UK News
Insights from the UK and beyond
from The Great Debate:
Stubborn national politics drag down the global economy
Four years ago world leaders, meeting in the G20 crisis session, agreed they would all work to move from recession to growth and prosperity. They agreed to a global growth compact to be delivered by combining national growth targets with coordinated global interventions. It didn’t happen. After the $1 trillion stimulus of 2009, fiscal consolidation became the established order of the day, and so year after year millions have continued to endure unemployment and lower living standards.
Only now are there signs that the long-overdue shift in national macro-economic policies may be taking place. The new Japanese government is backing up a "minimum inflation target" with a multi-billion-dollar stimulus designed to create 600,000 jobs. In what some call the “reverse Volcker moment,” Ben Bernanke has become the first head of a central bank for decades to announce he will target a 6 percent level of unemployment alongside his inflation objective. And the new governor of the Bank of England, Mark Carney, has told us that "when policy rates are stuck at the zero lower bound, there could not be a more favorable case for Nominal GDP targeting.” Side by side with this shift in policy, in every area but the Euro, there is also policy progress in China. It may look from the outside as if November’s Communist Party Congress simply re-announced their all-too-familiar but undelivered wish to re-balance the economy from exports to domestic consumption, but this time the promise has been accompanied by a time-specific commitment: to double average domestic income per head by 2020.
The intellectual case for change is obvious. A chronic shortage of demand has developed for two reasons. First, as the IMF announced at the end of 2012, the adverse impact of fiscal consolidation on employment and demand has been greater than many people expected. Secondly, the effectiveness of quantitative easing has almost certainly started to wane. As former BBC chief Gavyn Davies has put it, “the supply potential of the economy is in danger of becoming dependent on, or ‘endogenous to,’ the weakness of domestic demand. ...With demand constrained in this way for such a lengthy period of time, supply potential is beginning to downsize to fit the low level of demand.” It is a new equilibrium that can be reversed only by boosting demand.
But why is there so little optimism when the paradigm shift sought in 2009 is finally starting to materialize? Why do experts continue to downgrade their forecasts for 2013 and even 2014, while discussion so often drifts toward talk of a lost decade? It is, I suggest, because while countries are today adopting national growth strategies, they have missed out on the other part of the 2009 decision -- the necessity of coordinated global intervention. And the big question is whether the momentum for growth can be sustained by national initiatives alone in the absence of global action or will instead melt away once again under the pressure of narrow, self-defeating national policies.
from Felix Salmon:
Why Gordon Brown can’t run the IMF
Gordon Brown is very comfortable at the IMF. He chaired its most important committee, the IMFC, for many years, and he would love to take the top job of managing director. There might be a vacancy soon, if the incumbent, Dominique Strauss Kahn, steps down to run for president of France. But it won't be filled by Brown, now that UK prime minister David Cameron has made his opinions crystal clear.
Mr. Cameron told BBC Radio 4's Today program: "I haven't spent a huge amount of time thinking about this. But it does seem to me that, if you have someone who didn't think we had a debt problem in the UK, when we self-evidently do, they might not be the best person to work out whether other countries around the world have a debt and deficit problem".
from Global News Journal:
Should Norway bail out Iceland?
While not exactly pocket change, Iceland’s $5.5 billion Icesave debt to Britain and the Netherlands amounts to just 1.2 percent of the value of Norway’s offshore wealth fund. For Iceland, it's more than $15,000 per citizen.
Given the two countries’ close historic links -- Norwegian Vikings discovered the Atlantic island where people still speak a version of “old Norwegian” -- speculation about Oslo coming to the rescue has Reykjavik licking its lips.
Ghost of past failure haunts G20
Stopping off in New York during a marathon, 18,000-mile diplomatic offensive before next week’s G20 summit in London next week, British Prime Minister Gordon Brown recalled a conference held in eerily similar circumstances in London 76 years ago.
Sixty-six nations gathered for the June 1933 London Monetary and Economic Conference which was aimed at lifting the world’s economy out of the Depression.
from MacroScope:
Waiting for the G20 to….?
Finance ministers and central bankers from the G20 meet this weekend in the English countryside to discuss the world's financial and economic crisis. With this in mind, MacroScope asked a number of economists what they want to see from the meeting and the G20 summit to follow later and what they expect to see.
The answer, in short, appears to be that much is needed but not much expected.
Paul Mortimer-Lee, head of market economics, BNP Paribas:
"There will be progress on agreeing that regulation needs to be more effective and more effectively co-ordinated on a global scale but I am unconvinced we are going to go a long way further. Some populist posturing on bank bonuses etc should be expected. The less is achieved in other areas the more this will get played up. On bank recapitalisation, they will all agree strong capital is a good 
thing, but in no way do I expect a concerted plan -- it's driven by events and the exigencies of the local banking system.
from Global Investing:
And the next Iceland is…
If there's one thing you don't want to be, it's the next Iceland.
Since its currency, colossally indebted banking sector and economy collapsed in spectacular fashion in October, the country has become a byword for an economy that has truly hit the rocks.
Within weeks, banking problems and currency falls meant Hungary was being hyped as a "second Iceland", at least until a joint International Monetary Fund and European Union rescue package restored some stability.
‘What on earth was Darling talking about?’ – media ask
The media is still confused about the motives behind the Chancellor’s observation that “(the times we’re facing) are arguably the worst they’ve been in 60 years”.
What about the 27 percent inflation and 12 percent unemployment rates the country endured during the 1970s and 1980s, they ask?
-
The Wall
