Tuesday, Dec 29, 2009
Martin Wolf lays it on the line
FT: The challenges of managing our post-crisis world
"...an article published in the FT this week...argues that economics has redeemed itself by rescuing the world economy from the crisis. I agree, but only up to a point. Many economists argued that the measures were unnecessary, or even harmful. Moreover, these extraordinary interventions have not returned the patient to health. They have merely prevented him from dying. We now must heal five chronic conditions, instead of survive last year’s brutal heart attack."
The guvner of UK financial journalists spells out just how far up the creek we really are. This ain't Greg Pytel.
Posted by tpbeta @ 08:44 PM (1692 views) Add Comment
49 Comments
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1. devo said...
Policymakers could not stand idly by while such calamities unfolded. We could not, in such times, even take the survival of civilisation itself for granted.
2. tpbeta said...
"First, we have the ongoing force of the balance-sheet recession in the US, UK and a number of other significant high-income countries. It is overwhelmingly likely that the highly indebted parts of the private sectors of these countries will seek to lower their indebtedness and raise savings over an extended period."
This is very significant. If the FT's number one guru is saying we're in a balance sheet recession, he's basically saying that public spending needs to stay very high for a number of years or we'll get a slump. He's basically saying we're Japan in the 90's. Good news for HPC, if you don't mind waiting a few years.
3. fallingbuzzard said...
Public spending needs to stay high if we want to be Japan
4. tpbeta said...
Yes otherwise our choices are to be (a) Depression America or (b) a country with a heavily devalued currency - much more so than now.
5. devo said...
Alistair Darling's pre-budget report signalled that all of the increase in spending on public services by Labour in its second and third terms of government will be entirely reversed during the next parliament, the Institute for Fiscal Studies said today.
http://www.guardian.co.uk/business/2009/dec/10/pre-budget-report-institute-fiscal-studies
6. tpbeta said...
Then its devaluation or soup kitchens.
7. devo said...
In a radio and television broadcast this evening, the Prime Minister said devaluation would enable Britain to " break out from the straitjacket" of boom and bust economics.
http://news.bbc.co.uk/onthisday/hi/dates/stories/november/19/newsid_3208000/3208396.stm
8. fallingbuzzard said...
Ah, yes, the can't be Japan law. @4, I think both (a) and (b) but not for five years.
9. tpbeta said...
$2.80 to $2.40? Innocent times
In the immortal word of Bachman Turner Overdrive, "B-B-B-Baby, you just ain't seen n-n-n-nothin' yet" Reckon there's a chance we'll get close to dollar parity in 2010.
10. alan said...
The German government is about to launch a stimulation exercise based on borrowing more billions (euros this time).
Just who is going to led all this money? And at what rates?
11. devo said...
8. fallingbuzzard said... @4, I think both (a) [Depression America] and (b) a [heavily devalued currency] but not for five years
Five years? Give your reasons.
12. fallingbuzzard said...
@11, one parliamentary term.
@10, the money will come from pension funds and commercial banks, the rules of the game are being changed to force them to buy more gilts / govt bonds.
13. devo said...
12. fallingbuzzard said... @11, one parliamentary term.
So, the new Labour government will have another five years to put things right.
Don't bet against them doing it.
The City's spell upon the government has been broken.
As smugdog neatly put it....
3 - 2 - 1- and you're back in the room.
14. tpbeta said...
Fallingbuzzard - more like 5 months for the currency.
15. fallingbuzzard said...
yeah thats right
16. shipbuilder said...
To me this article stinks of arrogance and bluster. The economists and their policies saved the world. Laughable. The longer we persist with the view that the world can be modelled on a balance sheet by these fantasists, the more pain we will endure.
17. devo said...
16. shipbuilder said... To me this article stinks of arrogance and bluster.
This is from the FT's number one guru; 'the guvner of UK financial journalists' !
Show some respect, man!
18. tpbeta said...
Seriously I work in financial journalism. Martin Wolf is taken more seriously than any other financial journalist, with the possible exception of Anatole Kaletsky.
For example: http://www.bbc.co.uk/blogs/newsnight/paulmason/2009/11/information_have_you_ever_paid.html
Paul Mason - Newsnight Economics Editor: "I read every op-ed by Paul Krugman and Martin Wolf. ...Wolf I buy on a pink piece of paper that flaps a lot and soaks up coffee. I almost immediately bin the Companies and Markets section of the FT but keep the front bit, ripping out Martin's bit and stuffing it in my pocket. Usually, as an added bonus for my £2, there is more than just Martin Wolf: so I feel I have got a bargain. I would probably pay £2 per article for Martin Wolf online - even if Martin occasionally does not fire on all cylinders I have to read him to be able to have a sensible conversation with, say, the global chairman of a major bank, should I run into him."
He really is the guvnor.
19. devo said...
18. tpbeta said... Martin Wolf is taken more seriously than any other financial journalist, with the possible exception of Anatole Kaletsky.
I will let that sentence stand on its own merits.
20. tpbeta said...
I'm not commenting on their rightness - although I do think he's right. I'm commenting on how seriously the message is taken by people who matter (i.e not us)
21. fallingbuzzard said...
a very serious role for the profession of financial journalism
22. novice pete said...
Anatole Kaletsky! you gota be kidding, whoa mama now I got the serious blues!
23. tpbeta said...
Again - I'm not commenting on their rightness. The significance is that such a big hitter is saying balance sheet recession. People here need to distinguish between Martin Wolf and Greg Pytel.
24. devo said...
"People here need to distinguish between Martin Wolf and Greg Pytel."
I'm new to both, and I've made an independent decision 'on their rightness'.
Unless you realise that a ponzi scheme can't be patched, you won't understand where I'm coming from.
