Lordship 516

Now there is another problem looming - long term projects of critical mass with uncertain & unproven actual benefit commencing [HS2 & nuclear generation]. The sheer scale of these investments and also the imported content will cause "crowding out" effects in the UK economy. The construction elements will poach labour that would be better utilized in more urgent projects that are relevant to resolving current outstanding issues[housing, hospitals, schools etc]. There is also the crowding in effect that these mega projects will have on commercial interest rates as banks will charge more for funding as these projects will take up considerable capacity for funding in the market making project finance for other essential investment more expensive. Add to all that the considerable amount of foreign goods [generating sets from GE, specialist nuclear vessels from France & possibly China, train sets from outside the UK [China?] that will be purchased for these projects & this will affect the balance of payments over many years. Government investment can have an adverse effect if it is not directed towards infrastructure that has positive impacts across the board for all economic elements of the economic mix. There appears to be a lack of a cohesive investment policy in Westminster with ministers at all levels adopting an disjointed al la carte approach to project investment without considering the wider competing economic, social & environmental impacts of each project.

Also, at a time of a slow economic activity this is the exact time the government should "Crowd in" in order to replace slow private investment - Osbourne did the opposite. The poor paid for it big time. He is a total illiterate - should have stuck to the paint & wallpaper business. With his degree in Modern History you might think he would realize the consequences & his place in history.

Most of the low inflation & "recovery" effect was mainly due to low energy/oil/gas prices. He also claimed that low bond prices that were the result of quantitative easing were caused by his fiscal policies which demonstrates that he didn't understand the difference between fiscal and monetary policy...DOH..!

Osborne was appointed Shadow Chancellor of the Exchequer by Michael Howard in 2005 after William Hague and David Cameron turned the job down. Osborne promised that his austerity experiment would eliminate the budget deficit by 2015. Actually the UK is still borrowing ?100 billion per year, meaning that he failed big time on this target. Osbourne created more new debt than all the Labour chancellors put together. Osborne forecast that the UK national debt would be ?1.232 trillion by 2015. In reality it rose to to ?1.489 trillion - so he borrowed ?257 billion more than he forecast. Osbourne forecast that the UK economy would grow to ?1.916 trillion by 2015, but it ended up at ?1.822 trillion - this means that he borrowed ?257 more than he said he would in order to make the UK economy ?100 billion smaller than his forecast. Osbourne oversaw the longest sustained decline in wages since records began. The fact is that millions of workers are significantly worse off than they were in 2008 - this is one of the main reasons why economic demand is still so weak and & the so-called recovery is so sluggish. Cameron bigged up everything Georgie Porgie did & as The First Lord of the Treasury is more than equally culpable for the mess that they left behind them - at least Cameron has had the nous to slip out the back door so he can avoid being slagged off in Parliament about it. They also maintained the myth that they were cleaning up Labour's mess when in fact they were creating a far bigger mess than Labour ever did.

Blah Blah Wrote: ------------------------------------------------------- > And that is the view of most same economists > Lordship, as you say. This area of economics is > where Osborne has been very weak and I struggle to > find another chancellor in history who had less > understanding of or less wllingness to act (as I'm > not sure of which Osborne is guilty of) in this > area. Investment is a key engine of the economy we > work under. It has to be a vital measure of those > who manage it for us. What Osborne did was to de-gear the big G element of the UK economic model. This had the opposite effect to the fiscal multiplier effect & is exponential. Big G is the most important economic driver as it is usually spent in areas that private investors will not venture; the government has to act as the waymaker & then private investors will row in behind the projects with further ancilliary investment. The effect is even more profound when the extra investment is spent on Fixed Capital formation as once it is in place it is impossible to set it to one side & the effect will be a long term gain. What must not happen is investment in pork barrell/vanity projects such as HS2 [my opinion]. Keeping up with French & Chinese high speed trainsets is a poor reason to spend money that could be better utilized elsewhere, such as schools, hospitals, care facilities, new homes etc. Projects need to be relevant for the time we live in and to the population that live now.

