and keep the banks from even further collapse.

It is clear to me that the government should have separated the retail deposits from the casino investments when it came to the rescue, and allowed the almighty collapse of the rest of RBS and HBOS.

This collapse would have caused the loss of hundreds of billions of pounds from the wealthy and those with pensions (who you could argue are also the wealthy). But the government would have then been in the position to have created nationalised banks that could support economic recovery. The end result would probably have been an initial drop in GDP that doesn't bear thinking about, but a recovery that was affordable and sustainable, and without a debt legacy on the shoulders of the average UK citizen, their children and grand-children. However, the election would have been at the wrong time for labour as we would probably not be out of the depression by election time.

Instead we now have a government that has committed to borrow about £800Bn over 5 years, already about £180Bn used and counting. And they are totally unable to show how any serious growth can be obtained, yet alone at a level that could sustain this level of extra debt.

Because we are committed to borrowing this extra £800Bn over the next 5 years we now HAVE to have a clear run of ZERO PROBLEMS for the next 5 years. No more recessions, no more bank shocks, all our trading partners in growth wanting our exports, no currency issues. We need a clear run of 5 years of excellent growth, combined with massive cutbacks (halving the deficit) and then, only then, will we ONLY need to borrow the £800Bn.

And people think that concentrating on reducing the deficit is not a priority!

Stephanie wrote:

"low growth and relatively higher inflation are the precise combination that the Bank of England most fears"

The bank does not get it - its policies have most probably 'caused' this. I return to my argument about when a Keynesian injection of monetary growth support an already collapsed economy to grow again and when in this case it prevents the necessary rebalancing and downwards re-pricing of assets, that is essential for real, possibly sustainable, growth to return to the economy. The experiment that the Bank has been playing with is proving my conjecture I think. (I know I have been banging on about this for well over a year and it is the last thing I want to see - but I did point out this contingent problem with policy before QE and Zero interest rates were implement.)

Although we should not be starting from here, I still see no genuine alternative to raising interest rates to dampen inflation - I know that this will drive the economy back into a deep recession - but, without the financial pressure, the overpriced assets in the economy will remain overpriced and these will be a far larger damper on the economy for far longer than a real recession.

(Also the bank has already blown - pointlessly 200Bn + hugely inflationary zero interest rates - but it will have to do the same again - but at the right time - AFTER the repricing has occurred.)

So many statements now are vested interests that the public have become totally sceptical and believe nobody. If labour can take credit for anything over the last decade that is one of their claims to fame. What began as a modern approach to communications copied from USA has poisoned trust in our governments to such an extent that we have become tribalised and hatred spews from both sides in equal amounts. Even if we were to win the World Cup I would begin to wonder how it had been fixed rather than won on merit.So we now have a bit of inflation ? let's wait until we copy Zimbabwe and see which side takes to the streets and back the biggest thugs.

Nominal growth 4%, inflation *also* 4%? You know, there's a word for that and it begins with "Stag" and ends with doh #13 Friendlycard beat me to it.

If you'd looked at the CPI or RPI index level (rather than annual rate, which obfuscates things) as early as several months ago and fitted a trend through the part after the late08/early09 deflationary shock (as I did), you'd see a mean rate of something like 3-3.2% developing.

I don't know if i've got my figures right but if when all the stats are in and it turns out, say, we have 4% nominal growth while also 4% inflation in the same year, doesn't that equal 0% growth in real terms? ie; no actual rise in real income or real GDP at all then?

The abysmal results for Lloyds show the true extent of the so called recovery. We have a recovery built on bribes and lots of slush funds pushed into the economy via QE.

It is almost as if the current incumbents of Numbers 10 & 11 Downing Street's only plan is to fiddle the figures by reducing VAT, car scrappage; pushing through QE and spending on the UK credit card so they can claim growth and a recovery before an election.

Then if they were lucky enough to get away with the scam the truth would only come out later.

In the real world pretty much everyone knows things are tight monetarily and those are the ones doing well. Thise struggling are in a much worse position.

I am with posts 13 & 17 this is merely the beginning of stagflation. Trust me this will all end in tears.

We have growth which is less than price inflation and less than sterling devaluation.

Yes, I'll try to be optimistic.

Sorry, reading the article again, Stephanie answers my last question by saying "But, as we know, there wasn't very much real growth in the economy during that period. The growth in nominal GDP was achieved almost entirely through higher prices". And goes on to say this really isn't something we would want to have carry on for too long....

But i'm still not sure about the past growth inflation relationship, eg; take the year when growth was minus 6.25%, that I saw in another article on this site today, I couldn't tell if this was real or nominal?

Because if it was nominal, then am I wrong in thinking that if inflation was (lets say 3% in that period), then doesn't that make the 'real' declice in GDP even worse? ie; 9.25%? I'm confused!

If I was a cynic, i'd say that the government flatters the figures by giving us growth figures not taking into account of inflation when it suits them and do, when it would. Am I wrong? Sorry i'm not an expert, just want some answers!

I hope that this latest recession brings to an end the miss conception that has long as people feel they have money,all will be well when what they and all of us need is for them to actual have money

Stephanie wrote

"Bottom line? The hole was deeper than we thought - but we have at least been climbing out of it a bit faster than we thought."

Surely because it was deeper than we thought, despite climbing faster, we are still deeper in the hole than previously reported?

And another thing, i've noticed that on blog comments in general on the subject if the credit crisis, that there seems to be always criticism of those damn 'enonomists' for not seeing the crisis coming etc..

Sorry to sound like a heretic and a geek but i've read countless articles and analysis by economists in a wide range of papers, journals and websites over the years and I can remember loads that did indeed warn of the impending crisis, due to a massive bubble building up in asset/property prices fuelled by cheap money and underregulated banks etc.... years before in happened!

The problem as I see it, to be fair, is not that it's the 'economists' as one group that didn't see it coming (come on, they're always accused of never agreeing, so some of them must have warned us about it, even if you never read any articles!) but it's because many of the economists who were sounding the alarm very early on, were not paid / working for the financial industry, so were not biased or have vested interests in keeping the bubble going, where the others were and did.

The second component of this is that even though many economists did give us warnings very early on, most people were not listening! At all levels of the economy and society, hardly anyone wanted to listen to the 'party poopers' who were labelled as being negative (anyone remember Dr Doom? He was one of the many, ignored voices) widely scoffed at and accused of being over dramatic in there doom'n'gloom, just talking the economy down etc etc....

Governments / central banks weren't listening as long as inflation was low, because they loved the income from corporation and income taxes generated by the bubble..

Big business weren't listening because they loved the profits and growth opportunities etc in the bubble..

The public in general were'nt listening as long as they had a job & those with property saw their values soar..

