The expectations game
G20 leaders always try to beat expectations when they produce their final communiqué - and the expectations for today's final agreement, recently released, had been set very low indeed.
In the early hours of last night, negotiatiors made just enough progress on the vexed subject of exchange rates and global imbalances for all sides to declare victory.
The US can say they got some numbers attached to the language about limiting imbalances - but those numbers are dates. And even those are not very specific The question of whether countries will ever be - even nominally - committed to particular current account targets has been kicked down the road, for the finance ministers to sort out (or fudge) in the first half of next year.
The US President has had a tougher ride here than at any previous G20 Summit - and it's hard to miss the frustration on the American side at how their policies, and their position at this Summit has been portrayed. On the US version of events, the idea of hard targets was abandoned weeks ago, after the finance ministers' meeting. There is also consternation at the response to last week's decision by the Fed.
If these were different times - we'd be paying more attention to the development piece of this Communique. It sets a new tone in this area, with Asian members of the group pushing back against the traditional, Western approach to foreign aid and growth.
After days of complaint about the US and its cheap dollar policy, Eurozone leaders might take comfort from the fact that the dollar has been rising in recent days - and the Euro has been going down.
But they will not welcome the cause: growing concern about the safety of Irish and Portugese government debt. Once again, at this Summit, the leaders find themselves working to prevent the next crisis -while the aftershocks of the last one are still being felt.
~RS~q~RS~~RS~z~RS~02~RS~)
I'm 
© MMXI
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Does anyone take any notice of these G20 communiqués? I always thought these meating were just a 'jolly' for world leaders to get together and a bit of a chat. Nothing more than that.
Can anyone quote any previous G20 communiqués? Any completed tasks? Progress? Any reason to be holding these meetings?
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I think the point is for things "not to get worse"; that is, if one of them doesn't turn up, they may lose out in some way, whereas if they turn up they can dig their heels in to ensure no changes are agreed which could be to the perceived detriment of their country.
Therefore, the G20 summits provide the perfect opportunity for everybody to propose a superfluous action which would benefit themselves, then shout down everybody else's proposals, to enable the status quo to be maintained.
And have a 'jolly'.
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1 and 2 seem to have the measure of the G20 mass debate. It is not just Rome that is burning while G20 fiddle with their lexicons.
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Ah finally some economics from Stephanie's jaunt to Seoul. Right at the end we get one sentence on what is affecting both Portugal and Ireland.
Unfortunately this trip and the blogs on it has taken emphasis away from the real economic developments this week.
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Agree with 1,2 & 3.
A do nothing event and they are all fiddling, things are set to change though.
Here is the question that should be uppermost in everyone minds, will the Germans bail out, Ireland, Greece, Italy, Protugal and Spain?
I dont think so, no wonder the Euro is dropping - the flight to saftey is underway.
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No actual progress as usual just a commitment to talk more about the issues at hand. How many diplomats did it take to come up with this one. I could have written it weeks ago and saved them the time and bother. They could have gone somewhere nice and put their feet up rather than have to do all that smooching. Dancing around their handbags trying to make sure all can save face.
Meanwhile back at the ranch;
"Irish debts
Meanwhile, the UK, France, Germany, Italy and Spain issued a joint declaration to try to calm bond market jitters over a possible future EU bail-out fund."
So we have a group of countries who range from minor insolvency to outright bankruptcy committing to save another bankrupt country. Well that is sure to cure the jitters.
Lets face it;
The UK is hadley in a position to hand out wads of cash to a failed state that has brought about its own demise while it itself is running debts that are unsustainable and unless the bitter pill is swallowed could find it needing a bail out of it's own.
France is in a slightly better position but is far from being out of the woods yet.
Germany has it's own cross in the form of the Greece bail out which it is shouldering the brunt of for the ECB. Could it afford to do the same for Ireland, it has already said no to the ECB on this one, but what option for the Euro itself is under threat.
Italy is one of the founding members of the club of PIIGS and it only slightly better off than Ireland. There is very little they can offer in the form of a financial package and even acting as guarantor would not impress the bailiffs who may well be on their way round to them next.
And finally we have Spain who economy has stalled and is probably going to slip into recession in the current quarter. They are also themselves finding it hard to raise money. The cost to do so has rocketed and is putting a strain on their economy which is close to collapse.
So we have the sick and dying trying to carryout CPR. As one commentator said earlier this week, "the last rites would be more appropriate." However the last nail in the coffin for Ireland could be the first for the Euro......
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Oh sorry I meant to include one more comment I heard this week; "The EU thinks that if it continues to grow in size it will solve it's own problems and if not it will be just too big to be allowed to fail."
The PIIGS are lined up like dominoes now and it will only take the smallest of tremors to start them falling.
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5. At 08:51am on 12 Nov 2010, JavaMan wrote:
'Here is the question that should be uppermost in everyone minds, will the Germans bail out, Ireland, Greece, Italy, Protugal and Spain?'
I reckon yes, in my experience the prudent usually pay for the imprudent.
European politicians aren’t going to let the ‘Euro idea’ fail.
Someone’s going to have to pay, and it’s limited, to those who can.
They’ll call it a ‘stimulus package’ or other such uninventive name, but I think they’ll bail out those countries that need it, and likely by printing more money.
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What a load of hypocrisy and hot air! (G20)
They 'promise' not to competitively devalue - when that is exactly and precisely what the Bank of England has been deliberately doing and extolling for the past couple of years!
All the anti-Euro lunatics clam that the UK must be free to devalue its currency and that is why we 'can't' join the Euro.
The reality has to be that countries need to take 'internal' measures to re balance their economies - competitive devaluation is a fraud as a policy - it always has been and it always will be - it only benefits the bankers not the people or the economy.
We must decisively move away from an economy run for and by the bankers - the Bank of England needs to be entirely re-formed and the bankers eliminated.
The country's only real asset is the working capacity of its people and the economy must be re-arranged to make good use of this resource. That must be the aim and target of policy.
The consequences of this are that it is vital that the rest of the economy is directed to achieving this aim - inevitably this leads to need to keep property prices as low as possible as in order to employ the people of the country we need places fro them to work and if we can keep this cost as low as possible then more of the value of the labour of the poeple can be given to the workers.
We also need to put an absolute cap on personal income so that the terrible inequality of outcomes is addressed. (See David Cameron's remarks of limitation of bosses pay.)
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'concern about the safety of Irish and Portugese government debt'
Debt is never safe.
The transaction is - Somebody has money they have to put somewhere or it loses value and they take a risk, the risk is usually related to the return. Somebody needs money so they borrow it and take a risk based on the idea they can repay. There is always risk, never safety. But when contraction is called negative growth, an oxymoron if every there was one, what can you expect. It is the idea being peddle that things are safe rather than risky that unravels the situation. If somebody is peddling something as safe it is because they want you not to look at the risk. A lot of stuff has been peddled as safe.
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1 EuroSider:
'Can anyone quote any previous G20 communiqués? Any completed tasks? Progress?'
Definition of a G20 communique - memorandum of misunderstanding, you know bit like Chamberlains, peas in our thyme.
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PIIGS - may I remind everyone that California (and some other US States) is just as bust as Ireland or Greece and far larger. No-one talk of 'California to leave the US Dollar' and California causing the US Dollar to collapse. (Well actually only one hit on the popular search engine!)
Everyone who writes negatively about the Euro needs to ask why they predict collapse for the Euro because of internal problems, but they do not do the same for the US Dollar?
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I can well understand people thinking that there should be more action at the G20. I have a great deal of sympathy with that view - BUT....
We need to recognise that the global financial and governance system is being in the process of being rewritten to reflect the new realities. Since 1989 the increased speed of globalisation, the advances in multilateralism and the so-called 'Washington consensus' essentially relied on the fact that there was a single global power which shared many values with the EU. It was for this reason that the G7 or G8 could work.
We are now seeing the emergence of a new multilateral world which no longer reflects the global power relationships that existed in the immediate post war period. Obviously it is way above my pay grade but it seems to me that neither the EU or the US has come to terms with the new realities in part because it inevitably means recognising some loss of power/influence.
If the US and EU can get their act together they can have a significant say in the shape of the new world order. To do that they must recognise the need for new global arrangements that will each have with less power/influence than was enjoyed in the post WW2 era. The longer it takes for the US and the EU to recognise their position the less say they will have in shaping the future.
Unfortunately it seems to me that both thhe EU and the US are focussed on domestic issues at the moment. Moreover China (and other BRICS) are playing a pretty good game of divide and conquer.
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9. At 09:22am on 12 Nov 2010, John_from_Hendon wrote:
All the anti-Euro lunatics clam that the UK must be free to devalue its currency and that is why we 'can't' join the Euro.
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The benefits of joining the Euro are far out weighed by the disadvantages. The issue with the Euro is that it's value and interest rates are set by the strongest members and not the weakest. This is an issue that cost Greece dearly as they were not able to do anything about inflation or in fact assisting their main business of tourism which rose and declined respectively.
The only way, and I know I have said it before, for the Euro to survive is if there is a United States of Europe with all playing on a level playing field. And I can't see this happening soon, so the question for you is do you join a failing institution or is the Euro experiment, for that is what it still is known as within the EU, going to come to an end.
There is a third option of the Euro surviving within a smaller group, this could work but there may still be too many differences for it to survive.
Discuss.......
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5. At 08:51am on 12 Nov 2010, JavaMan wrote:
Here is the question that should be uppermost in everyone minds, will the Germans bail out, Ireland, Greece, Italy, Portugal and Spain?
I don't think so, no wonder the Euro is dropping - the flight to safety is underway.
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Point 1. NO!
Point 2. The markets in general are spooked by this not only the currency market. I think we will see the vultures move in soon on a number of fronts which will stretch the EU, ECB and Germany's resolve while exposing the IMF's lack of liquidity. No wonder the EU wanted a move on hedge funds when they saw this comming around the corner.
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Dempster @ 8. I would have thought another reason for the Germans wanting to bail out Greece is that so much of the debt is held by German Banks. Much the same in relation to the French Banks.
If the Germans and the French think the PIGS were imprudent and badly run - why did they lend them so much money?
I would be interested on any views on this one. I am assuming that most of the government debt in Greece, Portugal and Spain is held by banks in the Euro zone. Seems to me that gives the EU a good reason for bailing those countries out. I also asssume most of the bank debt in Ireland is held by British banks which are not part of the Euro zone. Is the EU going to be quite as keen to bail out Irish banks to ensure British banks do not suffer?
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12. At 09:44am on 12 Nov 2010, John_from_Hendon wrote:
Everyone who writes negatively about the Euro needs to ask why they predict collapse for the Euro because of internal problems, but they do not do the same for the US Dollar?
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Simple rely, one nation, many nations, one fiscal policy, many fiscal policies, Etc. Etc. Etc. Etc. Etc. The US is one for all and all for one while the EU is me, me, me.
Lets face it Germany will only back the EU while it is;
Beneficial to its own well being
and
It is getting it's own way.
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Apologies - hit post too early - with typos corrected.
I can well understand people thinking that there should be more action at the G20. I have a great deal of sympathy with that view - BUT....
We need to recognise that the global financial and governance systems are in the process of being rewritten to reflect the new underlying realities. Since 1989 the increased speed of globalisation (in certain areas at least), the advances in multilateralism and the so-called 'Washington consensus' essentially relied on the fact that there was a single global power which shared many values with the EU. It was for this reason that the G7 or G8 could work.
We are now seeing the emergence of a new multilateral world which no longer reflects the global power relationships that existed in the immediate post war period. Obviously it is way above my pay grade but it seems that neither the EU or the US has come to terms with the new realities, in part because it inevitably means recognising some loss of power/influence.
If the US and EU can get their act together they can have a very significant say in the shape of the new world order. To do that they must recognise the need for new global arrangements that will mean each have less power/influence than was enjoyed in the post WW2 era. The longer it takes for the US and the EU to recognise their position the less say they will have in shaping the future.
Unfortunately it seems to me that both thhe EU and the US are focussed on domestic issues at the moment. Moreover China (and other BRICS) are playing a pretty good game of divide and conquer. It is also why China is happy to play a long game.
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A Channel 4 programme last night said the UK National Debt was 4.7 trillion. Anybody know where this number comes from compared with the widely quoted figure currently just under 1 trillion.
8 MPs including Alan Johnstone were asked what the national debt was. Half of them hadn't a clue and the others said around 150billion. Isn't it frightening that our MPs inluding the shadow chancellor don't know difference between the budget deficit and the national debt.
