the economy - update

[Earl Aelfheah]

...unless Dave the Cabby is also a proficient amateur Economist. Which he might be of course.

[Earl Aelfheah]

@Red Devil - From the article I linked to:

"It is not good enough to say most forecasts were based on an assumption of an immediate UK notification of Article 50... Brexit uncertainty exists regardless of when the UK informs the EU of its intention to leave "

[Earl Aelfheah]

We have to accept that things haven't been as bad as was predicted. Of course, that's not to say that leaving the EU will not have negative long term consequences, but I think Remainers (of which I am one) have to accept that the dire predictions made about the immediate impacts of a leave vote haven't materialised.

[Lordship 516]

More like Cognitive Dissonance than bias...

Economists cannot forecast illogical behaviour of the herd...excessive borrowing to spend... overoptimistic expectations based on unreal criteria etc., etc. When the chickens come home to roost don't blame the economists - we can only comment on what reality is or might be, either historically or otherwise.

Current account - deficit; current budget - deficit; Government borrowing - all time high; Personal borrowing - all time high; Currency - trending definitely devaluation; Inflation - soon to rise dramatically in certain critical sectors; Health sector - underfunded; Education - underfunded; Housing - underfunded;

Brexit negotiations - not even started, totally unknown even to ministers.

Prognosis - doubtful & uncertain.

What more signs do you need ?

[Jenny1]

rahrahrah Wrote:

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> @Red Devil - From the article I linked to:

>

> "It is not good enough to say most forecasts were

> based on an assumption of an immediate UK

> notification of Article 50... Brexit uncertainty

> exists regardless of when the UK informs the EU of

> its intention to leave "

Logically that should be the case. But have you noticed how financial markets, and the economy as a whole, often don't seem to react to the prospect of events on the horizon, but only respond when things actually happen? I'm not sure why this happens - but I have noticed it before.

[Earl Aelfheah]

I agree Lordship - on the face of it at least, the spending and borrowing binge which has followed the Leave vote seem irrational. It's perhaps not that surprising therefore, that economists failed to predict it.

[Earl Aelfheah]

Jenny1 Wrote:

-------------------------------------------------------

> rahrahrah Wrote:

> --------------------------------------------------

> -----

> > @Red Devil - From the article I linked to:

> >

> > "It is not good enough to say most forecasts

> were

> > based on an assumption of an immediate UK

> > notification of Article 50... Brexit

> uncertainty

> > exists regardless of when the UK informs the EU

> of

> > its intention to leave "

>

> Logically that should be the case. But have you

> noticed how financial markets, and the economy as

> a whole, often don't seem to react to the prospect

> of events on the horizon, but only respond when

> things actually happen? I'm not sure why this

> happens - but I have noticed it before.

With article 50 to be triggered in March, I guess we will soon see whether or not it has an impact.

[red devil]

rahrahrah Wrote:

-------------------------------------------------------

> ''... Brexit uncertainty

> exists regardless of when the UK informs the EU of

> its intention to leave "

Is this implying that even if A50 is triggered, Brexit might not happen?...

[Earl Aelfheah]

It's just suggesting that whether article 50 has been triggered or not shouldn't make a difference in terms of the uncertainty created by a leave vote.

[red devil]

But it does make a difference, uncertainty isn't some form of mathematical constant...

[JohnL]

Seabag Wrote:

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>

>

> I'm guessing you're a subscribed reader rah

>

> Many are not, so the link is pretty useless

Oh I like the FT's economic reasons for a page not being found.

[Lordship 516]

Jenny1 Wrote:

-------------------------------------------------------

> rahrahrah Wrote:

> --------------------------------------------------

> -----

> > @Red Devil - From the article I linked to:

> >

> > "It is not good enough to say most forecasts

> were

> > based on an assumption of an immediate UK

> > notification of Article 50... Brexit

> uncertainty

> > exists regardless of when the UK informs the EU

> of

> > its intention to leave "

>

> Logically that should be the case. But have you

> noticed how financial markets, and the economy as

> a whole, often don't seem to react to the prospect

> of events on the horizon, but only respond when

> things actually happen? I'm not sure why this

> happens - but I have noticed it before.

The markets mainly moved on the basis of receiving huge quantities of QE which flowed more or less directly into the pockets of the banks & larger companies thus boosting the already rich with what was effectively unearned income that was reflected in their share prices. We are not all in it together when the benefits flow - only when they need bailing out.

Others got caught up in the feel good factor thinking that they too were to benefit in this supposed economic uplift & spent & spent & spent.... It is a financial chimera. Too late will they realize that this will not be so - the people who have loaded their credit/debit cards, overdrafts & remortgages with debt will learn a very sorry lesson over the next few years when there are the inevitable price increases, wage stagnation, job losses, cutbacks, less working hours etc that are on the horizon, as various businesses cut back on expenses & beyond that when interest rates do go up as they struggle to pay for their excessive spending.

