Mark Carney and Philip Hammond have delivered their belated Mansion House speeches.
What's the message, taking Carney first:
First, we're on a knife edge and forget interest rate rises.
Second, the economy will be harmed by Brexit and no one can stop that.
Third, there is no cake and no one will be eating it.
Fourth, without a transitional agreement soon it's not just cake we'll be dreaming of.
And then Hammond:
Fifth, we must stay in the Customs Union even if we say we've left it.
Sixth, we must have migration, so the question of control is almost irrelevant.
Seventh, we must have a very long transition out of the EU. I think he means very long indeed.
Eighth, he can do mumbo jumbo on tax, debt, globalisation and trade, none of which makes any economic sense at all. The man if ignorant when it comes to macroeconomics.
In summary, we're heading for a cliff.
But it might just be a steep decline with luck.
But that is only is we stick to what we had despite supposedly leaving the EU.
And the politician in charge of the economy has not a clue about how money, debt and tax works.
Call it a slow motion car crash if you like.
I'm just not sure about the slow motion or car bits in that prediction.
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The level of Brexit delusion that has overtaken our political class–from Left to rabid Right–is just extraordinary. Chasing magic ponies that have never and will never exist. Carney tries to politely point this out but nobody will listen. Literally frightening to watch.
Agreed
They are not deluded. They simply believe that the majority of people are deluded. They calculate that it is better to win votes by pandering to delusion, even if it causes harm. Worse would be to lose votes by telling people what they do not want to hear.
Should the last sentence say not instead of now?
Yes
Thanks
Edited now
Nail on head as usual Richard. Are you aware of any UK politician who understands macroeconomics, sovereign debt and MMT?
Surely there must be one, even if he/she is afraid to say it. It’s not as if the evidence is hard to find, viz the long periods when the UK, and no doubt other countries, have run problem-free deficits.
Evidence is surely the key to persuasion here. The point about using taxation, rather than just interest rate, to control inflation seems key. Both are ways of controlling the money supply if I understand this correctly. Can you point to a country that understands macroeconomics, and provides evidence that MMT is correct?
I think Caroline Lucas does
Angus McNeil in the SNP does
Few countries do yet, if any
Carney’s speech was bizarrely terrible, and suggests that financial elite have not moved on from their failures.
It contains some interesting data which shows that maker countries like Germany and China are in surplus whereas heavily financialised taker countries like the UK and US are in deficit. He rightly says that such imbalances are destabilising over the long term so what to do?
Oddly, rather than argue that we should refocus on making stuff (even high-tech and stuff and creative industries where we are competitive) he argues that we should try to monopolise the central counterparty clearing (CCP) because that will reduce costs for everyone – just like if we give Amazon a monopoly in the supply of all goods that will reduce costs for everyone too!
He starts his conclusion with:
“My Lord Mayor, this building, with all its majesty and history and this topic, central clearing of derivatives; could not appear farther from the concerns of people in this country.
But they are much more closely related than they appear.
A decade of radical financial reform was not an end in itself, but rather a means to serve households and businesses better.”
“Radical financial reform”? Where is it? Nearly 10 years on and the Serious Fraud Office which the Conservative’s proposed to abolish in their manifesto, are today issuing charges to 4 Barclay’s bankers relating to 2008. The finance industry gave us 10 years of zero wage growth and have done nothing to address it. Carney needs to visit the real world.
I have only had time to scan the speech
Another summary might be “We’re up the proverbial creek without the proverbial paddle because we relied too heavily on financial services. I strongly suggest we find a bigger paddle and keep going as we are”
Charles
Carney may have been alluding to the growth of ‘innovation’ in the financial sector that over-enabled debt capacity in the banking sector (derivatives).
It sounds to me that Carney is stating that few people know or care how this debt supply works. With tightening wages, it is tempting to see how credit provision can help – but as we know it all ends in tears.
Let us also not forget that the demand for debt is created in part by the demand for it from the public. I’m not saying its right but attitudes to debt these days are to accept it as a necessary evil ( well, not even evil – just a fact of life).