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#14. Chris London wrote: précis: No to the Euro
I disagree with you: the advantages of the Euro to trade and business outweigh any and all disadvantages. Without the level playing field of a single currency, trade and business in the UK will always be destroyed by the bankers - that is not an acceptable position or condition. For the UK to recover and make the best use of its assets, its people, all artificial hindrances to trade need to be minimised. Hence we must join.
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Paul Krugman blog 16 August 2010: "Right now, China is following a policy that is, in effect, one of imposing high tariffs and providing large export subsidies — because that’s what an undervalued currency does. That should be a violation of trade rules; it might in fact be a violation, but the language of the law is vague on the subject. But leave aside the fine print of the law for a moment: what China is doing amounts to a seriously predatory trade policy, the kind of thing that is supposed to be prevented by the threat of sanctions.
Yet the Chinese have taken our measure, and decided that we won’t act. Until or unless that changes, we’re just whistling in the wind.
I say confront the issue head on — and if it leads to trade conflict, bear in mind that in a depressed world economy, surplus countries have a lot to lose from such a conflict, while deficit countries may well end up gaining. Or to put it differently, right now we’re in a world in which mercantilism works. In the long run we’ll emerge from this kind of world; but in the long run…
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13. At 09:47am on 12 Nov 2010, Cassandra wrote:
Unfortunately it seems to me that both thhe EU and the US are focussed on domestic issues at the moment. Moreover China (and other BRICS) are playing a pretty good game of divide and conquer.
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I would agree and disagree with you.
On the first hand things are changing and on many levels and the balance of power is shifting but not as much as you stated. I agree that all need to be at the table to have a say in the way things are to turn out but they do have major issues to contend with at home. If the figures released re the US are accurate then they are in deep ****. And the EU are fighting for their very existence, lets face it if China had not stepped in the Euro would have crashed in the summer. An act of faith or one just trying to ensure their investments are safeguarded.
As far as the BRIC nations all have their own problems.
Brazil has an economy that is now solely dependant on natural resources and as such is open to fluctuations on the open market. Something it has little power over. Couple this with an unemployment rate of 10% and inflation rising to over 4% there is some trepidation around their current and future stability.
Russia is a country of many pro's and con's however it also has natural resources that it relies heavily on. It's economy over recent years has fluctuated greatly with a small group of individuals making vasts amount of money while the populous still appear relatively poor. A country with big aspirations but with a lot of baggage.
India on the one hand asks for and receives aid while wanting a seat at the top table. It has yet to earn it's spurs and manage it's own economy. As with Russia there are great divides here between the haves and have nots. This is causing some unrest with riots over food shortages and fuel. This is still a developing country and needs to invest heavily in it's own infrastructure. Something it appears not able and or not wanting to do.
And so finally to China. China has and still is investing in its own infrastructure. The cost of this means that its economy has to grow by at least 10% PA to stand still. It is also weak on natural resources which means that it has had to invest heavily in some countries which lets say they may well rather not have. This again has put a strain on their economy along with the fact that during the boom times they bought national debt, they singularly own more US notes than anyone else. Something which has left them extremal exposed. For if the US did fail China would have a double whammy. First their investment could be written off or at least downgraded and it would loose its biggest market by far. The US for all its ills is still way out in front in size with regards to GDP and purchasing. Oh and lets throw in the fact that they have double digit inflation and are about to experience the bust of their property boom.
Not such an easy call for them all.
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Well.....what an unsurprising result. It's obvious to all just how badly this reflects, again, on our 'world leaders'. So it's everyone for themselves I guess. And consequently, only a matter of time before govts start responding to what may likely be a growing clamour for interference in trade flows.
The problem with the Eurozone (apart from the difficulties of ECB regulation without political control) is that the bailout bucket is too small for the task in hand and political union too unrealistic to make any timely difference. I believe Chris London is right viz "There is a third option of the Euro surviving within a smaller group, this could work but there may still be too many differences for it to survive."
I'm giving it until about mid-late 2011 for that option to be openly discussed. I believe we're set for substantial social unrest in many places.
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19. At 10:07am on 12 Nov 2010, Segovia01 wrote:
A Channel 4 programme last night said the UK National Debt was 4.7 trillion. Anybody know where this number comes from compared with the widely quoted figure currently just under 1 trillion.
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I saw the C4 programme also
http://www.telegraph.co.uk/finance/economics/8118467/UKs-total-debt-forecast-to-hit-10-trillion-by-2015.html
The telegraph are reporting today and (quote):
'UK's total debt forecast to hit £10 trillion by 2015
Britain's total debt will top £10 trillion by 2015, according to PricewaterhouseCoopers, which warned the burden could slow growth for decades as interest rates eventually rise.'
If this is true ... then Britain is truly bankrupt ... NOW!
The 'good news' is that many other countries are in a similar position.
Hence my view that our govt must urgently adopt a 'national sustainability index' and related reporting and have a robust financuial model for running the UK economy.
The truth is that our politicians neither want to know or tell us what the real financial and resource position of the UK actually is.
The whole world is consuming more than it can produce for a massively expanding global population.
The signs are not good.
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20. At 10:07am on 12 Nov 2010, John_from_Hendon wrote:
I disagree with you: the advantages of the Euro to trade and business outweigh any and all disadvantages. Without the level playing field of a single currency, trade and business in the UK will always be destroyed by the bankers - that is not an acceptable position or condition.
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The only difference between the UK in and out of the Euro is that we would have very little influence on the value of the Euro and the interest rates. The influence the banks have is just the same in Euroland as it is over here. If you take the time to read the press in the Euro nations you would see they have the same issues as yourself with regards the banks and the ECB.
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For the UK to recover and make the best use of its assets, its people, all artificial hindrances to trade need to be minimised. Hence we must join.
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This certainly would not be the best time to join, I have differing views on joining as you know, but even you must concede that now is not the best time to be considering such an action. It would leave us totally exposed and anyway you should not negotiate from a point of weakness. Finally we can't join as we would not meet the criteria, what that's you say neither did most of the other members.......
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Chris London - I actually agree with much (if not all) of what you say.
Certainly the BRICS have significant issues to deal with. That is precisely why I think the US and the EU should be lookig at redesigning the post WW2 settlement. Do it now when the EU and the US can have more influence.
Bottom line is that I want the BRICS to suceeed because that is good for their vast populations and can also be good for the EU and the US. Unfortunately for that world to emergee we need to make some key decisions at a global level. To do that the EU and the US must understand that they do not have the same level as power/influence as they did once upon a time (I would cite the Doha round as one exaample). And the power of states like China ande India is only going to increase over time.
Maybe there is another option. Economic collapse in one or more of the BRICS retarding their growth for a generation or more? Unfortunately any such scenario is too awful to contemplate. If there are certain banks that are too big to fail I would suggest that the same applies to certain states.
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20 John_from_Hendon
I agree with you, but! I do not think we can join the euro? Well not at this stage. We still need a differential. If I remember correctly didn't old Gordy McBrown put things inplace to close this differential and hence making it posible for the pound to be the same value as the euro - another of his big cockups. (like Giving money to the banks without condition or control and relaxing regulations inorder to allow banks more freedom)
So it is a common acord but the mechanics are still to be agreed (we must be part of the G20)
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I agree with John From Hendon that we must take stock of our economy and where we set our priorities. How can buying so much in the way of manufactured goods made offshore be good for our economic well-being? The money we are saving in cheap labour costs is massively offset with the cost to our society in unemployment, under employment, and job insecurity. China has a huge Asian market potential. Let them manufacture for there. We should manufacture our own goods where we are able and only buy in materials needed and specialist goods that we can not produce ourselves.
Commerce must begin at home. The benefits are obvious such as employment, less transport and hence fuel usage, prospects and prosperity for our society.
Let's face it this globalisation idea is a loser for most and a lottery win for the select few. My idea of progress is where the vast majority feel they have an improved quality of life form their parents and that their children will have an improved quality of life from them.
We are squandering precious natural resources and polluting our environment with excessive long distance trade. Not to mention offering no prospects for economic stability. It's time we realised that we should drop this competition mantra and take the next evolutionary step towards true civilisation, cooperation and working for the common good.
No society can survive if we continue to follow the agenda of the 20th century which was the era of plentiful energy sustaining an unsustainable rise in population doing very highly specialised work.
All leaders and commentators keep spouting on about getting economic growth going again but no one addresses the fundamental issues of the medium term such as resource scarcity and excessive population, basically finite resources. To respond as many do and say war and pestilence will sort out the excess is both frivolous and callous, and after all you and yours could turn out to be the excess.
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Cassandra, again you fall foul of not understanding the exponential function. How can such vast populations of the BRIC's be sustained if they are to become western style consumers? Unfettered consumption growth is just not being thought through at all. To hang all our fiscal and monetary policies on trying to move the immovable object is fruitless and folly. The talk of others of sustainability indexes and such is surely a good suggestion?
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If you think 20 countries will all turn and agree major changes to the status quo you are as clueless as GB....
The good news for world trade is at least they are talking to each other.
I personally believe the developing companies(Incl China) are right to resist the devaluation requests of the USA . The USA , UK and parts of Europe need to ween themselves off borrowing to sustain growth.
Its back to basics for the West:
1. Paying down existing debt
2. Planning for smaller government in the future
3. Splitting gambling banks from high st banks
4. Becoming more competitive.
The USA in particular need to get real on debt and develop a plan to pay it back, if it wasn't for the dollar being the worlds reserve currency they would be paying Irish rates for their bonds....
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We have to forget the well-meaning words of communiques from conferences such as these. They always try to verbal us into some belief that all are agreeed to something or other when they are not.
The simple issue is that the two of the largest economies in the world, the USA and China are playing hard-ball with their own interests for the benefit of domestic audiences whose attitudes are more or less beginning to scare the ruling elites for different reasons.
The weakening of the dollar is causing Ireland to catch another bout of pneumonia. This is going to hurt the Euro and cause yet another sequence of fractious outbursts.
The concern we all have is that economic turbulence is proving too challenging for the institutions of the entire world so for the sake of their own self interest the ruling elites are going to have to play beggar thy neighbour or get spaded under. Joining the riot squad looks like a good career option for an ambitious young man.
If we are not very careful in the end no man will be left standing. We live in interesting times.
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*6 Good post
I agree the sovereign debt (Lets not forget Ex- bankers debt)is going to run and run for the next 5 years...
I still feel the USA could be the biggest risk. They just don't appear to have any plans to slow down future borrowing, never mind debt reduction. At some point something will give. Printing more money just makes the problem worst in the long term...
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We've all been eagerly anticipating the out come of this G20 summit, however it seems to have been false hope. The way you have reported it, Stephanie, implies that not much has been decided upon in order to progress through this, still shakey, recovery.
You said that the goals they have decided to reach "are not very specific" and I agree; to me it seems like everyone is still afriad of adding another crack to the remains of the recession and risk another.
Could it be that they are afraid to state "hard targets" because the recession we have only just left has, as you said, left us shell shocked?
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24. At 10:37am on 12 Nov 2010, nautonier wrote:
'UK's total debt forecast to hit £10 trillion by 2015
Britain's total debt will top £10 trillion by 2015, according to PricewaterhouseCoopers,
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Not much credibility here then for PricewaterhouseCoopers are to economic forecasting as Hans Christian Anderson was to factual novel writing.
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Well OK, let's concentrate upon the economics. In particular let's concentrate upon the fundementals. In terms of our present postion that really means the trade imbabalances. Unless and until we do something for ourselves to address this issue, this depression will both deepen and lengthen.
Now, I will not appolgise for returning to the strategy of protectionism. Only by raising the economic value of our populations will we able to solve our problems. Now we are told, by the short sighted that protectionism leads to both innovative stagnation and ultimately war. We still await a logical argument from them for these assertions.
If we look at innovation then please show me just how much technological innovation has been produced by the BRICS. The vast majority of the innovation has been developed elsewhere and employed in the BRICS.
We hear that consumers demand low prices and that they can only be provided by exploiting the low wage economies. This is perhaps the biggest lie that has ever been perpetrated upon society. The rush to globalisation was NOT as a result of consumer push. It WAS as a result of the demands of the financial sector to achieve even higher rates of return.
If we consider China as a prime example a protectionist economy, then protectioism has not prevented them from successfully meeting their material needs via international trade. Therefore why should similar arrangements for the EU have a different effect. If the BRICS now feel strong enough to make their own demands in bodies such as the G20 then they must also accept the consequences.
