War.
War.
In the UK there are many people who are relived that the election is over and as of today, 7th May, a new government is in power. It was a messy affair to get to this stage, a process that has resulted in a hung parliament requiring the formation of a coalition between the Conservatives and surprisingly the Liberal Democrats, not the Labour Party as was thought most likely. In this coalition, these two may be strange ‘bedfellows’ now but one that has been forced into existence by the people and a less than enthusiast Labour Party. So, on with the business of saving the UK; well England, as the N. Ireland, Scottish and welsh administrations want to strong arm the government to safeguard any cuts off their budgets; not that this will go down well with the English shortly to be told to suck up some major financial cuts.
The market has so far been soft on the pound and awaits the Con / Dem package to cure the fiscal imbalance of the credit crises, to move the economy forward and get out of the debt the previous labour government had to create to save the banking economy, for which, amongst a few other things, they have been given little credit by the voters to now be out of office.
Once the emergency budget has been formulated by the Con/Dem pack, there will no doubt be a degree of turmoil to work through as the cuts to public expenditure is felt, primarily in the public arena as jobs losses mount with a spin off to the private sectors which assume it will not be hurt as much. They will be wrong. As some economist would have it, it is a difficulty that has to be suffered to get the economy moving and investment flowing to extract the UK from recession. However pulling back a £168bn deficit will be no easy task and will throw up unforeseen pressures, pressure that will be exacerbated from not being in the Euro with the anxiety it is currently under, putting market weight on the pound. Also Immigration tensions, high imported inflation, much higher energy cost, depressing asset value drag and being disengaged with the EU (as is the Cons policy) will be focal points as will losing US ‘special relationship’ status (if there ever was one) with differences over Iraq / Afghanistan, can, with the lack of engagement with the EU, increase an isolationist view of the UK. Major capital project will be difficult and be apologetically subpoenaed for review as will the nuclear energy/deterrent, aimed to be mothballed. Similar difficulties to gain fiscal prudence will exist in other EU countries with deflation being a serious possibility and continued market tension over the life of the Euro.
Although austerity measures are in the process of being unrolled by a number of EU countries to counter the imbalance of their PSBR, the measures will impact and be felt on the general working populations and such measure, as usual, don’t effect the affluent to the same extent. Wide reduction in income and no wages rise to counter inflation with a loss in ‘white and blue collar’ jobs, disturbs social confidence; this is bound to created stark differences of attitude between ‘class’ to the unfolding of strife.
So has started a sequence of unintended consequences that builds up to pressures that can allow violence to mature as populations realise the enormity of the fiscal bill it has to absorb and one of the prerequisites for violent outbreaks is now unfolding. The fundamentals of economics are now breaking and expose economies to the versatility of market forces complicit on unfettered laissez faire economics that has built and has developed on the ability of borrowing in the assumption that growth will continue and inflation reduce the real cost of debt. If one takes Greece as an example it has ‘prospered’ beyond its means, now being forced to make corrective cuts, a situation that is to afflict many countries and is causing understandable social unrest in Greece; this social unrest and conflict has the potential of spreading. In this financially fraught situation countries are little different than people operating on a house hold income and if following the Mr Macawber idiom – spending more than one has, brings misery.
As a back drop to the unfolding of the coming crisis’s Read John Lancaster’s ‘Whoops’ a hard and humorous poke at the way the political control of the economy of the world has been castrated by the creation of financial instrument that had little substance to them other than in the illusion of mathematical modelling of generating a return on ephemeral ‘instruments’ of investment, ones largely not understood or quantified by the creators of them or government oversight. Both the market and governments have essentially been involved in the destruction of economic prudence and are finding it difficult to undo the gordium knot of the complicit arrangement that both benefited from. Sadly the political expedience of party popularity, spending power and the alliance of laissez faire with ‘the markets, is not a local problem and can be looked upon as a contagion that has to be resolved on a broad nation basis.
