There’s substance to the Trump team’s trade critique of Germany and the Eurozone
President Trump’s administration has made many criticisms of Germany. One of the more important was by his top trade advisor, Peter Nabarro. He accused the Germans of using a “grossly undervalued” Euro to “exploit” its trading relationship with America. The complaint that when the Euro was formed the Deutschmark was too low relative to the […]
Claims that a low tax, low regulation UK would be a disaster are rubbish
Dame Minouche Shafik, Deputy Governor of the Bank of England, is leaving to become Director of the London School of Economics. Last weekend, she gave her final interview wearing her Bank hat. Shafik issued what was described in the media as a “thinly veiled warning” to the Chancellor, Phillip Hammond. She stated that it was […]
What Dirty Harry tells us about economic forecasters’ Michael Fish moment
Economic forecasters are in the dock. Last week, none other than the chief economist of the Bank of England, Andy Haldane, was confessing the crimes of the profession. The failure to predict the financial crisis was, Haldane said, economic forecasting’s “Michael Fish” moment. Thirty years ago, the BBC weatherman predicted that the UK would avoid […]
The death of cash, the rise of trade unions and other eclectic 2017 predictions
It’s certainly been an eventful year. But rather than dwell on the past, what sort of things can we expect in 2017? Here are a few eclectic predictions. Sweden may become the world’s first cashless economy. Notes and coins are already fast disappearing as a means of payment, and retailers are legally entitled to refuse to accept […]
Rampant corruption – not just the euro – has doomed Italy to stagnation
So farewell then, Matteo Renzi! The resignation of the Italian Prime Minister after his heavy defeat in Sunday’s referendum on constitutional reform has created turmoil. Fears have been resurrected about the stability of the Italian banking system, and even the possibility of Italy leaving the euro has been raised. But the problems of the Italian […]
The OBR shouldn’t be expected to forecast so far into the future
Economic forecasts have become a political hot potato. The Office for Budget Responsibility’s (OBR) predictions, presented as part of the chancellor’s Autumn Statement, have put the government under pressure. The OBR has revised down its forecast for GDP growth over the next four years by 1.4 percentage points. The real controversy is that their gloomy […]
Forward guidance is just another delusion foisted on us by mainstream macro
The governor of the Bank of England, Mark Carney, was on good form last week when he appeared at the Treasury Committee of the House of Commons. Asked what “forward guidance” meant, he answered smoothly: “The thing about forward guidance is that it is guidance that is forward. Which is not to say it is meant to […]
Brexit was the final straw: it’s time to scrap the IMF
Sports fans will all be familiar with the commentator who almost always gets things wrong. “Arsenal are very much on top here” he – it is invariably a “he” – will pronounce, or “Root is looking very settled”, only for the opposition to score a goal immediately and for the Yorkshireman to be clean bowled. […]
Why the economic picture tends to be rosier than initial estimates suggest
One of the surprises of last week was the Office for National Statistics (ONS) estimate of economic growth in the second quarter of 2016, the period from April to the end of June. In the run up to Brexit, the economy expanded by 0.6 per cent on the first quarter of the year. This was […]
Why austerity must be the order of the day for May’s chancellor
On the face of it, the Brexiteers have a bit of explaining to do. A week before the vote, Boris Johnson dismissed fears about the value of sterling, and accused the governor of the Bank of England of “talking the economy down”. Yet the economy does seem to have stalled, property funds have had to […]
The poor state of macro justifies scepticism with Brexit disaster forecasts
David Cameron has tried to frame the Brexit debate into one based on economics. Standing with him is the overwhelming consensus of economists themselves, from academics to the International Monetary Fund (IMF). Their pronouncements are not having that much impact on the electorate if the polls are to be believed. There is justification for this […]
The coming explosion in natural debt is a serious risk to the economy
Martin Feldstein of Harvard is an economist who should always be taken seriously. Writing in 1997 about the forthcoming introduction of the euro, for example, he argued that “the adverse economic effects of a single currency on unemployment would outweigh any potential gains from trade flows”. He went on to predict that the euro was […]
Is Britain on the edge of recession? History is an unreliable guide
Concerns are growing about a marked slowdown in the UK economy. The Lloyds Bank purchasing managers’ index, for example, fell to 52.1 in April, its lowest point since 2013. The initial estimate for GDP, total output, in the first quarter of this year shows an increase of just 0.4 per cent on the final quarter of 2015. […]
From golf to GDP, why unlikely events confound forecasters
Life imitates art, as the sporting world has shown this week. The Grand National was won by a horse which had never previously won a steeplechase. The US golf Masters was won by Danny Willett, who nearly did not take part at all because of the birth of his son. With only nine of the […]
China is drowning in private sector debt: there’s no telling how this one will end
The eyes of the financial and economics worlds are now fixed on China, with focus predominantly on Chinese stock markets and the country’s GDP figures. A fascinating perspective was provided last week in the leafy borough of Kingston upon Thames. The university has recruited the Australian Steve Keen as head of its economics department, and it […]
