Happy Halloween special

Halloween Special.

Video from Red Rag

Gordon Brown’s Monster Crash

I was working in the bunker late one night
When my eye beheld the financial plight
For my monster debt had begun to rise
And suddenly to my surprise

The economy did Crash
It did the Monster Crash
The Monster Crash
It was an off balance sheet smash
I made a hash
It caught on fire in a flash
It burnt to ash
I made the mother of all crash

From my desire.. to keep the City unpoliced
Using the FSA where the bankers feast
The people double mortgaged their humble abodes
And get a jolt... when the credit implode.

My ratings did crash
Polls said.. a monster crash
A 1929 style crash
As Chancellor I ..was really trash
The banking smash
It caught on fire in a flash
I was rash
And now you're poor white trash.

Out from his coffin, Mandys voice did ring
Seems he was troubled by.. just one thing
He opened the lid and looked from his lair
And said, “dump this loser, bring back Tony Blair!”

SpAds did the hash
They did the old rehash
That I was Flash
And spending I refuse to slash
I claimed I had a stash
A stash of cash
But you did the math
And now my face you bash

Now I'm uncool, Barack won't hold my hand
And my financial crash is all over the land.
For you, the taxpayer, this Smash is costly too
About 2oo billion pounds, that's what I need from you

I was brash
And was so terribly rash
And now we’re trash.
The UK is just trailer trash
It was the Crash
And now my teeth I gnash
Because the Crash Oh,
The MHHHOOOONSTER CRASH..

repeat to fade into oblivion around May 2010..

Inspired by Guido's caption competition

Royal Mail strike update

The mail is getting through. So far.
CWU claim 50-60 million items undelivered, while Royal Mail say 5 million. Split the difference and its 30 million.
Royal Mail delivers about 85 million items a day so I expect the average delay will be 1 day extra. The 9/10 items that are posted by businesses can probably live with that. So can Royal Mail.
On strike days like today the mail actually being posted is far far less than normal as companies and people just don't post.

However this is causing damage to business. Card companies are especially hard hit as people just aren't sending what is usually an impulse item anyway. The damage is falling especially hard on small business who cannot switch to alternatives, and the 12,000 Post Offices who are paid by the stamp and are seeing a huge reduction in mail traffic. So far its manageable but if CWU continue to strike and RM is forbidden to bring in its 30,000 temps before the Christmas orders start it will be catastrophic for the economy.

The Tories feel strengthened by this dispute and have announced their plans to fully, not partly, privatise the mail. Quite how is unclear. If its anything like the trains privatisation a parcel will cost around £100 to send unless you book in advance through the national postal service. If you do it will only cost you £50 and taxpayer subsidy of £50.
But privatisation of the mail has long been a requirement of the Tories and is now virtually an EU requirement anyway. Ken Clarke would love to get rid of a government problem, a modernisation problem and a union problem and make it all a regulators problem.

CWU really must get an agreement soon. At the moment they have the support of the public sector, the fury of the business sector and a 50/50 from the public. Christmas orders traditionally begin increasing from Monday after the Halloween stock is packed away for another year and the Santa sets come out.

CWU really are bringing anything they can think of to the table. From the size of a postman's round to the time allowed for a coffee, to the weight of a bag of mail. Its exasperating for Royal Mail. But ,as we have said before, Royal Mail management aren't blameless.
Just today, in the middle of a strike, they sent out the latest round of hours reductions. Each delivery postie, deciding if they should go on strike on Saturday, will have been told today that their hours, and pay, will soon be cut and their workload increased. How did the incompetent management think the workers would respond?

Ken Clarke must be rubbing his hands in anticipation of a long,destructive and futile strike that leaves a broken union, demoralised workforce, and a bankrupt organisation ready for TNT.

Labour set to blow financial markets up, again

Reports abound this morning that Alistair Darling is looking to allow Lloyds Banking Group to escape the clutches of the Government Asset Protection Scheme. Well, after all the leaking and discussions recently this is not a great surprise.

However, Lloyds will have to raise £25 billion to do this and the Government will have to be in for over £11 billion to make this happen. Ouch. That is a lot more taxpayer money being sent out to a risky banking institution. So why do it?

Well, if Lloyds does not pass £250 billion of bad debts to the Government then the UK exposure is just with RBS and this is a much more palatable number for the treasury. However, that assumes that the debts will default at a high rate. To reach £11 billion equates to a default rate of near 5%.