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20**
John , joining the Euro is not the answer.
The solution is debt reduction linked to more exporting to the far east where the real growth is.
PS
You will be pleased to know borrowing continues to get more expensive (Typical std mortgage rate is now 4.5 %) and you can easily get 3% on your savings, regardless that the BOE rate is 0.5%.
Someone is making big bucks somewhere !!(Guess who - the banks !!)
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# 12 John_from_Hendon. Plenty of people are predicting the collapse of the US$. Plenty of markets, including the gold market, is predicting the collapse of the US$.
You are so interested in California ask why they printed up their own special California IOU vouchers. Ask if this was unconstitutional and ask why no action was taken to stop them and ask why the media were so disinterested.
Sure the US$ will collapse, it is just that its collapse will come sometime after the collapse of the euro.
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29. At 11:08am on 12 Nov 2010, Sage_of_Cromerarrh wrote:
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I agree in principal to a lot you say, not all that glitters is gold. However for us as a nation the change would be more than dramatic to say the least. No more TVs in every room, no more strawberries at Christmas, no more second homes in Tuscany. Peoples expectations are so high now that the return to the surface may well give us the bends. For we as a nation are material rich and morality poor. Are we hankering over a thing that is just a pipe dream, I fear the answer is yes just as those who hanker over a United States of Europe. I support it in theory but know in my heart it will never happen. For the nations within the EU have factions within themselves.
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There are some great posts here discussing some really important issues.
I hope people will not be offended if I say that most of the comments on a blog about the G20 seem to be focussed on domestic issues or at last not global issues. Will the EU collapse, should the UK join, who is right about the cuts, is the US debt too high and can they cut it, the bankers foolishness etc etc.
Those are all very important issues but in my view they are secondary to the issues emerging at a global level. The key message out of the G20 for me is that we will never get agreement at a global level on the host of issues that MUST be addressed until the EU and the US are prepared to offer the Chinese, the Indians etc. a whole lot more.
The key question is can the EU and the US come to terms with the new realities or will they try to defend the old world order because it gave them a more privileged system.
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HughZ @ 36 - please not the "far east".
I used the same phrase until I met a senior Chinese lawyer. He pointed out to me that in China and the US all of the maps show China, ASEAN and Australia (and the Pacific Ocean)in the centre, with the EU in the top left corner and the Americas running down the length of the right hand side. This projection makes the Pacific Ocean the focus.
In this country and the EU we use maps showing Europe and Africa in the centre, with the Americas on the left and Asia on the right (which makes the reference to the Far East understandable). This projection makes the Atlantic Ocean the focus.
My Chinese friend asked me which map I thought would be used in the 21st century.
According to him the correct nomenclature is East Asia rather than the Far East (which is considered to be the product of a colonial mindset).
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Post 22, chris London:
I find your comments on BRIC nationas too simplistic, and even misleading. Brazil does not exclusively depend on natural resources, even though the value of its natural resources are going to be valued at much higher in the near future. Russia, besides having large deposits of gas and oil, has highly developed technology sector including defense and space etc. China is the largest exporter of the world. India does not ask for aid, and in fact specially requested the so called 'donors' to stop aid. In technical and development cooperation, more aid is flowing to China than to India at the moment. Nothing is stopping India from becoming top ten economies, you can not have that from aid alone, can you. So please check facts before posting.
All these countries are investing on infrastructure, not just China, and its a priority for all. All these countries are diversifying their export base successfully, which by the way is the most legitimate way of expanding economies, irrespective of what the US think. The allegation of currency manipulation is an entirely different issue. Your contention that Euro would have failed without Chinese support, is far fetched, to say the least.
At the end of the day, the world economic order has to change and will change. Giving BRIC countries more say on IMF is a start, and a very good outcome of this summit. The world political order has to change and will change. It might upset you very much, but UNSC without India will loose credibility in future. Germany and Japan belong their too. Because all these countries have shown that they are responsible members of the international community, and all of them contribute to the economic and political stability of the world (which can not be said of all the existing permanent members of the UNSC)
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Chris London, I agree the change could be large for some. However, it will be forced upon us anyway as the trajectory we have taken since the second world war is not an option for us any more. (Not that it was ever a sensible one in the first place). However, for years we made TV's and can do so again, locally. Very few truly own homes in Tuscany, France, Spain or anywhere else, they are mortgaged. Yes many will have to de-leverage their positions.
Over all it is far better to be ahead of change and manage it than have no choice in the matter. Companies like Marks and Spencer, Next, Tesco (less so) etc too easily have gone abroad for their sourcing of goods to sell to UK consumers. I remember throughout the 70's, 80's and 90's M&S forever putting downward cost pressure on their suppliers in the UK clothing industry and then when costs were as low as our civilised welfare state society could afford stopped doing business here with suppliers and shifted all purchases to China.
Collectively we need to think more as a society and that includes retailers who sell to British consumers. Why not actually create employment for some of your customers? Next time you are in Next or M&S take a quick look at how many labels say made in the UK or EU versus made in China, India, Indonesia.
Rose and co keep bleating on about pleasing customers, well the best way he could do that is help create viable stable employment for some of them.
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'growing concern about the safety of Irish and Portugese government debt' - its now all about the timing of the Irish default. With zombie banks needing ever more money to prevent cash machines closing, Ireland looks like being a 'model' in the next phase of the worldwide debacle.
That PIIGS will need to be bailed-out by the IMF/Euro is now a given, the real question is over the position of Germany, France and the UK.
At heart this remains a banking crisis. It is the prospect of 'domino effect' that really drives the ECB, Fed & BofE, not intrinsic concern over the fate these countries.
The austerity measures taken by Ireland (and held up as a 'model' for others) are irrelevent and ineffective. Whilst the banks refuse to take any 'hit' on their porfolio of failed loans (which will NEVER perform), crisis will follow crisis in an unending sequence.
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Tridiv, I disagree that BRIC countries going for ever more exports is the most legitimate and certainly not moral way to develope. 800 million people in India live on less than 30p per day. This is a disgrace whilst the same country boasts the highest number of millionaires per square mile of any country in the world.
BRIC's would be far better to concentrate on raising the standards of living of their own general populations by encouraging local trade and fair reward and spread of wealth, whilst simultaneously doing something about the size and growth of these populations.
They are unsustainable and the developed world will become protectionist out of necessity and survival of the fittest which is where current population and economic policies are inexorably taking us.
When there is a protracted period of difficulty in the BRIC economies which there will be shortly we will see their cohesion as nation states sorely tested. I suspect many of them will fail such a test because they are not building fair and sustainable societies and populations.
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No 19. to answer your question from C4 the 1 trillion is our debt to creditors. The rest is the government commitment to us. C4 only mentioned pension liability to public sector works. How that 3.7 trillion plays out wasn't really covered by it's nature it covers something like the next 40 years whether that is met by new contributions I don't know.
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12. At 09:44am on 12 Nov 2010, John_from_Hendon wrote:
PIIGS - may I remind everyone that California (and some other US States) is just as bust as Ireland or Greece and far larger. No-one talk of 'California to leave the US Dollar' and California causing the US Dollar to collapse. (Well actually only one hit on the popular search engine!)
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California and all states in the US are part of a fiscal and monatary union which means if they go bust they dont have to pay taxes towards the federal budget but still get access to the money that is allocated to each. So put simply they can use some of the federal budget to pay of there debts the rest has to come spending cuts.
The Euro zone is moneatry union but not a fiscal union and the countries like Ireland cannot use the same mechanisms that US states can. Secondly the EU Budget compared to US Federal budget is small by comparison and would make little difference to countries facing major economic problems.
Thirdly if you wanted make the euro zone into a moneatary union. you would have to give national borrowing and tax powers to Brussles and also non eurozone countries would have to make a descion of either adopting euro or leaving the EU as they would comerical advantage being able to set there own tax rates.
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I find it very hard to believe that all the talking and negotiation doesn't take place before these jet lagged politicians arrive at these meetings for their self important photo ops.
It's a pity that the main stream media continue to report these things 'straight' as if it wasn't a theatrical performance taking place. We are usually asked to believe that these events can be turned by nice little arguments on the day and ‘personal chemistry’, when surely it must all be about brutal power politics and economic leverage - with some back scratching thrown in.
I usually find something of interest in Stephanie’s offerings, so I don’t point the finger particularly at her.
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34. At 11:29am on 12 Nov 2010, Chris London wrote:
24. At 10:37am on 12 Nov 2010, nautonier wrote:
'UK's total debt forecast to hit £10 trillion by 2015
Britain's total debt will top £10 trillion by 2015, according to PricewaterhouseCoopers,
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Not much credibility here then for PricewaterhouseCoopers are to economic forecasting as Hans Christian Anderson was to factual novel writing.
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Unfortunately, I think that PWC's projection based on interest rate rises is more than likely an accurate forecast, bearing in mind that the figure represents total public and private debt/liabilities. The other reasons being this all affects private incomes/UK government tax revenues.
Private sector debt is at a similar level to public sector debt by 2015?
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#24 nautonier et al.
The Telegraph and Channel 4 reports appear to be referring to total national indebtedness, not government debt. They are adding together the debts of everyone in the country along with the government's debt.
I have read a view before that if you are going to do that, you also ought to consider assets. So, for instance, we have a much better developed infrastructure than China, which is spending a fortune (no exaggeration) catching up in that area.
The Channel 4 thing was just a rather nonsensical trick question. I doubt their estimate was very accurate anyway and there's the assets, etc. see above.
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45. At 12:35pm on 12 Nov 2010, alan Hall wrote:
No 19. to answer your question from C4 the 1 trillion is our debt to creditors
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UK govt (taxpayer) liabilities are collosal as including e.g PFI, infrastructure, net immigration costs, population increases, ageing etc ... these are all on top of current governmt. borrowing.
The liabilities on top of debt can be met by higher taxation and/or more borrowing ... unless Britain is to default on its loans/debt.
The real answer is that no one knows for sure as our govt either will not tell us in public or does not measure this stuff properly ... I think its a combination of the two.
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12. At 09:44am on 12 Nov 2010, John_from_Hendon wrote:
PIIGS - may I remind everyone that California (and some other US States) is just as bust as Ireland or Greece and far larger. No-one talk of 'California to leave the US Dollar' and California causing the US Dollar to collapse. (Well actually only one hit on the popular search engine!)
Everyone who writes negatively about the Euro needs to ask why they predict collapse for the Euro because of internal problems, but they do not do the same for the US Dollar?
As an earlier poster remarked, the situation between Greece viv a vis the Euro and California v. the Dollar are quite different. I did a quick search too and this explains the difference quite well viz. 'California is a part of a 235-year-old republic. Even though it has not been a member for that same period, it nevertheless is a part of a union that has stood many difficult tests of time.
On the other hand, the European Union is still an experiment. It is barely out of adolescence, and we don’t know yet if it will even grow to stand among the older economies of the world.'
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Sage at 44
China (and other BRICS) can produce goods more cheaply because their labour costs and environmental standards are lower. Hard to criticise that strategy when we used similar tactics or colonialism to create our own wealth.
Maybe we will see the US and EU retreat behind ever higher tariff walls but I am not sure that is the answer. I certainly don't think it is an answer in the long term.
In my view the answer is to complete (not retreat from) the globalisation project. Any protection from the US and the UK will simply see retaliatory action. We will succeed in locking ourself out of the fastest growing economies in the world.
To start with I think we should introduce a range of global environmental and human rights/labour standards linked to things like national GDP. Once countries improved their levels of development they would progressively need to improve their human rights/labour and environmental standards to ensure they do not obtain an unfair advantage.
I would also introduce global regimes for the banking system and in relation to the taxes paid by (say) the largest transnational corporations. We have created a globalised world only for a select few - the large transnational corporations, their employees and advisers. The only way to deal with their power is at the global level.
This is the framework that the US and EU should be championing NOW. Unfortunately I suspect that will not happen:
- in part because the US and EU will not be prepared to make the sacrifices needed to get China, India etc. on board.
- the largest TNCs will never allow it to happen. In the current system they have the perfect world. The can make their products and profits in lesser developed countries with lower standards on things like labour, human rights and the environment. Meanwhile their executives can live and holiday in "more civilised countries".
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There have always been trade imbalances and there always will be.
So what?
Those that moan about it, have obviously not been good players in the 'trade game' and China has obviously 'learnt the game' well.
You cannot become that successful on credit cards and debt instruments alone.
You have to work at it.