And as for paddles – how about actually making that larger paddle instead of finding it – especially from sustainable sources?
PSR
I’ll have you signed up to the Green New Deal soon
Richard
Sorry to muddy the waters yet again but……..if probably 99 percent of modern sovreign states practising an open ( not necessarily capitalist) version of economic govt. policy patently adopt a strategy which us diametrically opposed to yours what are we to conclude?
That they are all economically castrated and that you are the lone John the Baptist figure crying out plaintively in the wilderness in firm anticipation that your doctrine will be joyously embraced on the occasion of The Secobd Economic Coming once the Chicago School phillistines have perished and confessed to the error of their ways?
I do not purport to support one view or the other
I am seriously seeking your interpretation of how the whole global econo/fiscal outcome is going to play out longterm in your opinion.
Read my books
In this case The Courageous State may be best
“And the politician in charge of the economy has not a clue about how money, debt and tax works.”
This ignorance led at least in part to many people, myself included, voting to leave the EU.
This ignorance has lead to grotesquely unfair social contract. Given the chance, people rebelled against it.
“the politician in charge” does not think it important to address these issues and is not equipped to do so. He will seek to minimise any change to the status quo.
But the anger will not diminish.
Sounds to me as though Hammond could well be our next PM.
He has all the required traits to be a modern prime ministerial contender.
🙂
Yes, it certainly doesn’t seem like he’d be capable of finding his posterior with both hands. A perfect Tory PM candidate.
The primary purpose of taxation is to influence behaviour. By providing quality public services we make available access to e.g. health and education because personal interest and national interest are both served by a population that is as healthy and well educated as they have the right to be. Taxation is therefore used to invest in the people. So Tax objective 1 is Personal Wellbeing. The second area is economic opportunity and covers things like funding research and development and priming emerging new industries to increase – 2.Economic Wellbeing. Getting this right creates a virtuous circle, in theory anyway, as economic activity generates tax and a healthy and educated population will increase their income potential.
The more equal a society is permits the majority to participate and reduces tensions between different groups who share lack of opportunity but think some other section has unfair advantage. Other areas of government expenditure like defence and security need to fit with that sense of national and personal wellbeing. Small spends like foreign aid would face less narrow questioning from a population more at ease with itself and its place in the world.
The cost of government, the delivery mechanism, faces challenges with a hard Brexit. Twenty-four regulatory agencies need to be created to replace those we share currently with 27 other countries and therefore share the cost of at present. We will vastly need to increase the size of the Border Agency and fund the cost of Customs & Excise at all entry points when tariff free access to the EU is cut off. Taking back ‘control’ comes with a large price tag and a loss of international influence.
One final point on the use of taxation to manage behaviour. Governments have always used various means to encourage people to save. This has got out of hand as allowances are now skewed towards ‘Welfare for the Wealthy’ and the increased provision of tax shelters has reduced future tax revenue potential. This video illustrates just a part of the legal framework available to those with the means to take maximum advantage. https://youtu.be/EynaoC3vgp8
Thanks
How do you see the coming crash ccuring. What will start it. What will its features be. Who will be effected. Will it be just UK or will it involve other countries. Will there be runs on banks. How ill the property market be effected.
It may have already begun: a Spanish bank has collapsed
More might
And we have no idea what contagion might result
So that was downplayed? Somehow they talked Santander into taking it over at the expense of their shareholders to avoid any repeat of states bailing out banks? So Italian banks and other Spanish banks to follow plys some of the weaker French banks?
Are you telling me you have not seen the pattern before?
No i am just asking you for more information of the coming crash you see as you are the guy that saw the 2008 crash coming. Its amazing how little attention the media gave to santander taking over the afflicted bank. I suggest that as it was disquised as a “take over” maybe they missed. You would have thought it would have occupied the attention of the more knowledgeable financial journalists. Were they asleep or preoccupied with May’s assassination?