However, if Lloyds is faced with the same default rate or higher then the bank won't make it. Particularly if the European Commission make it sell of profitable retail arms and keep the huge loss-making loan books of HBOS.

Oh dear, that is the plan. When the markets figure this out then Lloyds shares will be panned once more and instability will return to the markets.

This is a no-win scenario for the Government, but the APS is at least designed to underpin the banking system. The new plan introduces some big risks into the market just at a time of fragility. It could not be more badly timed.

Sea of Red

My portfolio has been tanking this week, over 10% down in total so far and today is another bad day.

Not as bad as the FTSE this morning which is down nearly 2% as I write.

The expected September/October correction has been a long time coming. Share in the US and UK have moved sideways for 6 weeks and now appear to be falling again.

Poor economic news is still everywhere and although companies have beaten expectations on profits, the levels are too low to sustain what has been a huge rally from the March lows.

Noticeably the big gains of State owned Banks RBS and Lloyds are really taking a beating and leading the index down, along with over-bought commodities. Despite the falls, I am not selling out just yet, although stop-losses are in place - here are some of my still hopeful investments -

AST.L - Ascent resources, a small tiddler drilling for oil in Europe, down only a fraction today and lots of good news to come in the next few weeks. I can't see the price collapsing even in a rout.

EME.L - Very similar position to AST.L, but drilling for gas in the USA.

TLW.L - Tullow, a FTSE 100 major, is going to get a bid in when the sale of its Kosmos field partner in Uganda is completed. The Major oil companies will want a big slice of this success story and this will underpin the price (already up so much from its £6 low to £12).

MNR.L - The property company, one of my favourites, will no doubt announced tenants for its newly completed City offices in the near future and the share price will rocket on the news.

George Osborne has Stockholm syndrome

I am back from my week holidaying in the UK (sadly much more economical due to Labour's destruction of the pound) and lo and behold, George Osborne is back to his old tricks.

George is a political strategist and a very, very good one. So good he has helped to destroy New Labour. However, if to defeat thine enemy one must know them, then I wonder where George is going with his pronouncement on bankers' pay.

For to pay them in shares will only make them richer, whilst the money saved will not come 50% as income tax but instead go to bolstering the banks' capital - fattening them up for sale at a later date when shareholders, including taxpayers, will get a better price.

This is a very unsatisfactory solution and I find it sad the politicians' are still going on about bankers' pay when there are much more pressing concerns.

Like how to fix the banking system. I have long advocated a Glass-Steagall approach of splitting off Investment banks. Now I was surprised to see in my near wi-fi free trip that even Mervyn King has come round to seeing this to be the only sensible long-term solution. No matter how much banks howl in protest, it is right that to prevent crises retail and investment banking should be separated.

George Osborne is not very keen on this though, as it is very unpopular with the banks and needs international agreement; so instead we get a New Labour policy of pretending to 'attack' greedy capitalism when in fact doing more or less the opposite.
As I said, he has Stockholm syndrome. Recently he has shown signs of getting out of this, but the affliction appears deep rooted.

They're All Mad, You Know

There is categorically no absolute shortage of oil in the world: but political and other non-economic barriers to oilfield development can easily create artificial – and very damaging – undersupply. (Watch out for oil prices in 2011, when economies have recovered from the soft patch that will follow the phasing out of fiscal stimuli). Many of the great oil exporting provinces – Saudi, Russia, Mexico, Venezuela, Nigeria etc – make it difficult and in some cases actually illegal for foreign enterprises to invest in oil projects.

I recently learned of an interesting parallel that, in combination with the oil nonsense has truly comical consequences, if one can be permitted to laugh in such matters. The USA, a great agricultural producer, makes it difficult and in some cases actually illegal for foreign enterprises to invest in US agricultural projects. Perhaps you knew this but I did not.

So: the Saudis, with oil and gas pouring out of their ears but short on food, turn energy into crops (by using it –wastefully - to desalinate sea water and watering the desert).

The Americans, with crops aplenty but short of oil, turn cereals into ethanol - wastefully - and hence into gasoline !

Politicians, eh ? Those whom the gods would destroy ...

ND

Digital Ed Miliband: An Experiment ...