Plus countless other reasons, my point being to ask people to not blame the economists in general for not fore-warning us all, what many seem to forget is the obvious fact that they are very varied in their views, analysis and political background too, they are naturally going to disagree, and many did get it wrong, mainly becasue of the vested interest reason I touched on.

But many got it right! And not just by chance, they used sound economic theory/ principles/ analysis/ stats to come to a reasonably robust conclusion about where the bubble was headed. But like I said, not many were listening, that was the main problem i'd say.

Just want to add another thought if anyone is still listening... I've heard many say this crisis has discretited/damaged economics as a subject (as against economists themselves) and many people are/will turn away from the subject because of the belief that 'they got it all wrong' etc..

My thought is that, on the contrary, many more millions of people, as a result of the crisis itself are taking a keen interest in the subject, many for the first time, as the thousands of blog / comment entries attest!


They might criticise this or that view, policy or theory but in a way they are still 'doing' economics when they add their tuppenc to the debate in blogs / comments etc.. and some of those taking a new interest may go on to study the subject in more depth, do a course or something.

So, as it has always been, economics is changing not ending! That's got to be a healthy thing?

Just a thought.

Why are we so obsessed with % growths or declines. If I am driving my car at 60mph and I take my foot off the accelerator I don't say we have slowed down by 5.432%, I say we are now say 57mph. So, if we are to compare apples with apples, why can't we have an absolute on GDP.

From what I have read the revised ONS figure for the end of Q4 2009 is an actual decline in GDP over first envisaged in January. So we slowed down much more in 2009 and although we are beginning to accelerate more we are still not where we thought we were in absolute GDP! Why can't we discuss real numbers instead of phoney percentages that obscure the real situation?

#13 friendlycard

Nice idea, shame the facts do not bare out the hypothesis!

The state of the UK economy in the 1970s has arisen in discussion on this website recently. The sweeping generalisation that the 1970s were all Labour and all bad is a sleight of presentation that has been successfully made by the Conservative Party since Margaret Thatcher.

Both major parties governed during the 1970s, unless you missed the first half of the decade. Inflation was higher and accelerated faster under the first part of the decade. The Labour government reduced inflation in all bar the last year. Inflation shot up in the first years of the Thatcher government. Unemployment then spiralled up above 3m and chronically remained there for the 1980s.

By historical standards inflation is still more under control, i.e. at a lower level than it ever was under Margaret Thatcher. Even John Major with the recession of the early nineties only managed to match the level of inflation, which the UK recorded last month in two years.

The key fact is that the oil price supply shocks caused respectively by OPEC formation, Middle East war and the Iran Iraq war bare more responsibility for sending the economy off course in the 1970s. This was particularly responsible for causing inflation. No single government or Prime Minister caused much impact on the economy until the 1980s and the 1981 budget in particular.

The same causal risk for stagflation applies now. The need to open up oil supply to bring the price down to nearer US$60 a barrel could not be more urgent and important to securing the recovery.

25. At 10:54pm on 26 Feb 2010, dontmakeawave wrote:
Why can't we discuss real numbers instead of phoney percentages that obscure the real situation
------------------------

Because phoney percentages conceal the inherited incompetence of the politicians and their lackeys, the economics (it could be the other way around).

You may find more answers here - https://bbc.kongjiang.org/www.bbc.co.uk/blogs/adamcurtis and don't forget to watch the video - Pandora's Box series.

#26 fleche_dor. Ah yes facts! Tell me, tell me, c´mon tell me the answer. How did the Iran-Iraq war send the economy off course in the 1970´s when the dates of that war were 1980-1988?

What consequences do you imagine would arise as a result of $60/bbl oil price when the 1873-2002 oil price averaged $17/bbl in 2002 $´s?

Dontcha just hate revisionsits?

A headline in the not too distant future...

read all about it, government announces latest GDP figures, a phenominal 10% growth posted in the UK economy... (small print; using the new government method of counting that includes the, erhem,.. black economy).

Well, "growth is growth" a government official replies when quizzed!

You can't print money without it leading to inflation, how many people have said that over and over again in these posts during the period of QE? If you also get no or low growth as well then you really do have a problem brewing! All this debt and borrowing just to hold up the insane levels of house prices! All this so our childeren can pay 250,000k mortgages on 25k salaries on top of paying down the national debt. The worst thing about it for me is that the whole political system just seems to ignore it, which means that nothing is really going to change whoever is in charge.

Never mind Stefanie we all realise the BBC always struggle to report the obvious. House politics always distort things.

Sorry armagediontimes but fleche_dor may have been wrong about the Iraq war date but the was factually correct about everything else. The Middle East war (Yom Kipper War) which caused the 1973 oil crisis was the key fact in the 1970's to have a peristant economic effect since the great depression. The world stock markets also crashed during the same period.

Just love the way people try and blame this government over the WORLD recession. The UK recession probably wouldn't have been half as bad if you all you doom and gloom merchants hadn't talked it down!

26 fleche_d

Would you like to give us the actual inflation figures for the 70s and 80s? You've tried to tell us this before. If you tell a lie enough times people might start to believe it. The truth is real interest rates are highly negative as they were in the 70's and savers are being robbed. This is to pay for Labour's and the country's own property (gold) rush. Not really fair is it?

The movement in statistics in a quarter is rarely larger then the margin of error in the statistics. So what is of more interest is the general trends. As figures get modified in the light of more information we need to know these if we are to assess trends.

A good report in the professional world separates data (or facts) from analysis (or opinion). If your reports, Stephanie, either started with the data - including historical data (or a link to well thought out tables) and was then followed by your analysis, then those wishing to comment would at least be singing from the same hymn sheet. Too much comment is based on selective reading - a bit like some reading the end of Ulysess and concluding that James Joyce did not know how to punctuate. If the whole story was made more accessible (ie information more complete and easy to find in a raw state) then the quality of debate might improve and charlatans exposed.

My other thought is that economics should not be studied beyond 'O' level. (Gives my age away) Armed with that and a 1955 copy of Teach Yourself Economics I have correctly predicted the rise and fall of our economy over the last 30 years. The basic reasons were always correct and the timing was no more than 12 months out. Pity that I did not work in financial services, but that might have been the reason for my successful predictions.

26. fleche_dor

Yom Kippur caused a supply shock which acted as the trigger that time, but the underlying problems were similar - excessive lending in a property bubble (though in this case commercial rather than residential), by niche banks funded through the wholesale money market, causing a liquidity crisis requiring central bank intervention. The Secondary Banking Crisis of the 70s was virtually identical to the Northern Rock fiasco, so why we have politians and economists claiming everything was unforetold and black swannish is beyond me.

