Blog 2023 Malcolm Blair-Robinson

World Cup Disappointment for England 

Oh dear.  After all that effort. And with a very slick team at the last push, combining Leadership, Royalty and Celebrity. The trouble is that the deal does not work like that. We may not know how the deal does work exactly, neither may we like what we know. Accusing those with the votes of being corrupt in the run up to the voting is maybe not clever. It may be in the public interest, so we can feel good about our self righteousness, but  if we do not approve of the system,  perhaps we should not go in for the competition.

Taking the wider view, in the context of sharing out these great sporting spectaculars, as we already had the Olympics in the bag, maybe we never had a chance anyway. More importantly this is a very good decision for the wider world. Russia, since the fall of communism, has been treated too much as an outsider. Efforts, in which the U.K. is fully participating, to bring Russia in from the cold are now underway.

This is a tremendous opportunity to engage with a country with whom we share many common interests and who, as I have said so many times, is a critical part of Europe’s strategic future. It also presents us with vast business opportunities to help them build the infrastructure and facilities needed. So we need to pick ourselves up from our disappointment, avoid sulking, and set off for Moscow. Right now. We must be the first in line. 

As to why President Putin did not go to Zurich. He knew he did not need to. You can, if  it makes you feel good, accuse the Russians of being all manner of things, but you cannot accuse them of not being savvy. That cap fits our rather big head better.

Economic Recovery

There are now signs that the economy is reshaping itself and recovering at the same time. House prices are continuing to fall. People and businesses are borrowing less. Mortgages are tough. Housing benefit caps will bear down on rents. The state is shrinking. Manufacturing is increasing at the fastest rate for fifteen years and creating jobs apace. All of this is good news, not just the last item.

This is where some economists run into difficulties. The idea that you can spend and borrow your way out of financial difficulty may have had some resonance in the past, but is deeply flawed today. This is because the staggering levels of  both personal and national debt, even relatively and adjusted for inflation, are way beyond any concept of anything that went before. Just as you can eat you way back to health after illness, it will not work if the illness is caused by overeating. 

This time the solution lies in working our way out of trouble in real jobs which contribute to wealth creation and employment and are not financed by the taxpayer. Businesses must raise enough capital to function without bank loans for day to day cash flow. People must earn the money to pay for what they want to buy. Inflated assets, especially housing, must fall back to their true worth. This will be tough, not least because at almost every level the culture assumes the only way froward is to borrow, whereas not all that long ago it was thought undesirable and to some even a sin.

The people sense this. This is good because a great re-shaping of our economic culture cannot be directed by government. There are now clear signs that something positive is happening. It is just a start. There is a very long way to go.

Eurozone Trouble Ahead

Yesterday Germany failed to sell all its bonds. This is an unwelcome straw in the wind. Markets remain nervous, if a little irrational. Portugal’s bonds were oversubscribed, but at a higher yield than two weeks ago. These bonds are for one year only, then the Portuguese government will have to come back to borrow more. This is truly living from hand to mouth on borrowed money. There are rumours and hints that the ECB might start buying this stuff in, with its own version of quantitative easing.

This kind of uncertainty will continue so long as ECB/EU teams lurch from one delinquent capital to another with bail outs and strictures. This is not government nor is it policy making. It is putting out fires. The trouble is, once one fire is subdued, another sparks into life. The danger is that sooner or later they all join up. That becomes a conflagration, which cannot be controlled. This is the danger to the Euro. Without a government it must in the end collapse. To set up some kind of federal economic executive would require either a new treaty or hefty amendments. Some countries would have to put these to their electorate in referenda. In the present climate at least some will say no. This is a very tricky situation.

Back home the Coalition may find itself caught between a rock and a hard place. Not to lend to the stricken will risk conflagration. To do so will risk losing the money. Borrowed money at that.

U.S. Deficit Reduction and U.K. Growth.

At last the U.S. government has woken up to the need to reduce its out of control budget deficit and the Administration has asked a panel of two experts, one from each Party to come up with a plan. They have done so. It amounts to an eye popping $4 trillion of cuts and tax hikes by 2020. Wow.

Now the arguments begin. To cut will harm recovery. To hike taxes will do the same.  Maybe, but to do neither is to end up like Ireland or Greece. Except there is not enough money around for a bail out, so it’s bust, or a national Chapter 11. Sorry, but it is that tough.

We have had all these economists running around saying carry on spending etc, but one by one the countries which did so, are having to call a halt. With vast deficits run for years and years, the whole Keynesian philosophy is unfit for this purpose. Keynes would be the first to say so if he saw the figures.

Meanwhile in the U.K. manufacturing output is rising at the greatest rate for a decade and a half and manufacturing jobs are being created at unexpected speed. In spite of the Governor’s worries about the inexperience of the Tory leadership and their advisers, the Coalition is doing rather well with its monetarist approach. Time for Washington to come on a fact find to London perhaps?  Time for the deficit deniers to come up with a better plan.