The Chinese government has recently taken radical action to prevent further capital flight to protect its shaky economy - they are preparing for the Trump economic war. Heretofore [up to 1st January 2017] every Chinese was able to export $50,000 per year with no questions asked. Now they have to justify every purpose for its use including invoices from schools/universities, invoices from foreign companies for supply of goods [permission not now given if similar is available in China]. The Chinese buyers are already defaulting on property purchases in Australia, New Zealand, UK, US, Germany, France, Brazil, Canada. So the marketing in China will come to an end and developers of properties in these economies will suffer a crash in their cashflow - prices will fall. House prices for 2017 will be flat at best & will likely fall. This will affect our economy as they were significant buyers of property & other assets.

This will not offset inflation in the construction industry as much of the purchases are in $ or are energy linked - on top of a flat market we will have inflation at 7%+ in construction [last year 6% - RICS figure]

[Lordship 516]

red devil Wrote:

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> But it does make a difference, uncertainty isn't

> some form of mathematical constant...

Don't know what you are trying to say, but your statement here is true - if it were a constant then it could be computed accurately.

Uncertainty is chaotic, but it can be modeled to reflect particular circumstances - we can apply certain deviation factors that are relatively dependable; the greater the range of the model the less accurate will be the answers you get. But for particular circumstances we can use uncertainty indices to point the way forward for specific issues. The biggest problem is that uncertainty typically rises abruptly but declines very gradually due to issues of trust & confidence.

The BoE has done its best to allay uncertainty but the government has exacerbated an already very uncertain economic environment - most economists are scratching their heads in frustration & foreigners are bemused with the UK government [non]performance.

[Earl Aelfheah]

Chief economist of Bank of England admits errors in Brexit forecasting: https://www.theguardian.com/business/2017/jan/05/chief-economist-of-bank-of-england-admits-errors

[JohnL]

OK Economy people riddle me this

The BOE and Government states we are growing faster than other economies

However when calculated in Dollars our GDP (last years in the link) will have shrunk

and not only that we will have fallen behind France since June 16. Also if the

pound tumbles after May invokes article 50 we could fall behind India putting us

7th in the world (we were 5th). No doubt in France our economic performance is being

reported in Dollars.

Some people say there is a danger of us even being relegated from the G7 and the pound

losing its status as a reserve currency yet everybody saying the economy is great and

the BOE apologising.

https://en.wikipedia.org/wiki/Economy_of_the_United_Kingdom

[Lordship 516]

JohnL Wrote:

-------------------------------------------------------

> OK Economy people riddle me this

>

> The BOE and Government states we are growing

> faster than other economies

>

> However when calculated in Dollars our GDP (last

> years in the link) will have shrunk

> and not only that we will have fallen behind

> France since June 16. Also if the

> pound tumbles after May invokes article 50 we

> could fall behind India putting us

> 7th in the world (we were 5th). No doubt in

> France our economic performance is being

> reported in Dollars.

>

> Some people say there is a danger of us even being

> relegated from the G7 and the pound

> losing its status as a reserve currency yet

> everybody saying the economy is great and

> the BOE apologising.

>

>

> https://en.wikipedia.org/wiki/Economy_of_the_Unite

> d_Kingdom

Nominal GDP is still expected to grow but at a slower rate in the coming years, mainly due to Brexit uncertainty. It has already fallen in Construction, Agriculture & Industry but was offset by increases in Services. However the effect of the devaluation in sterling will lead to a reduction of GDP measured as PPP [Purchasing Power Parity] & this will affect not only the UK ranking but also the UK capacity to perform internationally.

We have already fallen behind France

See the following comment from the Wikipedia article

"In the third quarter of 2016 wages were still 7% below the level they had been at prior to the Great Recession in real terms.[94] The previous 10 years had been the worst decade for real wage growth since the 1860s. Mark Carney, Governor of the Bank of England, described it as a lost decade. Productivity was 16% below the long-term trend."

There are two systemic issues in the current economy 1] Distribution - between regions & income/wealth levels experienced by different levels in society. 2] productivity - Krugman has made the comment "?productivity isn?t everything but in the long run it is almost everything? Krugman was talking about the determinants of growth, and hence living standards, in the economy over the longer-run. The raw numbers, looked at over long spans of history and large cross-sections of countries, suggest Krugman is right.

The effects of any improvement in the economy have been skewed & not everyone can recognize the claimed improvement.

Reserve currency ststus - SDR

The respective weights of the U.S. dollar, euro, Chinese renminbi, Japanese yen, and pound sterling are 41.73 percent, 30.93 percent, 10.92 percent, 8.33 percent, and 8.09 percent. These weights were used to determine the amounts of each of the five currencies included in the new SDR valuation basket that took effect on October 1, 2016 & are set every 5 years but also adjusted daily taking relative currency values into account. The next review is in 2020 & yes, the UK could fall out of being a reserve currency or have its weighting reduced. Sterling has been falling as an influence since the creation of the SDR in 1969.