LondonMix Wrote: ------------------------------------------------------- > Also, Blah Blah, I've looked and investment (at > least on infrastructure and major public service > projects) is not at an all time low. Its been one > of the few areas ring fenced within the budget to > be protected from cuts according to the Guardian. > > > Can you provide some evidence about your views on > investment or explain what you mean by investment > being at an all time low. UK Government Spending as a % of GDP 2015 43.2% UK Government investment as a % of GDP 2015 14% - an all time low. To get back to where it ought to be [view held by most sane economists] it would need another 5% spend on Investment in infrastructure - this would also kick in extra effect of fiscal multiplier which would be above unity during this recessive period. The fiscal multiplier that our esteemed treasury was using up to 2013 @ 0.5 was found to be incorrect & was revised by the IMF in 2012 to be @ 1.06 - the Treasury has since being using this figure. Extra spending on new productive infrastructure would actually cost the economy nothing as it would have a real locomotive effect.

red devil Wrote: ------------------------------------------------------- > Sounds like a name for one of those breakfast > bars. > Brexit - taking our cereal bars back... Quite apt really - 'cos currently Brexit is causing the UK quite an indigestion and will be regurgitated in a form that rabid Brexiteers will have a serious colic over. May will do Brexit but it will be her way - but she has little or no control over anything except immigration; the other 27 will decide on what the market conditions will be & each of them have a vote so Brexit really will be a car crash that is heading for the breakers yard to be picked over & hoping to salvage some spare parts to insert in the second hand UK economy that will take decades to recover.

Quids "Economic growth with low inflation is what we want - and currently have." There is no actual indication of either condition - all the data available is pre -Brexit & the short term excess demand is a classic response to revaluation that soon turns the other way without some policy or fiscal action to counteract the effects. Inflation in the order of 4% to 7% is coming down the line with all the negatives that come with it on the side. The employment scenario is uncertain as there is no data post Brexit to measure it by - let's see the next years performance. Devaluation of the pound did little to help the UK economy in 2008-2013. This time around will most likely be a repeat of 2008/2013 ? the devaluation of the Pound doing little to help the economy again. GDP in $ terms affects a lot of issues such as the capacity to borrow - UK National Debt to GDP ratio has now increased without any extra facility being made available. Also Quids, you are confusing your personal micro scenario with the Macro values - a common problem. The effects are quite disparate. In the real world [real GDP] the economy has most likely contracted . The presumption that devaluation is expansionary is not supported by empirical evidence. Relying on journalism or notional analysis to support the belief that devaluation has an expansionary effect is dangerous & self deluding. The immediate impact of devaluation is to create excess demand for home goods. However this is short lived [the effect has already been seen in the UK high street]. The eventual price increases caused by devaluation will create enough losers in real income terms to reduce effective home goods demand in the medium term; thus, falling output and employment after devaluation are to be expected after the initial period. Also, weak growth in major trading partners ? Europe and Asia - could lead to lower exports. By ignoring income effects, especially those transferring real purchasing power toward economic actors with a strong tendency to save & by redirecting income to high savers, devaluation can create an excess of saving over planned investment [ex-ante] based on forecasts, and reductions in real output and imports[ex-post] based on actual returns . Devaluation gives with one hand, by raising export prices, while taking away with the other, by raising import prices. If trade is balanced, and the terms of trade are not changed, these price changes are in equilibrium. But if imports exceed exports, the net result is a reduction in real income within the country. Output of home goods [and thus total output including employment, and imports], will rise or fall depending on whether trade is initially in surplus or deficit. The UK has had a ?unremitting current account deficit in the past 15 years. This is caused mostly by the deficit in trade in goods, and more recently a deterioration in investment incomes. Since 2012 the UK had developed one of the largest current account deficits [& getting worse since] with the deficit for Q4 2015 was 7.2% of GDP, the greatest on record & Q1 2016 deficit of ?32.6 billion [6.9% of GDP], so lets see the Q2 figures at end Sept & Q3 at end of Dec] - these will indicate whether there is an expansion or contraction in the UK economy & not any notional analysis or journalistic opinions. It is my view that there is a contraction under way - the quants all point in this direction. Only the BoE or the Government can effect a change of this likelihood by policy or fiscal actions. The BoE has deployed almost all of their conventional tools already with very little left in the toolbox, so the most likely action is in the hands of the Government which has already indicated that they are minded to take action by firstly abandoning Osborne?s ridiculous policy of reducing the deficit whilst simultaneously granting himself & his wealthy money worshipping mates tax concessions [totally failed - another micro economist trying to run the economy like a child?s savings account]. QE is a waste of policy as it only results in less than 2.5% ending up in the real economy - it boosts the banks & stock market in number terms only but results in a less valuable pound. QE is hugely inefficient & ineffective - it relies on boosting the wealth of the already-wealthy in the hope that they increase their spending. In other words, it relies on a ?trickle down? theory of wealth. It doesn?t work - the rich are rich because they hang on to most of their money tightly, what they have they hold & wait for revaluation in the future [read Piketty et al] The 2016 Autumn Statement & 2017 Budget will be the defining economic moment of the post-Brexit economy & the most important of Theresa May?s administration. Whatever they do they must stimulate Aggregate Demand & investment, borrow new money directly from the BoE and use it to build houses, renew transport systems, repair infrastructure, invest in energy-saving technologies etc. over all else - otherwise we will have a very significant [recession] depression. Ignore EU regulatory restrictions & those that advocate shrinking the role of the state - we need a life and need it now.

