economic situation is dire

[Ads]

Good news for our exports, considering we're one of their largest import markets.

[snowychap]

Good news for our exports

Possibly, in isolation.

Does it outweigh any potential bad news, though?

Does it help the balance of trade figure (if Germany is exporting a lot more then it might be reasonable to suggest that we're importing a fair bit of it :winkold:)?

[snowychap]

More 'temporary inflation' news - inflation forecast to stay temporarily above target for at least another 18 months.

UK inflation eased to 3.1% in July from 3.2% in June, the third month in a row that prices have risen more slowly.

However, the Consumer Prices Index (CPI) is still well above the Bank of England's 2% target rate.

The Retail Prices Index (RPI) slowed to 4.8% from 5% in June, the Office for National Statistics (ONS) said.

The governor of the Bank of England has written to the chancellor of the exchequer explaining why inflation is still above target.

In his letter, Mervyn King said that although the Bank's Monetary Policy Committee (MPC) had been "surprised" by the recent strength of inflation, this was largely due to "temporary" factors.

These included the return of VAT in January to 17.5% following the reduction to 15% during the recession, past rises in oil prices and higher import prices as a result of the depreciation in the pound since the middle of 2007.

However, he said "there remains a significant probability that I will need to write further open letters to you in the coming months".

Last week, the Bank said it expected inflation to remain higher than forecast in the coming months, largely because of the rise in VAT to 20% in January next year.

However, Mr King said inflation was likely to fall back below the Bank's 2% target in 2012.

In response to the governor's letter, Chancellor George Osborne said there were "significant uncertainties about the inflation outlook".

He also noted that the Office for Budget Responsibility, the independent body set up by the coalition government to assess the public finances and the economy, also foreasts that inflation will fall below 2% in early 2012.

...more on link

[leviramsey]

[Awol]

Government urged to reveal 'true' national debt of £4.8 trillion

The Institute of Economic Affairs (IEA) has calculated that the national debt is £4.8 trillion once state and public sector pension liabilities are included, or £78,000 for every person in the UK.

The IEA raised its concerns after the latest public finances data from the Office for National Statistics (ONS) this week, which showed that the total debt, excluding bank bail-outs, is £816bn – itself a record high. However, the figures strip out the state's pension liabilities in a contravention of standard accounting practices.

Mark Littlewood, the IEA's director-general, said: "The latest official national debt figure is seriously misleading. Looming in the background are pension liabilities. These should be moved to the forefront."

"The ONS should include these liabilities in their calculations. It is shocking enough to see official figures revealing a jump in national debt over the last year from the equivalent of 48pc of GDP to 56pc, but the grave reality is that our real national debt stands at 333pc of GDP."

Nick Silver, an IEA research fellow, said the full figure, including the £1.2 trillion public sector pension liability and £2.7 trillion state pension liability, should be published either monthly or annually alongside the net debt data for reasons of transparency.

The ONS has already begun to assemble the data, publishing the full list of Britain's debts and liabilities for the first time in July, which came to a total of between £3.68 trillion and £4.84 trillion.

Aileen Simkins, ONS director of operations on economic statistics, said the figures would be updated in September and that the ONS plans to compile and release them on an annual basis "to begin with".

"We are in no doubt that there is a bigger number that is also relevant to public data," she said. "We think it is important to have more transparency on public sector debt – looking at figures that go beyond standard monthly net debt and include state and public sector pensions."

The ONS numbers included a £1 trillion to £1.5 trillion liability for the Government's stakes in the part-nationalised banks, equivalent to the relevant portion of their total liabilities, £1.35 trillion for state pension liabilities, and £1.2 trillion for public sector pensions.

Oh dear, that's a lot of cash. Just for some perspective a million is the roughly the number of seconds in 11 days, a billion is the number of seconds in 32 years, and a trillion is the number of seconds since neanderthals last walked the earth.

Maybe this progamme of public spending cuts isn't just an act of right wing savagery designed to smite the poor after all?

[Awol]

Some belated pearls of wisdom from the fat, pie eating brawler..

John Prescott warns Labour Party faces bankruptcy

Labour former deputy prime minister John Prescott has warned his party faces bankruptcy if it cannot tackle its £20m of debt.

Lord Prescott, who hopes to become Labour's new treasurer, made the claim at the Scottish Parliament's annual Festival of Politics.

He said membership of the party was falling dramatically and called for limits on political parties' spending.

During the election the Conservatives were able to spend more than Labour.

Their campaign, particularly in key marginal seats, was part-funded by billionaire donor Lord Ashcroft.

Lord Prescott argued that the next Labour treasurer must be able to stand up to excessive demands for money from the party's leading lights.

He said: "The treasurer has got to say to the central body, you cannot keep on spending, we haven't got it.

"We want a strong treasurer who's involved in the membership drive, putting a proper financial account into the party.

'Cannot continue'

"The politics of organisation are equally as important as the politics of ideas. We forgot about the organisation bit."

Mr Prescott warned the party could not continue to conduct its financial affairs as it had in the past.

He said: "You can go on if you like and just have somebody doing what's always been the way.

"Well, we cannot continue to finance a political party in that way."

My bold: The irony of that statement is incredible. Where were you when your Government was slashing the national finances up the wall, Lord ( ) Prescott?

If Call me Dave follows through on his commitment to limit individual political contributions to 50K then they really are f**ked. The Tories can survive without Ashcroft's millions, can Labour survive without it's main sponsor the Unite Union?

