Posts Tagged ‘ economy ’

“I wanna be a billionaire, so f***ing baaad…”

It’s had over 120,000,000 views. If you haven’t heard the song already, you’ve clearly been living in the mountains of Pakistan. Or in a hole in Iraq. Or Afghanistan. Whichever.

The song’s opening line is the only real link to this blog to be honest. It’s a poignant reminder of the real motives behind the UK budget 2012, announced this Wednesday.

George Osborne has announced a series of measures which (apparently) defend his claim that there is “no other road for recovery”. This is certainly true in political terms:  the budget had to please the Tory backbenchers enough to quell their dissatisfaction of coalition, or else the party could have been left permanently damaged. Economically however, the Chancellor is still blind to Keynesian policy, leaving his statement as a narrow, personal truth, not a logical one.

Now, to the features of the budget. Top of the list was the changes to tax. The top 1% earning over £150,000 annually are to pay less in income tax, with the top rate reduced from 50% to 45%. Ed Miliband lashed back at the government front bench, openly mocking how much they would personally benefit from this change in tax brackets – hilarious to watch. “Same. Old. Tories” he cried, from a (rare yet) brilliant performance at the dispatch box. Whilst the government defend this regressive move with a progressive increase in the personal allowance (up to £9,205), they have offset the cost of this increase by reducing the income threshold in qualifying for the 40% tax rate, meaning several thousand of the ‘squeezed middle’ will pay more in tax. Yes the Chancellor promises to close tax avoidance loopholes. Valiant. But he lacks common sense: if you’re rich enough to attempt tax avoidance in the first place, you’ll be wealthy enough to hire top accountants to find other loops. Whoops.

There were of course measures to stimulate growth on a micro level. There are new ‘enterprise zones’ to be set up, and low interest rates to be passed on to small businesses via the National Loan Guarantee Scheme. UK export finance is to be expanded, blah blah blah… To be honest they’re not the headline-grabbers. Things like the “granny tax” are. Described by journalist Ian Cowie as an aspect of the budget to “bash baby-boomers”, it will effectively see pensioners pay £3.3bn more tax annually, with a freeze on age-related allowances. Poor granny.

And then there’s the change to the Sunday trading regulations. A temporary alleviation of the Sunday trading laws over the 8 weeks of the Olympics sounds sensible enough. Maximise the revenues generated from the millions of tourists arriving this summer, surely. True. And whilst there is no doubt that Sunday regulations will return after the end of the Games, I can’t help but feel uneasy about it. The Tories have sought an end to the restrictions for years, wanting to maximise UK trading hours. What’s to stop them using the likely success of these 8 weeks to vouch for an end to the culture of Sunday as a day of rest, of family? If they ever gain a majority in government again, watch this space.

Leader of the Opposition Ed Miliband was kind when he labelled Osborne’s plans as the “millionaires budget”. Millionaires and billionaires alike will see themselves with more cash-flow, whilst the majority will be even more cash-strapped.

No wonder we all want to be billionaires right about now.

So fucking bad.

For full coverage of the Budget 2012, I reccomend the BBC: ‘as it happened’.

2012
03/24
CATEGORY
British News & Politics
Economics
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The Mood at the Treasury killed on Valentines…

We laughed when the Americans lost their AAA credit rating.

We laughed when the Spanish, Italians and Portugese had their credit downgraded.

And now it might be our turn.

Put on a ‘negative outlook’ by credit rating agency Moody’s yesterday (implying a 30% chance of a downgrade within the next 18 months), serious questions must be asked about the British government’s austerity drive. Labour’s Shadow Chancellor Ed Balls points to this as evidence that George Osborne must wake up and smell the coffee if he’s to get the economy on track. With current borrowing levels higher than those projected by the last Labour government as ammo, Balls has gone on a rampage against the incumbent Chancellor since Christmas. And it looks like he was just getting started.

Mr. Osborne, however, points to Moody’s’ report as vindicating his action, claiming “we can’t waiver in the path of dealing with our debts” following the announcement.

Is this guy blind?