???? Wrote: ------------------------------------------------------- > yup - but my point is we haven't fallen off a > cliff yet and there is no signs of it, in fact > things are going in the opposite direction right > now - in contrast to much of the coverage in the > media and among our 'experts' on here the week > post-Brexit. The line of the pessimist now taken > is yours - on well it will be worse later, from > many who said it would be terrible by now. Of > course we don't know the future but the initial > pessimism was wrong - expect GDP forecast etc to > shift back up again now. > > We'll have markets and labour in 2 years time too > for reasons that have been much discussed already. Quids, GDP is a relative measure and has to be valued on the basis of PPP [Purchasing Power Parity] - right now actual GDP per person PPP in the UK has fallen by more than 10% simply because of the fall in the value of the ? - so where is the gain in a growth rate of 2.2% ? Our assets [both national & personal] have been devalued - is this optimistic ?

???? Wrote: ------------------------------------------------------- > Anyway, back to the economics > > Consumer Confidence up this morning (gfK), > houseprices slightly ahead (Nationwide), when we > add recent highs for FTSE 100 and 250, record > levels of employment, and growth currently above > pre-brexit forecasts - the wheels certainly aren't > falling off yet as many foretold...including some > 'experienced modellers' on here. Appreciate it's > still early days. Yep, quids - its early days; employment figures were for April to June when the market sentiment was in favour of Remain. Already input costs are rising - we are poorer, there are some short term 'gains' but lets see what the July to Sept & Oct to Dec data will bring - I don't think they will paint a pretty picture. Just as the July PMI/Markit fall was a pessimistic reaction, so is the apparent optimistic rebound at 5-points. The pound's rally of 1c is being reported as a 'surge' but it is still down by 10.8% & is expected to reach near parity with the Euro before the end of the year. China's Caixin/Markit index, which had showed signs of recovery in July [50.6] has now shown signs of stagnation in August [50] with output, new orders and stocks of purchase all declined from the previous month - so the outlook worldwide for the next three to six months doesn't look so rosy. The rates of input increases has kept pace with the fall in currency value [food materials - +10.6%, commodities +12% to 15%] and output charges are steadily rising also - manufacturers/suppliers can only hold prices for so long in an already challenging market. It's early days to pass judgement on whether the recent growth will be sustainable - the best one can say is that the recent the weak pound & BoE policy actions have averted a disastrous downturn - for now at least.

bodsier Wrote: ------------------------------------------------------- > People can make their own decision as to whether > they are interested or not. Your thread had 669 > views Rook, that's not bad, do what you want. Thank you bodsier. By the way I'm Lordship 516 & have received 246 views ;)

Thank you Rook, I agree with you and I am receiving the same feedback, with some suggesting that this will happen towards the end of Q3 and going lower as we enter 2017. The September FSR & the Autumn Statement will show us where things might be heading plus some feedback from the Brexit discussions, although I feel that this will be a slow & moody period of political maneuvering all round making it nigh impossible to evaluate.

Rook Wrote: ------------------------------------------------------- > Agreed ??? > > Interestingly GBP got a jolt higher today as MPC > member Weale has just made some pretty positive > comments about future policy (or should I say far > less negative). This is in direct contradiction to > comments by MPC member Andy Haldane late last week > which pushed GBP lower and got very widely > reported on / jumped on > > I noticed that not one media outlet explained that > Haldane is a known "dove" / negative on economy > and has been callign for a cut for 2 years. All > views welcome but balance is very important - > otherwise the knock on effect is that you the > start to see and hear lots of views cultivated > purely on the back on only negativity which I do > think affects sentiment. I almost think the > Guardian in particular is purposely misleading and > guilty of this. I cant look at it. Maybe it sells > more papers or gets more click throughs. > > If it helps, I do believe that we will see a > shallow recession in the UK to reflect the > adjustment period/pullback but the fact is that > markets are nowhere near armageddon. It's interesting that you pointed to the 'jolt' that the ? received yesterday - so what would you attribute today's drop of 1.3% to ? Also, what do you think about the prospects of the ? devaluing to sub $1.25 & when ? I would also like to point out that the 'markets' are not the economy or you might possibly disagree with that.

