The markets are right, yet again....

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14 November 2013

Regular readers will know that I trust the markets far more than any politician or any government bureaucrat.

The new governor of the Bank of England, only a few months ago, set his 'forward guidance' for when interest rates will rise based on unemployment falling to 7%. He predicted that would be in 2016.

The markets immediately scoffed at that and expected a late 2014/early 2015 date for interest rates to rise. This was based on strengthening economic data.

Now the Bank of England have changed their minds and are now agreeing with the market assessment.

This is not unusual, after all what are 'the markets' These are the collective decisions of millions of individual people in their day to day lives. Decisions about how much to spend, how much to save, where to spend and where to save. The markets are difficult to understand and that is where the beauty of the market lays. Nobody fully understands them, nobody can control them, people can influence them (via marketing for instance) but markets are fickle and can bite back. The markets are anarchic, that is what is so good about the markets.

The most dangerous politicians are those who think they understand the markets, think they can control the markets and have a bloated belief in themselves and a willingness to take money from the 'real' economy through taxation because they think they can spend it better than the millions of people who comprise of 'the market'.

Gordon Brown was one such and his many misjudgments turned a cyclical slowdown into the UK's deepest and longest recession. Eurozone politicians did the same as did the Clinton administration in the USA. Economic crises are born through the misjudgments of politicians.

The problem is that politicians think they 'need to do something' when often doing nothing is the best option. 'Doing something' invariably means spending money and that means more taxation, more debt and less economic activity.

Politicians are therefore not really to be trusted..... The choice therefore at election is not one of black and white but more shades of grey. For me and anyone else who does not trust politicians, it is better to vote for those who pledge to spend less money, to do less and who let us keep more of our own money.

Only too often though it is more about keeping out of government those who will spend the most and in so doing do most damage to the economy. There is one thing for sure - the Labour Party, in words, in actions and in the results, offer the worse of all worlds and do the most damage with the most damage being done to those they claim to help. They introduce a minimum wage that locks more and more people into low pay, they claim to want low unemployment but in every period of government have increased unemployment. Consequences, that is what they ignore, consequences..... They do not trust the markets at all and are therefore not worth trusting with anyone's vote.

Guest 1094 wrote:
Well argued case... however , in the interest of 'balance' may I add that it is the present Govt; who have forced (via Job Centers) many unemployed into Zero Hours contracts, vast numbers into part time employment, most of whom need 'Benefits' to 'make up' their wages..and in doing so have manipulated the unemployment figures . A clever ruse, but how beneficial it is to the national economy we don't know.
Guest 655 wrote:
Di - Zero hour contracts are not totally a new thing but are a reaction to the need for employment flexibility and are, in fact, one of the consequences I refer to. Yes there are more part-time, they are at a record high, but the big driver in more recent employment figures has been full time jobs and overall hours worked are increasing. This is no ruse, no manipulation either, but a market reaction to economic conditions. I would suggest that this is much preferable to the mass unemployment alternative. We want more jobs, better paid jobs, more secure jobs and that can only come from a more prosperous economy. The economy must be given the priority, public spending reduced to a manageable level and supply-side reform needed to de-risk and cut costs in employing people. Tax reform to low, flat and simple taxes would also help to boost growth and jobs. To help the low paid as well as growth the minimum wage and tax credits should be abolished.
Guest 745 wrote:
Barry are we seeing recovery or money printing driven recovery ?
Later to get bitten by mass inflation?

To me the only way to get true economic recovery is to re-industrialise the uk following the German model and power it with cheap coal and nuclear.

Forget the party line and just give me what you think.
Guest 655 wrote:
Keith - businesses and entrepreneurs will determine the shape of the economy. Governments do not industrialise or de-industrialise all you get are the consequences of government action. The measures I have referred to are all about improving the UK's economy and enabling businesses to compete and beat the competition. That is how it is done.
Guest 745 wrote:
To beat the competition. workers will need to work for a dollar a day
Guest 655 wrote:
Rubbish Keith. That is a one dimensional perspective, there is much more involved than low wages. High taxes on jobs (National Insurance) excessive red tape designed to protect people in work at the expense of those out of work. High taxes more generally on businesses and individuals - not to mention stupid tiered rates that damage growth. 'Elf 'n safety taken to absurd lengths. Employment red tape and myriads of pointless EU and government diktats. All of these get in the way of our ability to compete along with a massive public sector burden. Did you know that China's public sector costs are under half of the UK? Sensible governments keep the public sector burden to under 30% of GDP while the UK is around 50% (53% at one point). Our government makes life difficult for businesses to compete and without that burden they can go out and win.
Guest 725 wrote:
Barry you said this: "Governments do not industrialise or de-industrialise all you get are the consequences of government action."
You have written some tosh in the past but this takes the biscuit. This is exactly what the government is doing at the moment and only the blind and ignorant fail to recognise this.
This so called recovery is nothing of the sort. It's just a spending splurge helped by money printing. There is no real growth in the economy - it's a mirage and one that is set to backfire miserably in the not too distant future.
Far from cutting our debt this government is spending even more and with their mad environmental policies (you know the one you accuse me of obsessing about and which you consider to be, erm, balanced, de-industrialization is exactly where we are heading.
Don't even think of talking about Cameron having the ability to bring back powers from the EU. That really is delusional.
Guest 655 wrote:
Philip - The day governments build, staff and run factories we will know we really do have a disaster.

You have some kernels of truth in what you say about p.e., power and growth but as usual you are turning molehills into mountains. Balance is something that simply escapes your understanding in every sense of the word.
Guest 725 wrote:
Balance eh? I never had you down as a liberal democrat but it all fits into place now - straight down the centrist middle.
No policies worth having, a nice, cosy, easy listening kinda government doing what the nice folk in the focus groups ask them nicely to do.
Guest 655 wrote:
Philip - very strange that you refer to LibDem and centrist in the same sentence, they are far from centrist and are firmly on the left and in many ways more left than Labour.

I am on the traditional Tory right as you well know and have not spared criticism of the government for giving in to many LD demands but, I do 'balance' that with the knowledge (and experience) that to win a broad base of support is needed for any Party and that means compromise. You are unable to understand the reality of democratic politics.
Guest 725 wrote:
You manage to contradict yourself three times in one sentence Barry. A record.
Guest 655 wrote:
You are desperate Philip.