Once again we are seeing the plight of migrants to Europe who are refugees escaping war and famine in the Middle East and Africa. The people attempting to cross the Mediterranean from Libya to Italy are desperate. No one risks their life to board a flimsy boat at the behest of people traffickers unless they are desperate.
The reaction of European governments to this humanitarian disaster has been shameful. Also I am ashamed of the reaction of some of my fellow countrymen to this issue. The people trying to come to Europe are not economic migrants who want to sponge off our society; they are desperate to survive. If they are allowed to remain in Europe then they will be more than glad to work and make a contribution to the societies that welcome them.
Western governments have contributed to the malaise in Africa and the Middle East by indulging in wars to try to contain conflicts and problems that they do not understand. This is exemplified by the bombing of Libya. Britain and France did not have a plan for restoring stable government in Libya after Colonel Gaddafi was deposed. Our governments did not understand the politics and the intervention led to disaster.
We do not understand Syria either; western governments have armed the opposition to President Assad without any understanding of the politics and have allowed Isis to obtain huge quantities of western arms , probably, for free. Before the Syrian crisis millions of refugees were not fleeing Syria despite the despotic nature of the regime. Everyone knew the risks of opposing the regime but those who kept their heads down were relatively safe. Most despotic states fail and self-implode and then the time becomes right to obtain genuine political change but imposed from within the state.
The resources which western governments expend on war would be better deployed by promoting peace and useful economic activity. The world must also tackle over population and climate change. The rich and powerful nations of the world have the ability to improve the economic lot of the poor nations and this will help to reduce over population and famine.
The rich nations also have it within their power to mitigate the effects of climate change to reduce pressure on food and water supplies and alleviate famine.
If we all thought rationally then we could find solutions to the problems of migration by promoting peace, economic development and an equable climate for all.
If we persist with the policy of only promoting self interest we are going to head for disaster. We will not solve the problems of Africa and the Middle East by allowing a situation where millions and millions of people are forced to migrate. Everyone would rather stay at home so lets make all homes comfortable enough so that no one needs to run away. Migration should an option for the adventurous rather than a necessity for the desperate.
Monday, 20 April 2015
Thursday, 16 April 2015
UK Economics 2015
All of the opponents in the UK general election have ignored some disturbing facts about the UK economy: productivity is down and the trade deficit or balance of payments deficit is up. They have few or no real policies to improve either.
Productivity was down by 0.2% for the last quarter of 2104 and overall our productivity as a nation is insufficient to get the economy moving and reduce our budget deficit and national debt.
To improve productivity we must invest in skills, manufacturing equipment, infrastructure, house building, new products and the means to bring new products to the export and domestic markets. An improvement in productivity will enable our nation to compete more effectively in international and domestic markets. It will also allow us to reduce the debt burden.
It is apparent that very little of the £375 billion of quantitative easing (QE) generated by the Bank of England has been directed at investment in the real economy. Such a large input of liquidity into the economy should have generated some inflation in the real economy - so far it has not. Inflation helps to reduce the burden of debt. The billions spent on QE have been used by the banks to support their balance sheets by investing this money in the stock and property markets. The effects of QE are to artificially inflate asset prices in the property and stock markets. This form of inflation is not included in the inflation statistics therefore there is no real pressure on the Bank of England to control it. We are in danger of creating new asset bubbles just like we did prior to 2007.
QE is benefiting property speculators and financiers rather than industries in the real economy who produce goods for sale or build roads, railways and hospitals etc..
When it is more productive, the real economy generates more higher valued jobs and this means that the government needs to spend less on social benefits.
http://uk.reuters.com/article/2015/04/01/uk-britain-employment-productivity-idUKKBN0MS48J20150401
Linked to productivity is the balance of trade deficit. For the month of February 2015 Britain's overall balance of trade deficit was £2.859 billion up from £1.536 billion in January. Our exports to the US fell in February 2015. Every year Britain records enormous balance of trade deficits and this means that we are not paying our way as a nation and we have to live on credit. Poor productivity along with the higher value of the pound contributes to the balance of trade deficit.
