Let’s face it. We’re fucked.

I once tweeted growth would not return to levels of 2 – 3% until 2022; it is with deep regret that I am probably right. Britain is the new Japan.

Low unemployment, low inflation, but facing an aging population (which we cannot afford to look after) and low wages. National debt is over £1 trillion and the deficit is 8%; there is literally nothing the government can do.

During the 1930s, the First Great Depression, we targeted the middle classes, home builders and manufacturers with tax cuts. Those options are no longer available to us. All savings have been allocated.

Not only are there no silver bullets, but the arsenal is now completely empty.

We’re fucked; both politically and economically. This is a forlorn read, but it is the honest truth. At some point in the future, Britain will be able to live within her means and the country will become fiscally stable. It is going to take time; probably another 9+ years.

There is no magic wand, money tree or quick solution that will solve everything over night. No choice, but to head straight into this tempest and succumb to our fate.

Read Full Post »

The Eurozone enters “the point of no return”

Euro area government debt hit €8.52 trillion (£5.32 trillion) – 90.0 per cent of the seventeen countries’ total GDP – in the second quarter of 2012, Eurostat said, up from 88.2 per cent of GDP in the first quarter of the year.

Debt 90% of GDP is widely viewed as the point of no return; it is incompatible with AAA status and paints a worrying future. The Eurozone is playing a very dangerous game, which can end at any moment; failure could result in the collapse of the monetary union.

France wants more federal spending, the UK doesn’t. Germany has no intention of financing a major bailout package; Ireland, Greece, Spain and Italy are demanding more flexible austerity packages – the EU has said no. Britain has threatened to veto the EU budget and Germany might cancel the next summit.

There is still no agreement.

Time is running out.

Read Full Post »

Meanwhile in Spain….

Source, credit to Aljazeera

Read Full Post »

Friday 13th marks the birth of subprime 2.0

A day which is culturally foreseen as unlucky (especially if you’re a Knight’s Templar) has seen the government announce its next disasterous policy: “Funding for Lending”

For every £1 of additional lending made by a bank, it will be able to access an extra £1 of cheap funding from the scheme. Those that reduce lending will have to pay higher fees to use the scheme.

They will be able to borrow up to 5pc of their existing lending stock, which will be increased if they expand net lending over the next 18 months.

This economic crisis was created by cheap money and endless credit; you do not rescue the economy with more of the same.  If anything, this is clandestine bailout scheme for the banking system. We are literally paying banks to lend to the wider economy; forgive me, but what has happened to the promise of sustainable growth?

“Funding for Lending” is a recipe for disaster.

Read Full Post »

Watch: 2012 Economic Collapse explained

This video of two animated rabbits is the best explanation for what is happening; the 2008 economic crisis never ended. 5 minutes long and well worth watching (warning: occasional bad language):

Read Full Post »

EU Summit Summary – Good for Britain, so far.

This is brief post to provide some update on the summit. Very good for Britain, the growth plan is quite similar to what the coalition is doing in the United Kingdom; EU will seek to unlock private capital funding, deregulation and lower administration costs for SMEs

EU Draft Summit Conclusions

•  Propose measures such as better mobilisation of EU structural funds for SMEs
• Increased support from the European Investment Bank for SMEs and infrastructure, rapidly examining the Commission’s proposals on a pilot phase for the use of “project bonds” to stimulate private financing of key infrastructure projects
• Increasing support for micro-enterprises
• Reduction of the administrative and regulatory burdens for SMEs.

The Fiscal Treaty itself has several key points:

• Article 15 states the Treaty will be “open to accession” of member states, who do not currently back the agreement.
• Article 16 clearly states it will be based on “assessment” before treaty is incorporated into EU framework. Majority decision required.
• Article 3 states member states budgets should be balanced or surplus.
• Article 8 fines will be 0.1% of GDP. The amounts imposed will be payable to the ESM. Non-EZ will be sent to EU general budget
• Since removing the veto on the use of institutions, especially the Court, the UK can financially benefit from a fine imposed on a member state – even though we are not subject to any levy.

Read Full Post »

£15 billion for the IMF? No, thanks.

IMF are prohibited from bailing out currencies; it is not in the remit. Plus, there is no evidence to suggest the Euro is sustainable and will last the year – without countries leaving. The economic arguments are so negative, that this is huge risk for the British government and taxpayer. There is a reason why the United States are not keen; Congress will not sanction a Euro bailout.

Japan are reluctant, too.

Taxpayers are already facing massive losses with RBS and Lloyd’s Banking Group, so why on Earth should Parliament risk £15 billion?

Read Full Post »

The solution to the financial crisis…

There is none; the answer does not exist. Households, private sector and governments have to de-leverage a colossus amount of debt. Stimulus and inflating the bubble (again) will make the depression even worse-which we are currently in-and would destroy living standards even more.

During the Great Depression, British growth was sluggish and uninspiring. But the economy grew, similar to current standards.  All packages to accelerate growth and employment proved to be insignificant – the economy had to rebalance from the excess credit addiction. You cannot maintaining spending and credit without a massive contraction or, worse case, economic collapse. Japan is entering a second loss decade after a similar housing bubble in the 90s and China phantom construction boom is about to explode.

Europe is becoming the new Japan.

The entitlement culture, corporate and welfare, is too costly for the economy. Corporate socialism should cease to exist under the coalition; a failing business should fail. Government should not bail out the losers and hand the losses to the taxpayer. And those, who think a life on benefits is good choice, need to be dealt with. Taxpayers should not finance the lifestyle of those who refuse to work; this
minority are just as bad as bankers, who demand we write cheques for huge losses.

As I’ve said countless times on Twitter, cuts will continue post 2015 – we have not begun to deal with Britain’s spending addiction. Western economics, with huge deficits and debt levels, have no choice but to advance towards fiscal sanity, whilst hoping the emerging economics can continue to reform and expanded. But there is nothing we-this government-can do.

Read Full Post »

Will this come back to haunt Obama?

“Moving American Forward”  Tour – where the President announced an economic depression was no longer a threat…

Read Full Post »

Afghanistan: We can’t afford it, let alone win

The Ministry of Defence are implementing 8% cuts over four years. A strategic review has been ordered, and carried out, to draft a modern army; instead of preparing an invasion force to march on Moscow.  Currently, we are engaged in two conflicts (Afghanistan and Libya) and on operational standby in the Falklands.

In this climate of austerity, which I welcome, we have spent a near £20 billion on the Afghan war. That’s right, £20 billion – borrowed against the savings of every person in this country. This ludicrous position has to end; we cannot afford to remain in Afghanistan – political or economically. The war must end.

400 troops are to leave this year. 9,500 will remain till 2014 though, and the government will have to pay for the operational costs; which, again, we cannot afford. The country has to live within her means and this has implications on our military and foreign policy. A nation with £1 trillion debt and £150 billion deficit cannot develop a vicious wanderlust to spread democracy and good will to all men.

The madness must stop.

Fact: During the Second World War, economic growth was near 10% and we had full employment. But, Britain’s debt was over 200% of GDP, bankrupt and half a million of our citizens (both serving in the military and non-combatants) were dead after the war. So yeah, wars are fundamentally illogical to prosperity and balancing a budget.

Read Full Post »