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VOLATILITY?

By Pete Moore On October 27th, 2011 at 5:07 pm

News is out that the American economy grew in the third quarter, up from 1.3 per cent in the second quarter to 2.5 per cent in July-September.

All those experts who extended the lines on their charts and forecast a double-dip recession for later this year will now be rolled out to say what GDP growth means. Keynesians, on the other hand, will be rejoicing that the ‘animal spirits’ which they believe to underpin any economy are revived. You might recall, dear reader, that someone (modesty forbids) suggested that there would be no double dip recession later this year in the US and that, instead, there would be inflationary growth. It was all quite easy to see because Ben Bernanke has been printing money at almost record speed:

In short, it shows the new money being pumped into the economy. The Austrians saw this coming but then they’re amongst the few economists who watch money supply. So there’s no immediate risk of recession. In fact it heralds yet more (price) inflation next year when the full effect of that money hits. This comes after a collapse in the money supply early in 2010 and the chaos that caused in currency, stock and commodity prices. Come 2011 and it’s a volte-face and printers back on to ramming speed.

No-one should be surprised that markets struggle to achieve price discovery. All this volatility is inevitable because the Federal Reserve prints money like mad, shuts it off and then prints like mad again. Volatility and chaos is inevitable.

THE REASON NORTHERN IRELAND REMAINS IN RECESSION

By David Vance On October 20th, 2011 at 7:38 am

Some new news to ponder on the economy;

Four thousand public sector jobs have gone in Northern Ireland in the last year. However, Northern Ireland is faring better than any other UK region according to analysis from consultants PricewaterhouseCoopers. From a starting point of 227,000 public sector workers in Northern Ireland, it is a reduction of 1.8%. In south west England the fall was 5.9%, it was 5.4% in the north east and over 4% in London and the north west. In Northern Ireland, the public sector story is much better than the private sector where job losses have been severe.

Let’s just dissect this.

With Government spending out of control, adjustment is urgently required in the PUBLIC sector. Yet in Sovietised Northern Ireland, there is almost a sense of boasting that we have made the smallest concession to this urgent reality. It’s about refusing to accept the need to bring change.

Between 2008 and 2010, more than 30,000 jobs were lost in the private sector, so that puts this 4000 loss in the public sector in proportion.

Then there is the pesky issue of who FUNDS all the public sector jobs. It’s the private sector, of course. This subtle but telling fact is one that flies over the head of our political Kommisars as they beaver away trying to sustain the unsustainable. You see the hardest truth of all is this; UNLESS we shrink the State sector, the Private sector will languish in the doldrums. The wealth creating sector cannot compete with the salary levels afforded to those who work for the State, never mind the holidays, the pensions, the languid working conditions. With a totally dominant State sector, there is no scope for the Private sector to flourish and most business organisations here know that – hence their drive for lower Corporation Tax, which I can understand if not agree with.

There is no political will to change things here.  Truth be told those at Stormont worship the State and will not take the axe to it. So we will continue to lag behind the rest of the UK and yet some commentators scratch their head and ask why. The answer is obvious.  We are diverging from the rest of the UK economy because of a stubborn refusal to cut the size of the bloated unproductive State.

(PRICE) INFLATION AT 19-YEAR HIGH

By Pete Moore On October 18th, 2011 at 1:32 pm

Feeling poor enough yet?

The Office for National Statistics has announced that (price) inflation hit 5.2 per cent in September. Demonstrating true economic misunderstanding, The Telegraph reports: “Inflation jumped to a 19-year high of 5.2pc in September driven by higher energy prices, underlining the squeeze on living standards and landing the Government with a bumper bill for increased state benefits.”

Ladies and gentleman, this is Economic Commissar Mervyn King’s fix, and it’s in. He’s been warning of (price) deflation for three years, as if falling prices are a bad thing for most of us, while the Austrians warned against revving up prices by printing money. Well price inflation continues to intensify and it’s only going to get worse, meaning we are becoming poorer more quickly.

The Telegraph fails to see that if higher energy prices alone were pushing price inflation higher then prices of other goods and services must fall as we direct more of our income to energy bills. Since prices are rising across the board we can say that King’s attempts to inflate prices are a rip-roaring success.

Says Bob Wenzel: “Only an understanding of money flows and its impact on the economy, something only understood by Austrian economists, can explain what is going on now. Note to Keynesians: The price inflation is going to get much worse”

The forecast is for “experts” to remain surprised.

A FALSE CHOICE…

By David Vance On October 10th, 2011 at 9:34 am

The future economic prospects of the United Kingdom are being framed by politicians as if there were two plausible choices. Let’s call them Plan A and Plan B.

With Plan A, we have the Coalition saying we need to stick with the idea of reducing the national budgetary deficit and on the other hand we have Labour and a section of the liberal media demanding Plan B, that we choose “growth” instead.

Which is right?

The fascinating aspect to all of this is that there is NO choice whatsoever but cynical politicians like to pretend otherwise. Let’s consider a few facts

According to that well know organ of the right, “The Guardian”, (sic) the European Commission’s spring economic forecast back in 2010 put the UK deficit in that calendar year at 12% of GDP, the highest of all 27 EU nations and worse than the Treasury’s own forecasts. This mountain of Debt was Gordon Brown’s farewell gift to the Nation and the culmination of almost a decade of profligate government spending. Unless it is cut, and cut savagely, the UK will turn into Greece, that’s the simple economic reality. Against that background, there is no growth but plenty of decline assured.

But to the political left, to the people who ran up the debt mountain, it’s not that simple. They now like to claim that rather than focusing on reducing the Debt mountain, we should be focusing on going for “growth” instead. Yes there should be deficit reduction but this needs to be done more slowly. The magic definition of what constitutes right amount of slowness is left dangling, just one of those pesky details that the boffins can sort out, later.