Still, Blair could easily bail them out with 20 million from his own blood money if he wanted to - we all know he's a proper socialist after all....

[avfc89]

Did you know a cleaner makes £1 for the Country every hour? While a banker destroys £7 every hour.

[Awol]

Did you know a cleaner makes £1 for the Country every hour? While a banker destroys £7 every hour.

How exactly does one destroy money (without burning it)?

Seems like your statement might not be accurate to me but I'd be interested to see the source if you have one?

[bickster]

Did you know a cleaner makes £1 for the Country every hour? While a banker destroys £7 every hour.

How exactly does one destroy money (without burning it)?

Seems like your statement might not be accurate to me but I'd be interested to see the source if you have one?

So if he said a cleaner makes the country a pound every hour and a banker loses it £7 every hour you'd be happy. I think its pretty obvious what he meant Jon

[snowychap]

Did you know a cleaner makes £1 for the Country every hour? While a banker destroys £7 every hour.

I'm not sure anyone knows that.

The NEF reckoned that hospital cleaners benefit to society was around £10 in 'social value' for every pound they earned (which, even at minimum wage would put it at close to £60 per hour).

If you thought their opinion (the opinion of the authors of the report) of bankers was poor, you should see what they say about tax accountants. :winkold:

Edit: NEF - A bit rich.

[Awol]

Did you know a cleaner makes £1 for the Country every hour? While a banker destroys £7 every hour.

How exactly does one destroy money (without burning it)?

Seems like your statement might not be accurate to me but I'd be interested to see the source if you have one?

So if he said a cleaner makes the country a pound every hour and a banker loses it £7 every hour you'd be happy. I think its pretty obvious what he meant Jon

Well I don't think that his statement is factually correct even when you say "loses" instead, unless we are talking about the cost of interest and capital from the bailouts. The City is a major contributor in terms of the national tax take.

[bickster]

well question that aspect then, it makes you look petty

[snowychap]

The City is a major contributor in terms of the national tax take.

From the paper linked in the previous post, their calculation was derived from the following:

Factors in value created:

1 Average annual contribution of the City to UK economic activity, as measured by gross value added

2 Tax contributions to the Exchequer

3 Jobs provided in the wholesale finance sector.

Factors in value destroyed:

1 The cost of the current financial crisis in terms of loss to UK gross domestic product and economic capacity

2 The cost of that crisis in terms of the negative impact on the public finances.

Whilst many of their assumptions might well be arguable (perhaps very arguable), it's an interesting idea to try and take a different look at a nett contribution.

[Awol]

well question that aspect then

It may have been unclear but I was trying to, hence two seperate paragraphs.

[avfc89]

Sorry Jon, I meant for every £1 they're paid they create £10 worth of value to the Country. A banker destroys £7 in every £1 they generate.

[leviramsey]

Except being government employees, the entirety of their wage is stolen goods...

[LondonLax]

Except being government employees, the entirety of their wage is stolen goods...

That bankers you mean?

[leviramsey]

Except being government employees, the entirety of their wage is stolen goods...

That bankers you mean?

I suppose the shoe fits both parties now...

[leviramsey]

[leviramsey]

The OECD reports on the EU stress tests' ignoring of sovereign debt exposure

From Blundell-Wignall, A. and P. Slovik (2010), “The EU Stress Test and Sovereign Debt Exposures”:

The EU-wide stress test did not include haircuts for sovereign debt held in the banking books of banks on the grounds that over the 2 years considered default is virtually impossible in the presence of the EFSF [European Financial Stability Facility Special Purpose Vehicle], which is certainly large enough to meet funding needs of the main countries of concern over that period.

The haircuts applied to the trading book in the stress test are shown in the first block of Table 1. The trading book exposures (not reported in the stress test paper) are also shown. The EU wide loss from the haircut is around €26. bn. The contribution of the 5 countries where most of the market focus has been (Greece, Portugal, Ireland, Italy and Spain) is only €14.4bn.

A different picture emerges when we consider the banking book. First it is important to note that the EU banking book sovereign exposures are very much larger than those of the trading book—around 83% of the total. If the same haircuts are applied to these exposures the loss amounts to €139bn, or 12% of the Tier 1 capital of the EU banks at the end of 2009 (and €165bn and over 14% of Tier 1 if trading book losses are added in). The haircuts of the 5 countries of market focus amount to €75.8bn in the banking book, and €90.2bn if the trading book amount is added in. This is around 8% of EU Tier 1 capital of stress tested banks.

...

This study has shown that most of the sovereign debt is held on the banking books of banks, whereas the EU stress test only considered their small trading book exposures. Sovereign debt held in the banking book cannot be ignored however. First, individual bank failures would see latent losses on the trading book realized, a fact that creditors and equity investors need to take into account. Second, and more importantly, the market is not prepared to give a zero probability to debt restructurings beyond the period of the stress test and/or the period after which the role of the EFSF SPV comes to an end. The main reasons for this are: the very large job ahead for fiscal consolidation in a period of weak economic growth; and the apparent difficulty of achieving structural/competitiveness reforms in some countries in a short period of time. The paper also showed that excessively exposed banks in principle can reduce their exposure by not re-financing maturing sovereign debt, with the government funding gap being met instead by the SPV. This would have the effect of transferring sovereign risk from the bank concerned to the public sector.

What happens in less than 2 years when the European Financial Stability Facility Special Purpose Vehicle is no longer providing funding?

The referenced paper