In fact, after struggling with the resulting stagflation that time round, a lot of people came to the conclusion that the Keynsian theory of spending one's way out was debunked. This ushered in Friedman's monetarism which became our faithful paradigm - until, that is, we found ourselves in a liquidity trap. Then, of course, it was back to good old Keynes, water under the bridge, no harm done, best of friends again, never doubted him for a minute!

Stephanie

We all know you are an apologist for Gordon Brown and would love to see Labour re-elected, but don't you think in the interests of public service broadcasting you should present a balanced report on all the salient points of the figures. Would it not have been reasonable for you to report on both the upward and the downward revisions to the GDP figures which you failed to do on the news at six, you had corrected this by the ten o'clock news, but the political spin damage had been done by then. I feel this is a blatant misrepresentation of the facts and actually dishonest.

#32. It says all there needs to be said about belief in our PM, when, in your opinion, a handful of bloggers can talk the the economy down, and succeed, while he is doing his best to talk it up.

The following is a direct quote from George Orwell's, scarily prescient, 1984.
20th edition, re-printed 2003, bottom of page 47 to page 48 :-

"But actually, he thought as he re-adjusted the ministry of Plenty's figures,it was not even forgery.
It was merely the substitution of one piece of nonsense for another.
Most of the material that you were dealing with had no connection with anything in the real world,
not even the kind of connection that is contained in a direct lie.
Statistics were just as much a fantasy in their original version as in their rectified version.
A great deal of the time you were expected to make them up out of your head.
For example, the Ministry of Plenty's forecast had estimated the output of boots for the quarter
at a hundred and forty-five million pairs. The actual output was given as sixty-two millions.
Winston, however, in re-writing the forecast, marked the figure down to fifty-seven millions,
so as to allow for the usual claim that the quota has been over-fulfilled.
In any case, sixty-two millions was no nearer the truth than fifty-seven millions,
or than a hundred and forty-five millions. Very likely no boots had been produced at all.
Liklier still, nobody knew how many had been produced, much less cared.
All one knew was that every quarter astronomical numbers of boots were produced on paper,
while perhaps half the population of Oceania went barefoot. And so it was with every class
of recorded fact, great or small. Everything faded away into a shadow-world in which,
finally, even the date of the year has become uncertain".


Note to the moderators :- You should not ban this post, it is not Plagiarism.
Plagiarism is the uncredited use (both intentional and unintentional) of somebody else's words or ideas.
Please note that due credit and reference was given at the start of the quote.
Neither is it breach of copyright, which applies to :-
"...shall not be otherwise circulated in any form of binding or cover....".
Well it is not bound nor has it any form of cover.

If you do ban this post then you might as well start banning and burning books,
and we all know where that leads, dont we ?
P.S. RATM Christmas number 1 2009 - get in !

Always thought Mervyn and the Government would hide inflation when it suited them. People have known for some time that household inflation was already running at above 6% and pensioner inflation at nearer 12%. They are devoid of any really good ideas, just same old rubbish peddled around as economics (Mr Keynes is dead!!!), just an excuse for not fixing the problem. The bubbles have to be let down, the longer it is left the worse it will be. Get ready for deep rooted inflation, they are incapable of fixing it so the best they can offer is more of the same old rubbish.

#2 Nautonier - great post.

Labour are frantically pumping the economy in a bid to save themselves and it looks like their plan is succeeding. Mervyn King will go down in history as a lapdog who did the bidding of his masters.

Where is the integrity in people at the top? I don't say where has it gone - it is the stuff of fairy tales which are subtle propaganda from the ruling class. Always Alsan the true leader will return and prevent this wicked rule.

Maybe only a run on the pound at the prospect of 5 more years of Brown can save us.

I believe in McBully - I believe that he is really is a bully!

A Point of Information for Post #23 from 'edward':

The 6.25% number (not over a calendar year by the way, but it was the peak to trough recession) is in real terms. I appreciate real vs nominal can be very confusing but generally speaking reported GDP numbers in the Press are almost always in real terms, unless specified otherwise. So thankfully no, it wasn't a c.9% GDP fall! It's also worth bearing in mind that for much of the recession, we had moderate deflation, so the GDP number in nominal terms would actually be worse than in real terms, although this is exceptionally rare.

I think Stephanie has made a valuable contribution by discussing the impact of the GDP deflator ("inflation") on nominal GDP but she must bear in mind most of her readers would require some explanation of real vs nominal, otherwise we see some of the hysterical responses above claiming the ONS and Stephanie are New Labour members or that numbers are being manipulated by Big Brother!

GDP - who cares? Most of it is government anyway - we know its going up because the government are spending more

But the bit that really matters, private sector GDP - Yup, thats the bit that pays taxes - is going down!

End benefits but Gizza-job! Any job will do!
Full employment - British thingey-mi-bobs for British wotsits!
Empty the jails and make them work for their porridge!

Where's me Nobel prize!

Ask Frank Field - he knows!

This is quite a change of view for you Stephanie. I have read your blogs and throughout the period you mention you have continuously dismissed the danger of inflation. Now you say that Neville Hill's work has convinced you it may be a danger.I also notice that you are trying to mention as an aside that you now agree with the view that I have seen first mentioned on https://notayesmanseconomics.wordpress.com that the expansion that Quantitative Easing has caused has mostly been in inflation so far.Fortunately I have followed his updates on QE and inflation dangers and was aware of the situation. Those that have followed you would have been led in completely the wrong direction until today...

Stephanie

One quick point: watched you last night on the News and clear message was the growth revision upwards to 0.3% from 0.1% was a good thing, though not massive. Fair enough.

But today I read in the FT that the upwards revision was due to a DOWNWARDS revision of GDP earlier; i.e. because the recession was even deeper than had been thought, the recent GDP figure represented slightly better growth than hitherto thought. It was not in itself revised upwards. It wasn't an 'absolute' increase in GDP which was what you implied, rather a 'relative' one.

Forgive me, but I do feel slightly misled. I don't think you fairly put the small upwards revision in its proper context. As such, I think your report on the News was misleading.

I recognise striking the right balance in what you say in a very short period on TV is difficult; however, I think you were wrong on this occasion.