25. fallingbuzzard said...
But the horse bolted three years ago!
26. devo said...
exactly
27. tpbeta said...
Yeah but one is a blogger with zero influence and the other has a massive influence on political and economic sentiment. And as every HPC member (including me) has painfully learned in the last 6 months, sentiment backed by political can sometimes get the upper hand over economic fundamentals .
Of course the fundamentals will win in the end, but in the meantime you need to pay attention to what's actually happening.
28. devo said...
27. tpbeta said... Yeah but one (Greg Pytel) is a blogger with zero influence.
Are you sure about that?
Do you have zero influence?
Do I have zero influence?
(481 views so far.. all without influence one presumes)
29. fallingbuzzard said...
Well he either has zero influence or sees things far too late, or both. I bet that he has great influence within the community of financial journalists but if you're an investment manager, he's just another journalist wannabe economist.
30. devo said...
'if you're an investment manager, he's just another journalist wannabe economist.'
Ah, the new messiahs... of course!
Consider the possibility for a second that the opinion of the leading financial journalists is worth jack sh!t.
31. tpbeta said...
I'm sorry but yes you have zero influence (among decision makers.) Yes I have zero influence. And I work for the mainstream media. Greg Pytel has zero influence. Martin Wolf has loads of influence.
if we had influence, there would be a public backlash against QE. There isn't. Hose prices would be allowed to drop. They haven't.
I don't mean to be rude, but I think it's wise not to confuse being right with having power.
32. tpbeta said...
Devo - of course he might be wrong. The point I'm making (and is this so hard to grasp?) is that lots of people will be influenced by him. Yes - including investment managers. Even the ones that think he's wrong will recognise the shift in sentiment.
33. devo said...
'if we had influence, there would be a public backlash against QE'
To use your example, even those that implemented QE don't understand its effects, so why would you expect a public backlash?
34. devo said...
'lots of people will be influenced by him. Yes - including investment managers. Even the ones that think he's wrong will recognise the shift in sentiment'
And what caused his 'shift in sentiment', pray tell?
35. tpbeta said...
"even those that implemented QE don't understand its effects, so why would you expect a public backlash"
My point is that QE has been endlessly excoriated on this website. If what we thought mattered, it would be impossible for the BoE to have continued the policy.
36. tpbeta said...
"And what caused his 'shift in sentiment', pray tell?"
I don't know why he thinks what he thinks from day to day. What am I - a mind reader?
37. devo said...
"If what we thought mattered, it would be impossible for the BoE to have continued the policy (of QE)"
The public has NO THOUGHT on the matter because they don't understand it and it has not yet impinged on their day to day life, so again... why would you expect a backlash?
38. devo said...
36. tpbeta said..."And what caused his 'shift in sentiment', pray tell?" I don't know why he thinks what he thinks from day to day. What am I - a mind reader?
I didn't ask you to read his mind - I would presume his current thinking would be reflected in his article.
I was asking you to give an opinion on what influenced his change in sentiment.
39. tpbeta said...
"The public has NO THOUGHT on the matter because they don't understand it and it has not yet impinged on their day to day life, so again... why would you expect a backlash?"
I'm not talking about what the public think about QE. I'm talking about the sentiment of people on this website (and like minded people) and how little it has made a difference to public opinion. I said "if we had influence, there would be a public backlash against QE."
If the public were as rabidly against QE as most people on this website (including me) then it probably wouldn't have happened.
40. devo said...
39. tpbeta said.. If the public were as rabidly against QE as most people on this website (including me) then it probably wouldn't have happened.
So, do you think QE will be extended in February?
41. icarus said...
Anybody who thinks (a) that governments and economists have brought us back from the brink of disaster and (b) that 'global imbalances' are the root of our problems cannot be taken seriously.
42. fallingbuzzard said...
journalist wannabe economist
43. devo said...
got you rattled fallingbuzzard?
44. novice pete said...
Got me rattled there devo, thought tpbeta held reasonably well though. Any more to come I wonder.
45. fallingbuzzard said...
nope, just dont take any note of that writer
46. tpbeta said...
Devo wrote : "So, do you think QE will be extended in February?"
Probably not, because I think it likely the January GDP figures will show us out of recession. Wouldn't be surprised if we get QE2 later in the year though, post election.
47. tpbeta said...
Devo wrote: "I was asking you to give an opinion on what influenced his change in sentiment."
I genuinely wouldn't know. Presumably the number of people subscribing to the balance sheet recession argument is reaching, if not a critical mass, then a higher concentration. It's author, the Japanese economist Richard Koo, was in the UK in November and appeared in a number of places. Perhaps that influenced the debate.
48. clockslinger said...
tp...isn't the choice of `spend more or soup kitchens` a bit more limited, and difficult, for us than it has been for Japan? The enormous total UK debt (particularly including household debt) and the lack of foreign buyers for UK bonds complicates things, doesn't it? I don't think the Japanese govnt are buying their own bonds and consumers are carrying nothing like our debt levels but things still aren't that pretty for them. However, it is quite reasonable to suggest that in the UK if you cut public spending, given the amount of the population directly and indirectly employed by that sector (not to mention the endless extortion the private sector is now entitled to enact in perpetuity through PPP) then this will certainly exaccerbate things! Perhaps we think we can do things differently here however. Lots of pain after election (whilst trying to preserve house prices!) for a "recovery" later! (Well, if things are really bad for a few years, anything that follows might feel like recovery)
49. letthemfall said...
Martin Wolf usually delivers a pretty good analysis. I think his point on China is especially important. Their surplus is after all the main source of cheap credit, responsible for the largest house price boom ever, which is still refusing to disappear.