Some forget, the oodles of US dollars being used to buy up commodities, land and anything else that moves or breathes that can be sold on, due to the 'printing' of enormous amounts of 'free' US$ by the Fed, in every other country on the Globe, THAN the USA itself.
WhY? Raise prices and increase profits and no doubt, indebt these countries and tie them down to US$ funding forever.
The USA used to have a good reputation for what it did in its own backyard.
Shame that it is now reduced to whining jealously, when others are doing so well.
Should be G19. The USA needs to go back to School.
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Cassandra, by complete the globalisation project I assume you mean one world order brave new world type stuff. If the United Kingdom struggles to be united not to mention happy unions such as Russia, China, India, pakistan, Indonesia, Iraq, Turkey etcc.. the chances of one world order is a nice round number, namely zero.
I suggest that it would be far more sensible for all to agree that we should try and trade primarily locally and sustainably. There will always be a need for some long distance trade because some products and materials are pretty unique to one country or even region. For example Oil, Scotch Whisky, Stilton Cheese, etcc. However, dresses, trousers, shoes, cars, bikes, door knockers etc. can just as easily be made local to where they are consumed as they can be in China or other developing nations.
In terms of retaliation for tariffs the BRICs are onto a loser here. The West is still overwhealmingly the customer (except Germany with their Beamers and Mercs,[ Rolls Royces and Bentleys too]). To coin a commercial phrase the customer is king.
UK consumers need to apply more pressure to retailers and manufacturers to source much more locally. A ground swell of opinion and action (purchasing pressure) would start the snowball rolling down the hill. Once people see factories opening and hiring again as a result the momentum would build rapidly.
I don't subscribe to the "it's inevitable" mindset of globalisation. Economics is a man made construct. (You can tell that from how wrong it usually is). We can make any economy we choose if we apply our cognitive skills and powers of logic and reasoning.
Economic thought and policy at the moment seems to be all tactics and no strategy. Guru's seem to be trying to make the flat Earth model equivalent of output growth forever fit when any study of the evidence points to this being a false hypothesis. It's like a religion, but then again when did religion ever take account of or require evidence?
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51. At 1:14pm on 12 Nov 2010, Clive Hill wrote:
On the other hand, the European Union is still an experiment. It is barely out of adolescence, and we don’t know yet if it will even grow to stand among the older economies of the world.'
I prefer 'a work in progress' with specific aims one of which will be the extension of the very sucessful German Social Market Economy through out the EU.
It is also impressive in terms of the metrics of education, R&D and investment.
Looking good.
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Post 44. Sage_of_Cromerarrh
Export orientation of the economy is diametrically opposed to creating domestic demand. You also have a strange perception of priorities facing the BRIC nations? When you cite millionaires and poverty in India, do you suggest that countries like India and Brazil should reign in their entrepreneurs before all the population are strictly on equal footing? Do you also know that India has the most persistent and longest running poverty alleviation programmes in the world? Yes, poverty is disgrace. But it is a sign of responsible nation that tries and has lifted millions of people out of poverty in recent years. i also have a feeling that when people here talk of poverty, they have very little idea about the efforts, resources and commitment needed to successfully alleviate poverty. In short, if you are a caring person, concerned about the sustainability of our planet, you would be deeply thankful to the Indian government for successfully managing a situation, which should have been a potential time bomb to the world twenty years ago. Instead millions of them are now consumers like you and me, in a democracy and a caring capitalist economy.
Secondly, export orientation is the most legitimate way of growing an economy. No one is stupid enough to think that this will prevent India or Brazil in creating and increasing domestic demand. In fact the potentially large domestic markets are an advantage over smaller nations. But Indians and Brazilians will be fools to create products and services that are not demanded in the world. In fact i do not understand this debate. You buy a BMW over another brand because of technology and value. The Germans are to be complemented for creating a product that is in high demand, it brings them money. They did not cheat, did not bend the rules. Similarly, every country has the right to develop products and services to sell in the world. This orientation, trying to develop the best products to sell in the world is certainly worthier than shady finance deals.
What get me is this. The USA has spend last few decades blaming japan for their trade deficit, now its China, and Germany should please reduce their surplus, in a decade the list will also include India and Brazil, Russia and so on. We all know by now (currency manipulation apart) that its better to closer home for the ills of economies.
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9. At 09:22am on 12 Nov 2010, John_from_Hendon wrote:
Good points.
Devaluation is a sleight of hand and does nothing to address fundamental problems (of which the UK has many).
It is also inflationary and in the long term deters inward investment.
Europhobes always get terribly excited by any tiny little tremor in Euroland.
Comical to watch.
(Pst. Did u know that the Eurocrats want to legislate on size of cricket balls, also planning to tax Sunday morning lieins, honest)
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Is it simply ironic or more calculated that a communist Government is sending the major capitalist democracies into a state of panic? You've got to laugh really and simply hope that the aim of the Chinese isn't to drive their global economic competitors into the dirt.
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Sage @ 54 - I am responding because I think you made some good points. And I am not nearly so certain of my own ideas that I do not welcome constructive debate. To respond to a few of your points.
1. At present globalisation is talked of as an economic concept. It is not. It is a technological one. It is increasingly possible to share images, text, ideas etc with people all over the world instantaneously. In my view the technology means we can not stop "globalisation". All I want is a more complete globalisation. At the moment it is big business and the big banks that have embraced and benefited from globalisation. All of the big issues of our day, however, require global solutions. We cannot effectively regulate the large transnational corporations other than on a global basis.
2. The idea of UK consumers taking action is a nice one but I think we need strong action urgently. Lets face it the boycott of Israeli goods has not been a unqualified success. In tough economic times people will buy what is cheeapest and why shouldmn't they. If we are not going to expect the bankers to act in the interests of the nation (tax our bonuses and we'll leave) how can we expect more of others.
3. I do agree we need to seettle a price on carbon so that transport costs are then factored into things appearing on supermarket she
4. And don't believe this stufff about the BRICS being dependant on EU and US consumers. Even if we could learn to live without the cheap exports they are inexorably on the rise. It will not belong before they can rely on their own emerging BRIC middle class.
My point is that we still have some serious negotiating power but it is reducing every day that we do not take action.
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The US President has had a tougher ride here than at any previous G20 Summit; it's hard to miss the frustration on the American side at how their policies, and their position at this Summit has been portrayed.
The word I would use is "accurately".
I would describe the American Q.E. 2 as a selfish, stupid economic dirty-bomb meant to take the world by surprise to benefit the good-ole USA.
Asian members of the group pushed back against the traditional, Western approach to foreign aid and growth. This is a good sign because I firmly believe that Asian countries, especially China, have better, unbiased financial wisdom at this momwent in time than any western country. Asian economists tend to see the world as it is, nit how they can manipulate it.
Let me re-write Shakespeare:
"Oh what a world we dictate,
when first we practice to manipulate."
Once again, at this Summit, the leaders find themselves working to prevent the next crisis:
Where did the waves of the firsat crisis originate?
Where are the waves of this second potential crisis originating?
Any country still "stupid" enough to follow American financial policies deserves all the repercusions that they get.
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India a caring capitalist economy you must be joking. Their caste system and treatment of the poor can be described in no other way than shameful. Their entrepreneurs and wealthy elite could spread their wealth around several orders of magnitude more than they do now. I think I'd sooner live in America than India anyday and so would Indians given the chance looking at the number of entrepreneurs from India living in the USA and the UK.
The UK and the USA will be major world economies forever because we are inventive. Look at the major modern inventions of today. 50% plus were invented bu UK or USA and most of the rest by other European countries such as France and Germany, FACT. All we have to do is put our talent and resources into worthwhile enterprises instead of ponzi financial services and make a commitment to look after our neighbour by trading locally wherever possible to build sustainable communities and economies. It is perfectly possible to have constant generation upon generation increases in life quality without economic output growth. Just like it's possible to sail to America without dropping off the edge of the world.
Let India serve it's own huge market and raise it's own out of poverty to consume their own locally produced sustainable products. Before you come back with British colonialism of the 18th and 19th century we've moved on and learned from history. I have no desire to colonise anyone.
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I meant export orientation is not diametrically opposed to creating domestic demand, obviously. sorry.
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Re the Channel4 program ,thanks for those who responded to my question about the distinction between total government liabilities and debt. You would have thought that C4 would have made some attempt at explaining the huge difference.
Interesting that nobody commented on my other point that the shadow chancellor and other MPs hadn't a clue what the difference was between the national debt and the budget deficit.
Perhaps we naturally expect so little from our politicans
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#63. Segovia01 wrote:
"Perhaps we naturally expect so little from our politicians "
The poor dears are just amateurs - most have never run anything and frankly couldn't be trusted to run a whelk stall!
However, just like, bankers the stability of the whole system depends of them giving the impression that they are the omnipotent masters of the universe.
But neither of these two points is new - that last lot were just the same etc. etc.
It is part of the con-trick called democratic government and our ability to change governments at elections. In fact the Permanent British Government stays the same for generations, no matter which party is in elected, or indeed if no parties are elected. It is a multi-party dictatorship (just as the USA is a two party dictatorship).
These are the realities - sorry if it makes you uneasy!
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Ive read many comments about the G20/DC visit to China/Obama visit to India over the past few days. Many from UK & USA relate to defending/criticising their countries. If you dont like whats going on get yourself out. I had no option but to take a job overseas in 1995 as my company ( for 17 years closed & there was nothing in UK at the time ), yes I got on a long bike ride as N.Tebbit advised and have never looked back. Now retired at 60, I only have currency exchange & whether my private pension has been squandered by some useless financial investor. I have back up though as I invested a lot in UK companies ( in March 2009 ) when they were rock bottom ( now worth 40% more ). Pity we cannot look after our own money without tax ( pension plans ) in the UK without the financial leaches taking a cut.
Ronald.
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Sage - I cannot believe you said that and I am sure you did not really mean it
"The UK and the USA will be major world economies forever because we are inventive. Look at the major modern inventions of today. 50% plus were invented bu UK or USA and most of the rest by other European countries such as France and Germany, FACT"
That statement may very well be racist but it certainly shows a very narrow eurocentric view of the world. Your view is not only naive it is actually dangerous. It totally misunderstands the rise of East Asia and over estimates the importance of Europe.
For most of recorded history the most advanced societies on earth were located in Asia. Since the disintegration of the Roman Empire (in the west) 1500 odd years ago it is only in the last 350 years that Europe and then America have risen in global economic and political importance. There is nothing to guarantee that situation will continue indefinately.
Don't get me wrong I believe in English or EU values (democracy, freedom of speech, individualism, rule of law) but please please do not just assume they will survive because in some way our system is inherently superior.
It is for this reason that I believe that the EU and US should be engaging China et al now to redesign the global political and economic architecture. To do that we are going to need to make suignificant concessions but we will get to shape the future. Every day we put off this negotiation our negotiating power gets weaker.
The other options is to retreat behind tarrif walls. In my view that option will simply mean Europe becoming as irrelevant to the world as we were for the 1,000 years following the collapse of the Roman Empire (in the west).
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63. At 3:57pm on 12 Nov 2010, Segovia01 wrote:
Interesting that nobody commented on my other point that the shadow chancellor and other MPs hadn't a clue what the difference was between the national debt and the budget deficit.
Perhaps we naturally expect so little from our politicans
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Our politicians don't want to know because if they did (and most of them probably do know more than they let on as they're not all complete economic duffers like e.g. Johnson)... some might think that something (more) should be done about 'it' and would mean they're going to have to make themself even more unpopular with further reductions in govt spending, particularly amongst those who will riot, strike and don't care what happens anywhere so long as 'it doesn't happen to them' and they get their 'benefits'/govt services!
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Cassandra, my comments may well not be pc but they are not racist. Major inventions now lets pick a few fields: Electricity, electromagnetism, nuclear physics, automobiles, aeroplanes, rocket propulsion, space shuttle, bicycle, combine harvesters, tractors, spinning wheels, jet engines, rotary engines, submarines, steel and iron bridges, steel and iron skyscrapers, string theory, evolution by natural selection, genetics, splitting the atom, chemistry and the table of elements, gravity, general and special relativity, organ transplants, the microbial theory of disease, need I go on? The list is the vast majority of modern technology and science.
Now we may well have significant contributions from other nations in the future and there is no intellectual reason why not. However, these emerging societies do need to level the playing field for their populations if they are to unleash and realise their true potential and benefit from it. They have more than enough work to do raising their own societies and this will be best achieved by cooperation internationally especially peace, but also by trading locally and spreading the surplus out fairly.