Rendel & quids Thanks for your kind comments. I hadn't intended to shout - just had left the caps key on by error early in the morning. Its been changed now by the moderator although I notice THE ECONOMY header is still in caps. I don't accept that it's a micro issue in any sense. The ARM deal has connotations for the larger economy which is why I became interested. I usually care less about micro issues, either in the social sense or economic sense. I was attracted to offer my fourpence worth as I read a lot of similar comment that a lot of the time lacked any real logic or scrutiny. Anyway, if people would rather I didn't share my thoughts & analysis I'm not so bothered and can easily find plenty to occupy my time & energy otherwise.

It's always best for some to tackle the man rather than address the actual issues. Of course I use references from elsewhere as everyone does, so whats the problem? I also add my own analysis & commentary. If you disagree why not state your own opinion ? I don't apologise for being an econ wonk of sorts - that is my work. Maybe you prefer notional & emotional responses ?

DaveR Wrote: ------------------------------------------------------- > Next time you feel like opening a thread can it be > something other than re-hashed Bloomberg plus econ > consultancy wonk product? For all our sakes? > > What do you think of M&S vs Iceland, for example? not bovvered !

healey Wrote: ------------------------------------------------------- > Lordship 516: > > "HS2 nor HS3 do not fit this criteria as the > payback is uncertain in both time & yield and in > these austere times ought to be put to one side in > favour of improving existing networks where the > benefits are measurable & can be implemented in > the relative short term." > > Good points but don't agree with this bit - > upgrading existing networks isn't much less > expensive in the long term and adds limited > capacity (often reducing it over the time period > of the works). We can't rely on Victorian > infrastructure forever, so let's get HS2/3 built. Although the project has failed a recent Department for Transport review, on the issues of both costs and the scheduling of work, it appears that the Transport Secretary is minded to proceed with the project. The project started of with a cost of ?17billion in 2009, rising [as it does] to ?30billion & is now projected to cost ?55billion. As we are all to familiar with these projections, by the time contractors are finished with finessing their profits, these costs will undoubtedly rise with the attendant plausible reasons over the course of the project which won't see a single passenger until 2026 [or so]. However, by that time today's decision makers will be long retired on healthy pensions paid for by ever suffering taxpayers. The question is always going to be - What better could we get for ?55billion plus ?120billion in interest over 75 years where 80% of the benefits will accrue to the West Midlands & West London but the whole country will have to pay for it ? Just for starters, would you prefer 150,000 self funding houses that could be widely built where there is current need with no interest burden on taxpayers ?

???? Wrote: ------------------------------------------------------- > I'm questioning your forecasting skills even more > now Lordship :) "100,000 by the 11th" Read what I wrote - "... if it keeps up at the slower rate of yesterday & today it could reach 100,000 by 18th July 18th" I question my own skills every day - forecasting random events is not a skill & the last man that could do so walked on water & died on a cross !

???? Wrote: ------------------------------------------------------- > Dose this really need another thread as it's > already been discussed on another?? It's a bit > spammy Lordship.... The other thread is about the ECONOMY - this is about a specific & important issue - I didn't intend to spam & there is plenty of space. Next time I feel like opening a thread I might ask your approval first.

A fake ID from a bloke in Cameroon is the solution to all your nationality problems !!

edhistory Wrote: ------------------------------------------------------- > Lordship 516 Wrote: > -------------------------------------------------- > ----- > > The number of signatories signing up has slowed > > somewhat but if it keeps up at the slower rate > of > > yesterday & today it could reach 100,000 by > 18th > > July > > 19 July > > 19,656 signatures. > > More signatures than the Save Southwark Woods > petition. Disappointing but the issue is now being actively pursued by many others including a proposed legal challenge that is well supported & funded.

