by Richard Partington Economics correspondent on (#5T1NC)
People investing in the cryptocurrency should be aware of risks, central bank saysThe Bank of England has said that bitcoin could be “worthless” and people investing in the digital currency should be prepared to lose everything.In a warning over the potential risks for investors, the central bank questioned whether there was any inherent worth in the most prominent digital currency, which has soared in value this year to close to $50,000 (£37,786) a piece. Continue reading...
Economic body says Britain has dealt well with Covid-19 but new variant poses a new threatThe chancellor, Rishi Sunak, should be drawing up contingency plans for a mini-furlough in the event that the Omicron variant forces the government into closing parts of the economy, the International Monetary Fund has said.In its annual health check of the UK, the IMF warned the fast-spreading mutation of the Covid-19 virus posed a fresh threat to the economy after what had been a “challenging year”. Continue reading...
by Richard Partington Economics correspondent on (#5T0Y4)
Jobless rate falls to 4.2% as number of workers on company payolls rises by 257,000Unemployment in the UK fell in October despite the end of the furlough scheme, according to official figures, as companies continued to hire amid record numbers of staff vacancies.The Office for National Statistics said the unemployment rate fell to 4.2% in the three months to the end of October, representing about 1.4 million people, down from 4.3% in the three months to the end of September. Continue reading...
by Richard Partington Economics correspondent on (#5T0J9)
Bank wants to scrap rule that borrowers must be able to afford rate rise of three percentage pointsThe Bank of England has announced plans to ease mortgage lending rules in a move that could help thousands of first-time buyers get on to the property ladder.The central bank said it wanted to remove a requirement that forces borrowers to be able to afford a three-percentage-point rise in interest rates before they can be approved for a home loan. Continue reading...
Paul Volcker’s shock therapy in the 80s hollowed out American manufacturing and permanently boosted both Beijing and Wall StreetDown the ages there has been no shortage of central bankers intent on squeezing inflation out of the system, but Paul Volcker is in a class of his own.Appointed by Jimmy Carter in 1979 when the US annual inflation rate was well into double digits, Volcker administered brutal shock treatment to the world’s biggest economy, at one point pushing official interest rates above 20%. Fans of the 6ft 7in (2.04m) chairman of the Federal Reserve continue to be in awe of his single-minded approach to price stability. Volcker is the inflation hawks’ hawk. Continue reading...
Voters can spring surprises at any time. This is not a time for Remainers to despair. It is never time for thatDuring the closing stages of Margaret Thatcher’s premiership, I said to the Conservative MP John Biffen: “I think Mrs Thatcher must be suffering.”This was surprising, coming from such a long-term critic of Thatcherism as myself, but so was the reply from Biffen, a former member of her cabinet and also, for years, her leader of the Commons. “Yes,” he replied, “but is she suffering enough?” Continue reading...
Despite new restrictions, some experts say rising inflation and vacancies are good reason for the Bank of England to take a lead this weekThere is a contrarian view of Britain’s economic outlook. Those who subscribe to it argue that despite fresh government restrictions to combat the Omicron variant, the recovery is robust and the Bank of England will have to raise interest rates when it meets this week.It is a minority view in the City, but it could find favour inside Threadneedle Street when members of the nine-strong monetary policy committee (MPC) gather, and bring a surprise increase in the base rate from 0.1% to 0.25%. Continue reading...
A new study on the movement suggests that its abiding legacy might be as an insultNo one admits to being a “neoliberal”. You cannot vote for the Neoliberal party or join a neoliberal club. Like 21st-century fascism and religious fundamentalism, neoliberalism is a movement without declared adherents.If you call opponents “fascist” or a “fundamentalist”, however, at least your audience knows you are condemning them. A “neoliberal” though? Most people won’t know what you are talking about, but will guess that it doesn’t sound such a bad thing to be. The exceptions will be the minority immersed in leftwing thought. They alone are primed to shudder at the sound of the word. Continue reading...