I can’t help but take everything the Chancellor says as well rehearsed spin. Yes, Britain needs to deal with its debt. But how he has yet to realise that reducing debt with no growth is harming the economy is anyone’s guess. You can’t be stingy, especially on Valentines. Moody’s underpin this by stating “economic or fiscal deterioration would put into question the government’s ability to place the debt burden on a downward trajectory by fiscal year 2015-16.” Essentially, cutting debt isn’t enough to escape a credit rating downgrade. Reduce the speed of austerity, and create growth. Growth creates confidence, which attracts investment, which creates more growth. Positive multiplier effect. Basic economics – even with WJEC as your A Level exam board.

I fear Mr. Osborne is too stubborn. He may have caved into his wife’s demands this one day of the year, but he’s too hardline a neoliberal to adopt any manipulation of Keynesian economics to promote growth. It moved away from sound economics to political pride a while ago. Plan A-plus doesn’t exist. It’s not as if his job is insecure unlike some (must I even mention his name?), so the risk is only to the economy. He’s appeasing the right wing of his party, and able to dominate the moderates already. His narrow focus on the economy may be reflective of his grit and determination – assets needed to be the party’s next leader. Perhaps that’s a part of his real motive.

To be fair, 30% risk of a downgrade is a small(ish) percentage. If the Eurozone situation improves, we may just escape the chop of an A. May. But we must remember that France and Austria have also been put on a negative watch, alongside Britain. So seeing as the likelihood of a Eurozone recovery is minuscule, we must expect higher borrowing levels within the next two years. And a very miserable UK economy.

Oh dear.

Britain just got dumped on Valentines Day.

2012
02/14
CATEGORY
British News & Politics
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Christmas. Turkey. Stuffing?

Sadly, the title is as seasonal as this blogpost will get.

Rather than the kind that most will find on their dinner plates tonight, it is the namesake nation that will be my focus.

For a decade, Turkey has quietly been flourishing; It has halved its national debt, brought inflation down from over 50% to single digits, and recorded consistently strong growth. And that’s just the economics. Politically, it has sweet-talked its way into regional significance – highlighted in it’s diplomatic efforts with Syria and their bullish response to the Palestinian aid flotilla earlier this year. Religiously, Turkey can boast the accolade of  being a successful Muslim democracy. World leaders have not hesitated in recommending the nations of the Arab Spring follow their example. And now at a time where Europe is struggling, Turkey’s application for EU membership (gathering dust since 1987) now seems somewhat irrelevant. The dynamic Middle-Eastern/European hybrid state has carved itself a position of global standing and importance.

There is doubtless more to come. Having recently taken a forceful stance against France after their decision to criminalise denial of Armenian genocide, Turkey are clearly enjoying – and exercising – their new-found clout. Swift attempts to aid the infant governments of North Africa show intent signs of spreading influence, and a rising thirst for power. Its ridiculously strict military discipline leaves Turkey with an army to be feared; it’s dynamic economy has remained the envy of the world.

But for all its dynamism, the Turkish economy is threatening to burst, much like a few belt buckles this evening. With overheating a real danger, such unsustainable growth will leave the economy well and truly stuffed. Consumer credit levels has risen from 5bn Turkish Lira in 2001 to 211.2bn by 2011. This has seen domestic consumer demand account for 70% of Turkish GDP, with imports far outstripping exports. Subsequent dependence on foreign funds has left Turkey’s economy vulnerable to events elsewhere – namely the Eurozone. The irony is that because of this, a primary economic target for the Turkish government next year is to actually reduce growth, whilst the rest of Europe is looking to do the opposite. Record-low interest rates hasn’t helped the situation.

So, it looks like next year will be a crucial one for Turkey. Whilst most eyes have been on the likes of China, India and Brazil, a quiet, new challenger in a new region has been emerging. If they play their cards right and tame their spiralling economy, this could well be Turkey’s decade. I guess there’s no respite for the nation’s economists this festive season.

And on that sombre note,

Merry Christmas!

2011
12/25
CATEGORY
World News
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Apple has lost its top Job – but can the rest of the world stay employed?

The announcement of Steve Jobs stepping down as CEO of the hugely successful Apple technology brand he co-founded has come as a somewhat inevitable blow to the Silicon Valley giants. Plagued with illness since 2004, his future at the company was always speculated. Investors and loyal customers alike were afraid of losing such an iconic fugue in the industry.