Huge amounts of hot money are continuing to come into Britain to fuel financial speculation; this increases the value of the pound and makes our goods more expensive in export markets. Our pound is not increasing in value because we are running a trade account surplus. Hot money is not being used to fund the real economy therefore productivity suffers and the balance of trade suffers too.
http://www.tradingeconomics.com/united-kingdom/balance-of-trade
We need a new economic model of capitalism which generates wealth in the real economy. Our governments have almost left the running of the economy to the Bank of England who are using interest rate policy and QE to try to regulate financial matters only. We need the Treasury and the Department of Business to get more involved in running the economy. Monetary policy alone will not solve the structural problems of the British economy: we need to become more productive. A central bank cannot be expected to direct monetary policy towards this end. Fiscal policy must become more involved again. It was a mistake to allow the central bank to determine economic policy as it is more concerned with protecting finance rather than industrial investment.
The next government of the UK must rescue fiscal policy and industrial investment as part of a completely coherent economic and monetary policy to control supply and demand and investment in the real economy and its workers.
None of the political parties in this election have mentioned the trade deficit or the failure of Britain to improve its productivity. It almost seems as if the political establishment has given up promoting sound and stable economic development. Our politicians seem only interested in arguing about book keeping rather than using the money of the nation to create real wealth. They are thinking more like sales ledger clerks than management accountants. If they continue in this vein there is not much hope for a real economic recovery. Long term stagnation,lost opportunity and continuing poverty for a substantial proportion of the population could be the unfortunate result.
It is time for the politicians to have the courage and nous to wrest back economic power from financial speculators and grant it to the wealth creators in the real economy of entrepreneurs and workers alike.
Productivity was down by 0.2% for the last quarter of 2104 and overall our productivity as a nation is insufficient to get the economy moving and reduce our budget deficit and national debt.
To improve productivity we must invest in skills, manufacturing equipment, infrastructure, house building, new products and the means to bring new products to the export and domestic markets. An improvement in productivity will enable our nation to compete more effectively in international and domestic markets. It will also allow us to reduce the debt burden.
It is apparent that very little of the £375 billion of quantitative easing (QE) generated by the Bank of England has been directed at investment in the real economy. Such a large input of liquidity into the economy should have generated some inflation in the real economy - so far it has not. Inflation helps to reduce the burden of debt. The billions spent on QE have been used by the banks to support their balance sheets by investing this money in the stock and property markets. The effects of QE are to artificially inflate asset prices in the property and stock markets. This form of inflation is not included in the inflation statistics therefore there is no real pressure on the Bank of England to control it. We are in danger of creating new asset bubbles just like we did prior to 2007.
QE is benefiting property speculators and financiers rather than industries in the real economy who produce goods for sale or build roads, railways and hospitals etc..
When it is more productive, the real economy generates more higher valued jobs and this means that the government needs to spend less on social benefits.
http://uk.reuters.com/article/2015/04/01/uk-britain-employment-productivity-idUKKBN0MS48J20150401
Linked to productivity is the balance of trade deficit. For the month of February 2015 Britain's overall balance of trade deficit was £2.859 billion up from £1.536 billion in January. Our exports to the US fell in February 2015. Every year Britain records enormous balance of trade deficits and this means that we are not paying our way as a nation and we have to live on credit. Poor productivity along with the higher value of the pound contributes to the balance of trade deficit.
Huge amounts of hot money are continuing to come into Britain to fuel financial speculation; this increases the value of the pound and makes our goods more expensive in export markets. Our pound is not increasing in value because we are running a trade account surplus. Hot money is not being used to fund the real economy therefore productivity suffers and the balance of trade suffers too.
http://www.tradingeconomics.com/united-kingdom/balance-of-trade
We need a new economic model of capitalism which generates wealth in the real economy. Our governments have almost left the running of the economy to the Bank of England who are using interest rate policy and QE to try to regulate financial matters only. We need the Treasury and the Department of Business to get more involved in running the economy. Monetary policy alone will not solve the structural problems of the British economy: we need to become more productive. A central bank cannot be expected to direct monetary policy towards this end. Fiscal policy must become more involved again. It was a mistake to allow the central bank to determine economic policy as it is more concerned with protecting finance rather than industrial investment.