Supply chain disruptions have left many UK households waiting months extra for deliveries of sofas and tablesThe £800 Townhouse dining table is an “elegant, sturdy classic” built for gathering round. Marsha Moore’s £20 melamine camping table, with a surface area of less than a square metre, is not, and certainly not where she imagined eating Christmas dinner.But Moore, a writer who recently moved into an unfurnished flat in London with her husband and son, is one of many Britons trapped in a furniture nightmare before Christmas after deliveries of key pieces such as sofas, tables and beds were delayed by supply chain disruption. Continue reading...
For six months in a row prices increased across many sectors, including gas, food and housingThe US inflation rate rose 6.8% over the last year, the highest increase since 1982, the Bureau of Labor Statistics reported Friday morning.Inflation rose 0.8% in November after rising 0.9% in October. Price increases were seen across many sectors, including gas, food and housing. This is the sixth month in a row the US is seeing price increases. Continue reading...
No government has openly embraced modern monetary theory, but many of the radical doctrine’s core principles are informing today’s policy decisionsToday, citizens are unwitting participants in a covert policy experiment. It embraces the idea of higher government spending without the necessity of increased taxes. While modern monetary theory (MMT), the doctrine, has obvious appeal for politicians, irrespective of economic religion, the long-term consequences may prove problematic.A state, MMT argues, finances its spending by creating money, not from taxes or borrowing. As nations cannot go bankrupt when they can print their own currency, deficits and debt don’t matter. Accordingly, governments should spend to ensure full employment, guaranteeing a job for everyone willing to work. Alternatively, though not formally part of MMT, governments can fund universal basic income (UBI) schemes, providing every individual an unconditional flat-rate payment irrespective of circumstances. Continue reading...
Xi Jinping’s mission is not only to control the housing bubble, but rein in untethered industries and foreign capitalChina’s economy has become heavily dependent on property development over the last decade. High-rise apartments have mushroomed across hundreds of cities to house a growing white-collar workforce, while glass and steel office blocks are dominating city centres, mimicking Shanghai’s glittering skyline.Valued at more than $50tn after 20 years of rapid growth, Chinese real estate is worth twice as much as the US property market and four times China’s annual income. Continue reading...
Super-rich have grabbed an increasing share of the world’s income, economists’ study findsGlobal inequality is as marked as it was in the early 20th century pinnacle of western imperialism after the capture by the super-rich of an increasing share of the world’s income, a new report has shown.A study by a group of economists including Thomas Piketty and Emmanuel Saez said 30 years of the globalisation of trade and finance had widened the gap between rich and poor. Continue reading...
Beijing to increase business lending and build more affordable housing, but reports say property giant has missed a key bond repaymentChina’s politburo has signalled measures to kickstart the faltering economy as the crisis gripping the country’s debt-laden property sector continued to blight prospects for growth.President Xi Jinping’s senior leadership committee rubber-stamped a plan from the central bank on Monday for more targeted lending to businesses and outlined support for the housing market. Continue reading...
BoE monetary policy chief Ben Broadbent says pressures will include rise in energy price capThe Bank of England’s monetary policy chief has said inflation is likely to soar “comfortably” above 5% next spring when the energy regulator Ofgem raises a price cap affecting millions of households.Record high levels of vacancies are also likely to persist for longer than previously expected as the jobs market adjusts to changes in the economy brought on by the pandemic, said Ben Broadbent, the central bank’s deputy governor with responsibility for monetary policy. Continue reading...
The head of ‘levelling up’ should be on a mission to direct funds to struggling areas – but No 11 is a strong adversaryMichael Gove has become the British economy’s Mr Fixit. While Rishi Sunak gives the appearance of someone who obsesses about little other than how and when to reduce the national debt, it is left to the MP for Surrey Heath to chart the government’s next steps.As the new boss of Whitehall’s most clumsily renamed department – for “levelling up”, housing and communities (DLUHC) – it is Gove and not the chancellor who appears to have the job of joining the random dots on Boris Johnson’s map to a brighter, more equal and more planet-friendly future. Continue reading...