Although some effort is being made to restrict some financial activists by the EU and the US (UK is not keen on restrictions) there is naturally a bit of a confrontation with the markets and they are slowly moving against any measure that will curtail their activities, but for the moment, the assumption is that with a rebalancing of budgets the markets will be grudgingly favourable and continue to pick up government bonds to loans at ‘reasonable’ rates so long as it can be seen that a realistic effort is made to reduce debt and be in a position to repay loans when they fall due, without defaulting or rescheduling.
However being in a good position to meet these conditions requires prudence in expenditure, fairness in spreading the pain of retraction, stability and a path of growth. Ideally all four elements are needed in order to gain relief and fund economic optimism. Unfortunately the growth profile of some countries is not in evidence and they have to have substantial growth potential to structure earning income ability. This weak situation does not compare well with the ‘developing’ world which does not carry great debt or social cost and they are in a much stronger position to compete against developed ones if a world revival occurs and as the nature of the market is to maximise profit from weakness, it will exploit any opportunity it sees or can create.
In order to be economically buoyant, balancing budget over a medium period of time will be essential. Given the state of some countries GDP, PSBR, and reducing opportunity for growth, developed countries will, as is the case now, move onto a path of fiscal rectitude and shortly of beggaring thy neighbour with trade tariffs. Although at the same time some limited financial controls will be placed on elements of rogue speculation seen in hedge funds, short selling and naked selling, in general as the market has no inherent principles, acts in discordant conformity to effect monetary gain, engenders protection against loss at any threat to its dealing ability; it will eventually struggle back with new manipulative instruments, unless it is re-educated.
It might be thought that considering the massive different states funding required to bale the markets out to save a global collapse and the near penury to be placed on element of populations, that the markets operant’s are the new world enemy being the instigator of the ephemeral hyped economic wealth now dissipating and the massive distortion they cause in global trade value that will drive political expedience to respond in a country’s self interest and unless the G20 are prepared to “kettle” them the eventual outcome can only be war.
© Renot 2010
75101517
In the UK there are many people who are relived that the election is over and as of today, 7th May, a new government is in power. It was a messy affair to get to this stage, a process that has resulted in a hung parliament requiring the formation of a coalition between the Conservatives and surprisingly the Liberal Democrats, not the Labour Party as was thought most likely. In this coalition, these two may be strange ‘bedfellows’ now but one that has been forced into existence by the people and a less than enthusiast Labour Party. So, on with the business of saving the UK; well England, as the N. Ireland, Scottish and welsh administrations want to strong arm the government to safeguard any cuts off their budgets; not that this will go down well with the English shortly to be told to suck up some major financial cuts.
The market has so far been soft on the pound and awaits the Con / Dem package to cure the fiscal imbalance of the credit crises, to move the economy forward and get out of the debt the previous labour government had to create to save the banking economy, for which, amongst a few other things, they have been given little credit by the voters to now be out of office.
Once the emergency budget has been formulated by the Con/Dem pack, there will no doubt be a degree of turmoil to work through as the cuts to public expenditure is felt, primarily in the public arena as jobs losses mount with a spin off to the private sectors which assume it will not be hurt as much. They will be wrong. As some economist would have it, it is a difficulty that has to be suffered to get the economy moving and investment flowing to extract the UK from recession. However pulling back a £168bn deficit will be no easy task and will throw up unforeseen pressures, pressure that will be exacerbated from not being in the Euro with the anxiety it is currently under, putting market weight on the pound. Also Immigration tensions, high imported inflation, much higher energy cost, depressing asset value drag and being disengaged with the EU (as is the Cons policy) will be focal points as will losing US ‘special relationship’ status (if there ever was one) with differences over Iraq / Afghanistan, can, with the lack of engagement with the EU, increase an isolationist view of the UK. Major capital project will be difficult and be apologetically subpoenaed for review as will the nuclear energy/deterrent, aimed to be mothballed. Similar difficulties to gain fiscal prudence will exist in other EU countries with deflation being a serious possibility and continued market tension over the life of the Euro.