His influence cannot be understated. He took the company from the verge of bankruptcy in the 1990s to one of the largest corporations of modern times, even boasting higher financial reserves than the United States government. He was the brand and the brand was him; his life was his work and Apple was moulded in his image. Jobs was a visionary innovator and design genius. He is known to pay so much attention to detail, that he once demanded changes to the iPhone because he felt the second ‘o’ in Google’s logo was the wrong yellow gradient on screen. With personal technology such a fast changing industry, his ability to lead that change saw him become a cut above the rest. Supported by a world-class management team, Apple and Steve Jobs have become ridiculously successful.

But does his resignation symbolise a wider parallel to the global economy? His exit has been reminiscent of politicians the world over: regardless of their economic actions, their step-down from office was always inevitable. Think Britain’s Gordon Brown, Ireland’s Brian Cowen, Japan’s Naoto Kan and Spain’s José Zapatero (not standing for re-election in 2012). Jobs’ ability to reassure investors has diminished, as has confidence in the economy. As an integral cog in a vast machine his decisions rippled throughout the company, thus losing him has left Apple weakened; the interconnected nature of financial markets and government central banks has seen the recovery vulnerably exposed.

We cannot imagine life without Apple products. Especially in my generation. From the iPhone to the iPad to the iPod, Macbook to Apple TV, the company has dominated the gadgets my friends and I own. They’ve tapped into our lifestyle and made themselves addictive to our personalities. And it’s a part of human nature that once you have enjoyed something, you will be reluctant to sacrifice it. The exact same theory applies to the boom years: consumers thrived off comfortable economic conditions, buoyed by government spending – but when the credit crunch struck and austerity followed, huge uproar occurred when governments wanted to cut spending. The UK government had to fight (and are still fighting) to reduce public expenditure only down to 2007 levels.

Where does that leave the likes of me and other students going out into the working world over the next five years in this so-called ‘Age of Austerity’? Jobs have been falling like flies, and competition for vacancies has hugely intensified. With faltering confidence and a negative outlook on growth, investors have sprinted to safe havens such as gold and the Swiss Franc, rather than in firms and banks which fuel job creation. With my generation likely to be worse off than my parents’, expectations don’t look great. Nor do they look like they’ll improve any time soon.

Whilst such gloomy prospects never want to be addressed, Steve Jobs realised it was his time to step down. He was achingly pragmatic. His humble decision has made it clear that he values the long term stability of his life’s work over the short-term buzz of continuing in one of the most prestigious positions in technology. The rest of the world could take a leaf out of his book in this sense, choosing a sustainable long term plan to cure these contagious fiscal pains, not via short term quick-fixes as was the case in 2008.

Hopefully the magnitude of the current economic turmoil will see the Apple, rather than the pin, finally drop.

2011
08/28
CATEGORY
Economics
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“The storm clouds are back. It seems we’re only half way through a decade-long downpour…”

Since last week, it’s felt like déjà vu.

Right, so the markets were in muddy chaos for a week, as companies around the world saw billions wiped off their value. The UK’s FTSE 100 as one example saw over £250 billion lost from the country’s 100 biggest firms in only four days. This has been coupled with a rise in dangerous short selling, which has seen some European countries ban the practice temporarily. All this has fallen under the umbrella of plummeting confidence in the markets, with words like debt, default, bailout and downgrade flying around, frightening investors and insurers alike. The state of the global economy has not been in such turmoil since the thunderous collapse of Lehman Brothers in 2008.

And then there’s America. Their political struggle to compromise on a package to allow their nation’s debt ceiling to be raised caught the world’s – and the markets’ – attention. Their subsequent downgrade by credit rating agency Standard & Poor’s to AA+ only shook confidence further. In an attempt to galvanise dampened growth, the Federal Reserve have announced that they will keep interest rates ”exceptionally low” until 2013. However with it failing to do the trick in countries such as Britain, it holds bleak hope.

So why did we ever think the markets had recovered sufficiently, and that the worst was over?