. . . using only PowerPoint (R)

Question Time from 1936

Almost universally Nick Griffin's Question time debut has been seen as dire. Even though it was a most unusual setting, with a hostile audience and the major topics of the day ignored in favour of highlighting BNP policy and racism, he failed to elicit much sympathy. He missed the opportunities to present his views rationally, possibly because they aren't rational, and missed basic political points. He should have had better advice and better preparation. Jack Straw floundered on immigration. as did the other major parties. Jack Straw insists the veil is removed in his surgeries. A stick for Mr Griffin to beat him with that he failed to grasp. British jobs for British workers, fear of crime,the immigration stats from the ONS just released, all help the BNP. He must have known the event would be stacked against him. The majority of the country is against him after all. Regardless he was poor and the decision to let him speak seems justified. The longer he spoke the less he said and the more awkward and foolish he was.
Hitler could have presented his case better.

Question time 1936. Live from Alexander Palace.

On the panel tonight... Sir Arthur Bastion, Minister for Gasworks.
Lord Beaverbum, proprietor of the Daily Announcement
Lady Helena Ashcroft-Osbourne-Reynard, Socialist MP for Whitechapel and slum areas.
Field Marshal Alexander Blimp, Inspector General of the cavalry ,
And Adolf Hitler ,Chancellor of Nazi Germany.

First question, The gentleman in the top hat.
"Does the panel think that we should have closer ties with Europe?"

Herr Hitler?

Absolubtely. I fully believe that we should have a single currency, a single administrative system, and a single trading area. A single transport policy and a single representative body. I fully support closer European unity." {Applause from the audience} And if great Britain and the Commonwealth doesn't want to join? "Then we will bomb you into dust!" {smattering of uncertain applause}

Next question. From a Mrs Trellis. Should this country still be engaged in a police action in the middle East. Field Marshall?

Erm, well I can't say anything political, but our Armstrong Whitby tri-planes should have been withdrawn in 1920. Our 1903 Lee enfields are getting on a bit and their isn't enough head armour for evey soldier. Some still just have forage caps instead of tin helmets.

Herr Hitler?

Its an outrage. The armed forces are being denied the equipment they need.
{Applause} This feeble recession hit government spends money on immigrants, claiming to flee oppression in,erm,Germany and Austria, yet they cannot support their own troops. I would spend {voice rises} Three -Four - five -five hundred - five thousand times on armaments. I would provide work for our national socialist brothers in the Panzer and Messerschmidt factories by making our armed forces the best in the world. {Applause}

Another question. gentleman in the flat cap..no not you..the grubby one..looks a bit working class. Yes!

'Ow would t'panel deal with rising crime?"

Lady Helena Ashcroft-Osbourne-Reynard? What would you say?

Well I think that the global recession from the Wall street crash, that started in America remember, has caused a few social problems that this government , with its Labour exchanges and soup kitchens is dealing with.."

Hitler {interrupts} Nein! Garbage. You have allowed youths to drift into unemployment and become anti social. You are to blame.{claps} I would put another 100,000 Brown uniformed special constables onto the streets to keep order.{Applause}. I would make sure that offenders are removed from society to special camps where they will learn proper discipline and respect. Those that don't have jobs can go into the army! We will provide training,food, shelter,skills , a real future and discipline! {Applause}. We will stop crime and the causes of crime. Extra police is what's needed. Not just my 100,000 'Brown shirted' special constables but if a crime is reported a detective from the Gestapo will arrive to investigate the reported crimes. Identity cards will be introduced to combat terrorism. CCTV cameras will observe the trouble makers. A period of 42 days detention without trial will be introduced to deal with the worst troublemakers. Lady Helena Ashcroft-Osbourne-Reynard claims to represent Hardworkingfamilies. She does not. She does not give them jobs. The national Socialists will give them jobs. British Jobs. British jobs for British workers! This is the future, this is what is needed. short term pain for long term gain. The future is being built now. Tomorrow belongs to us! TO US!

Smart Guys, Looting

Jostling for position amongst the many explanations for the current crisis is this new one: that the finance sector started going off the rails when the smart guys turned up in Wall Street, previously the preserve of some pretty mediocre minds. (It’s an NYT subscription piece but you can see it for free via this link.)

There’s a great Dilbert cartoon where Dogbert the Evil says to the boss: I can show you how to loot this place and escape. Dogbert was clearly one of those bright fellahs. And they’ve been looting all right: US chief executives were paid 344 times the average worker's wage in 2007, against 42 times in 1980, and the bankers weren’t stinting themselves in the process.

Flippant though it sounds, I’d say this observation has some explanatory force. It is absolutely clear that Enron made a mint out of the utterly dozy utilities by being altogether smarter (not difficult) – candy from a child - and the whole Enron episode looks now like a dry run for what the Wall Street Smarts did at the expense of, well, almost everyone else, really.

