Carney’s rose-spectacled survey of the economy as Parliament returns does not convince

The UK economy’s ticking over fine: that’s the view of Carney, Osborne’s man.   So that’s alright then.   Or is it?   With time-honoured spin we were treated to the most optimistic scenario on every count, with the flip-side downturn kept carefully out of sight.   His central message was that “there is no clear evidence of deflationary mindset among UK households”, bankers’ jargon for households continue to borrow to buy what they can’t afford.    That matters because the government’s entire economic strategy now hangs on consumer borrowing.   That is very worrying if interest rates rise, which the City is constantly lobbying for, because the hundreds of thousands of households mortgaged to the hilt will be forced to cut their spending and the government’s reliance on consumer borrowing as the main driver of demand will collapse.   That could be the start of the next crash.

The other driver of demand is supposed to be investment, but that is mostly in property, especially expensive prime property in west London.   Then there’s manufacturing (remember Osborne’s ‘march of the makers’ which never materialised like his Northern powerhouse).   It’s now caught in a pincer between uncertainties of demand and a higher exchange which illogically makes exports harder to sell.   He’s also assuming that the UK economy is now insulated from the impact of global economic pressures for him to be able to set our own monetary policies, but that’s a wry assumption which is simply too good to be true.    Another bland assumption is that real wages are now rising, but that neglects the fact that they’ve only been rising for a period of 6 months after a decade of flat or falling wages, and even now have only reached the levels of 2004.

One crucial item of the UK economic outlook which Carney did not even mention – hardly surprisingly given the facts – was the balance of payments.   This has gone from very bad to awful.   At the latest count Britain’s trade balance in manufactured goods – the index of how far we are paying our way in the world – is nearly £110bn in deficit.   This is the worst recorded figure since 1830!   The simple fact here is that this appears on the government’s accounts as a huge debit and consequently a significant increase in the government’s deficit.  Until that trade deficit is reduced by a very large amount, it is difficult to see how the budget deficit, now standing at just under £90bn (it was predicted by Osborne to be zero in his 2010 budget), can be cut by any large margin.


8 thoughts on “Carney’s rose-spectacled survey of the economy as Parliament returns does not convince

  1. They have told nothing but lies ossie with the failed banksters from canada but then the people believe them even that joke letter left by labour in the treasury people believe them you have the national papers even the mirror has proved diabolical read giving out tory propaganda you have bbc channels four and five doing the same the only places left for atleast some truthfull news is rt and the arab news one sorry forgoten its name but how have you all allowed the papers to be taking over by tory supporters the bbc is run by torys who toe the party line yet its we who pay the fee not you has you all claim it back so news is bleak only the tory view so ossie and carney can flip it to look very rosie while the idiots who listen to their lies haven’t a clue yet we pay daily alot with their lives while they pretend austerity for all jeff3

  2. An absolute disaster in the making, the man is not fit for purpose as are many in office.

    As Mr. Meacher so rightly states Osborne “assumes ” and that is all he is capable of “assumptions” not fact nor forward rational thinking.

    Sadly we are all going to suffer a lot more than we bargained for under this government and it’s reckless policies.

    Why we have to tolerate such incompetence from an unqualified individual is beyond comprehension.

    I only wish they could be ousted on a vote of no confidence just take IDS as another example, a total disgrace.

  3. It is very worrying when Yvette Cooper gives the same message. On the channel four hustings last night she repeated her mantra that Jeremy’s PQE “would cause inflation as the economy is growing.”
    For a lady who spent time studying economics I am disgusted. Surely she should recognise that this growth is an economic bubble built on the help to buy inflated house debt and other debt.
    As this article points out, it is so precarious that a rise in interest rates would cause a crisis.
    All of the MMT economists are urging OMF, or PQE, and more deficit spending. Even those who are not MMT economists such as some of the 77 economists who wrote to George Osborne recently state that sectorial balances show households sinking further and further into debt as injections of real asset money (what MMTers call the deficit) are withdrawn. With a trade deficit, further cuts will cause a crisis.
    Why can’t Yvette see this? Is she a deeply indoctrinated neoliberal who thinks that government intervention causes inflation unless it is only done in a drastic crisis and only helpful to the banks?
    Can’t she see that investing in the real economy would prevent a crisis?
    She should look at the NEF report on strategic quantitative easing which shows evidence that it has worked in Canada in the past and elsewhere.

  4. Sandra –
    Cooper was at it again last night on the Sky Hustings, saying Jeremy’s People’s QE is about printing money that we won’t be able to pay back (and interrupting / talking over him to the extent that it was hard for people to hear what he was trying to say).

    I went onto a number of Facebook groups last night and posted a simple explanation of how it would work, which seems to have had some effect. I also made the point that she either didn’t understand economics (in spite of the fact that this was the subject she apparently studied at Harvard) or that she was trying to mislead people; neither of which bodes well for a future leader. I was pleased to read many comment saying people had changed their minds about voting for her.

    Funny how these attacks against Jeremy Corbyn seem to backfire!

    PS There’s a short video that explains how £1 of QE can generate a further £2.80.

  5. Thats whot got us into trouble allowing them to play about with monies yet if jc does bring control back to government of all that was sold off then its proffits will not be going to offshore accounts making more people employed but allowing q easing hum I wonder is it the road to ruin jeff3

  6. Jeffery,

    You’re right to be sceptical about QE. In previous articles Mr Meacher has explained that when QE was created to bail out the banks, only about 8% was used to invest in GDP creating projects. That’s why Jeremy Corbyn proposes a People’s QE, where the money would go directly into GDP creating projects, thus stimulating the economy.

    Yvette Cooper keeps on having a go at him saying it’s about printing money that we won’t be able to afford to pay back. However it has been estimated that every £1 will in fact generate a further £2.80. For example: building houses creates jobs for planners, architects, construction workers, decorators, furnishing and furniture makers, etc, etc, all of whom will pay taxes on their earnings and will also have more money to spend in the general economy, thus boosting jobs even further. A winning formula.

    One of the points she has made, is that PQE isn’t appropriate in a growing economy, which is probably true, but Jeremy has said his is only a proposal and would not be implemented if the deficit has been eliminated by 2020. However our economy is growing at a snails pace and is almost stagnant, so there’s still likely to be a deficit in 2020.

    It’s worrying that, should Cooper become leader and still not understand this, she would continue with austerity, which is one of the reasons Labour lost GE2015. This is the main reason why Jeremy Corbyn is more “electable” than her!

  7. If cooper becomes leader then the partys over for these little tories but oe havent you learned whot ones hasnt got you go without but then thats whots got this country into a mess by allowing greedie banksters to run amoke yet oe I laugh behave you have them doing it over and over again but now you saying if another beats jc to the leadership then they would run under austerity strange last week it was when jc one it now looks like the blair babies are like ossie going to cook the books once again in their favour im afraid very afraid the dark clouds are rolling back once more over this greedie party of mps jeff3

  8. Wanda-
    It is well worth studying Modern Monetary Theory, based on Keynes and Abba Lerner. It gives excellent insights to the monetary system. Government is a sovereign issuer of currency, and can never run out of money, and never default on its debts. It need not issue private debt to create money for stimulus either.
    Read Bill Mitchells blog,
    and watch this.
    A real eye opener.
    I saw Kelvin Hopkins attend a lecture in London on the 27th August given by Bill Mitchell, Anne Pettifor and Richard Murphy. I hope he spreads the word!!!!

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