Shadow Chancellor Ed Balls has suggested that we cut VAT by 2% whilst imposing a tax on bankers bonuses. The problem here is that there is a £10bn gap between these two aspirations and that leads to…yes, you’ve guessed, more borrowing. The law of unintended consequences or a deliberate evasion?

The “growth” being advocated is a growth in spending. The actual economic growth being conjured up as a viable short term option is a pure socialist chimera, but it sounds nice and ever so plausible when dealing with the zombies in the media, the same people who never once questioned Labour during the profligacy years

The UK can only grow when National debt is reduced, when Interest Rates increase, when income taxes fall, when the State shrinks and when politicians stop pandering to uninformed populist appeal. I reckon the 12th of never is the target date for that.

LATVIAN LESSONS FOR IRELAND AND ELSEWHERE…!

By David Vance On September 18th, 2011 at 8:08 pm

Just imagine – Latvia has a major lesson for ALL Western democracies;

It is a small peripheral European country. Three years ago, one of its major banks failed. It ended up under the control of the IMF, but now has one of the strongest growing economies in Europe after sweeping cuts to its public sector. No, of course it is not Ireland . It’s Latvia.

Its population of less than two-and-a-half million has endured the harshest recessions in history, with the economy declining by one quarter and unemployment peaking at 22 per cent. However, as a result of some fierce austerity measures and an opening up of its public service, as dictated by the IMF, Latvia in 2011 is growing in excess of four per cent, with some saying growth could top five per cent this year.

You see the substantive point? You CUT the level of government spending, you open up the Public Sector to real competition, and you get growth.

DYLAN RATIGAN, TAKE A BOW SON

By Pete Moore On August 16th, 2011 at 8:48 pm

Glorious!

SCHIFF ON A ROLL

By Pete Moore On August 7th, 2011 at 1:47 pm

S&P – downgrades not enough – prospects – everyone wrong – both barrels – lose your dollars

Peter Schiff – whose credentials, as we know, bear scrutiny – is on fine form this weekend. Barely pausing for breath he lets everyone have it. Cracking  stuff and well worth watching, not only because of his rational, Austrian analysis to economic affairs but because of what he thinks is coming next.

I see Schiff had a chance to cheer everyone up on Newsnight a couple of days ago (do catch that one too). Not so long ago this would have been unthinkable, even if the BBC had heard of him (which I suspect is very unlikely). As the BBC/LSE impliedly acknowledged with the recent Keynes vs Hayek debate, orthodoxy is not the only option anymore and that Austria is the emerging alternative.

To think, Connecticut Republicans had the opportunity to pack him off Washington but voted instead for a showbiz type.

GOING DOWN….

By David Vance On August 5th, 2011 at 9:18 am

The frenzy in the markets from yesterday has continued this morning;

European markets have continued a steep sell-off, with investors worried about both the eurozone debt crisis and the weak US economy. The UK’s FTSE 100 index was down 1.9%, Germany’s Dax was 1.7% lower and France’s Cac 40 index fell 0.7%. Earlier on Friday, Asian markets had slumped with Japan’s main index down 3.7% and Hong Kong’s 4.6% lower. In London, banking shares saw heavy falls, with Royal Bank of Scotland down 9%, and Lloyds Banking Group 7% lower.

Let’s see what happens in the States when markets open. I fear the worst later today.

However I am at a loss as to why anyone is surprised about any aspect of this.

For years now I have been arguing that Governments cannot spend what they do not have. Yet the reverse has happened as Governments print money in order to spend even more of what they do not have! Rather than get a real grip of spending, reducing government spending right now, lower taxes and encourage small business – most Governments have kicked austerity into touch or else simply made tokenistic moves towards it. The faux debate in the US is a perfect example of this folly. The Debt Ceiling is raised but the cuts come much later. Years later. Maybe, but no specifics, no deadlines. This is hailed as a triumph for reason and moderation but in truth it is an easy opt-out. And the markets no longer buy this guff from Washington and Brussels.

That’s WHY the markets are falling.  Investors do not believe the politicians.

When you hear it, you will know it.

By Mike Cunningham On July 29th, 2011 at 8:52 am

“We will all be significantly poorer in twenty years time.”

Fresh and fascinating words from an Investment analyst. Terry Smith was talking during a BBC Today interview, and the words I remember best are those are ‘We are living in a fantasy’, as well as ‘there haven’t really been any cuts yet; as the Government has borrowed more every month than they did last year!’ At last, a man who simply tells it as he sees it, without all the caveats, the bullshit, the temporising and the lies.

Being a BBC interview, the name of the one who placed us all in such deep debt was missing, but for those who missed it when it happened, that name of course is Dr. Death himself, Gordon Brown. Just listen to the interview on the link, and see if you agree or not.

STOP! THIEF!

By Pete Moore On June 21st, 2011 at 5:48 pm

Falling prices are the natural, benevolent harvest of free markets to which everyone is entitled, though not according to Paul Fisher of the BoE’s Monetary Policy Committee. He threatens more coin chipping QE because “If we get stuck in a deflationary rut it’s not clear we have sufficient ability to get out of that quickly.”

I see he has a PhD in Economic Modelling. What a shame for him; all that effort when the only good economic model is in the bin.

A fall in prices is to become more wealthy because our money is worth more. To a central planner like Fisher too many falls/too many people becoming more wealthy is a rut out from which we must be rescued by the Bank’s printing presses. This is not even to mention that prices are ripping right now, a predictable disaster not predicted by people like him when they started printing three years ago. Alas, printing money is all they know.

So savers will be robbed of fair interest and we will all become poorer through inflation because, well, the economy might not conform to someone’s model.