Only after building strong industries can countries safely open up to international competition, says Richard Ross, and power imbalances are keeping people poor, writes Benny DembitzerYour editorial cites India and China as countries that opened up their economies gradually to international competition (The Guardian view on the WTO talks: poor countries can’t be kept poor, 29 November). This has been the way to development of pretty well all countries.Japan’s economic miracle after the second world war was based on protecting its economy with quotas and import tariffs, and directing investment to industries such as motor vehicles and electronics to enable them to develop, safe from competition. Only when these industries were strong were their firms permitted to enter international markets. Other Asian countries such as South Korea and Taiwan followed suit. Continue reading...
Total is less than half the growth that economists expected while unemployment rate dropped to 4.2%The US economy added 210,000 jobs in November, less than half the jobs growth that economists had expected, in a report that was compiled before the discovery of the Omicron coronavirus variant that now threatens to derail the economic recovery from the pandemic.The unemployment rate dropped to 4.2% as employers added jobs in business services, transportation, warehousing and construction. The overall gain was less than half the 500,000 plus jobs that economists had expected to be added over the month. Continue reading...
Omicron’s arrival highlights how each wave of Covid-19 embeds structural changes in the way the economy worksChristmas parties are being cancelled. Restaurants are reporting an increase in the number of diners’ no-shows. The first tentative signs of the impact of the Omicron variant on the economy are starting to emerge.True, the relatively modest drop in the number of diners in the week up to 29 November might have had as much to do with the storm Arwen as with consumers taking fright at the possibility of a new wave of the pandemic. Continue reading...
Global gateway infrastructure strategy aims to counter belt and road initiative impact in Asia, Africa and EuropeThe EU’s plan to invest €300bn (£255bn) in global infrastructure will be better than China’s belt and road initiative, the European Commission president has said, as she announced a strategy to boost technology and public services in developing countries.Ursula von der Leyen said the EU’s global gateway strategy was a positive offer for infrastructure development around the world and based on democratic values and transparency. Continue reading...
Some investors accuse European Central Bank to allow inflation to run out of controlInflation across the 19-member eurozone soared to 4.9% in November, outstripping City forecasts and putting pressure on the European Central Bank to review its policy of ultra-low interest rates.With some investors reacting to the news by accusing the ECB of allowing inflation to run out of control, the European statistics agency Eurostat said its early flash reading of inflation in November had reached the highest level since relevant records began in 1997, two years before the euro was launched. Continue reading...
The trade liberalisation of the 1990s did not lead to higher economic growth rates. This should raise serious concerns for backers of globalisationPutting off the crunch meeting of the ministerial World Trade Organization won’t defer the chronic malfunctions of the world economy. The currency and debt crises experienced by developing nations, the eurozone’s turn to austerity and the great financial crash are symptoms of a broken trading system built on the global role of the dollar. Deeply embedded within the world’s trade and capital regime is a hierarchy where cheap labour goods from developing nations keep rich world wages down. Meanwhile, elites in the developing world run their nations in order to be able to consume in the manner of the developed world. Greed sees income hoovered away from most of the population by a wealthy layer.The extensive trade liberalisation of the 1990s did not lead to higher economic growth rates. This should raise serious concerns for backers of globalisation. Are wealthier nations interested in raising the living standards in poorer countries? Or are they only really bothered about ensuring that debtor nations pay back their loans and open their economies to international trade and finance? The evidence suggests the latter: since the 1950s the evidence is that poor countries are financing rich ones through net resources transfers, rather than the other way round. Continue reading...