1984 is my favourite book, and as time goes by, it get's more accurate, so good to see it mentioned

I have no idea whether Stephanie is a fan of One Eye Moody or not, although fellow bloggers who drew her attention to the utter misrepresentation she gave of the revised figures deserve credit for correcting her

Maybe she rushed, wrote it without thinking clearly enough

It is interesting to see Darling tell Brown to keep off his grass, and my guess is that his instincts are closer to Osborne's than Brown's as far as the defecit is concerned

Brown was wrong about so much, and clings to the wreckage of his reputation

Cameron has been too indecisive of late, which we all know to be corrosive to potential PMs

Personally, I don't think 0.1%/0.30% matters too much

We are still neck-deep in doo doo

The car scrapage scheme will end soon....cuts will begin...public sector strikes...all factors which will make people feel pessimistic

PIIGS will have to do something

There is a bubble of gloom, which is going to be hard to shift in my view

I want Brown out whatever, not least because like the President of the EU not one vote has been cast for either, and we have the temerity to talk democracy ad nauseum

Cameron is not going to win the election with the hope-expectation of 1997, although in current circumstances, maybe he won't find it too hard to exceed expectations if he does get in with a majority

The Q1 figures may well see us sliding backwards

We will see

I repeat my call for the BBC boffins to come up with an economic prediction league..so we can see who get's it right BEFORE the event

Deflation is the midwife of inflation.

It is only the timescale that is in dispute.

We are growing at 0.3%

Or is it 0.251.

Or is it 0.349.

On reflection, taking into account rounding error, we are flat (flat broke).

On all my posts I have highlighted the danger (extreme likelihood) that we will not grow significantly for at least a decade but will begin to experience significant inflation.

If this scenario comes to pass the deficit becomes a terminal disease and sterling will fall sharply.

Richard, we are not growing at 3% it is exactly the same GDP as the previous estimate of 1%, the difference is that the previous quarter was worse that thought and has been restated.

The ONS is a disgrace or was pressure put on it by the Government to spin the best view of a worse recession that otherwise reported.

Stephanie,

All this talk about the economy recovering by some miniscule amount apears to be a waste of your time and money. It's a bit like waiting for Spring to arrive - the sound of the first Cuckoo or the first Daffodil. You know it will eventually come, but when?
What really matters is how the electorate are going to feel come the election later in the year.
Will they feel good about themselves? I doubt it.
Do they have confidence in their own futures? I doubt it.
Can they pay their mortgages, heating bills, food bils etc.? I doubt it.
I think this is the recession that brought down governments (and probably countries if Greece is anything to go by).

Stepahanie
I did think your report on the 10 o'clock news was like the programme itself, more spin that substance. The fact as you well know because we have corresponded on it is that the revised GDP went down £113m in the 4th quarter, the difference was that the ONS revised its figures for the previous quarters as you indicated on your 1817 update of this blog. So why did you continue to peddle the story that growth improved?

So come on Stephanie, stop reporting the Government spin and start reporting the facts, that is that the recession was worse than previously reported.

The BBC is institutionally biased towards this Labour Government and continues to put a positive slant on poor figures, it is a disgrace.

#49
"Richard, we are not growing at 3% it is exactly the same GDP as the previous estimate of 1%, the difference is that the previous quarter was worse that thought and has been restated."

=========================================

"The revised UK GDP figures released on Friday showed that the economy grew by 0.3% in the last quarter of 2009" (BBC)

Is that not what I said. Growth for Q4 2009 was 0.3%.

I tend to pay more attention to anecdotal evidence and my own eyes; boarded up shops, zero meaningful job creation.
Not really interested in the minutiae of ONS statistics.

The land of tumbleweed.

Can't blame politicians for spinning the numbers; they are desperate.

BBC is biased towards Labour because Cameron has a deal with Rupert Murdoch to scrap the TV license fee as he intends to start charging for news.

You just watch who the Sun readers will vote for.

Stephanie, you say " In many ways, that's good news. The whole point of the Bank of England's quantitative easing policy - pumping money into the economy - was to boost growth in nominal spending and demand. These figures suggest it has achieved that."

If the growth of nominal GDP came through higher inflation without real growth, how on earth can that be said to be an achievement of anything, let alone QE.Demand is subdued, isnt it? I accept some financial assets and some prime investment-grade property lots may have enjoyed QE boosted price rises.I accept commodities, oil prices and currency devaluation have caused upward price pressure, but why should I think this is some sort of achievement of policy-makers?

It was only in October that I read Adam Posen's speech trying to convince his audience at the Cass Business School that QE was all about restoring confidence and liquidity in the credit markets - a bank bailout. He quoted research that monetary expansion is unrelated to prices. He recites the Japanese experience where a spike in narrow money growth did not result in growth in broad money or credit, let alone prices. He warned that our SME sector was left vulnerable by their over-reliance on a disfunctional UK banking sector.

I am starting to conclude that I am being shown smoke and mirrors by the QE-sers - and dont bother quoting the " you cant prove the counterfactual" as if that shuts down the debate as to whether we need to do something else for the real economy, not just high finance and the FTSE 100s.

"CONSTABLE @ 4.

On the Button.

It would have been better if the Bank bailout money and the Q.Easing and been given directly to the People then there would have been no Recession,( or should I say Depression - for that is what we are in.)

Reposted from last thread which was jarringly superseded by this "new" thread:

133. At 2:48pm on 27 Feb 2010, you wrote:

125. At 08:46am on 27 Feb 2010, bryhers wrote:

"Do you think we are so stupid we don`t know where you`re coming from.It`s visible a mile off!"

Quote:

And what accomplished villains these old engineers were! What diabolical ways to sabotage they
found! Nikolai Karlovich von Meek, of the People's Commissariat of Railroads, pretended to be
terribly devoted to the development of the new economy, and would hold forth for hours on end
about the economic problems involved in the construction of socialism, and he loved to give advice.
One such pernicious piece of advice was to increase the size of freight trains and not worry about
heavier than average loads. The GPU exposed von Meek, and he was shot: his objective had been to
wear out rails and roadbeds, freight cars and locomotives, so as to leave the Republic without
railroads in case of foreign military intervention! When, not long afterward, the new People's
Commissar of Railroads, Comrade Kaganovich, ordered that average loads should be increased, and
even doubled and tripled them (and for this discovery received the Order of Lenin along with others
of our leaders)—the malicious engineers who protested became known as limiters. They raised the
outcry that this was too much, and would result in the breakdown of the rolling stock, and they were
rightly shot for their lack of faith in the possibilities of socialist transport.

End quote.

It seems we all (all desperately indebted countries) think we can export our way out of this mess! What a joke!

The only countries that can afford to import don't need to! And what can
we export anyway? We don't make anything in any quantity cheap enough!

Greece "needs" more tourists, spending lots of money. I hope they're
advertising in China!

Our economies (USA, UK and to a lesser extent EU countries) have been
milked dry by the banking system. These people, who produce nothing except numbers in a computer, have sucked money out of the economies - in reality actually stealing it from people who have worked hard to produce things (and services) of real value, like food, clothes, cars etc.

When I started contributing to a pension fund I naively thought the fund
managers were carefully putting my money into sound companies that were
producing needed products, and putting it there for the long term. Now I
find that they were gambling it for huge stakes, and no real benefit accrued to the companies concerned. The only benefit accrued to the fund
managers. I certainly didn't benefit much from my pension fund (£55pw! -
which is just knocked off my pension credits, so no benefit at all!)