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Cassandra,
Are you for real or just politically and economically naieve?
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The G20 meeting and their ‘communiqué’ will not resolve anything; the capitalist economic and financial bank debt-slump credit crunch debt crisis and world trade depression, rising unemployment and currency-trade wars continue and continues to deepen.
Capitalism is in its 'death agony'. No subjective measures or wishful thinking by political leaders or central bankers printing funny money will revive the capitalist zombie corpse and its parasite bankers and zombie banks!
In Ireland, the Irish bank-debt crisis is now fuelling the panic that was witnessed during the Greek debt crisis in April 2010. It is only a matter of time – when debts mature and another ‘clearing house’ demands payment and the bond vigilantes and vultures will demand more or simply cut and run.
The risk of a sovereign–Government debt-default is high now in Europe –it could be Ireland first, then Portugal and Spain or all three defaulting closely together.
Who are the Irish bond and debt loan holders? Many European banks in Germany, France and the UK.
In the UK, the Government supported HM Treasury insured RBS (virtual) UK Public quasi-State Bank is exposed to some $50 billion of Irish toxic bad bank debt.
But RBS bankers don’t have to worry about the RBS exposed debt loans because they will still collect their fat multi £ million bonuses and they can always rely on the banker friendly Tory Lib-Dem Government to bail them out of their PRIVATE bank debt insolvency with another injection of liquid cash courtesy of UK public taxpayers and more QE.
When the UK taxpayer funded bank bailout shares in RBS tumble – as they started to do yesterday – the losses will be added to UK bank bailout debt of £1.2 trillion already and rising. The UK taxpayer insures - courtesy of HM Government through the HM Treasury APS a massive toxic bank debt mountain at RBS of some £282 billion!
Meanwhile the US Fed QE prints more funny money to depreciate the US $ dollar thus fuelling and unleashing more inflation and the consequent commodity price rises in food, oil and precious metals.
Gold has now hit a record $1400 an ounce and oil is now touching almost $90 dollars a barrel both of which are a sign of inflation and dollar weakness or rather deliberate QE dollar depreciation.
While back in the UK, the Bank of England Governor Mervyn - ‘moral hazard’ - King is clueless in the face of a double whammy of a contradiction of rising UK inflation and deflation! Official (fantasy) inflation - CPI is 3.1% with a forecast of CPI rising to 3.6% by the end of year plus a VAT increase to 20% in January 2011 to add to inflation fire together with rising UK food and fuel prices; e.g. British Gas today announced a 7% price increase in fuel bills; with deflation-depression - deepening the UK slump with low productivity and rising unemployment!
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Well Foredeckdave@69 - perhaps.
I understand from looking back at your previous comments that you are in favour of protection - I presume by raising EU or is it UK tariff barriers and/or subsidies. Maybe this is a good idea but I think you will need to give some explanation of how your ideas will work in practice before you start accusing others of being politically and economically naive.
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These summits just show the lack of structure for global management - I think the economists use the term 'Fallacy of Composition' when everybody believes if we do what is right for 'me at this moment' the world will become a better place. This is however a bi-product of our X-Factor democracy which we are stuffing down the neck of China, they must think we are daft.
Given the micromanagement at the moment I can't believe that the Ireland and Portugal scenarios haven't been anticipated and planned for. If not what on earth have people been doing (World Bank, IMF, EEC, etc)?
With respect to Sage and Cassandra - Sage make a good historic point; but should realise that when over 2 billion people get organised and are ruthless in developing their brightest people then the UK (60 million) and the US (360 million) may lose their intellectual lead. Especially when we are enthusiastic about helping them
India has made HUGE progress in IT and China is just a development powerhouse; with an operationally effective government.
Yes there is a debate about Human Rights, but it is a debate.
Think we will see wome changes??????????
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#71 Cassandra,
You are correct that I would favour protectionism as a starategy to re-balance both the European and global economy. Such a staretgy could not be enacted unilatterally by the UK. It has to be part of a pan-European strategy - and I will agree with you that therein lies the rub.
I would impose tarrifs and quotas on ALL those imports that can be produced within the EU. The level of the tarrif should be set at the difference between the nominal cost of an EU product and the price in the country of manufacture. If the imported product can deliver value then it will be able to secure sales.
Such a strategy would provide the space for Europeans to be put back to work. Rather than stultifying development, it would force EU manufacturers to meet and exceed the values built into products by overseas competitiors. The same conditions would likely face EU exporters thereby again ensuring that they raise their game in order to make sales.
It is often claimed that such policies would lead to war. I would counter that with the possibility that, if the present imbalances are not addressed then they will become the primary cause of a future war.
Now, from your posts today, it would appear that you favour more globalisation. In order to facilitate that it would be necessary for the living standards of the Western economies to reduce significantly - the classic race to the bottom. Why should the workers of those economies let that happen? We are already challenging the financial authordoxy that led us to this position. Yet you expect us to allow living standards to continue to fall for the 'greater good' in the full kmowledge that all that would be achieved is further concentration of wealth - to the dtriment of the 'greater good'.
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73. At 10:26pm on 12 Nov 2010, foredeckdave wrote:
Now, from your posts today, it would appear that you favour more globalisation. In order to facilitate that it would be necessary for the living standards of the Western economies to reduce significantly - the classic race to the bottom. Why should the workers of those economies let that happen?
False logic.
Exporting low added value jobs to emerging economies is, I agree not nice for those who lose their jobs, but good for their children who will benefit from the higher added value jobs replacing the ones lost.
It is also good for the emerging countries who over time increase their spending power in the developed countries. Also it promotes democracy and equality of opportunity as that in turn facilitates knowledge / skill growth necessary to lift these emerging economies to the next level.
Prediction: China will liberalise. It has to. China is tasting world power; it likes the taste and the current political set-up stunts innovation. China needs innovation to keep moving up. This will keep the Germans on their 'toes' (education, R&D, investment). Not the British, they chopped their 'toes' off some time ago.
It is 'not a race to the bottom'.
Dejavu. Have we been here before.
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We should all already know that with the technology we have today, the world would be unable to support everyone having the current standard of living of the well-off west. I choose my words carefully, there are many in US who have little and live in poverty. The same is true of other western nations. The west is not a haven of well-being as some seem to think. I hope we would all like the standard of living of the poor to be raised. But given the current state of the economies, it isn't likely to happen. Our debt-based economy would appear to be in severe difficulty and may not survive. I suggest, however, you should not underestimate the ability those in power to manipulate things to their advantage and to keep things going so they have a good life, possibly at the majority's expense. It won't change quickly.
Probably, the answer will emerge gradually if it comes at all. The world's standard of living could just gradually sink from what we each have as our natural resources that we can afford decline, [even if this is a long time in the future]. Evolution is the natural way. Humans can cause things to happen more quickly, usually by economic conflict or war. We have this now at a lowish level with no obvious end. It absorbs resources we should be spending on technology development and education to reduce our dependence on raw materials.
I believe that the trend to globalisation has increased our rate of raw material consumption. To reverse this prolific consumption, maybe the global markets need to be curtailed. There is no political will for this yet. The events that started in 2007 could be the start of a long term change in the way we think.
Personally, I would like to see each country and region in Europe start the process of becoming as self-sufficient as possible. It would seem a sensible political measure as it will probably take decades of change and require long term political consensus. Diversification will also help our country should the current terrorism spread into the UK. It needs leadership and vision.
The economic system must also change so that it isn't dependent on continual expansion and growth. The Costs of Economic Growth, [I wish I could find a copy of the book of this name by E J Mishan], are becoming too high. Expectations will need to change and our continuing thirst for the new will need to be curbed. The question is; 'how should this be achieved?' There is no correct answer in my view; we need to evolve it towards this. Some objectives may not work, but if we don't start the process, it will be our children and grandchildren that will be affected. But this is never discussed within G20. They can only see the short-term view of their own next election. Will it ever change?
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#74 Richard Dingle,
" Exporting low added value jobs to emerging economies is, I agree not nice for those who lose their jobs, but good for their children who will benefit from the higher added value jobs replacing the ones lost."
What an arrogant statement that is. What are these parents supposed to do whilst the higher added value jobs are being prepared for their children? If (more likely than when) these jobs do arrive then there will not be enough of them to satisfy the employment needs of all the children and their parents - even if they are capable of taking them.
A balanced economy does not purely exist on high added value. The skills that have been developed in the UK (in say shipbuilding, mining and steel making) are rapidly being lost. The people who held these jobs were extreemly skillful in what they did. However, their skill-sets were not easily transferable. Take away these people's ability to be the best miner etc that they could be and what do you leave them with.
These jobs were exported not because we were unable to produce, they were exported merely to reduce costs to raise corporate dividends.
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76. At 11:47pm on 12 Nov 2010, foredeckdave wrote:
What an arrogant statement that is. What are these parents supposed to do whilst the higher added value jobs are being prepared for their children?
Further education. Sanskrit Poetry. Forget that too expensive.
Seriously, would you want their children too have low skilled jobs. Follow daddy down the heavily subsidised mine.
These jobs were exported not because we were unable to produce, they were exported merely to reduce costs to raise corporate dividends.
Very high on the list off all time fallacies.
They were exported to remain competitive. So that the higher skilled jobs could be preserved (design, R&D).
Dyson, an example of a British success story, moving his manufacturing to the far east for that reason. Not because he is a fat cigar smoking capitalist, he aint.
Look, we can produce anything in this country. Not the point, what can we produce competitively, that is the point. Please no more nonsense about others being competitive because, boo hoo, they cheat.
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#77
Richard,
"These jobs were exported not because we were unable to produce, they were exported merely to reduce costs to raise corporate dividends.
Very high on the list off all time fallacies.
They were exported to remain competitive. So that the higher skilled jobs could be preserved (design, R&D)."
Your response would be laughable if it were not so tragically wrong.
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78. At 00:44am on 13 Nov 2010, foredeckdave wrote:
Your response would be laughable if it were not so tragically wrong.
Why is it tragically wrong.
Numerous companies have done this successfully and wrong.
What drives corporate behaviour is maintaining the dividend, via healthy profits, which can only come from remaining competitive.
Maintaining the dividend, slightly increasing ideally, indicates good corporate health and an ability to compete.
Reading your post again I withdraw the 'fallacy' bit. Our difference is that you think it bad as British workers lose low paid work, while I think it good that companies remain competitive and survive.
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TYPO.
Numerous companies have done this successfully and wrong.'
should read'
'Numerous companies have done this successfully and survived.'
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#77 & #78 - I think a bit of both but now that the economies of China, India etc have been kick started we have to look realistically at our situation.
The bell shaped curve of IQ and ability demands the preservation of jobs requiring manual dexterity and physical strength that gave the young men, who did not do well in academic studies, a certain status. The social consequences will be dire - we are already seeing this my area where local manufacturing industry has disappeared - there are plenty of opportunities for girls but nothing for the non academic boys other than loading and unloading lorries full of imported goods that could have been made locally.
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#78 #79 #81
We all agree on the outcome. Strong employment across the broad spectrum of UK society.
However, judicious, use of subsidies to preserve manufacturing when it can be done cheaper abroad is not just the wrong approach it is fatal to economic recovery.
'done cheaper abroad'. Market forces should decide this simply because there is no better way.
However we do need more international co-operation to bring down trade barriers and also to 'reflect the cost of environmental impact'.
The key words are 'international co-operation'. Unilateral action is always an own goal.
As an example, I would favour an environmental tax on some metric of transportation. But it must multilateral.
Protectionism is the beginning of the start to war for the following reason.
It does not work and entrenches recessions.
Severe long term recessions lead to impoverishment and this in turn is a breeding ground for extremism.
The effects of protectionism in the 1930's played a significant part in the success of fascist parties in Europe.
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#82, Richard,
You are just wrong.
Globalisation has to be viewed in context. We have to critically examen why firms chose to remove themselves from domestic manufacturing AND the long term consequences of doing so (both for the low cost economies and their home economies).
The sole reason for exporting manufacturing was to reduce production costs and raise profitability. It was a direct response to the bean-counter mentality that captured and continues to dominate both corporate and political thinking. It was not engaged upon for any ultruistic reason. It was not engaged upon to shorten the supply train as part of a market development strategy. It was, in effect, another form of empirialism.
