Jail Bait

Hello there, hope you are all getting into the festive spirit. I personally can't wait for the Mighty Ducks and Home Alone to hit our TV screens, some escapism is in order. I've been trying my best to avoid financial news this week, all this doom and gloom is getting a bit repetitive! So my attention switched towards politics, and Mugabe-esque arrest of Damian Green and the subsequent debate in the House of Commons on the handling of the issue. Thankfully, former Latymerian and Chairman of the Home Affairs Select Committee, Keith Vaz has stepped in and is investigating. The whole issue reflects badly on Zanu Labour, who have continually eroded the civil liberties of our country, undermined Parliament, and squashed free debate.

Anyway back to economics, and the implications of the Pre-Budget Report are still bothering me. The government aims to deal with the economic problems, by borrowing EVEN more money. Everybody knows this is a terrible idea, one that has never worked. Let's leave this problem for now, as it is one that will not be changing for a while! And let's turn our attentions to the USA:

• 530,000 jobs where lost in November. This is considerably more than forecasters predicted (they will be too optimistic at the start of this recession, and when things slowly start to get batter they will be too pessimistic) and October's job losses were revised up by 80,000. Since September a total of 1 million Americans have lost their jobs. And none of these figures include the potential job losses that will occur if General Motors or Ford fail. This chart shows the percentage of people employed, and illustrates how things are going awry in America (the grey areas indicate when the economy is in recession):
  

• Obama is the Messiah....no seriously the whole world, especially Wall Street is looking/hoping that he will save the world economy, and drag it out of the abyss that we are quickly tumbling into. He has promised a "stimulus package" worth $500bn, that will create/keep 2.5million Americans in their jobs. Now if this doesn't work then we are in big doo doo.
• Over here in the UK, we are buying less in shops, with sales in November down 0.4% compared to last year. That may not sound like big news, but this is the first time ever, in the history of this survey, that retail sales have dropped for consecutive months....and this is just the beginning. The abysmal situation facing retailers is best illustrated by M&S launching yet more promotions after it held its second "one day sale".
• I forgot to mention that the Bank of England cut interest rates from 3% to 2%, the lost level since 1951. I expect interest rates will be 0% sometime in the Spring of 2009. The usual calls for the banks to pass on the full rate cut, to keep on lending..... This whole episode has become rather hypocritical. The banks were attacked for lending too much, now they are attacked for lending too little, who would want to be a banker?
  
• If you are angry at the banks for lending too little, put yourself in their shoes. Imagine you have £100million that you can lend; now the economic environment does not look good for 2009, this will mean that people will lose their jobs, and therefore have trouble paying back the money you lent them (so don't lend to them, or if you do, charge them a higher interest rate to cover the risk of them losing their jobs). This is exactly what the banks are doing, it is perfectly rational, and remember banks are not charities. However, if EVERY bank does this, then this will just make the situation worse, and their predictions will become a self-fulfilling prophecy (if no-one lends, no-one can invest in new ideas/businesses, therefore less economic growth, therefore more people lose jobs and so on..).
• You may reasonably reply, "well the government, therefore the people, own the banks, and they should listen to us and give us what we need", unfortunately that is the way to run a profitable bank....personally I need at least £2million! :)
  
• Finally China....some truly worrying news is emerging from there. China's export FELL in November, China's exports grow at over 20% per month, they do not fall. If this is true (it may not be, but the main picture is that exports are at the very lest growing at a considerably slower rate than before) then China is heading for a big slowdown and it needs to implement a fiscal stimulus (China can afford it, as it has huge foreign currency reserves, nearly $2000bn). China needs to grow at around 8% in order to continue the rural to urban migration, and the rapid creation of new jobs. If it does not grow this fast, there will be an increase in social unrest, and I would not be surprised if calls for democratic change grow louder, a revolution could be on the cards.
• Finally this graph shows that we have a long way to go (click on it to make it larger):
  

So any good news??? YES!! The death of consumer culture, or consumerism! Society had become so celebrity focused, so brand conscious, so vulgar....the recession, and future austere times will ensure that this hollow way of life will be buried for if not at least a good while then hopefully forever. It was best epitomised by stuff like this. We can now come together as a society through these tough times, allowing us to have a more meaningful existence. And remember!