Newsnight – economists discuss the ‘graphs of 2011′

This week I appeared on Newsnight with Gillian Tett of the FT and Louise Cooper of BGC Partners. We discussed our graphs of 2011 (see mine below) and wider questions around the global financial crisis this year – and how ecnomists and policy makers need to respond.

Watch the show on iPlayer for the next 5 days here. Our discussion begins at 33 mins.

It's not the public, but the private finance sector, stupid.

Image: acknowledgements to the BBC.

The Autumn Statement reveals but one thing: the Chancellor and his advisers are both ill-advised and dangerously ill-prepared for the forthcoming prolonged Depression. (And if you think I exaggerate, let me remind you that 20 years after the Japanese debt bubble burst, Tokyo house prices are still falling, and the stock market is worth 60% less than 20 years ago. And the Japanese economy was in a healthier state then, than the UK is today, thanks to an export surplus.)

Today’s penalising of the innocent – public sector workers, pensioners and those hundreds of thousands of young people entering the labour market  - is a result of a deeply flawed economic analysis by the Chancellor of the causes of the global financial crisis.

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Osborne: Speaking truth to wealth and power? Really?

George Osborne was presumably aiming at himself and his friends, when he vowed “to speak truth to power and wealth” at the Tory party conference this week, but dare he speak economic truth to the rest of us? – simultaneously published on Left Foot Forward >

On the narrowest of bases, he might still claim he spoke “truth” to the weak and powerless when in the House of Commons debate on the economy on August 11th he made this challenge:

“Those who spent the whole of the past year telling us to follow the American example, with yet more fiscal stimulus, need to answer this simple question: why has the US economy grown more slowly than the UK economy so far this year?”

It was a ‘brave’ claim when he made it, and it’s looking even ‘braver’ – and more disingenuous – now.

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My verdict on Ed Balls’ conference speech – apologies are not enough

Published in the Guardian Cif alongside responses from Jonathon Freedland and Sheila Lawlor:

Ed Balls said sorry for Labour’s record on ultra-light-touch financial regulation, and that must be acknowledged.

But apologies are just not enough. He and Ed Miliband must stop attacking his electoral base, “hardworking families”, many of whom are trades unionists.

As Balls recognises, unless urgent action is taken, this may be the gravest economic crisis in history – given the global integration of finance and the growth of world population.

So Balls must go further.

First, he must declare loudly and forcefully that Labour will never again be captive to neoliberal central bankers like Alan Greenspan; or private bankers like Sir Fred Goodwin of RSB.

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What a financial tailspin may mean for you and me

Wall Street plummeted as concerns over European debt and the US economic downturn spurred a broad sell-off. Photograph: Shen Hong/Xinhua Press/Corbis

Read my article from Guardian Cif, Friday 19th August:

As bank shares and stock markets plummet, and investors flock to the safety of government bonds; as obstinate EU leaders crucify their countries in a futile struggle to defend today’s equivalent of the gold standard; as British and American politicians adopt austerity policies and drive their economies closer to the cliffs of depression; and as most professional economists stand aloof from the escalating crisis – what lies ahead for ordinary punters like you and me?

First, let’s take look at the big political picture. This crisis is already sharpening the divide between left and right in both the EU and the United States. Studying a precedent – the implosion of the 1920s credit bubble in 1929 – we note that four years after that crisis erupted, the political divide sharpened decisively. The United States and Britain moved to the left. Germany chose a different path. After 1930, Germany’s Centre party under Chancellor Brüning adopted austerity policies that resulted in cuts in welfare benefits and wages, while credit was tightened. At the same time the German government engaged in wildly excessive borrowing from the liberalised international capital markets. The ground was laid for the rise of fascism.

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Savings and the alchemy of credit - my article for Aviva

Aviva has brought together a collection of prominent thinkers to provoke renewed debate and fresh ideas about future prosperity and creating a culture of sustainable savings. The group, names the ‘Future Prosperity Panel‘, published their report ‘Big picture thinking – Towards sustainable savings’.

My article is called ‘Savings and the alchemy of credit’ and is published alongside valuable work from Alain De BottonSimon TayPaweł Świeboda and Diane Coyle.

Read a summary of my essay on the Aviva site and watch a video interview with me here… >

Austerity: OECD economists show clear signs of ‘cold feet’ for austerity

(Photo: REUTERS / Yiorgos Karahalis )
A Greek riot policeman stands in front of graffiti written on the wall of a bank during violent demonstrations over austerity measures in Athens, May 5, 2010. Greece faced a day of violent protests and a nationwide strike by civil servants outraged by the announcement of draconian austeristy measures.

Dear readers….Recovering from ‘flu and a trip down to Hay on Wye…Thought you might be interested in this piece I have written for Prime.

“We should note recent developments in political economy, that – while understated – are, we hope, of significance. Last week, the OECD published their latest World Economic Outlook, which features chapters on each developed economy as well as an assessment of the world economy as a whole.

The report is schizophrenic. It clumsily offers an outlook of excessive optimism; makes a selective assessment of ‘risks’; but continues adherence to an economic policy doctrine that is clearly making OECD economists very uncomfortable.

While the OECD report contains the expected justifications and support for the ‘austerity’ approach, nevertheless the organisation’s ‘cold feet’ are becoming apparent, even before the full extent of austerity programmes has begun to impact. There is no better example of this unease than their approach to the UK.

The report commends UK policymakers for their “current fiscal consolidation (which) strikes the right balance and should continue.”  At the same time, OECD economists hedge their bets by urging the UK government to embark on “higher infrastructure spending (that) would lower the short-term negative growth effects of consolidation without affecting its pace.”   At a press conference last week, the OECD chief economist warned that the UK should be prepared to cool austerity in the wake of weaker growth.

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Is the banking system broke, as well as broken?

Much of the news of the last few weeks -

… can be explained by the  need for banks to urgently raise money to fix their balance sheets. Unfortunately their activities are akin to the little Dutch boy with his finger in the dyke. Just as they raise funds from e.g. commodity speculation to shore up balance sheets, those funds may be drained from some other part of the bank by e.g. a rise  in mortgage defaults or company bankruptcies as economic activity stalls, house prices fall,  foreclosures are held up by legal arguments, and the over-borrowed fail to repay.
This explains why the banking system may be broke, as well as broken.

Is George Osborne a radical Chancellor? - far from it

I was on Newsnight last week, to comment on the Budget. (You can watch it with the BBC’s iPlayer..our slot is about 35 minutes into the show.)

Newsnight’s Jeremy Paxman posed a question to the panel, which included Lord Lamont, ex-Chancellor, and Irwin Steltzer. He asked: is George Osborne a radical Chancellor?”

Radical, according to the dictionary definition means: “desiring or advocating fundamental or drastic reforms”.

I argued that George Osborne is not a radical. Far from it.  His imposition of austerity, in my view, punishes the weak and rewards the strong. No change or reform in that. Instead the government’s central economic strategy is aimed at appeasing the financial markets, in particular the international bond markets and ratings agencies, irrespective of the implications for an already severe unemployment situation, or for the wishes of the British people. In doing so, George Osborne follows a long line of predecessors in putting the interests of finance before the interests of society as a whole. In this respect, he is no radical.

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Update: bankers complete capture of UK Treasury – & attack Cable

So Sir James Sassoon has joined the Eton boy, Osborne, and the Barclays banker, David Laws, at the Treasury, as Commercial Secretary – a post invented and designed for him.  Sir James was vice chairman Investment Banking at UBS Warburg between1985-2002, where he specialised in privatisations. 

The capture of the Treasury by the City of London is now complete.

The war on industry and the public sector can now begin in earnest.

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