You then have to follow the money train. Where did all of this increased profitability go? From our European experience we can clearly see that it was not dispersed throughout our domestic economies. It was, and continues to be, concentrated in the hands of of the vested financial institutions. Why do you think that money has been allowed to climb out of its box and financial services (commodity markets, hedge funds, etc. etc.) become the prime drive forces of western economies (including Germany BTW)? The main reason is because money was/is all that was truly left!
If we take China and India then we can see the consequences of the manufacturing bubble that we in the West have created. As Chris London said earlier this week, China now has to grow its domestic economy by 10% each year merely to stand still. It has raped both its people and environment to achieve this position. Projects like the 3 Georges Dam have had to be undertaken irrespective of their environmental consequences. The desertification of Northern China goes on a-pace without any tangible response. In India we now hear that millionaires are being created daily and yet the majority of its population live in poverty and squallor. What has the billions invested in these countries actually achieved? Why are both of these countries still in reciept of aid when they proclaim themselves to be financial super-powers.
If we look at our position in the UK, we can clearly see the consequences being played-out in our society. Ask yourself why our youth appear so disaffected. What truly is the point for the majority of them? All that will soon be left is 12 hour contracts on minimum wage at some supermarket or other shed. At the same time they are bombarded with media telling them that they must have the latest 'app' at prices that they cannot afford! Why should they train and get skills that are not appreciated by our society and certainly not rewarded.
If an X Box costs pence to produce in China why is the price so high in the UK?
No Richard, globalisation is the biggest con ever to be perpotrated on our economies. It has merely served to satisfy the greedy demands of a select few. It has not increased the true value of anybody. It can be seen as an accelerator of the transfer of wealth from the poor to the rich.
Your logic is severly flwaed when you assert that protectionism leads to the start of war:
We already have war. At the moment it is a financial war but left to continue it could well end with a military response.
Merely stating that it does not work does not make it so.
When economic activity is re-generated that is a form of "entrenched recession".
I will agree with your third point and we are seeing the first signs of that already in both the UK and Europe.
Many factors led to the rise of facism in the 1930's. Far more significant factors include the emergence of communist Russia, the enfeeblement (politically and economically) of France and the UK as a counter and the lack of an established political establishment in Germany.
Those of us who espouse protectionism are not merely little Englanders or little Euros. We do not turn our backs on international trade. We do require that the imbalances are adddressed.
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83. At 1:30pm on 13 Nov 2010, foredeckdave wrote:
#82, Richard,
You are just wrong.
On the contrary I have never been more convinced of anything.
1. That globalisation is beginning to level out world economic development.
2. That protectionism really is turkeys voting for xmas.
Globalisation keeps the 'emerged economies' on their toes and increases wealth in the 'emerging economies'.
Free trade and globalisation will be drivers in these 'emerging economies' of democracy, liberalisation and mass education. It has to be because these economies cannot move to the next level without innovation which requires mass education opportunity.
We do require that the imbalances are adddressed.
You have still not come up with a better tool than the market for organising trade. What industries would you choose to support; an army of bureucrats presumably with clipboards.
How can you possibly decide if a machine tool maker in Sunderland needs protection from a similar centerprise in Bangalore. What criteria ? Wages paid, purchasing power of those wages ? Tax levels ? Subsidies ?
I don't have a problem with the UK government fiddling around with subsidies and tax breaks. Though, quite rightly, within the EU we need to follow the rules.
Quotas and tariffs should never be allowed to shield non-competitive enterprises from reality. This is protectionism
Rules and regulations, within the EU, are different, they impose standards. This is not protectionism.
I am sure you can see the difference. The first protects inneficiency. The second invites, say, Chineese toy makers to up their game and maybe not use lead paint in toys, as an example. It does not stop them trading.
As posted before, you can't have a little bit of protectionism any more than you can be a litte bit pregnant.
'Anything that can be made in the UK'. That is just silly, it includes almost everything.
'Anything that can be made in the UK competitively. Well we have mechanisms in place already and they work well - free trade, competition and market forces.
It would be better if these 3 forces in the UK existed within the framework of German style Social Market Economy, but thats another story.
Maybe the English have the same phsycological problem with the Germans that the Chineese have with the Japanese.
You seem to have a couple of huge blind spots. The other of course is your indifference to the elimination of private education. I remember recalling that you posted 'it doesnt matter to me where parents send their kids'. Well it does matter a lot. If we ever do have a serious structural change in our economic direction a unified first class free education system will provide the foundation.
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83. At 1:30pm on 13 Nov 2010, foredeckdave wrote:
#82, Richard,
Many factors led to the rise of facism in the 1930's.
Yes they did. But to take root they need economic hardship.
Protectionism will give them that.
Significant that you seem to be (almost) sharing a hymn sheet with the Sara Palins of this world.
It was always the 'flat cap' end of Olde Labour that were against the EU and in favour of protectionism.
Eh, by heck lad, you know nought. :)
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#85, Richard,
What the hell do you think we are facing with the continuation of trade imbalances if not economic hardship?
You can make sarcastic references all you want but they do not disguise that your arguments are not only flawed they are totally wrong.
BTW do some research on the rise of facism. I think you will find that the paupacy of political leadership created the environment for it to flourish. Sounds just like the situation we presently face across Europe.
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Trade & currency imbalances were the bedrock of the Wall St crash.
That major States have agreed an outline approach to resolving persistent imbalances is, therefore, the best sign since the London G20 of a willingness to resolve long-term economic issues for our world.
Everything depends on the detail - of course - and there's wide differences both about what constitutes persistent imbalnces and mechanisms for correcting those imbalances. But it's still good news that the sherpas will be instructed by each government to find ways of reconciling differences.
Our role is - as ever - as spectator and idea maker (not much of those from the Cameron, Cable, Osborne partnership) rather than prime mover.
Nor is the EU engaged in this. But it will have to be, otherwise its failures in Greece and Ireland will be more difficult to resolve.
So, as usual, it's up to the USA and China to do the talking that will lead to some policy improvements for our long-term futures.
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Post 61 Sage..:
It is apparent that you can not keep up a logical and rational discussion. Hate and bigotry is getting the better of you. May be less intellectually demanding site would be better suited.
Post 66 Cassandra: Thanks, but i did not think it was worth replying to.
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86. At 2:42pm on 13 Nov 2010, foredeckdave wrote:
#85, Richard,
What the hell do you think we are facing with the continuation of trade imbalances if not economic hardship?
Trade balances seem to be the latest buzz phrase but how significant are they.
A list (current account balances,2009 )...
1. China 296.2
2. Japan 131.2
3. Germany 109.7
4. Saudi Arabia 95.8 oil
5. Russia 76.2 oil
6. Iran 70.8 oil
7. Norway 60.0 oil
8. Netherlands 52.5
9. Kuwait 48.0 oil
10.Singapore 39.2
...
175. UK -32.4
...
181 USA (last) -380.1
Digging behind the numbers reveals some interesting facts. About half the China surplus is due to foreign multinationals, mainly USA, setting up shop there (Wallmart has 700 factories in China), this alsp partly explains the US deficit.
Both Japan and Germany are less hospitable to multinationals and their surpluses are more 'home grown'.
Exchange rates are not the main driver. Multinationals locating to low cost areas are. Often they have more clout than nation states.
Protectionism is really not the way to correct this.
A Social Market Economy is the answer. Social not Socialist; it is still a Market model.
The German economy does not have many multinationals but it does have a massive number of SMEs. German companies do locate some of their operations to cheaper areas but no way on the same scale as the USA and UK.
The Anglo Saxon model has been instrumental in spawning the multinationals. Workers in the USA and UK pay the price.
Is this a good thing. Definitely, yes, for the emerging countries, and also indirectly for Germany and Japan who need growing export markets provided by growth in these emerging markets.
Globalisation has been not so good for the UK but you cannot put this right with protectionism.
A link worth looking at...
http://www.angrybearblog.com/2010/02/global-trade-imbalances-as-statistical.html
Incidentally, I am a citizen of planet earth and tend to take the round view.
We must have growth in these emerging countries. In the long run it will provide Europe with even more export opportunity, so long as we are good enough, and eliminate causes of extremism.
So attack the Anglo Saxon model rather than advocate protectionism.
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89. At 3:50pm on 13 Nov 2010, Richard Dingle wrote:
86. At 2:42pm on 13 Nov 2010, foredeckdave wrote:
#85, Richard,
What the hell do you think we are facing with the continuation of trade imbalances if not economic hardship?
......................
'Globalisation has been not so good for the UK but you cannot put this right with protectionism.'
?
It depends on what is meant by 'protectionism'?
Is the UK, globally, one of if not the most wide open economy?
It is not just a matter of what you do ... its the way that you do it ... there are many, many forms of 'protectionism'.
If countries like e.g. China do indeeed agree to take in more foreign imports ... does anyone really think that the UK will get a decent share of this trade with substantially higher UK exports to China? (beyond Rolls Royce which is a special case and breeding pigs) What is likely to happen?
Any thinking that Britian will get special treatment to fill any such Chinese trade gap is incredibly naive ... Other countries will 'fill the gap' before the UK; as the UK is not sufficiently competitive and reactive and is at least several years and possibly 'never' in terms of being able to do this. The Chinese have as good as said this week, in so many words, that the UK is not going to receive special treatment with British exports to China.
The UK needs a strong dose of 'reality' and realise where we are at ... and the UK govt must intervene and be unorthodox and radical as there is no short or medium term solution to Britain's trade problems as our elected politicians are more focussed on winning elections and not just in 'putting the country right'.
The UK is not going to export its way out of trouble here in e.g. the next 5 or 10 years ... we need to decide who our global friends are (if we have any left and trade with them) and when we encounter 'protectionism' we have to do what we can to meet 'fire' witn 'fire' ... in a civilised and diplomatic fashion.
Import (and export) tariffs are the best and these are relatively quick and easy and efficient and can be removed virtually instantaneously when the need arises. Russia has put a 25% import duty on all foreign made cars ... have you heard anyone outside Russia complaing about this?
http://uk.reuters.com/article/idUKLDE67T1E720100830
No, of course not ... because the Russians don't care a damn what anyone else thinks as what they do in their country is their business. Whereas in the UK, in economic or trade terms we can't even 'kill a rat' without asking for permission from some foreigner or foreign quango.
The UK plays by all of the rules WTO etc ... when nearly every other country in the world breaks the rules all of the time ... and the result is what we have now.
Eventually, import tariffs will be inroduced in the UK, probably when its too late and Britain has slid too far for it to make any difference ... but the need for them is unavoidable unless we (UK Joe Public) all take massive pay cuts and devalue our £ currency in order to try and compete against very low overseas production costs.
The alternative to avoiding import tariffs are many years of stagnation for all but those with vested intersts and their finegers in the global pie.
Those who oppose the idea and implementation of carefully chosen and directed import tariffs are feeble and have no idea and no solutions ... as we need action now ... not prattle ... we need action. We should be discussing what imports need tariffing ... not whether they are a good idea.
IT's are a good idea for the UK ... because, generally, no one else has got a btter idea ... and generally, most have no idea at all
Cheers
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http://www.wto.org/english/tratop_e/tariffs_e/tariff_data_e.htm
For those who like a bit of 'light reading'
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90. At 7:48pm on 13 Nov 2010, nautonier wrote:
Any thinking that Britian will get special treatment to fill any such Chinese trade gap is incredibly naive ...
What is 'special treatment'. Do the Germans get it. No but they still manage growing exports to the BRICS especially China.
I wonder why !
Tariffs of any sort are utterly wrong and won't happen unless the lunatics (BNP) start running the UK mad house.
Anyway, what's happened to your NIX index.
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92. At 8:24pm on 13 Nov 2010, Richard Dingle wrote:
90. At 7:48pm on 13 Nov 2010, nautonier wrote:
Any thinking that Britian will get special treatment to fill any such Chinese trade gap is incredibly naive ...
What is 'special treatment'. Do the Germans get it. No but they still manage growing exports to the BRICS especially China.
...............
That is what I am saying ... Germany is better able to fill the gap ... partly because it is itself protectionist by its internal organisation, constitution, culture, language, education system, company law etc ... 'covert protectionism'. So Germany is not on a level playing field with the UK ... it is better organised ... the Germans are not any better than the UK in terms of overall ability, creativity, knowledge ... they just have a better overall working attitude and systems ...
But after that there you go again, straight off topic again ... because...
'Those who oppose the idea and implementation of carefully chosen and directed import tariffs are feeble and have no idea and no solutions'.