SOFTBANK DEAL Japanese shareholders not so enamored with Softbank acquisition of ARM. Following the recent disposals, shareholders had expected that Softbank would address the debt problems that are inherent in Sprint, the US telecoms company where Softbank owns 80% stake & possibly issue a dividend to long suffering shareholders. Softbank will have to take on a lot more debt [$10billion] to complete the ARM deal and they also have $7.2 billion of bonds due for maturity in 2018 so many shareholders just had enough & bailed out and this has left the Softbank share price down 10%, the lowest price since their 2013 acquisition of Sprint. Japanese ownership may even hinder ARM?s efforts to expand in China, as the Chinese government has some political issues with the Japanese government so if ARM is acquired by SoftBank, China will likely massively invest more to develop their own architecture and maybe some Chinese companies will use alternative architectures with the government already pushing local technology companies to come up with alternatives to foreign-owned technology. So there is a potential high loss of business for the future ARM business - China is not an insignificant buyer of technology, both for huge local consumption and massive export volumes. South Korea is also quite reluctant about doing business with Japan if they can avoid it. Loss of control might see a dash for the door for some/many of ARM's highly qualified workers who would find no problem in getting good job offers elsewhere in the event of any interference with their current operating model or corporate culture. This deal looks good for ARM now but how is Son going to fund the completion ? - more debt, $10billion - and also fund the proposed new jobs that he has promised ? More debt or possibly funded from cashflow - preferable as this would help the current account by reducing outflows but Son appears to be addicted to debt & financial engineering [sprint has $30 billion debt & Son has raised some funds by sale & leaseback of assets]. For the economy the immediate effect on the current account will be hugely positive, contributing ?24.3 billion FDI in a single deal, but it will impact future current account performance as ARM's profits [?340million & set to rise if we are to believe Son] flow out to Japanese banks, year after year. A competing offer could possibly arise but even if the deal goes through unopposed the jury has to be out on the outcomes for a few years as we have to wait & see if Son's strategies & financial management will benefit ARM, its workers, the wider UK economy & Softbank itself. May & Hammond might relish the short term effects of this deal but come to rue the long term outcomes.

rendelharris Wrote: ------------------------------------------------------- > Thanks for that explanation. Interesting. I have > the innocent/ignorant man's view of these things > in general, which is that if there's a reason > foreign investors want it, that's the same reason > we should keep it! Allowing ARM abroad now seems > shortsighted to say the least - it's not as if the > world's going to be needing fewer microchips in > future, is it? Sure, there is an attitude that says this - "If it's worth that to you then surely it must be worth that to me so I won't sell because its still profitable with lots of upside" The CEO of Softbank is known for making risky investments but has recently come under pressure to engage in better financial management. Recently Softbank reduced its ratio of net debt to earnings before interest, taxes, depreciation and amortization to 3.3 times, from 3.8 at the end of March. It will be interesting to see what the effect of the Arm purchase will do to its debt ratio & earnings.Today's statement had little effect on its share price - let's see how tomorrow's performance will go in Tokyo.

rendelharris Wrote: ------------------------------------------------------- > Why is the sale of one of our few outstanding > success stories, in fact our only remaining one, > in the technology field, ARM, to a Japanese > multinational, seen as a cause for celebration? > Part of the new PM's pitch for leadership was that > she would intervene to try to prevent foreign > companies stripmining our profitable industries, > today she proudly announced she had called the > president of SoftBank to congratulate him on his > purchase. Last year ARM made ?414.8M pre-tax > profits...next year those profits will be pouring > into Japanese banks. Can someone explain why this > is desirable please? Hi Rendel, I'm afraid I have to agree with you - not so desirable from the UK perspective but it now a reality &a short term gain. Ex-President Nikesh Arora [ex Google] who was in charge of foreign investment recently left the company due to strategic differences with the CEO/Founder Son & some major shareholders. They had been divesting to reduce debt & a share buy back; it appears there was a fundamental disagreement on strategy which caused Arora to leave, albeit on friendly terms - he is to stay on as a consultant. Mr. Arora?s departure came after he faced a barrage of criticism from investors over lackluster investments, with some shareholders having mounted a campaign to oust him. SoftBank is struggling with slowing profit growth and $80 billion in debt that the company is saddled with following the 2013 acquisition of unprofitable U.S. wireless carrier Sprint Corp. It recently had a round of divestment supposedly preparing for this deal which will improve its cashflow & profits and hopefully their share price also. Interesting times ahead for Arm.

Rook Wrote: ------------------------------------------------------- > Also great news on BBC site who report that Wells > Fargo (one of biggest banks in US) have just > purchased a large office block in the City. Looks > like they believe in future of London as remaining > key to financial services across Europe > > Great to see some real events coming through with > M&A and investment into UK to counter some of the > overwhelmingly negative rhetoric/headlines weve > seen recently These are two good deals for the UK but it is also necessary to look at both in their own contexts. The Wells Fargo deal was done in early March & the bank just got a 7% cut in the price. Wells Fargo is a huge bank & if they had to leave anytime & take a loss they wouldn't even notice it in their P&L or Balance sheet. The Arm deal has obviously been in the pipeline for quite some time being offered to Softbank by the same guy that sold Pilkingtons to the Japanese in 2006. Again the buyer just got a 7% discount on the deal & the Softbank deal is offering to double UK jobs which is an added bonus. I'm sure both buyers will time their closing payments to take any advantage of further devaluations of the ? to get further discounts, so good deals all round. Both are inward investment deals so there is only another ?10 billion or so to go for CRE inward investment for the next quarter but the Arm deal is significant & will add substantially to the Current Account & employment.