What do you think ? Good explanation, or glib observation ?

ND

Euro rate

CU on holiday,ND away and BQ has the auditors in.

While busily shredding old paperwork I notice that in Aug 2006 the Euro was £1.52.

Today - £1.04 is all the wholesalers will give.
Great for export. Shame about the import.

A Nice Bit of Legg ... Old Drew Reminisces

The unexpected and gratifying swathe being cut by Sir Thomas Legg through our troughing MPs reminds me of how Sir James McKinnon set about British Gas after privatisation, causing just as much surprise. Draw up a sandbag, my boys, swing the red lamp and harken to old Drew ...

Having been dragged kicking and screaming into privatisation, Denis Rooke, the irascible Chairman of British Gas (an unrepentant and brutal monopolist), extracted a concession. Rooke was assured (by arch dirigiste Peter Walker, the Energy Secretary of the day) that a patsy would be appointed to head the newly-constituted regulatory body Ofgas. McKinnon was duly appointed, a diminutive and superannuated accountant who, at first glance, looked the part.

Everything started well: McKinnon accepted an invitation to lunch with the BG Board in their private Thameside eyrie; and over the coffee, Rooke generously offered that, if McKinnon would simply like to forward drafts of his reports on BG to BG itself in advance of publication, they would do the fact-checking and editing for him and generally tidy everything up.

In response, McKinnon thanked Rooke for the splendid lunch . . . and asked him what principles would be used when allocating the cost of the repast to BG’s customers.

Things went downhill from there.

The story has a very happy ending, because over the coming years McKinnon (or St James, as we should call him) and his successor trussed up BG like a chicken and prepared it for dismemberment, as should have happened at the outset.

The dinosaur Rooke should perhaps have seen this coming, because the 'mild-mannered accountant' was a Glasgwegian terrier with the ego the size of a small planet, as evidenced by his first Ofgas annual report which contained 13 (thirteen) (sic) photos of himself !

What a man. I feared they'd broken the mould, but Legg is clearly following in his footsteps, and he's made a great start.

ND

The Nuclear Subsidy-Wallahs Are Back

The Grauniad reports today that, despite protestations to the contrary over several years, our beloved government is planning to subsidise new nuclear power stations – by a levy on us all to ensure the price of CO2 doesn’t fall below € 30.

This is not actually new: I can tell you that DTI / BERR / DECC / XYZ have been contemplating not only a nuclear levy but also a ‘diversity’ levy (to make electricity suppliers buy their power from a wide range of different sources) and a ‘capacity’ levy (to make them buy large amounts several years in advance). We already have a renewables levy, of course,

Putting aside for a moment the prospect we’ve noted before, that such levies may count as government spending (and thus be quite awkward for several years to come), you really have to marvel at the reasoning.

> nuclear power ‘needs’ a CO2 price of greater € 30 to be ‘economic’
> today’s prices (spot and forward) are a lot less – around half that - and thanks to (a) plenty of measures taken to cut emissions (!!), and (b) the recession, they are set to stay that way for quite a while
> so nukes ‘need’ a minimum price to be guaranteed by the government, thank you very much

This syllogism only works, of course, if we ‘need’ 'em in the first place !

Here’s the answer. There is no natural market in clean energy, so the EU has created one using cap-and-trade on CO2 emissions – and in mechanistic terms it works very well, too. Let’s assume it continues in being (indeed, probably to be joined by a US one in due course).

IF the caps have been set at the correct level to meet emissions targets - and, with a couple of exceptions (Poland, this means you) they have, and IF the resultant CO2 price is less than the level required to justify nuclear power at the moment, THEN it means we don’t need nukes to get our emissions down – at the moment. We only need whatever can be justified by reference to the forward price of CO2.

Ah, the nukes say (well, aarrgghh!, actually), but that ignores the long lead-time for nukes to be built, there isn’t a CO2 forward curve out 8-10 years. So we ‘need’ the government to guarantee one for us.

No, matey, you ‘need’ the government - well, us actually - to make an heroic, costly and entirely speculative shot in the dark, to cater for the highly probable contingency that we solve our problems before 2018 or whenever it is you think you might be ready, using much cheaper means.

I can confidently predict that this will be by a combination of gas and coal. And if this means we need to find a modus vivendi with the Russians, well, that’s what we’ll do.

ND

Gordon Brown's Crackers

The PM was asked a tough question a few days ago. One that he wasn't briefed for and one that he felt too unprepared to answer. This question that had Gordon Brown flummoxed was

What is your favourite biscuit?