Although austerity measures are in the process of being unrolled by a number of EU countries to counter the imbalance of their PSBR, the measures will impact and be felt on the general working populations and such measure, as usual, don’t effect the affluent to the same extent. Wide reduction in income and no wages rise to counter inflation with a loss in ‘white and blue collar’ jobs, disturbs social confidence; this is bound to created stark differences of attitude between ‘class’ to the unfolding of strife.
So has started a sequence of unintended consequences that builds up to pressures that can allow violence to mature as populations realise the enormity of the fiscal bill it has to absorb and one of the prerequisites for violent outbreaks is now unfolding. The fundamentals of economics are now breaking and expose economies to the versatility of market forces complicit on unfettered laissez faire economics that has built and has developed on the ability of borrowing in the assumption that growth will continue and inflation reduce the real cost of debt. If one takes Greece as an example it has ‘prospered’ beyond its means, now being forced to make corrective cuts, a situation that is to afflict many countries and is causing understandable social unrest in Greece; this social unrest and conflict has the potential of spreading. In this financially fraught situation countries are little different than people operating on a house hold income and if following the Mr Macawber idiom – spending more than one has, brings misery.
As a back drop to the unfolding of the coming crisis’s Read John Lancaster’s ‘Whoops’ a hard and humorous poke at the way the political control of the economy of the world has been castrated by the creation of financial instrument that had little substance to them other than in the illusion of mathematical modelling of generating a return on ephemeral ‘instruments’ of investment, ones largely not understood or quantified by the creators of them or government oversight. Both the market and governments have essentially been involved in the destruction of economic prudence and are finding it difficult to undo the gordium knot of the complicit arrangement that both benefited from. Sadly the political expedience of party popularity, spending power and the alliance of laissez faire with ‘the markets, is not a local problem and can be looked upon as a contagion that has to be resolved on a broad nation basis.
Although some effort is being made to restrict some financial activists by the EU and the US (UK is not keen on restrictions) there is naturally a bit of a confrontation with the markets and they are slowly moving against any measure that will curtail their activities, but for the moment, the assumption is that with a rebalancing of budgets the markets will be grudgingly favourable and continue to pick up government bonds to loans at ‘reasonable’ rates so long as it can be seen that a realistic effort is made to reduce debt and be in a position to repay loans when they fall due, without defaulting or rescheduling.
However being in a good position to meet these conditions requires prudence in expenditure, fairness in spreading the pain of retraction, stability and a path of growth. Ideally all four elements are needed in order to gain relief and fund economic optimism. Unfortunately the growth profile of some countries is not in evidence and they have to have substantial growth potential to structure earning income ability. This weak situation does not compare well with the ‘developing’ world which does not carry great debt or social cost and they are in a much stronger position to compete against developed ones if a world revival occurs and as the nature of the market is to maximise profit from weakness, it will exploit any opportunity it sees or can create.
In order to be economically buoyant, balancing budget over a medium period of time will be essential. Given the state of some countries GDP, PSBR, and reducing opportunity for growth, developed countries will, as is the case now, move onto a path of fiscal rectitude and shortly of beggaring thy neighbour with trade tariffs. Although at the same time some limited financial controls will be placed on elements of rogue speculation seen in hedge funds, short selling and naked selling, in general as the market has no inherent principles, acts in discordant conformity to effect monetary gain, engenders protection against loss at any threat to its dealing ability; it will eventually struggle back with new manipulative instruments, unless it is re-educated.
It might be thought that considering the massive different states funding required to bale the markets out to save a global collapse and the near penury to be placed on element of populations, that the markets operant’s are the new world enemy being the instigator of the ephemeral hyped economic wealth now dissipating and the massive distortion they cause in global trade value that will drive political expedience to respond in a country’s self interest and unless the G20 are prepared to “kettle” them the eventual outcome can only be war.
© Renot 2010
75101517
posted by Renot at 11:46 pm
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