Other than continually rubbing our UK noses into the fact that Germany (and yourself with your own set up) are in many ways doing better than most in the UK ... you have nothing , nada, zero that is of any benefit to those who are struggling in the UK ... no hope, no prospects, no idea, no policies
http://www.e-to-china.com/tariff_changes/data_tariff_changes/
Import and export tariffs are complex and huge and make up a huge proportion of global government revenues ... the import /export tariff battles are carried on all the time, 24/7 and 365 per annum.
The UK is in a 'straight-jacket' on its trade and is 'sliding' despite the govt and media lies and misinformation ... the UK is 'sliding'.
Most people do not understand the role that tariffs already play in global trade ... and the existing import/export tariffs have in part contributed to the global trade imbalances. The BBC do not seem able to research or investigate 'tariffs' as it is real economics and probably beyond their competency level.
You obviously don't really understand the effect/importance/occurrence of global tariffs and import duty mechanisms and sometimes it is better to do some research rather than just writing something off .. as the discussion is getting into 'real economics'.
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93. At 8:59pm on 13 Nov 2010, nautonier wrote:
Import and export tariffs are complex and huge and make up a huge proportion of global government revenues ... the import /export tariff battles are carried on all the time, 24/7 and 365 per annum.
Agreed. It is complex. Most countries impose tariffs of one sort or another. Often they are tit for tat and then after negotiation are withdrawn. They are the reason the world economies have almost continous trade talks.
But do you not see that the UKs problems go deeper and imposing tariffs to protect non-competitive economic activity is pointless.
German economic success is predicated by consistent investment, good state education and above average R&D spend, and the Social Market Model. Proved and tested - it works.
Anti-dumping tariffs have a role to play but to suggest that UK's woes are down to other countries swamping the UK with cheap goods are fanciful.
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#94 Richard,
Do you actually think about what is presented to you? You never answer any questions put directly to you.
You really should look at the fundementals of the whole German economy before you try and present it as a paragon of vertue. If everything is so rosey then why is Germany facing an even larger pensions/welfare problem than the UK. Why has Germany carried a far larger unemploment/non-economically active level then the UK for the last 5 years? Why are the German media focusing so much on the growing levels of dissatisfaction in Eastern Germany? Why is both the German government and banking industry running so very scared of the levels of their exposure in not only the PIGS but also across Eastern Europe. Why, when German companies are so productive (and by the way they are not) was merkle so prepared to spend so many Euros saving jobs at GM plants? You really should look far more closely at the truths behind the folklore.
BTW, the biggest laugh tonight was your statement; " The German economy does not have many multinationals". Just go and look at any international reference work.
Nautonier is quite right when he says that Germany deliberately employs both regulatory and cultural protectionist policies.
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94. At 9:56pm on 13 Nov 2010, Richard Dingle wrote:
'But do you not see that the UKs problems go deeper and imposing tariffs to protect non-competitive economic activity is pointless.'
.................................
Yes .. I do see .. but the question is what can the UK do now .. in the short and medium terms to give our UK doemstic productive capacity some much needed revenue and breathing space to re-structure, re-educate, re-constitutionalise, 're-balance', re-engineer.
Another point is that much of the ordinary produce which we buy ordinarily e.g. rice, maize, flour, fuel, oil etc ... has been raised in price by export tariffs at the exporting country.
Trade Tariffs are a fact of life in the global economy ... if they're not used timely, properly, proportionatley and judiciously ... a country's economy gets walloped ... just like what has been happening to the UK for the last 40 years.
The WTO is weak and most of our other UK/ EU Trade Tariffs are set in Brussels by incompetent eurocrats setting uniform trade tariffs for the entire EU when the economies of the EU member states are all very different. If that isn't enough damage, the incompetent bungling eurocrats are messing up our WTO tariffs at the same time and it is going to kill our country with inflation, unfair competition of every kind, including subsidised/cheap foreign goods very often produced with child and slave labour with actual or near zero employment rights.
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95. At 00:03am on 14 Nov 2010, foredeckdave wrote:
#94 Richard,
Do you actually think about what is presented to you? You never answer any questions put directly to you.
Do you FDD. You have actually just described yourself. A common trick.
Still waiting on how you would replace market forces with an army of bureaucrats to collect and sift through all the minutae of which businesses to protect.
You really should look at the fundementals of the whole German economy
The German economy does face challenges. Show me an economy that does not. But to suggest that the UK and German economies are in the same 'ball park' on fundamentals is fantasy. You should also factor in the cost, (approaching 300BN Euros) of integrating the old East Germany.
So ' Why are the German media focusing so much on the growing levels of dissatisfaction in Eastern Germany?' is a stupid point.
Since integrating eastern Germany German GDP per capita has dropped significantly, but even with this handicap overall the German economy is still in better shape than the UK economy.
As for Germam multinationals they do not dominate the economic landscape in quite the same way as in the UK. I was making a point about how the Anglo-Saxon model is rather adept at moving British jobs to low cost areas. You missed that one.
There is a jobs migration from the western economies to the east but in the UK and USA it is more marked for a reason.
Conspiracy theories about others not playing fair and imaginary barriers are not even in the top 10 reasons why the UK economy performs badly.
When you suggest tariffs as the main route to protecting jobs it shows that you have given up. 'We can't beat these people they are better than us, lets change the rules'.
Finally to say...
"Nautonier is quite right when he says that Germany deliberately employs both regulatory and cultural protectionist policies."
No he is completely wrong.
The Social Market Model does a better job at looking after all the stakeholders. Are you suggesting that the Germans should dumb down to the Anglo-Saxon model.
Language as a barrier tends to be used by the French not Germans. EU regulations effect all members including the UK. Can you give me a specific example of a German regulation that would stop FDD Plc or Nautonier Plc starting up in Germany.
The English language is spoken in more parts of the world than either French or German. This massive advantage is wasted because the UK economy struggles to make goods that the rest of the world wants, struggles to devize a fair and equitable 'social contract' (cue student riots) for its citizens, and suffers from an unbalanced economy.
The tone of your post is very little Englander. All about the wicked foreigners cheating and not playing fair. Ever thought of joining the BNP.
You also generalise far too much. Picking on the odd instance and blowing it out of proportion. Even as I write there probably is some German business person cheating and fiddling to increase his exports; this happens everywhere in the world but to build a whole premise on is puerile in the extreme.
Fudamentals, dear boy, fundamentals.
So the German economy has a ball and chain - the east.
The British economy has a massive advantage - the English language.
FDD / Nautonier. Homework for today. Look up and reflect on the words 'balance' and 'proportion'.
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96. At 09:57am on 14 Nov 2010, nautonier wrote:
94. At 9:56pm on 13 Nov 2010, Richard Dingle wrote:
'But do you not see that the UKs problems go deeper and imposing tariffs to protect non-competitive economic activity is pointless.'
.................................
Yes .. I do see .. but the question is what can the UK do now .. in the short and medium terms to give our UK doemstic productive capacity some much needed revenue and breathing space to re-structure, re-educate, re-constitutionalise, 're-balance', re-engineer.
Here you make a good point and actually hit the proverbial.
Between a rock and a hard place.
Caused by years of bad policy. Or good policy, from the perspective, of the elite (private schools, private health, gated communities) who run and control this country for their benefit.
I don't live in Germany BTW, I live here and care very much about the UK economy.
So to answer your question honestly.
I dont know.
We could make a start by using 'civil disobedience' to roll back the more corrosive legislation of the ConDems and force another election.
The 'student events' of the last week show the way. It needs more discipline and co-ordination. Though I totally condemn the halfwit who chucked the fire exstinguisher - own goal.
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97. At 10:21am on 14 Nov 2010, Richard Dingle wrote:
"Nautonier is quite right when he says that Germany deliberately employs both regulatory and cultural protectionist policies."
No he is completely wrong.
................................
Frau Merkel 'disagrees' with you:
http://www.newser.com/story/103087/immigrants-learn-to-speak-german-merkel.html
As I say there are many forms of 'protectionism' and on the matter of balance and proportion ... it looks to me like it is you getting most of it wrong ... and incidentally, we hardly need any lectures related to Germany on the merits of avoidng 'nationalism'.
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99. At 10:56am on 14 Nov 2010, nautonier wrote:
97. At 10:21am on 14 Nov 2010, Richard Dingle wrote:
"Nautonier is quite right when he says that Germany deliberately employs both regulatory and cultural protectionist policies."
No he is completely wrong.
................................
Frau Merkel 'disagrees' with you:
http://www.newser.com/story/103087/immigrants-learn-to-speak-german-merkel.html
As I say there are many forms of 'protectionism' and on the matter of balance and proportion ... it looks to me like it is you getting most of it wrong ... and incidentally, we hardly need any lectures related to Germany on the merits of avoidng 'nationalism'.
You are proving my point for me.
Merkel is talking about immigrants (from a non EU country) who settled in Germany as guest workers in the 1960s. She is completely right to say it and it is a good example of 'German directness'.
Immigration is a good thing and hugely beneficial to both parties. But to move to another country and create a country within a country by ghettoising and not learning the host language is 'tantamount to invasion by stealth' (oops, do I hear the sound of a can of worms being opened).
' hardly need any lectures related to Germany on the merits of avoidng 'nationalism'
Suggests you have no real argument. Next it will be two World Wars and one World Cup.
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Export duties paid by Britain on its imports?
Anyone have an idea how much these amount to in billions cost per year
(as is all passed on by 'middlemen importers' to the British consumer as higher prices and inflation)
Also, this tax on British imports ... wait for it ... shows in our UK GDP figures ... as 'GDP GROWTH'. The more foreign goods that we import and pay the exporters' own export duties on those goods ... the higher our own UK GDP!
No wonder the UK is in such an economic mess!
Britain had workable import duty controls until about 1901 ... which is about the time that Britain became a 'net importer' and started its economic decline as the dominant world economic power.
My final world ... Britain, as a sovereign global 'cost centre' with responsibility to its British tax-payers, will stagnate until Britain recovers full control of its own import and export tariffs and starts using these properly and judiciously in the UK national interest.
That is my prediction.
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Britain had workable import duty controls until about 1901
'workable' I wonder why.
I would suggest an increase in international tension caused by 'workable import duty controls' was not a serious issue if you have the biggest army and navy in the world.
Just give Johnny Foreigner a slap. They don't like it up em.
Going back to 1901, really, and it was you, Nautonier, who keep telling me that the world has moved on (Keynes not being relevant,etc).
Back to the future.
LOL
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#97 Richard Dingle,
I'm not sure if you are an osterich with its head in the sand or a rabbit frozen in the headlights. It matters not which you are because the effect is the same.
This is NOT an argument about which is best UK or Germany. It IS an argument about how the whole of the Western Hemisphere can both survive the on-going economic catastrophe and sustain ourselves sustainably into the future. The old economic strategies and systems are crumbling before our eyes. As the song says "the drugs don't work anymore".
I do not need to employ tricks in order to make my points - so just another cheap and falacious point on your behalf. But to answer the points you put to me:
"replace market forces" It is the whole concept of market forces that needs to be addressed urgently. It is underpinned by two major factors (a) that markets are supposed to be free - they never were; (b) that money controls the market when money itself is becoming valueless.
This is not just a piece of socialist dogma. It is a clear appreciation that our whole understanding of the state and its economies are in vital need of revaluation - globally.
"You should also factor in the cost, (approaching 300BN Euros) of integrating the old East Germany." Wow! That much! Sorry Richard it pales into insignificance against the amounts that were pumped into West Germany by the US and UK and France after WW2. You must also factor in the cost of protecting the borders of West Germany from WW2 until the present day. You should also factor out the value of having a virtual blank sheet physically, financially and legally with which to re-start the German economy.
Conspiricy. There is only one area in which I have postulated upon the idea of conspiricy and that is in the concentration of wealth (money) in the hands of fewer and fewer individuals and institutions. In terms of Germany and its actions I have not made such a claim and resent your false statement.
"When you suggest tariffs as the main route to protecting jobs it shows that you have given up. "
Very far from it. The whole rationale of the proposal is not to protect what exists but to generate new jobs and stabilise the European economies.
"East German dissatisfaction ...." If you believe that growing levels of their 'lot' by former East Germans should be ignored is a stupid point then you display exactly the same myopia as UK politicians who ignore the mistrust of anybody north of Watford.
Multinationals. You should go back and re-read what you actually said. German multinationals do and have acted in exactly the same way as those from the US and UK - in fact in every other country that spawns multinationals.
Finally, though addressed to nautonier, try setting-up an insurance operation in Germany. Try supplying local authority services. You can't!
