Tuesday, 2 August 2016


AEP reports in the Telegraph that the world appears to be emerging from the doldrums. Money growth is healthy in the major currency zones. Global growth seems to be coming, just as plenty of people were concerned that the Brexit vote may damage confidence around the world.

At the same time as monetary growth takes off, the US and Europe are slackening off their public-sector "austerity" policies.

China, according to AEP, is pressing Go yet again, and putting a lower priorty on longer-term  structual reform. AEP is always worth noting especially on China issues, as he seems to have a better eye for what is happening there than some other leading commentators.

Japan is loosening again after its counter-productive fiscal retrenchment in 2014.

Oil prices are low and apparently staying low, as the US is now a swing producer able to extract at ever-lower marginal cost.

What does this mean for the UK? Well the timing could be perfect for the much delayed rebalancing of the UK economy. The pound's fall against major currencies and an uplift of general global demand could boost our overseas sales in a way that has been tough in recent years. We have already seen a boost to inward investment, and this ought to continue: the UK's attractiveness ought not be diminished by the Leave vote.

Inflation is low, and the panic price increases pencilled in by Project Fear do not seem to be materialising. Employment is strong. Money is getting cheaper.

All of this points to a potential decent couple of years ahead of us in Britain and elsewhere. 

Reasons to be cheerful, and perhaps some breathing space for our new government to start to address some of our entrenched and longer-term challenges such as housing, transport and education.


dearieme said...

But while the Remainiacs are still working each other up into pants-wetting mode, could they actually do some damage here? They seem determined to make a drama out of a crisis.

Electro-Kevin said...

We're not leaving the EU. I've said it before, I say it again.

AndrewZ said...

"perhaps some breathing space for our new government to start to address some of our entrenched and longer-term challenges"

More realistically, our dismal political class will see it as an excuse to carry on ignoring all the difficult stuff for another few years.

Blue Eyes said...

So much optimism!

andrew said...


Why is it hard to accept you won
It may take a while - and once done you probably won't notice,
but this country will be going

Anonymous said...

There's a big housing bubble in in the SE that's going to have to readjust - I can't see how the current trajectory can be sustained for much longer.

"At the same time as monetary growth takes off, the US and Europe are slackening off their public-sector "austerity" policies."

Did the US public sector every show austerity? Wouldn't it be more sensible in this time of global growth to reduce the amount of public borrowing and even pay off some public sector debt.

Anonymous said...

"Money is getting cheaper"

You say that like it's a good thing. We've had decades of cheap money (only broken temporarily by the Volcker Fed era 79-87), during which time land and property prices have soared while wages have stagnated. The world's awash with cheap money.


Dick the Prick said...

There's a wonderful quote from Blackadder 'when all else fails, a total pigheadish refusal to stare facts in the face will see us through!'

Nah, seriously - I hope the chap's correct as i've just recapped my house and am off travelling for a year or so and it'd be useful wandering back to a decent jobs market. I do think the metrics for an earlier general election are getting stronger but if we compare ourselves to France, Germany or the US then even that pails into relative insignificance considering their domestic issues.

Happy days? Why the chuff not - i'll have a drink to that!

Blue Eyes said...

So "wage stagnation" has been *caused* by "cheap money"? I would like to see your working.

Or, to put it another way, would the perceived negative effects of globalisation etc. have been avoided by tighter UK monetary policy? Again, show your working.

A good blogger I read who is an actural economist describes such opinion-spouters as Internet Austrians. In a dismissive way.

Andrew, I feel a bit sorry for EK because even when the results go his way he doesn't like it. There was a bitter woman at my old office who hated everyone and everything. In the depths of the Great Recession the bosses gave everyone a bottle of decent champagne instead of a cash Christmas bonus.

Most of us were hugely grateful as the gift suggested no imminent (further) redundancies. Bitter Woman moaned that she didn't even like champagne.

Blue Eyes said...

DTP - sounds great! I want to do something like that at some stage.

Charlie said...

BE you make an interesting point about cheap money having nothing to do with the effects of globalisation. However, something just occurred to me - before globalisation, if you didn't earn much money, you moved to a cheaper part of town. Now, you move to a cheaper part of the country. Cheap money has made it harder to avoid the impact of globalisation, such as more people chasing limited housing supply with more debt. How much longer before people are priced out of their own country?

Anonymous said...

The relative pricing of housing and wages over the long term has nothing to do with monetary policy. You can easily see that if you imagine what wages vs house prices have been doing in terms of gold or mules or Portuguese Escudos.

The reason people are "priced out" is because housebuilding has not kept pace with population shifts (the SE being very popular with people from elsewhere in the UK) and the relative success of certain industries, which in turn fuels inequality generally. London is a victim of its relative success. You can answer that in two ways: by accepting the big differences between London/the SE and the rest of the country, or you can try and make London less competitive with the rest of the world.

There are plenty who see the latter as the preferred option.

Thud said...

I do so love the continuing cold war between blue and EK, it makes it more human round here.

Anonymous said...

Could you please inform the BBC of your optimistic forecasts. They were still spouting doom and gloom on PM today.

Blue Eyes said...

Well it is their job to talk down the economy, because if Brexit were to be "de-risked" then there would be bog all for the righteous to bang on about. See also the Independent and Guardian for details.

Electro-Kevin said...

Being happy with the result (which I am) and coming out of the EU are two different things. The latter hasn't happened yet and the longer it takes the less likely it becomes.

Especially if there is a resting on laurels thinking the job is done.

Blue Eyes said...

Did you expect it to have happened by breakfast time on the 24th?

Electro-Kevin said...

I was having a champagne breakfast that day - so was prepared to wait.

I was shocked at the forces ranged against the Leave campaign. They are formidable and still active.

It's been six weeks and still no plan, no word on progress - nothing. We have 2020 mooted. I expect a recession/depression and then another referendum in this time - as precedented.

It's more likely that the EU disintegrates while we're in it.

Perhaps Brexit will be blamed for a run on Italian banks.

andrew said...


How much longer before people are priced out of their own country?

One could say this has already happened in the sense that there appears to be a group of people who are not well-qualified / skilled enough to do a job that can allow them to buy a home of their own.
That group appears to be growing.

Blue Eyes said...

Yes that is true but how much of that is to do with monetary policy? None.

EK what was Boris' plan? Who should be formulating a plan quickly? You might be shocked that the government might be doing stuff behind the scenes without giving a running commentary. How long do you think it should take to unwind 40-odd years of integration into an economic and political structure?

It takes years to do anything. Why on Earth would an orderly Brexit be any different?

Anonymous said...

All People have more access to credit.

More wealthy people have even more access to credit.

People therefore can afford to pay more for housing, and given various reasons they therefore pay more.

Credit availability logarithmically scales upwards with wealth.

House price inflation therefore increases faster than the increase in low/low/middle wages due to the credit availability unbalance (the wealth gap?)

Does that explanation make sense?

Anonymous said...

It sounds plausible, but it also ignores such factors as rent de-control, changes in property taxation, and so on. In the long term people pay what they can for housing, dependent on the overall supply and the amount they have to spend. Which is only indirectly linked to monetary policy.

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eyad ammar said...

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