Where does this leave us? I think most of us know. As "our" credit
worthiness shrinks, interest on government bonds will have to increase (to attract buyers), debt will explode, leading to even higher interest on bonds, etc.... leading inexorably to the printing press.... How long do we have? It depends on how savage the cuts are after the election.... To avoid catastophe the cuts must be draconian (or worse).

And who would want to be in power when all this happens? (maximum 30 months in my opinion). Only a deluded megalomaniac! Which is why I think
David Cameron is doing his best to let Labour win the election! Even the
LibDems must be dreading a hung parliament!

The problem is that politicians cannot implement the necessary olutions,
as they are integral to the problem (I know, statement not backed by
argument or facts - just an opinion).

Labour will "win" the election. And never again be re-elected. I used to
be a socialist, but I "knew" they had lost it, when Tony Blair wanted to
erect casinos everywhere! There's not much point in voting now. I'm a
turkey and the only option available is christmas.

Might as well enjoy the fireworks on christmas eve..

PS Even if we get a lot of money from the oil in the Falkland islands it
will only delay the inevitable - we will never put our house in order
until we reach rock bottom. Just like the alcoholic who drinks himself to the point of death. We might as well hand over the islands to the Argies now, save us a lot of grief. We make even be able to negotiate some immigration into Argentina - how about it?

Thanks Stephanie for your update. I have been following your articles for a while now but have never commented. However having read this one I can see that you have changed your position by quite a large amount. Firstly you are changing your view on inflation as you have always told us it is not a danger and secondly you are changing your view on the GDP update.
I have to confess that after reading these blogs and seeing a recommendation I had taken a look at the notayesmanseconomics web blog and felt that his view on inflation and Quantitative Easing was much more likely to come to pass than yours. But I have to now ask as you have changed so much in this update what are your views going forward?

Bottom line? The hole was deeper than we thought - but we have at least been climbing out of it a bit faster than we thought. Hardly a resounding note of optimism with which to start the weekend.

We have been climbing out of the hole?

We are 5% out of the hole we dug (0.3% growth out of 6.2% decline), despite using the most exceptional measures known to economists.

Also, when Labour took office in 1997, debt was £350 billion. The Pre-Budget projection of public sector net debt is that it will reach £1,370 billion in 2013/14.

Even at only 4% interest, that is an additional £40bn a year to service the debt, let alone considering finding the extra £1 Trillion to pay it back.

That is £40Bn a year that could be helping us to get out of recession, instead of adding to the burden while in it.

The Government are out of control. The Bank of England are out of control. They have used every measure available, to excess.

Its now time to stop utterly destroying our future in yet more "double or nothing" roulette betting.

When the new Government is formed, they need to metaphorically sit the country down and explain that the last time things were so serious we had just emerged from WWII; that Labour has blinded millions in this country by taking advantage of the low inflationary environment to mask any impact of this depression.

They need to explain to "Mrs Smith", the nurse, that it is her 14 year old daughter's future taxes that having been paying her salary for the last 5 years. And explain to "Mr Green" that the last 4 foreign holidays he went on, from profits he gained for working as a contractor for the MOD, were paid for by the next 20 years of taxes from his housekeeper.

We really are being so reckless, are we a nation full of zombies?

I have just caught George Osborne's speech today in Brighton:

One major fault line in his policy announcements was to build up an economy based on savings (rather than borrowing) having earlier said that he would keep interest rates low. How does he want to incentivise savings as against borrowing when all of the financial benefit goes to the borrower and virtually none to the saver?

He and his party do not even seem to be aware of this fundamental contradiction in their policies. If he wants a country with an economy based on savings he has to make saving worthwhile doesn't he, otherwise everyone will vote with their pocketbooks and continue to borrow?

I will also add that one of the reasons that so many company pension funds are so dramatically underfunded is the lack of return/low level of return, on investments and savings. That makes yet another reason to increase interest rates - I conclude that George Osborne's economic skills do not include arithmetic! Annuity rates are almost catastrophically low for the same reason. To achieve his aim he must raise interest rates - there is no other way! He claims however the Labour party will raise interest rates, but yet that is exactly what he will need to do to achieve his stated aims - in short it is all so much political claptrap!

There is a level of Emporer's New Clothes in all this talk of growth. Such received wisdom means that the level of debate is very surface indeed. I look to commentators like Stephanie to question the status quo within the current ecomomic debate. I accept that there is something short term about growth that is in some ways essential today because that is the way we have built the economy. But the there is a much deeper debate and that is abut the single minded push for growth embedded in all policy imperitives in developed economies. It is happening now and is also a large part of the reason for the crisis in which we find ourselved. Growth cannot continue unchecked ; resources cannot be sustained and the waste 'sinks' are discovering their limits with what is apparently an attempt to establish what these are by emperical inquiry.

There is something deeply conservative about this GDP debate. Stephanie when will you tell the emporer he has no clothes ? I am not suggesting that the alternatives are easy but the issue need to be addressed.

60 John-from-hendon wrote:
"I will also add that one of the reasons that so many company pension funds are so dramatically underfunded is the lack of return/low level of return, on investments and savings."

And why do you think we have this low return? Because some 13 years ago Pension McRuin abolished tax relief on dividends so netting himself £5billion a year to squander on his pet projects. In doing so he destroyed a system that secured the future of millions and provided much needed investment for commerce and industry. A very clever move indeed? Do you really want these clowns back?

#60

Interest rates must rise there must be a carrot to encourage Savers and investers in the UK. There will not be any sustained recovery in the UK
until the solvent savers can get a decent return for the use of their Capital, at the present time the UK government is helping the debtor's to much by keeping BOE base rate's low, things will only improve when the solvent begin to spend and invest unborrowed money again
The debtors must be allowed to go under.

#32 Melvinstar. Regretfully your star is not in the ascendency.

You are free to delude yourself all you wish, but why not take a look at what rich people are telling other rich people.

https://matterhornassetmanagement.com/2010/02/11/sovereign-alchemy-will-fail/

There is no way out - who you blame is not important, you need to take responsibility for yourself, cos aint no one coming to save you.