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102. At 11:31am on 14 Nov 2010, Richard Dingle wrote:
Britain had workable import duty controls until about 1901
'workable' I wonder why.
...............................
Some things in history are still relevant ... Britain became wealthy and industrialised partly because it was an independent sea faring nation.
We have lost our 'independence', our borders and now we're becoming an EU island 'back-water' ... the total lack of proper and economic management and strategy of our UK import and export duties is a substantial part of that decline and stagnation ... and a major impediment to improvement in our national economic performance.
'No Recovery' ... without proper and economic management and strategy of/for our UK import and export duties.
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103. At 11:34am on 14 Nov 2010, foredeckdave wrote:
#97 Richard Dingle,
This is NOT an argument about which is best UK or Germany. It IS an argument about how the whole of the Western Hemisphere can both survive the on-going economic catastrophe and sustain ourselves sustainably into the future.
Totally agree.
Protectionism will make it a lot worse.
Investment.Education.R&D.Innovation. -> the way forward.
"You should also factor in the cost, (approaching 300BN Euros) of integrating the old East Germany." Wow! That much! Sorry Richard it pales into insignificance against the amounts that were pumped into West Germany by the US and UK and France after WW2. You must also factor in the cost of protecting the borders of West Germany from WW2 until the present day. You should also factor out the value of having a virtual blank sheet physically, financially and legally with which to re-start the German economy."
The Marshal Plan was smart but not based one tiny bit on altruism.
British and American factories boomed in the fifties on the back of, inter alia, orders for machine tools... from Germany.
Multinationals. You should go back and re-read what you actually said. German multinationals do and have acted in exactly the same way as those from the US and UK - in fact in every other country that spawns multinationals.
...but the Anglo-Saxon model spawns them best. My point.
You must also factor in the cost of protecting the borders of West Germany from WW2
Again. Not altruistic. The west could not countenance the rest of Germany falling into communist hands. German rocket scientists put both the Russians and Americans into space. For years East Germany was the most efficient and succesful of the communist countries. The west would not have coped with the communist threat had the whole of Germany been taken by the Soviet Union.
Use your imagination here. All the German rocket scientists end up in Russia. The Russians decades ahead of USA in ICBMs. Game over. BTW the Americans had very good rocket scientists of their own but Werner von Braun gave them one hell of a 'leg-up'.
two major factors (a) that markets are supposed to be free - they never were; (b) that money controls the market when money itself is becoming valueless.
The market is not perfect, I never claimed it was. It is the best we have for efficient resource allocation. Every other system has failed Comrade FDD.
As for 'money'. We are on the same page here (read my endless posts condemning the bailout). Money should stick to the job of facillitating exchange. The banks are over powerful because 'idiot politicians' took away their only predator, the market.
So 'that money controls the market when money itself is becoming valueless' might be because the market was interfered with (bailout).
And you want to do the same with protectionism. A major 'predator' of inneficient enterprises is the market, please dont take it away, look at what happened to banking.
Do you actually think about what is presented to you? You never answer any questions put directly to you.
Oh I do, I do, I just have.
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103. At 11:34am on 14 Nov 2010, foredeckdave wrote:
#97 Richard Dingle,
'Finally, though addressed to nautonier, try setting-up an insurance operation in Germany. Try supplying local authority services. You can't!'
.............
Yeah! You can write all day, every day all year about German, Chinese, India, Russian, Brasilian, Venezuelan, Cuban, and virtually every other country in the world and their brazen ... 'protectionsim' ... no other country in the world, as I know of, is as grossly and stupidly 'wide open for business' like the UK.
Israel has up to 75% tariff on some of its imports
A recent report showed the UK as still one of the top three countries in the world in which to arrive from overseas and receive an 'international business loan' even though our own UK SME's are still being denied the same privileges.
Much has been and still is so seriously wrong with management of the UK economy and the Coalition govt have got too much on their plate to deal with right now ... but they have highly paid HM Treasury Civil Servants, advisors, BOE, who should be looking at this and advising govt ministers with proposals for rectifying this gaping hole in Britain's finances.
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104. At 11:56am on 14 Nov 2010, nautonier wrote:
Some things in history are still relevant ... Britain became wealthy and industrialised partly because it was an independent sea faring nation.
True. But you need a big navy.
Squaring the circle here. If the present trend continues with decreasing job opportunities for British workers..increase the size of the Army.
This is how Prussia started. No industries, not much of an economy. At one point the greater part of Prussian revenues came from hiring out their 'bouncers' to any European state / royal family with a score to settle.
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101. At 11:16am on 14 Nov 2010, nautonier wrote:
My final world ...
Obviously not.
... but they have highly paid HM Treasury Civil Servants, advisors, BOE, who should be looking at this
Don't hold your breath.
There is not a single voice in the above groups who will give you what you want. Name one if you can.
You will find those voices in the BNP - don't go there.
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106. At 12:12pm on 14 Nov 2010, nautonier wrote:
Israel has up to 75% tariff on some of its imports
Hmm, Israel is a special case.
Not quite worked out why a people with their recent history is spending so much effort in recreating a full working model of the Warsaw Ghetto in Gaza.
Shameful.
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#105 Richard,
Three words:
HOLE DIG STOP
You are just making your position more and more ridiculous.
(1) Nowehere in my post did I mention utlruism.
(2) Go and learn some history. In the fifties US and UK factories did not boom on the back of German machine tools. At that time they had far better domestic suppliers. Don't believe me? - go and check the records.
(3) Whilst you are at it check where Wherner van Braun ended up after the war.
(4) What a silly boy you are! If you cannot distinguish between a communist and a socialist whilst espousing the Social Market Model then it really makes me wonder if you truly understand what you are talking about.
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108. At 12:46pm on 14 Nov 2010, Richard Dingle wrote:
101. At 11:16am on 14 Nov 2010, nautonier wrote:
My final world ...
Obviously not.
... but they have highly paid HM Treasury Civil Servants, advisors, BOE, who should be looking at this
Don't hold your breath.
There is not a single voice in the above groups who will give you what you want. Name one if you can.
You will find those voices in the BNP - don't go there.
....................................
I am 'going there' as it is a 'fair trade' issue ... and this has nothing at all with the BNP ... just because you're losing the arguments and are struggling with the real underlying economic issues on UK and world trade ... there's no need at all to bring the BNP into the 'discussion'.
I've just been listening the BBC's food programme on R4 re: Nicaraguan pineapple prdoduction and Del Monte's off-shore 'transfer trade' dealings ... the best economics programmes are on BBC R4.
This particular fair trade issue relates to import/exports traiffs and the lack of them and the hugely inflated prices that we pay for our Del Monte pineapples. A free and independent Britain would be able to smash this evil cartel and buy or pineapples cheaper and give both pruducers and workers in Nicaragua a better and fair deal.
Its well worth listening to (on BBC I-player when its available next) week) ... UK import and export duties are as much of a problem for the UK as the on-going financial crisis ... anyone who thinks otherwise is just ignorant of real economics.
An excellent article in the telegraph today:
http://www.telegraph.co.uk/finance/comment/edmundconway/8131083/How-the-Tea-Party-is-brewing-up-trouble-for-the-worlds-currencies.html
As written by Ed Conway, as making the same point:
'But why shouldn't emerging nations shield their industries from international competition to allow them to develop into full-grown businesses – just as Britain and the US did in a similar stage in their development?'
The UK is emergent again and needs to protect both itself and others who need protection on 'fair trade'.
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110. At 12:55pm on 14 Nov 2010, foredeckdave wrote:
#105 Richard,
Three words:
HOLE DIG STOP
(2) Go and learn some history. In the fifties US and UK factories did not boom on the back of German machine tools. At that time they had far better domestic suppliers. Don't believe me? - go and check the records.
Germany had to re-build. With what ? The Marshal Plan was all about kick starting trade.
And the best to last...
(4) What a silly boy you are! If you cannot distinguish between a communist and a socialist whilst espousing the Social Market Model then it really makes me wonder if you truly understand what you are talking about.
The Social Market Economy is not the 'Socialist Market Economy'.
"The social market economy seeks a market economic system rejecting both socialism and laissez-faire capitalism, combining private enterprise with measures of government regulation in an attempt to establish fair competition, low inflation, low levels of unemployment, a standard of working conditions, and social welfare."
"The term "social" is stressed because West Germans wanted an economy that would not only help the wealthy but also care for the workers and others who might not prove able to cope with the strenuous competitive demands of a market economy. The term "social" was chosen rather than "socialist" to distinguish their system from those in which the state claimed the right to direct the economy or to intervene in it."(http://countrystudies.us/germany/136.htm)
The UK system is based on laissez-faire capitalism and that is why the jobs are going east.
Do you really think Porsche, Mercedes, Audi would have been spawned by a socialist system.
I expect a retraction, if you are big enough.
You are confused, not me.
As for von Braun you amaze me
" von Braun would later be regarded as the preeminent rocket engineer of the 20th century in his role with the United States civilian space agency NASA.[2]" (Wickipedia and just about everywhere else)
The Russians took another German rocket scientist equall in ability but not fame to von Braun.
Do you ever actually read posts properly or just home in on one word and shoot from the hip.
British and American factories boomed in the fifties on the back of, inter alia, orders for machine tools... from Germany.
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FDD
You must really read all the words (curly things on a light background) properly
I said...
"British and American factories boomed in the fifties on the back of, inter alia, orders for machine tools... from Germany."
You said...
"(2) Go and learn some history. In the fifties US and UK factories did not boom on the back of German machine tools. At that time they had far better domestic suppliers. Don't believe me? - go and check the records."
Now lets analyse...
I said 'orders for machine tools... from Germany'. This means exports to Germany of British and US machine (and they were of excellent quality) tools. From US / Britain to Germany paid for with Marshal Aid.
Not sure how much you know about engineering or the chicken and eggs bit but the Germans could not make machine tools without first buying them. German machine exports came later in the sixties. In the fifties they imported.
(Incidentally my first job was in Halifax for a UK machine tool firm).
I will give you the benefit of the doubt and assume are just a WUM.
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111. At 1:24pm on 14 Nov 2010, nautonier wrote:
To end on a pleasant note...
I like pineapples.
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#113 Dingle,
I will start with an appology for misreading your comment on machine tools.
As the Americans spirited away von Braun and his team who were not only the leading rocket theorists of their generation but also had the most practical experience I will stick with my contention.
Whilst it is not easy to seperate out the statistics for machine tools from those of general engineering exports between 1948-1960 ( and thanks to the good offices of the refernce section of Harvard University) it would appear that Germany was far from being the prime market for UK exports. Where you were first employed is irrelevant in this instance. My first job was in pharmaceuticals - so what!
I will treat your WUM comment with the contempt that it deserves.
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115. At 6:56pm on 14 Nov 2010, foredeckdave wrote:
Apologies appreciated.
I don't think my first job was relevant either.
As the Americans spirited away von Braun and his team who were not only the leading rocket theorists of their generation but also had the most practical experience I will stick with my contention.
Are we in parallel universes here.
I said the USA got von Braun the Russians got someone else.
We agree don't we.
The big issue is the distinction between Social Market Economy and Socialist Market Economy. German since WW2 has had the former and it is endorsed by all parties in the spectrum apart from the extreme right and left, and it works.
I found it hard to call you a WUM and I regret it but I was driven by exasperation.
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41. At 11:57am on 12 Nov 2010, tridiv wrote:
I find your comments on BRIC nationas too simplistic, and even misleading. Brazil does not exclusively depend on natural resources, even though the value of its natural resources are going to be valued at much higher in the near future.
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The Brazilian economy is highly dependant on its natural resources more than 67% of it's GDP is down to it's natural resources. Source WB
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Russia, besides having large deposits of gas and oil, has highly developed technology sector including defense and space etc. China is the largest exporter of the world. India does not ask for aid, and in fact specially requested the so called 'donors' to stop aid. In technical and development cooperation, more aid is flowing to China than to India at the moment. Nothing is stopping India from becoming top ten economies, you can not have that from aid alone, can you. So please check facts before posting.
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#116 Richard,
Let's call it off and have a'love-in' :)
I honestly do understand the difference between the Social Market Model and Socialism. The statement that I made alluded to the governmental element of the model which has been centreist to left leaning. This model may have worked in Germany's favour but it does not appear to be directly transferable to other countries (perhaps the historical, legal and cultural differences are just too big) and it may not be an answer to our new reality.
I will not hide my socialist philosophy but I hope that you truly understand the difference between that and the communist philosohy as described by both Marx and Engels?
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