Asked at a Mumsnet session where the leader was trying to set out his vision for a pan global solution to the credit crunch and demonstrate his communication skills and man of the people credentials, The PM resorted to evasion.

Imagine the tough questioning from Mums twittering the Labour party leader.

"What's your favourite biscuit" Sarah-Jane , Telford.
"I believe in choice. That is why we introduced competitive tendering into the NHS.."
"Prime minister..what is your favourite biscuit?" Lindsay, Stockport.
"Erm .. I can't read that..sorry ..Next question?"
"Gordon..what is your favourite biscuit?Do you like pink wafers" Kylie, Guildford..
"Well, I think the real issue here is about Labour investment versus tory cuts.."
"What's your favourite biscuit. Will you answer the question?"
"If I may just be allowed to answer the question without these interruptions..Now I bailed out the banking sector.."
"Gordon..do you believe that men eat more biscuits than women?" Harriet, Westminster
"I don't have those figures to hand but if you write to me at my office I will have the ONS look into that for you.."
"Sarah is on record as liking plain biscuits-You were inclined towards chocolate. Did you threaten to over rule her?" Mrs Paxman, Oxfordshire.
"I have made my position quite clear.."
Did you threaten to over rule her?" Mrs Paxman, Oxfordshire.
"I canot answer this questions on the grounds of national security.."
Did you threaten to over rule her?" Mrs Paxman, Oxfordshire.
And so on.

Today, after two days working non-stop with various focus groups and spin doctors, cautios not to alienate any section of the community, but anxious to demonstrate strength and leadership, whilst also appearing sensible,frugal, but not miserly the somewhat lame answer to this question of national importance emerged.

"Anything with a bit of chocolate."

Really? He looks absolubtely Cream Crackered to me.
Or maybe, in view of his indecision a Cowardy Custard Cream?

Sunday snooze.. In the comments if the mood takes , biscuits for
George Osborne
Tony Blair
Boris Johnson
Vince cable
Baroness Scotland

Government by Blancmange

The events of Friday 16 October illustrate vividly just what a gelatinous, quivering puddle of blancmange the government have become:

Item: they throw £ 60 million to the luvvies. ("without the prime minister's backing, this wouldn't have happened”, gushes Ben Bradshaw)

Item: they do not vote on the Goldstone Report in the UN, but are at pains to have us know this was not anything as principled as, err, an abstention (script by Armando Iannucci)

Item: they rush to appeal against a court ruling in the Binyam Mohamed case, on the grounds that Hillary Clinton might (or more probably, might not) momentarily frown

Curiously, when we read "Brown to talk tough to public sector", everyone just laughs ...

And we have six months more of this nonsense to look forward to.

ND

+ UPDATE +

And now Gary McKinnon's extradition is to be reviewed ! (it should have been thrown out from the start, of course). What other populist stuff will Gordon's bunker-team come up with ? Six months ..!

For the Weekend - a Clerihew

The elegant Iain Dale
Gets astonishing quantities of mail
But he'd give it all up tomorrow to be
A Tory MP . . .




- good luck mate!
ND (first aired chez Idle)

Hair of the dog asset bubble fueled by QE

The Dow has hit 10,000 and Goldmans and JP Morgan in the US have beaten their Q3 estimates. All is good in the world and so the rally continues. This week and next are key weeks for the stock markets in the US and UK because so many companies are reporting Q3 numbers.

With every company that beats its number, the rally grows a bit stronger. I really did not see this coming (although am long stocks so it is all good). There really should have been a correction by now as markets are very over-bought considering the state of the economy.

There is only one answer as to why the correction has been put off; that QE is such a powerful drug that it has kicked of the mother-of-all-hair-of-the-dog-asset-bubbles. This really gives me the heebie jeebies as it means the Stock markets (and everything like gold, oil etc is correlating at the moment) is going to be on one huge roller coaster for the next few years with massive ups and downs.

White Elephants on the Road to Recovery

The paper Road to Recovery published today by Reform (“an independent, non-party think tank whose mission is to set out a better way blah blah”) makes some vital points that chime with much of what we bang on about at C@W.

Their theme is infrastructure of the steel-and-concrete (and cables) varieties; how it gets built and how very bad we are at it in the UK. In particular, they inveigh against picking winners by government (Mandy and Miliband.E, this means you), money wasted on white elephant projects, and general government interference – particularly in rail, roads and renewables.