The next government of the UK must rescue fiscal policy and industrial investment as part of a completely coherent economic and monetary policy to control supply and demand and investment in the real economy and its workers.
None of the political parties in this election have mentioned the trade deficit or the failure of Britain to improve its productivity. It almost seems as if the political establishment has given up promoting sound and stable economic development. Our politicians seem only interested in arguing about book keeping rather than using the money of the nation to create real wealth. They are thinking more like sales ledger clerks than management accountants. If they continue in this vein there is not much hope for a real economic recovery. Long term stagnation,lost opportunity and continuing poverty for a substantial proportion of the population could be the unfortunate result.
It is time for the politicians to have the courage and nous to wrest back economic power from financial speculators and grant it to the wealth creators in the real economy of entrepreneurs and workers alike.
Monday, 13 April 2015
UK General Election 2015
The UK general election is not tackling the real issue which Britain faces, which is the problem of private debt. It is only concentrating on government debt. We are being treated to arguments about minor differences about how much the government should spend and tax over the course of the next parliament or 5 years, if the next parliament lasts that long even though there is a legal obligation for a government not to resign.
At present the whole of the British economy generates about £1.6 trillion in one year. Our public national debt is some 80% of GDP which is around £1.3 trillion. £1.3 trillion is a colossal sum of money which results in interest payments of around £48 billion per year which the government must finance before it spends any money on welfare, the national health service, education and etc.
The UK's total annual spending is about £714 billion pounds. The budget deficit is around £100 billion as the government raises just over £600 billion pounds in taxes.
The difference between the political parties' spending and tax plans is around £12 billion per year. They are arguing about a tiny proportion of the national debt and the public sector borrowing requirement.
http://en.wikipedia.org/wiki/Economy_of_the_United_Kingdom
http://www.ukpublicspending.co.uk/breakdown_2014UKbt_14bc5n
http://www.theguardian.com/business/2014/apr/23/uk-deficit-lowest-financial-crisis-osborne-budget
The national public debt of £1.3 trillion is dwarfed by private debt, which stands at over £5 trillion; this is almost unimaginable. Price Waterhouse predict that for the fiscal year 2105 total UK debt will rise to about £10.2 trillion. £1.4 trillion will be the national public debt and the rest will be private debt.
Households will owe £1.9 trillion mostly in the form of mortgages. These debts are secured but if another housing market bubble burst many of these debts will become un-secured or will have their collateral severely reduced.
Financial sector debt is predicted to be £4.2 trillion and although much of this debt is balanced by assets but a lot of those assets are at risk.
Non-financial companies owe £2.2 trillion and around half of this debt is secured against property.
Britain's total private and public debt has not reduced substantially since 2009 when the financial crisis was in full swing. In 2009 it stood at 543% of GDP and PWC predict that for 2015
it will be 536%. The balance sheet of Britain is still just as precarious as 2009.
http://www.theguardian.com/news/datablog/2010/nov/09/economicgrowth-debt-relief#data
The high level of private debt is crippling our economy by reducing the amount of credit that the Bank's can grant to small and mid sized companies.
The Bank's are in so much difficulty that the government of the UK has bought £375 billion pounds of gilts and mortgage backed securities from them. This £375 billion which has been spent by the Bank of England as part of its quantitative easing programme has shored up the Banks' balance sheets to protect the UK Banking sector from collapsing. Little of this money has found its way into the real economy to support businesses. If a substantial amount of this money had found its way into the real economy then we would have had inflation.
None of this £375 billion bonanza has been spent on a hospital, a care home, a library or a road.
This money was spent by both the Labour and Conservative governments between 2009 and 2012 without any real discussion and no-one voted for it. Why therefore are the politicians arguing about £12 billion?
One day we shall have to pay back the £375 billion of quantitative easing which the governments have borrowed on our behalf. To spend £8 billion on the NHS is chicken feed in comparison.
