Liberal Burblings

Archive for the ‘Economy’ Category

It’s been heartening to see the rally in the stock market over the last week or so. Even the BBC have been giving it a bit of fanfare, as they did on BBC1′s Breakfast this morning. Hurrah!

If you go to the heart of the recovery in the States, however, there is a bit of a conundrum at the centre of it.

As CNN’s The Buzz explains, by enlarge, the shares are rising in response to good profit statements from companies such as AT&T and 3M. However, those profits are being obtained by companies reducing costs rather than increasing revenues. Indeed, sales are dramatically down, generally (with some notable exceptions such as Apple).

And there’s the rub. You won’t get a full recovery from recession until sales start rising. Companies are pushing share prices up by making profits through reducing costs. The main way they have reduced costs is by laying off staff. People are unlikely to go out and spend oodles of money if they have been laid off, or if their friends or neighbours have been laid off, frightening them into penny-pinching.

So, the rally is a bit deceptive and unlikely to be followed by a proper recovery until sales pick up and they won’t pick up…..you get the picture.

The leader in today’s FT says that the Tory plans to close down the Financial Services Authority and give its powers to the Bank of England represent unnecessary and counter-productive butchery:

Under the Tory plans…an unchecked and unchallenged Bank may fall into groupthink about financial stability – as it did during the decade before the crisis. The Conservatives propose recruiting a handful of outsiders to sit on a financial policy committee to inject intellectual competition into the monetary authority. But it is unrealistic to expect these few people to spot and counter biases across the Bank’s domain.
All in all – and taking into account the disruption they will cause – these plans are unwise. They are also a distraction from the Tories’ better ideas, such as improving banking competition policy. And they will make the FSA’s task more difficult over the coming year. A little keyhole surgery on the government’s proposals would yield better results than these plans for wholesale butchery.

Sir Fred Goodwin was a guest of the PM’s at Chequers no more than six months before being forced to quit as RBS‘ boss. Is there any greater demonstration that Gordon Brown did not have a clue what was going on with the banks until they fell around his ears?

The words of William Blake might be relevant here (then again they might not be and I just include them anyway because they’re good): “Prudence is a rich, ugly, old maid courted by incapacity.”

It seems that Gordon Brown’s incapacity lost the courtship.

We have seen Lord Myners carrying the can for allowing Sir Fred to get away with a stupendous leaving package. Is it not clear from the Chequers guest list that Sir Fred’s brownie point reservoir, in high places, was well and truly topped up when he needed it? Perhaps a tad more can-carrying should be done by G.Brown Esq.

I have oft repeated my dislike of Robert Peston’s style. I am sure he is a nice fellow and he is very talented, I just put everything he says through a “down-toning machine”. Now Stephanie Flanders. The blue stocking’s blue stocking. She’s someone I trust. And she has been outpouring a string of pearls of wisdom (see what I did there?) on her Stephanomics blog. I throughly recommend it.

Occasionally I get fed up of ‘Today’ or Five Live and resort to Terry Wogan during my morning journey. Today I took an even larger leap and listened to RTE Radio 1′s ‘Good Morning Ireland’ on 252khz long wave. Now that was an experience!

The Irish economy is in a worst state than ours, with the IMF saying it will contract by 13.5% over 2008 to 2010. The government is having to look for a further 5 Billion Euros’ worth of spending cuts (which may well involve cutting social benefits – including child benefits!) on top of 13 billion of cuts already made. And the IMF are breathing down their neck.

On a positive note, the abalone industry is booming! Yes, I had to look it up too. But RTE had a little report from Bere Island in County Cork, where they have a factory farming abalones (photo below). These taste a bit between an oyster and a scallop apparently. In a restaurant in London you can pay £80 for a bowl of abalone-based soup. The producer said that ideally, a full grown abalone should be “about the size of a rugby player’s ear”.

Occasionally I get fed up of ‘Today’ or Five Live and resort to Terry Wogan during my morning journey. Today I took an even larger leap and listened to RTE Radio 1′s ‘Good Morning Ireland’ on 252khz long wave. Now that was an experience!

The Irish economy is in a worst state than ours, with the IMF saying it will contract by 13.5% over 2008 to 2010. The government is having to look for a further 5 Billion Euros’ worth of spending cuts (which may well involve cutting social benefits – including child benefits!) on top of 13 billion of cuts already made. And the IMF are breathing down their neck.

On a positive note, the abalone industry is booming! Yes, I had to look it up too. But RTE had a little report from Bere Island in County Cork, where they have a factory farming abalones (photo below). These taste a bit between an oyster and a scallop apparently. In a restaurant in London you can pay £80 for a bowl of abalone-based soup. The producer said that ideally, a full grown abalone should be “about the size of a rugby player’s ear”.