So we’re all on the same page.

As an empiricist I like their fund of historical examples of good and bad decision-making (not sure Sizewell C should be in the Good list, though). I like their ‘5 Principles’ and good-&-bad industries list; and I quite like their proposed road to recovery. Have a read: it’s not easily summarized but the paper itself isn’t long.

What can be readily identified is the source of their striking optimism, captured in an assertion - “the impossibility [for the next decade] of big public spending” - and a rousing slogan for the future:

“Tight money = better decisions”

Hmm. You’d like to think so, but impossible is a strong word when governments are concerned, and there are quite a few Tory white elephants on the horizon.

Hopefully, Conservative front benchers will be reading this stuff closely. Up against little Ed Miliband on Newsnight last week, Tory shadow energy minister Greg Clark said he’d be approving 5 GW of clean coal projects within days of taking office. This doesn’t bode well.

Mr Clark, there are several months till the election. Spend the time wisely, & give the Reform paper a read.

ND

Unemployment no worse for now.

Unemployment was not as bad as feared at 2.47 million {7.9%) and youth unemployment remained below 1 million. Reported in the news as good news by Yvette Cooper, as it shows economic growth, it still means 88,000 extra claimants in the last 3 months.
The forecast was only for 2.5 million so its still pretty bad.

But visiting many ,many shopping centres and high streets I was very surprised to note that maybe 40% of stores and food outlets had vacancy signs on them. A mix of full and part-time jobs.
This sudden retail optimism for Christmas must have helped hold down the unemployment figures and will continue to do so until mid January.

Once the busy trading period is over, the end of the VAT cut admin/ticketing nightmare is out of the way and the incredible rise in business rates that are due to fall in april, as is the increased cost of employment with a rise in N.I. contributions, expect a very high % rise in unemployment figures, even against the seasonal norm.
Only a very good final quarter trading can prevent that, and that means real profits instead of the reports of boom sales against soft trading 2008 figures that will dominate the media at Christmas.

As Alan Tomlinson of the insolvency practitioners Tomlinsons said the worst was not over.

"Unemployment will continue to rise as long as businesses continue to struggle, and a significant number of businesses, small and medium enterprises in particular, are still fighting to survive," he said.

"Turnover is depressed, cash flow is uncertain and margins are squeezed and so in order to stay afloat companies are having to make economies, the first of which, unfortunately, is to reduce head count."

Exactly.

We shall see.

Carter Ruck defeated; now is the time for change

I have been a little busy to get involved in the whole Carter-Ruck story. Most of it is shown below in the video. Well done to all involved. It is very important that we protect free speech as our Labour Government has been intent on taking it away.



Another issue it brings up is the role of the judiciary and the judges who cravenly give in to the QC's and barristers in this country.

There is a simple solution, elect them . yes from amongst the qualified, but nonetheless the makers of law should not be above the 'demos' over whom they seek to rule. As it is we have an very imbalanced constitution where the Executive has control of the legislature without recourse and the judiciary is also without the power of the people. No wonder as modern society has grown on this model, we feel we have become more of a police state. Political correctness and such like was bound to thrive.

Perhaps the new wave of technology that is the Internet can re-energise the people to take back some control. However an incoming Government would be well advised to redress the constitutional balance in favour of the people (and how convenient it would stymie some of the worse EU excesses too).

Can the UK avoid deflation?

Quite interesting numbers out from the ONS this morning. UK inflation has fallen from 1.6% in August to 1.1% in September. As we said earlier this year, it was always going to be hard to keep inflation in positive territory due to the energy price spike of last year. From October onwards these pressures will fall away.

In addition, the VAT rise in January will be another small boost to inflationary expectations. So all in all it looks on the one hand as if actual CPI deflation will be avoided; in the RPI world we have had deflation for most of the year.


However just look at the trend in the graph below (last month's ONS figures), it shows inflation falling away in a deep trend. Trends change, but this month this one has become more entrenched not less. We only need 2 more months of this trend to end up in CPI deflation.




So what does this all tell us?



1 - There is no sign at all of any real inflationary pressures, people betting on inflation for next year are way out. The Japan style deflationary scenario lay ahead of us with very low interest rates for years to come. Bad for saving, good for borrowing.

2- The Bank of England will probably increase the level of Quantitative Easing in November having seen these figures as it will be worried about scenario one taking hold - horse, stable door situation for them.

3 - The Pound will continue to drop due to 2. If you are making investments, try some denominated in Euro's or Aussie Dollars.