53. At 3:08pm on 27 Feb 2010, plamski wrote:
You just watch who the Sun readers will vote for.

We are voting for Cheryl !

honestgradgrind @ 55

35,000 to each basic rate taxpayer right at the start rather than bale out any bank.
I said it at the time and I said it to my MP.
The 35,000 goes into the taxpayers bank account - so the banks get the money initially.
Then the taxpayer spends it as they please. So they may pay off bank loans they already have ( the bank gets the money + an early payment fee!).
They buy some consumer durables - stimulating the economy - and paying VAT ( so retailers get some - and so does the government)
They spend it on some consumables - stimulating the economy - and paying VAT.( as above - retailers get some and so do the government)
What they can't spend they leave in the bank - or invest in bonds, pensions or shares - stimulating the financial services market.
Viola! - a free market solution with everybody getting a slice. And since the taxpayer is going to be paying for it anyway and paying it back over the next 10 - 20 years, it's just a loan to ourselves(interest free) of our future tax contributions - to save the economy.
So why wasn't it ever considered?
Think Government and bankers - and where their interests lie.
Think taxpayers - and what the attitude bankers and government have to them.
Think parasite - and what a parasite actually does.
And - Oh Joy! we're about to get the choice of changing from one species of parasite to another.

#62. dontmakeawave wrote:

(on pension funds)

"And why do you think we have this low return? Because some 13 years ago Pension McRuin abolished tax relief on dividends so netting himself £5billion a year to squander on his pet projects"

However consider this: why should one type of savings product be advantaged as against others?

Why should the state give a huge commercial advantage to something called a pension fund that it does not give to individuals that save for their future?

Is it not proper that all savers - be they in pension funds or not get the same level playing field on which to save fro their future?

Frankly institutional investors are not very good at investing or managing money they do not in general achieve any greater return than investing in a range stocks and shares that make up the FTSE 250 index for example.

The only reason that the pensions industry exists in the form that it does is because of its still huge tax advantages which goes some way to offset its inefficiencies. It can also be shown that as institutional investors are extremely inactive shareholders they have permitted the huge excesses of pay in many large companies.

So all in all it is my opinion that all savers need to be encouraged and should receive the same level of encouragement and pension funds should not receive any extra consideration over individuals that choose to save themselves and manage their own investments.

#63 Jeff King wrote:

"The debtors must be allowed to go under."

Yes, but the assets that are financed by these debts must also be returned to the market as second-hand goods and sold on at lower prices. (By the way in many countries such a German for example second-hand houses fetch a lower price than new ones.)

You are being quite brutal in your prescription, but you should also remember that kicking families out of their homes creates a social necessity to provide alternative housing for them, or perhaps you want to see destitute families on the streets?

BBS 56

You sound as if you have just emerged from the gulag Comrade BiiBoidshateu,head shaven,prison clothes and with some priceless samiszdat secreted in your armpits.Do you have news of other prisoners? The intellectually disappeared,Comrades Digby,RugbyProf,Alesha,nautonier,Kevin B,WeeDavey,Gruad....

It is whispered your release was because you were because overheard calling for the overthrow of the socialist system.This should commend you to Comrade Stalin and help towards your rehabiliation.Love the poem,put the fear of God into the equality mongers. Got to go,off to Berchtesgaden for coffee.

#67 JFH,

It appears that many people still cling to the belief that the underperformance of private and company pensions is GB's responsibility because he ''abolished tax relief on dividends''.

But then better a good myth than a complicated set of facts that take time and understanding to appreciate.

foredeckdave #70

You're correct to point out that it is by no means just the abolishing of tax relief on dividends that has resulted in underperformance of private and company pensions.

GB has also contributed to this by the general damage he has done to British business and its ability to compete. See this link from Independent on Sunday

https://www.independent.co.uk/news/business/news/uk-slips-further-down-competitiveness-league-508857.html

To quote from the 1st para. of this article.

'The UK economy has slipped down in a global league table of competitiveness thanks to the burden of tax and red tape and the low educational attainment of Britain's workers'

also,

'...the UK had "plummeted" from 4th to 13th since Labour won power in 1997'

Which in Premiership league terms means GB has taken Britain from a Champions league position to just above the relegation zone.

Plamski is bang on.

Most households are writing down or repaying too easily accumulated debt and the banks are fending off the aggregate numbers of people/companies that cant even afford to do this. Until there is an equilibrium in our system of affordable and manageable debt provisions, then no growth in economic terms is going to come - it just cant.

We can stimulate demand in things that 21st Century UK does need such as renewable energy, sustainable development etc.. Meanwhile public sector workers bit the bullet and get real as the taxes that pay your salaries just are not there and you are going to be facing extremely tough times, no matter how many efficiencies, policy reviews and management action plans you produce. Most are horse pooh and you know it.

In a previous post I asked how much guesswork was involved in collating the GDP figures. From what I can discern with the downward revision for the Q3 2009 data, it would appear quite a lot! How many other countries revise their quarterly figures 5 MONTHS after that quarter has ended?

The chimpanzees at London Zoo could do a better job and a darn sight quicker too!

This all makes some more sense. By printing money to replace the wholesale money markets which had sustained the economic bubble before the crunch the Bank of England can argue that the worst of a crash has been avoided.

It seems that it is being claimed that Phase I of the rescue plan has worked. Fine: but what about Phase 2? Was there ever a Phase 2? Then how about Phases 3 & 4?

It seems to me that all the policymakers were expecting was a clean `V' shaped recession: fast in, followed by suitable recovery measures, then fast out. This has become so important that the numbers are being talked up to justify this picture. Only it is apparent this is not what we are seeing.

Of course, there are huge vested interests in this scenario and these are so powerful they seem intent upon enforcing this outcome regardless. The trouble with using policy to enforce a particular economic outcome is to invite other distortions within the economy. I think we are at that point. It is evident that we are now in stagflation and that money has to be taken out of the economy either by interest rates, severe cuts in government spending or both.

Are we able to wait until after the election? I think not. We are at least two months away from an election date which could then be delayed for a third month, and as Harold Wilson once remarked one week in politics is a long time.

It is quite evident from the pre-election jockeying for position being conducted by all parties that there is no desire to talk about spending cuts. Indeed the fact that the Tories have suggested that such are needed has allowed Labour to frighten their public sector client base, thus causing the Tories to scale back on their proposals. It seems to me that as a consquence of this dissumlation the truth will not be spoken in front of the electorate. So everything is being deferred, the electorate are being misled and it stinks! However, this all suits the vested interests in Big Government and Big Business.

There is a demand implosion going on in the real economy. Investment is so far in reverse it has dropped off the dial. All that is sustaining demand as far as I can see is purchases because they are needed and purchases in case the price goes up. When the latter passes the former then we know we are deep in the dirty stuff.

Despite all of this though the rythmns of the real economy still vibrate so hope remains. What we now require are the policies that will enhance those rythmns of life whilst at the same time as depleting the destructive themes that got us into this mess in the first place.

To begin with retail banking must be separated from the casinos and the taxpayer guarantee applied only to the retail banks. Then we need to verify the precise liabilities the casinos have dumped on ordinary people of this country and this world. This will require that individuals and businesses will be called to account. At the same time interest rates must be allowed to reflect the real price of money so that an accurate measure of investment, value and return can be defined. The size of the bloated bureaucratic state must be reduced in that period in such a way that public services are least affected whilst other taxpayer funded money is directed at encouraging new business creation and enhancement so that the unemployed can find work or even create work for themselves.

