This is really a Sunday post but I didn't get around to loading it. It's mostly about the economy with a little bit of personal stuff afterwards.
Last week was the first for a while when controversy about dealing with the economic crisis appeared to outweigh the sense of common purpose - more disunity than unity. The consensus in our sunday paper - we're back with the Observer - seemed to be that Peer Steinbruck's and David Cameron's fiscally conservative approach is unsound and that for the whole world to start saving would be in nobody's best interests. The conclusions to draw from Steinbruck's remarks seem to be that European unity means very little and that the UK media are easily rattled; otherwise they wouldn't have taken comments that were intended for home consumption so seriously (the interview was in Newsweek, not a British paper).
The media also seemed unnecessarily rattled by the news about the US Senate stymying the rescue of the US auto giants. The latest problems of the car makers look to be more a symptom of the downturn rather than a cause of more serious trouble, except, of course, in Michigan. we already knew that the car industry was being knocked by the crisis as a new car must be one of the most discretionary purchases of all. yet, even though we'd heard this bad news already, together with supporting evidence such as the drop in UK car registrations, the media seemed determined to mame the senate vote in new bad news.
The media also seemed dot be doing their best to make the worst of the drop in the value of the pound, In fact, unless the pound drops precipitously so that the price of food and petrol starts rising again, it looks as if the fall in sterling is a good thing; more visitors to the UK, more UK exports and a boost for anyone, any company or its pension fund with foreign assets. It shouldn't even seriously affect the government's ability to borrow money. Presumably world finance is just waiting until sterling has reached its likely bottom and then they'll all pile in to gilts and make pots of money - rather like would-be equity investors are waiting to see if the stock market has really reached its lowest point before they pile in there. Yet John Humphries was like a dog with Dvid Milliband's trouser leg over the exchange rate when he interviewed him on Friday.
I've been re-reading JK Galbraith's 'The Great Crash 1929' (in conncetion with my latest writing project).As the first book of financial history I read it's had a marked effect on me. Galbraith makes the point that, although the speculation leading up to the crash in October 1929 was huge, the target of all the speculation wasn't laughably weird like the tulip mania in 17th century Holland or the South Sea Bubble in the following century. Americans in the twenties were only speculating in investment companies; and there's still plenty of that kind of institution around today - some may think that they're a bit 'old hat' but certainly not ridiculous.
The point is that the speculation in this decade looked even less extravagant than the stock market boom of 1929. Those mortgage backed securities may have seemed abstruse but we didn't think they were the wonder of the age - it was just a mechanism that was good for business. The point was that unlike earlier bubbles, millions of people were drawn into it. So, although I think a lot of the crisis reporting is low on facts and analysis and strong on speculation, it looks as if some leaders haven't yet adjusted their ideas of normality sufficiently. They really do need to work together more on the world economy.
Nicola Horlick was being interviewed on the Today programme this morning and she commented that the Madoff hedge fund had been 'incredibly credible'. Madoff is alleged to have been a pyramid scheme so was an intentional fraud but a lot of the securitised investments also looked 'incredibly credible' until last year.
This particularly applies to the leaders of the European Union, who don't seem to realise how perilous the position of that institution has become. They don't seem to be able to agree on defence, energy security or the economic crisis and there seems to be a great gulf between ordinary people and the EU.
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On a lighter note, I had a great walk last week. I've now arranged for the full accounts to be drawn up (see last week's post). This is happening in the Haslemere area. After I'd met the accountant I went south to the hill above Henley. I started from quite close to the relay station, which is one of the most prominent landmarks in this part of the country, walking westwards, crossing over the A286 and passing Madam's Farm. After about a mile on this lane I turned right (northwards) onto a footpath which seems to have been colonised by badgers. This takes you to the escarpment overlooking Henley and Henley Common - though, as it's covered in trees, overlooking isn't quite the right word. I wanted to avoid hitting the main road (and losing too much height) because I hadn't got long so I turned off the path to the right and picked up another path a little further east. It's called the Serpent Way. this drops you down to the main road just above Henley. There's a bend in the road nearby so you need to listen out for traffic. Having skirted Henley you're on Verdleyhill and in one or two places there are fantastic views to the north east. After that I lost the footpath for a while so I only turned south at Poor's Common. The last part of the walk was along a lane. It was only 70 minutes in all but on a bright winter morning t was a delight.
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I've read one good book in the last week; Ken McClure's 'Hypocrites' Isle'. It's about medical research in Edinburgh. A good read and educative into the bargain.
Pick1
Thanks Melrose, an interesting post. I agree the fall in sterling is actually good news, a strong pound only seemed to benefit Brtish tourists as far as I can see!
I understand your point that we need the world to start spending rather than saving in the short term. But in the long term I don't think Britain and the US can continue to run current account deficits, and the UK seems to be over reliant on financial services and consumer spending. However I think consumerism is the now the most important part of British culture (the new religion?) and I think only redundancy would stop most people from shopping. Therefore I think more should be done to promote an export economy, similar to Germany's because we will probably never be a nation of savers, easier said than done I guess.
Also the world is too reliant on wealth created in the West, the Gulf for its oil exports and the Chinese for their consumer exports. The Chinese need to create their own consumer society they can't rely on the west to create wealth forever; although I don't think their own working class is rich enough yet. Hence the imbalances in the global economy.