by Presented by Hannah Moore with Phillip Inman; prod on (#5SEWQ)
The inflation rate keeps going up – and some economists are warning that it’s time to take urgent action. So what is causing the change, what does it mean for ordinary people, and what’s the best way to deal with it?Many younger people won’t remember a time when inflation was a big political issue, or a subject that might affect their day to day lives. But recent increases in the cost of living, partly caused by the coronavirus pandemic and the supply chain crisis, have started to have a real impact. Last week, the CBI warned that shoppers would face the biggest price rises in more than 30 years this Christmas – and with the inflation rate expected to hit 5% next year, the Bank of England is under pressure to take urgent measures to do something about it.In this episode, the Observer’s economics editor, Phillip Inman, explains to Hannah Moore exactly what’s going on, setting out how the situation came about, what the options are for dealing with it, and why it affects people’s daily lives. And he examines the arguments for the Bank of England increasing interest rates – as well as the risk that such a move would be premature if the change is largely the result of the coronavirus crisis. Continue reading...
Sector faces ‘unprecedented combination’ of rapidly rising costs, supply chain woes and high debts from the pandemicBritain’s manufacturers are facing a “perfect storm” crisis of rapidly rising costs and towering debts that many fear could push them over the brink, according to a new survey.The leading industry trade body on Monday urged the government to introduce payment holidays on loans, warning that thousands of firms faced a “tipping point” that could make their business models unviable. Continue reading...
Using GDP to assess wellbeing is a flawed view which has led us to narrow, short-term decision-makingGross domestic product as a measure of welfare is like exam results as a measure of intelligence. Neither is especially good. However both are widely cited and heavily relied upon.Why? They’re not great – but they’re the best we’ve got. Continue reading...
Sharing vaccines with poorer countries is the right thing and the self-interested thing to do. The west needs to stop being so short-sightedMandatory face masks are back in England. The fear factor has returned. After months of assuming the Covid-19 pandemic was all but over, the UK government has imposed new restrictions in an attempt to curb the spread of the new Omicron variant of the coronavirus.Financial markets didn’t wait for the announcement from Downing Street. It is far too early to know how big a threat the new strain poses but investors assumed the worst as soon as the reports arrived from southern Africa. Share prices fell heavily, with airline stocks the hardest hit as travel bans were re-introduced. Continue reading...
The failure of Germany’s second biggest bank in 1931 was a factor in the rise of the NazisFinancial crises are a really bad idea. We learned that in the UK with the 2008 banking crisis. It doubled our national debt and was followed by a decade of lost earnings growth. But banks going under contributes to grim politics, too.That’s the lesson from some economic and political history contained in new Bank for International Settlements’ research. It examines Germany’s 1931 banking crisis and the link to the rise of the Nazis. In July that year, the country’s second largest bank – Danatbank – failed, triggering a bank run, financial crisis and big income falls.Torsten Bell is chief executive of the Resolution Foundation. Read more at resolutionfoundation.org Continue reading...
Leaving the EU has had a terrible impact on all parties. We must grasp that it is a policy that cannot be made to work‘Excuse me, sir, but why are you wearing a poppy? Remembrance Day was on Thursday.” The speaker was a Spanish gentlemen. The scene: the breakfast room of a hotel in Valladolid, an hour’s train ride north-west of Madrid, on Saturday, the 13th of this month. I was struggling with the toaster. You know how it is when one arrives at a self-service breakfast room.I replied that I always wore a poppy until Remembrance Sunday, when there was the traditional Cenotaph parade in London. “Ah,” he said. “Forgive me, but why on earth did your country vote the way it did?” Continue reading...
Northern Ireland faces economic problems similar to those of rest of the UK, with some extras all of its own. Now what it has achieved is threatened by a looming trade warBars are full, restaurants are turning away customers who don’t have reservations and, judging by the people laden with bags, the Christmas shopping season is already under way. Belfast has known plenty of crises down the decades but this doesn’t feel like one of them.Instead, on a Thursday evening in November, Northern Ireland’s capital has the air of any other big provincial UK city, with a thriving hospitality sector and plenty of money changing hands. Were it not for the accents, it could be Leeds or Manchester. Continue reading...