This is necessarily a multi-faceted approach, it will upset vested interests and it will be very uncomfortable to implement. There maybe better ideas out there as I am in no way the keeper of any truth. I just like things that work. But the current state of affairs is too unstable, quite unworkable and very dangerous to allow to continue.

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

#71,jobsagoodin,

Well if you want to use the thoughts and opinions of self-serving respondants as the basis of your argument then go ahead - you merely add to the myth.

#74 stanilic,

I couldn't agree with your analysis and conclusions more.

From my perspective we need to acknowledge the UK is not in a recessive mode, it is in a depressive mode - no matter what the figures 'appear' to say. To really start to see the first green shoots of any sustainable recovery is going to take longer than a mere 18 months - 2 years! Therefore, we have to plan on 2 levels. Firstly a survival strategy and secondly a future development strategy.

A depression is far more than a long term (years) set of negative/poor economic indicators. It has major psychological and hence social consequences. It truly leaves the nation without a sense of hope.

Now I really don't care which political party is in power. I do care that the major ones on offer to us are all sadly lacking in their ability to offer credible policies that offer such hope.

As the BBC's economics editor, I find it staggering that you can run a headline about GDP growth being revised upward, and hide the fact that GDP was actually revised downwards in your blog.

The BBC is supposed to be politically impartial, but you seem to have been got at by the Labour spin doctors.

I would have expected that any independent assessment of the figures would result in a headline of "Q4 economic activity is worse than expected", or the "Brownturn is worse".

I know tha the Conservative party want to (rightly) cut the TV tax, but you really shouldn't be so blatantly biased.

FDD #77

'Now I really don't care which political party is in power'

Please accept my apologies, I hadn't realised you were politically neutral. I must have been misled into thinking you had a preference for New Labour by the fact that nearly all your previous posts either attack the Tories, defend New Labour, or both.

Tell me how much of the UK economy is floating on derivative bubbles? Give me that answer, & I will tell you the true state of the UK economy. In fact, it may be worse than that of Greece or Spain.

The Bank of International Settlements (BIS), which seems to be the only financial institution that tracks the derivatives market, has recently reported that global "outstanding" derivatives have reached 1.14 quadrillion dollars: $548 Trillion in listed credit derivatives plus $596 trillion in notional/OTC derivatives.
Quadrillion = 1 followed by 12 zeroes.
Derivatives are now several times larger than the entire global economy. How is this possible? The gross domestic product (GDP) of all the countries in the entire world is about 60 trillion dollars.
The answer: derivatives derive from an asset the debt on which is bundled and sold, rebundled and resold, re-rebundled and re-re sold...Enough said.
Britain's Financial Services Minister, Paul Myners, once said: "We do not see the need for mandating trading of standardised derivatives on organised trading platforms." There is none so blind as those who don’t know what they are looking for.
The G20 group of countries agreed last year that standardised over-the-counter derivatives should be centrally cleared and, where appropriate, traded on an exchange or other type of electronic platform.This is seen as cutting risk and increasing transparency in a sector whose cancerous opaqueness alarms regulators and screams at economists: "Financial crisis over? You poor fools!!"
The United States is the nexus of this financial cancer because its economy is totally, TOTALLY unregulated. Hasn't the US all but stated that it destablized the Greek economy with derivatives and derivative instruments (like credit default swaps)?
European Commission is due to publish a draft law on derivatives clearing by July, 2010 which will need the approval from member states and the European Parliament to take effect.
BIS tracks
a) over-the-counter and
b) exchange-traded derivatives.
But there are other private markets for derivatives that are not tracked by BIS and these contracts are red-hot risky. BIS derivative figures grew at a reported rate of 15% between 2006 and 2007.
With this knowledge of derivative contracts outstanding we can begin to talk about the world's capital base and annual gross productivity. The current world derivatives markets have leverage that is 12-13 times larger than the entire estimated world capital base. Put another way, a loss of only 7-8% of the total derivatives exposure would be enough to wipe out ALL of the world's capital.
That's the picture of world-wide exposure. This is the epitome of the financial risk. Now do you really believe that those pathetically little bail-outs could possibly resolve the problem?
Stocks are not likely to return to their real fair-market value within the next 25 years and, if my prediction holds true, God help those people depending on stock portfolios for their retirement.
So, tell me how much of the UK economy is floating on derivative bubbles? Give me that answer, & I will tell you the true state of the UK economy. In fact, it may be worse than that of Greece or Spain.

72. At 1:09pm on 28 Feb 2010, thetopbrummiecat wrote:
Plamski is bang on."

Is that the Plamski who said goods sold at Christmas didn`t count because they were "fantasy" goods? Perhaps he`s Father Christmas!

78. At 2:49pm on 28 Feb 2010, RA22Y1 wrote:
As the BBC's economics editor, I find it staggering that you can run a headline about GDP growth being revised upward, and hide the fact that GDP was actually revised downwards in your blog."

And what Ms Flander`s actually wrote:

"A logical implication - which I should have spelled out - is that the level of GDP at the end of 2009 has been revised slightly down, even as the growth rate has been revised up. Indeed, it is largely because the economy started the quarter smaller, that the recorded growth rate after that has been revised up."

What I find staggering is how you can allow your shabby little orthodoxy to distort someone`s report.It is quite clear there was no attempt to hide the downward revision in growth, as is made clear,the downturn in 2009 was deeper than expected.

This is about the struggle to contain a global crisis potentially as damaging as 1929,not your petty attempt to distort statistics as part of a political narrative.

79 jobsagoodin

I am not going to speak for the foredeck but there are many of us with our roots in the Left who are not supporters of New Labour or this government. My family broke with Labour shortly before I was born as my father, then a Labour PPC, discovered corruption in his local party, reported it to the local party managers and got told `so what?' This did not alter where we came from but it did seriously constrain where we wanted to go. Later as a young politics graduate and activist I was assiduously groomed by Labour but declined their blandishments as I just don't believe that the state can change anything for the better.

The issue facing this country is not really about politics, but we have to work within the existing political environment in order to both keep and make any sense, but about achieving something that works in a way that does not chuck out the baby with the bathwater. It is in fact above politics.

For my part I come from the intellectual wasteland between the anarchist-communism of Piotr Kropotkin and the liberal interventionist state of L T Hobhouse. In other words I believe in mutualism and workers' control plus a healthy dose of Beveridge's social insurance. Intellectually this is miles away from the big bureaucratic state of New Labour. I also accept that the small state and moral individual aspects of my views resound favourably with the more conservative. However, this is ideals and not reality. We must shape the ideas around the reality that we have and where we are thus ensuring that we end up with something tolerable but very workable.