The level of private debt could create another dangerous asset bubble which if it bursts will create
such havoc that it could break our economy. We cannot afford to bail the Banks out again. None of our politicians want to talk about this . They are just living in hope that a little pruning of the budgets here and a little additional taxation here will somehow pay off all our debts.
In the future, we don't know when, interest rates will have to rise and when they do the whole economy will suffer again. Unfortunately this is an unavoidable consequence of too much private debt rather than public debt. No political party has an answer. In 2005 most politicians, economists and members of the public though the garden was rosy. In 2015 we would all be fools to think the same thing again. The trouble is there is no-one to vote for who has got any idea how we are going to balance the books of UK PLC. We need a new economic model of capitalism and quickly.
At present the whole of the British economy generates about £1.6 trillion in one year. Our public national debt is some 80% of GDP which is around £1.3 trillion. £1.3 trillion is a colossal sum of money which results in interest payments of around £48 billion per year which the government must finance before it spends any money on welfare, the national health service, education and etc.
The UK's total annual spending is about £714 billion pounds. The budget deficit is around £100 billion as the government raises just over £600 billion pounds in taxes.
The difference between the political parties' spending and tax plans is around £12 billion per year. They are arguing about a tiny proportion of the national debt and the public sector borrowing requirement.
http://en.wikipedia.org/wiki/Economy_of_the_United_Kingdom
http://www.ukpublicspending.co.uk/breakdown_2014UKbt_14bc5n
http://www.theguardian.com/business/2014/apr/23/uk-deficit-lowest-financial-crisis-osborne-budget
The national public debt of £1.3 trillion is dwarfed by private debt, which stands at over £5 trillion; this is almost unimaginable. Price Waterhouse predict that for the fiscal year 2105 total UK debt will rise to about £10.2 trillion. £1.4 trillion will be the national public debt and the rest will be private debt.
Households will owe £1.9 trillion mostly in the form of mortgages. These debts are secured but if another housing market bubble burst many of these debts will become un-secured or will have their collateral severely reduced.
Financial sector debt is predicted to be £4.2 trillion and although much of this debt is balanced by assets but a lot of those assets are at risk.
Non-financial companies owe £2.2 trillion and around half of this debt is secured against property.
Britain's total private and public debt has not reduced substantially since 2009 when the financial crisis was in full swing. In 2009 it stood at 543% of GDP and PWC predict that for 2015
it will be 536%. The balance sheet of Britain is still just as precarious as 2009.
http://www.theguardian.com/news/datablog/2010/nov/09/economicgrowth-debt-relief#data
The high level of private debt is crippling our economy by reducing the amount of credit that the Bank's can grant to small and mid sized companies.
The Bank's are in so much difficulty that the government of the UK has bought £375 billion pounds of gilts and mortgage backed securities from them. This £375 billion which has been spent by the Bank of England as part of its quantitative easing programme has shored up the Banks' balance sheets to protect the UK Banking sector from collapsing. Little of this money has found its way into the real economy to support businesses. If a substantial amount of this money had found its way into the real economy then we would have had inflation.
None of this £375 billion bonanza has been spent on a hospital, a care home, a library or a road.
This money was spent by both the Labour and Conservative governments between 2009 and 2012 without any real discussion and no-one voted for it. Why therefore are the politicians arguing about £12 billion?
One day we shall have to pay back the £375 billion of quantitative easing which the governments have borrowed on our behalf. To spend £8 billion on the NHS is chicken feed in comparison.
The level of private debt could create another dangerous asset bubble which if it bursts will create
such havoc that it could break our economy. We cannot afford to bail the Banks out again. None of our politicians want to talk about this . They are just living in hope that a little pruning of the budgets here and a little additional taxation here will somehow pay off all our debts.
In the future, we don't know when, interest rates will have to rise and when they do the whole economy will suffer again. Unfortunately this is an unavoidable consequence of too much private debt rather than public debt. No political party has an answer. In 2005 most politicians, economists and members of the public though the garden was rosy. In 2015 we would all be fools to think the same thing again. The trouble is there is no-one to vote for who has got any idea how we are going to balance the books of UK PLC. We need a new economic model of capitalism and quickly.
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