Simple: we were fed the illusion that it was the case. The reality of the situation is that the problem never went away. A ‘banking crisis’ was merely replaced by a ‘sovereign debt crisis’. Sounds like waffle? In layman’s terms, this means that the banks were saved at the expense of government funds, which saw government debt levels rise unsustainably. However as there was nobody to bail out the governments, strong austerity measures were imposed across the West to bring debt levels under control. That’s essentially what all those confusing headlines have said. They also highlight that the issue is exceptionally rough in the Eurozone: with Portugal, Ireland and Greece already bailed out by fellow Euro members, the financial strains on Germany and France (who contribute most to the European Financial Stability Facility) are putting their economic recoveries at risk. Without going into too many particulars, France has been threatened with a credit rating downgrade as a result, and Spain and Italy are on the verge of requesting a (hugely expensive, mind you) bailout. This has huge implications for its trading partners such as Britain, as the European continent is our largest export market. Adding politics into the mix makes the situation a whole lot more complicated. For the meantime, it really isn’t worth getting into; we’ll save that blog for a rainy day.

So, the state of economies around the world have hardly changed since the start of the credit crunch in 2007. I guess that’s the summary of this jargon-filled rant. All the talk of a “strong recovery” was fake confidence at best. The only change over the last four years is that we now realise the vast problems in our banking and public finances. Yes, the world is facing austerity – but real reform and change has yet to come, particularly in the regulation and attitudes of worldwide banking. In a globalised world, we cannot afford to risk just patching over the hard times, only for the issue to crop up again in the future. I reckon that it will take five or six years before we see markets, banks and government books stabilise. I could be ridiculously wrong; this is just a forecast from my two years studying A-Level economics…

…But for now, it feels like we were misled and are heading for an even gloomier future. The truth is, the clouds never cleared. Oh well, guess the umbrellas need to be out a little longer.

2011
08/14
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Economics
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Whilst the economy burns by day, London burns by night

After the markets closed in London’s Square Mile yesterday, the FTSE 100 had seen a record triple-digit loss for the fourth consecutive day. In numeric terms, more than £250bn has been wiped off the value of the largest 100 UK firms. Confidence is struggling, worsened by the Eurozone crisis unfolding in Italy and Spain. At a time when the UK economy is hanging on to recovery by a 0.2% sliver of growth, the third quarter (Q3) figures are almost certainly going to be negative.

This is worsened by the huge economic costs caused by the riots in London. Not only is high street trading ending early on police warnings, but the vandalism rife across the capital will create significant withdrawals from the economy, as damage repair costs skyrocket. With reports of riots spreading nationwide (to Birmingham, Liverpool, Manchester and Bristol) the loss of economic activity will have an increasingly significant impact on Q3’s growth figures, creating a political headache for the coalition.

But as a friend put it, these figures mean nothing compared to people’s lives at risk in Britain’s capital. No doubt David Cameron and Boris Johnson will take some stick for not returning from their holidays earlier. However, it is not a time for political point-scoring (with Ken Livingstone already starting); real discipline and political unity is needed to enforce order amongst this anarchy. It is a world away from a reaction to the death of Mark Duggan – these are not protesters, or demonstrators, or angry citizens. These are simply greedy, selfish individuals who have no moral compass and find a twisted pride in being associated with such violent actions. There is no racial, religious, or generational attachment to this tragedy. It’s disgusting.

It’s the sporadic nature of the riots that most Londoners find unnerving. The disorder has evolved from looting big firms, to independent businesses, to people’s homes and attacks on members of the public and the media. It’s heartless carnage. I’ve been hearing police sirens all night, with the riots having moved to Camden and Chalk Farm, not far from me. I’m scared my community is next.

The public mood has reached its nadir of 2011. This has marred Britain’s image on the world stage. How can civil unrest in the UK be to steal desirables and burn establishments, where in the Middle East it’s fighting for freedoms, deomocracy and human rights? This gulf in priorities says a hell of a lot.

So, the economy looks set to worsen, as unrest continues in the capital and is moving to the UK’s other major cities.

345 years on, the Great Fire of London returns. Only this time, society’s burning too.

2011
08/09
CATEGORY
British News & Politics
Economics
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