I too don't care who is the next government so long as it is not New Labour. I might even be able to put up with the Taliban for a few weeks as they have an interesting line on interest rates and who does the washing up....not really, that last bit was a joke but I can't help feeling betimes that even they would be an improvement on the bunker at No.10.

#79 jobsagoodin,

I can't match the political pedigree of stanilic but I agree with him that those of us of the Left do not necessarilly support New Labour. Yes, I do attack the Conservative proposals but I do so because I do not believe them to be in either the best interests of the economy or of the country as a whole.

Now the essence of my stance is given in the 2nd and 3rd paragraphs of my #77 reply to stanilic. I don't see either the Conservatives or New Labour making any policy statements that are in-line with that. As part of the survival element I have proposed establishing an EU protectionist policy - I don't see either of them proposing that either.

Stanilic 83

Intellectual justification for your position, but is it realistic? The "Big bureacratic State" is not New Labour,Conservative or Republican.It is the history of the 20th and 21st century as free market capitalism has given way to a growing state sector across the industrialised world.

This trend results from economic crisis,war and war preparation, and health,education,welfare.Small business dislike it,corporations depend on it,and the tiddlers depend on the big guys across the river.

You are now doubt aware that pre-crisis,spending on HEW was higher in the EEC and Scandinavia than here.Their greater public spending has resulted in a more equal society than,and one with greater satisfaction about quality of life.

As I have written previously,the state is the elephant in the room of free market capitalism,a clock that not even the Blessed Margaret could reverse.

80. At 3:22pm on 28 Feb 2010, BluesBerry wrote:
"Tell me how much of the UK economy is floating on derivative bubbles? Give me that answer, & I will tell you the true state of the UK economy. In fact, it may be worse than that of Greece or Spain."

A doomster Bluesberry,and what`s worse a derivatives doomster,arguably the most opaque of the financial instruments which brought private capital to the verge of collapse.

We know the lords of the universe didn`t understand this mass of circulating paper, whose magical power to generate profit from vapour was lauded as a discovery of the age,we do know that like a lot of magic the spells have a nasty habit of turning on their creator.

As impressed as I am by this newest incantation,do you have the necessary protection? It may already be too late.

Protectionism=war

Not my ideal path of choice

#87 KevinB,

Your first statement is not true.

If you have an ideal path then state it.

As far as I am concerened there is a great need for Britain and Europe to find work for its population. The experience of the last 20 years clearly demonstrate that a continuation of globalisation runs contrary to this imperative. This failure is far more likley to lead to war.

#80 BluesBerry,

"Derivatives are now several times larger than the entire global economy."

Is it not about time that we just simply ignored them? I know many will find that idea both shocking and maybe silly. However, to me it makes perfect sense because they are practically worthless anyway.

bryhers alludes to this fact in his reply. If we can start to re-relate wealth to value then these idotic phoney money schemes become worthless anyay

69. At 11:38am on 28 Feb 2010, bryhers wrote:

"You sound as if you have just emerged from the gulag Comrade BiiBoidshateu"

Thanks to your Glorious McBully,yourself,and your fellow ZaNulab minions and dupes,everyone now has the "pleasure" of living in a squalid communistic gulag.

#86 Bryhers. There is no maybe about it. It is already too late. The crazed money printers will keep right on going until the end of the line. Nothing new here, and no consequences that cannot be foreseen.

https://www.zerohedge.com/article/ben-bernanke-second-coming-rudolf-von-havenstein-central-banker-responsible-germanys-hyperin

#89 foredeckdave. Oh were it so simple. Take a look at our friend AIG who suddenly discover that they have a further $150 billion at risk based on deals designed to evade (mainly) European regulatory capital requirements.

Isn´t this a crime? Does it matter? The only way AIG can pay is if the US government pays. Why should they?

What happens if they don´t pay? Do a lot more European banks/countries get flushed down the financial toilet?

Why should Europe stand by and watch AIG destroy what is left of their economies? Is it not the case that the destruction wrought by AIG is a direct consequence of their seeking to aid and abet regulatory evasion? How can this be fair? Why shouldn´t the unemployed, homeless and indebted American citizenry foot the bill for this? How can they pay they have no money?

Oh yes there are many ways of introducing "protectionism" and many ways of creating the conditions that lead to wars.

#1 >>...nuclear Reactors that run on depleted uranium....

Err.... exactly how would you run nuclear reactors on *depleted* Uranium, since it is one the end products of a nuclear reactor !!

It's a bit like building a car that runs on the carbon dioxide emitted by another car !!

Please clarify !!

#5 >>Banks aren't lending money, because there is NO DEMAND and unlike China, the Government can't force them to lend to people who don't want to borrow.

It may interest you to know that China is trying its best to rein in lending in order to cool down an over-heating economy, especially in its housing sector !! Guess what Britain is doing.... ??

93. At 7:55pm on 28 Feb 2010, ishkandar wrote:
Please clarify !!
------------------------------------------

https://cleantechnica.com/2009/02/02/terrapower-developing-nuclear-reactors-that-run-on-depleted-uranium/

#92 Whoops, Here is the relevant excerpt (and commentary) from the AIG 10Q filing

https://market-ticker.denninger.net/archives/2017-Bombshell-In-AIG-10Q-Capital-Relief.html

...and here is a perspective of a company that will no doubt be on the "winning side" of any further fall outs.

https://dailybail.com/home/the-predictable-odor-of-the-goldman-sachs-seepage.html

Small Business would borrow, unable to secure borrowing, there is demand

#24 Well said !! There had always been those lone voices crying out in the wilderness but the general populace were mesmerised by the Golden Calf !!

And then there are those who heeded the warnings and signs and prepared their Arks and floated their family and assets to safer, calmer shores !!

One other prediction, from early in 2008, is that this pain will persist for many years; perhaps as many as, and maybe more than, 5 years. The eternally optimistic said that this was nonsense and merely "talking down the economy" !! We shall see...

To use a good English term, this is deja vu of the 70s and Old Bushy-brows Healey going cap-in-hand to the IMF !!

#26 >>The key fact is that the oil price supply shocks caused respectively by OPEC formation, Middle East war and the Iran Iraq war bare more responsibility for sending the economy off course in the 1970s.

How did this happen since, at that time, Britain was a net *EXPORTER* of oil (from the North Sea) ?? If anything, the price rises should have *helped* Britain, not cause a recession !!

#28 Ragnarokblat >>Dontcha just hate revisionsits?

No, I don't !! Without them, the day will be dull and boring. With them, there'll always someone I can poke fun at !! :-)