Andy Haldene is a great economist and has been very hard on himself. He is a down to earth person and well grounded without any airs or pretensions. We all admit to failing to measure the uncertain & irrational elements in the economy & have to do better in the future at evaluating the seemingly irrational micro behaviours that can radically influence the macro outturn. Comparing economic forecasting to weather forecasting is a bit tongue-in-cheek - we don't have the luxury of having multiple satellites broadcasting real-time information that we can use. Much of our data is lagging & the uncertainty data is mainly compiled from social feedback & analysis which is subjective & varied.

Brexit is a unique scenario & is made more so due to the lack of information/direction coming from the government. Who knows what is inside any of their heads - Brexit is Brexit; Red, white & Blue Brexit; more like BS Brexit; - we are in a state of suspended animation until this dormant government actually says/does something comprehensible & that could be made more difficult in the light of whatever the Supreme Court might rule.

We are directionless policy-wise & we can only wait & see.

Addendum - The Economist article on May is telling. They don't make commentaries lightly but their Theresa Maybe tag is hard-hitting & timely. The article was obviously written by a Tory sympathizer but they spared her little and characterized her openly as a personification of Eden rather than a Thatcher reincarnation.

Let's hole it doesn't turn into Theresa Mayday....Mayday...Mayday...

[JohnL]

Thanks :)

I just found this Telegraph article from a year ago, they were gloating about the UK becoming the worlds 4th largest economy and mention France and Italy would be knocked out of the G8 due to their poor economies.

Of course we may still boom after Brexit and I wouldn't be complaining.

http://www.telegraph.co.uk/finance/economics/12068319/Booming-Britain-to-become-worlds-fourth-largest-economy-as-France-and-Italy-face-G8-exclusion.html

[????]

rahrahrah Wrote:

-------------------------------------------------------

> Chief economist of Bank of England admits errors

> in Brexit forecasting:

> https://www.theguardian.com/business/2017/jan/05/c

> hief-economist-of-bank-of-england-admits-errors

Personally I'm nearer this....

https://www.theguardian.com/commentisfree/2017/jan/06/economists-economic-policy-brexit-crash-failure

[JohnL]

Morgan Stanley have it - we need a Goldilocks Brexit, however ...

'Morgan Stanley makes it pretty clear that it sees the "Goldilocks" Brexit ? named for the fairy tale when the character of the same name tries out porridge and beds in a house of bears to find the conditions that are "just right" ? is pretty unlikely'

http://uk.businessinsider.com/morgan-stanley-on-goldilocks-brexit-and-the-british-economy-2017-1

[Lordship 516]

???? Wrote:

-------------------------------------------------------

> rahrahrah Wrote:

> --------------------------------------------------

> -----

> > Chief economist of Bank of England admits

> errors

> > in Brexit forecasting:

> >

> https://www.theguardian.com/business/2017/jan/05/c

>

> > hief-economist-of-bank-of-england-admits-errors

>

>

> Personally I'm nearer this....

>

> https://www.theguardian.com/commentisfree/2017/jan

> /06/economists-economic-policy-brexit-crash-failur

> e

Sir Simon Jenkins [PPE degree] on his usual rant against science & mathematics of any sort. A truly regressive chappie - ex liberal turned small conservative in every way. Tried his hand editing the Evening Standard - moved on. Tried his hand at editing the Times - was moved on by Murdoch due to poor sales. Tried his hand as Political Editor at the Economist - moved on. Writes for the Guardian & Huffington Post. Quite a mover. He's in favour of handing back the Falkland to Argentina. Famous for saying "Wave a banknote at a pundit and he'll predict anything" He's not so slow at taking a few pounds for his own brand of punditry. Gave great parties at the expense of the National Trust. You are welcome to him.

[????]

We know who he is we aren't complete ignoramuses to your towering intellect and fantastic forecasts :)

[Lordship 516]

???? Wrote:

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> We know who he is we aren't complete ignoramuses

> to your towering intellect and fantastic forecasts

> :)

He's a wannabe economist, described as a "professional miserabilist" in The Londonist.

As to my intellect, it is modest but I try to be objective & honest. As to forecasts - these are in Theresa Maybe's waiting room so let's see where we are in 12 months time....

[Jenny1]

I really appreciated Simon Jenkins' books on churches and cathedrals. But I don't find his political journalism very thoughtful or convincing.

[????]

...that's maybe, but i found his views on Economists to my liking

[Lordship 516]

???? Wrote:

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> ...that's maybe, but i found his views on

> Economists to my liking

Take away the economists & what would you have..?

Theresa Maybe. Boris Johnson, Liam Fox, David Davis ...Oh, my days...