Its that time of year....
9 January 2013
... for my main investment conference in The City.
... for my main investment conference in The City.
Over the next couple of days I will be meeting with economists and fund managers and hearing what they are saying about the world's economic prospects. This is very different to a political conference as this is not just waffle, this is serious stuff. It is a chance to look behind the headlines and see the broader picture, sometimes we get a very different picture of the economy to that portrayed by politicians in the media.
It is this difference between what politicians say and do compared with reality that got me thinking today.
Back in the 'olden days' - 20 years ago, we were told that it would all be OK if the Bank of England were given their independence to run interest rate policy instead of it being controlled by the politicians. We all know how badly that turned out - politicians after all set the terms of that independence and got it wrong. What with screwing up fiscal policy as well we are all truly paying for the mistakes of politicians.
I sometimes think that it would be better if all economic decision making were taken out of the hands of politicians all together. With our political leaders being banned from setting tax and spend policy, banned from setting deficit budgets of more than a certain level and banned from interfering in interest rate setting. The problem here though of course, as just like 1997 and Bank of England independence, politicians would still be setting the terms and we can be certain they would mess it up.
The brief for the economy should be growth and prosperity with clear limits on what politicians can take from it so they cannot screw it up. We all depend ultimately on the wealth generated by the economy. If politicians want to spend more then we need economic growth to cover the extra cost, not just have the money taken from us in extra taxes.
Spending money is the easy bit, we can all have our pet projects to spend it on. Buying popularity is just so easy for politicians and even when that spending is on something worthy, unless UK PLC can afford it in a sustainable way, then the benefits of that spending is just an illusion. We see this now with the way the excessive spend, spend, spend mentality of those terrible 13 years of Labour rule have driven the economy into the ground.
Warren Buffet (above) spoke himself on such a theme recently. He said the deficit problem could be solved if politicians were to be kicked out of office if ever the deficit were to rise over a set (very low...) level.... He is right - politicians are to blame for all our economic ills so why on earth are so many people so keen to just place more and more power and influence in their hands? We should be limiting their capacity to do damage.
- Politicians ruin everything Barry, they waste our money, lie to us and start wars. The vast majority enter politics because they've failed at everything else.
- "We all depend ultimately on the wealth generated by the economy."
Which is why we should ensure that all businesses pay their full share of tax.
He is a card, that Warren Buffet...
http://www.snopes.com/politics/quotes/buffett.asp
There is a link to 'the 28th amendment' within that "Barbara 'warren piece' Mikkleson" article, also worth a read. - Tom - your problem is that you see the economy only in terms of tax. Stuff tax, it is a necessary evil and is economically inhibiting with some taxes more of a problem than others.
Yes, tax is necessary, I am not saying it isn't but in the UK and in much of the Western economies tax is far too high and far too complex and, as such, it is a negative influence over the economy.
Lower simpler taxes will be fairer and more economically sustainable. Economic prosperity must come before tax and most certainly before public spending. - Pie in the sky, Barry. When tomorrow comes we shall all be drowning in the promised jam.
First let us ensure that all of profit's fish that are caught in our economic pond are landed within these shores, irrespective of how long a pole is used or from where in the world the line is cast. - Are economists any better than politicians Barry?
I'd take notice of anybody pre 2008 predicting the bust, the rest were as oblivious as the useless politicians. Most economists are politically biased and to a great extent will say what they're paid to.
The truth is that our general standard of living can only deteriorate from hereon in, for too long we've spent too much money and its pay back time. - David, I was 6 months ahead of any economist in predicting the big dip. July 2007 I started boring my customers about it, Barry will back me up on that. Jan 2008 I laid off all my full time staff and took over the kitchen myself. Saved us from disaster.
- On seeing the title, Barry, I thought you were referring to Silly Season, when bankers decide their own bonuses. But that's in February!
- David - there are two kinds of economist in my experience. Those academic economists, like David Blanchflower (Ball's mate) who don't know the time of day and others who are involved in the practical end of things.
Incidentally, Blanchflower was a speaker at one of these conferences when he said 5% inflation per annum for 5 years was a price worth paying. He went down like a lead balloon, everyone in that conference had clients on fixed incomes who, in that scenario, would face what would be compounded a 30% plus drop in their buying power over those 5 years...
So yes - there are different kinds of economist.
The problem that arises though is when the politicians ignore what even their preferred economists say. Brown, that Keyseyan, who totally ignored the part of Keynes that did not suit him by allowing the deficit to increase during the growth phase of the economy - the opposite to what Keynes said.
So yes, even the 'wrong' type of economist, if running things true to their theories, is better than a politician who is only interested in what suits him to buy votes and a selfish need to feel good when spending other people's money driving the economy into the ground.
Yes Peter, you did. But then there were quite a few people signalling warning bells and being ignored from before even 2005. - I had been worried for some time about consumer debt levels especially the way people were being offered 120% mortgages. The clinchers for me were firstly the Northern Rock failure and secondly Blair heading for the exit and passing the parcel to Brown.
- Expect a run on the banks. Forget the £85,000 promised by the Government to cover any losses. Once the balloon goes up it will all snowball faster than anyone can say "Quick get a picture of me with that Husky" and by then it will be too late. Sovereign default and all that goes with it. Sorry to be the bearer of bad news but that's the way it is.
No growth, a government committed to wasting over £32 billion on HS2, an energy policy which will destroy our economy, more debt, more borrowing and a leadership with no vision.
It's going to get bleaker than anyone can possibly dream of.