When the markets dip, the banks step in to help with stimulus. Such action may prove counter-productiveAfter a year that involved one of the biggest U-turns in recent monetary-policy history, central banks are hoping for peace and quiet in 2020. This is particularly true for the European Central Bank and the US Federal Reserve, the world’s two most powerful monetary institutions. But the realisation of peace and quiet is increasingly out of their direct control; and their hopes would easily be dashed if markets were to succumb to any number of medium-term uncertainties, many of which extend well beyond economics and finance to the realms of geopolitics, institutions and domestic social and political conditions.Just over a year ago, the ECB and the Fed were on the path of gradually reducing their massively expanded balance sheets and the Fed was increasing interest rates from levels first adopted in the midst of the global financial crisis. Both institutions were attempting to normalise their monetary policies after years of relying on ultra-low or negative interest rates and large-scale asset purchases. The Fed had raised interest rates four times in 2018, signalled further increases for 2019 and set the unwinding of its balance sheet on “autopilot”. And the ECB had ended its balance-sheet expansion and begun to steer away from further stimulus.Related: We must tackle global energy inequality before it’s too late Continue reading...

World’s central banks running out of options to stimulate economies – Mark CarneyMark Carney has dropped a hint that interest rates could be cut soon to boost the British economy, while warning that the Bank of England is running low on ways to combat recessions.In one of his final speeches before he departs Threadneedle Street in March, Carney said the economy had been sluggish in recent months and that inflation was below the Bank’s 2% target set by the government.Related: Pound slides as Bank of England's Mark Carney drops rate cut hint - business live Continue reading...

Current debt wave is largest, fastest and most broad-based since 1970s, say economistsThe World Bank has highlighted the risk of a fresh global debt crisis after warning of the biggest buildup in borrowing in the past 50 years.In its half-yearly Global Economic Prospects (GEP), the Washington-based organisation said of the four waves of debt accumulation since the 1970s, the latest was the largest, fastest and most broad-based. Continue reading...

Rumors of Middle East war used to inevitably lead to soaring gas prices but fracking revolution has changed the market landscapeFor many older Americans the thought of war in the Middle East will trigger memories of soaring gas prices and long lines at the pumps. But as US relations with Iran sink to a new low there is, as yet, no sign of panic.Related: By killing Qassem Suleimani, Trump has achieved the impossible: uniting Iran | Dina EsfandiaryRelated: Iran threatens to hit US bases with medium- and long-range missiles Continue reading...

Fears grow that Donald Trump will now set his sights on the EU and the UKThe gap between US imports and exports shrank to its lowest level in three years in November following a 15% decline in the country’s annual trade deficit with China.A boost to US exports also improved the trade balance, fuelling concerns that Donald Trump will expand his campaign to squeeze the US trade deficit, which has so far focused on China, to include the EU and the UK. Continue reading...

Rolling coverage of the latest economic and financial news, including a tale of two carmakers

Kristalina Georgieva calls for rethink of economic policies to better help those left behindRaising income tax on the wealthy will help close the growing gap between rich and poor and can be done without harming growth, the head of the International Monetary Fund has said.Kristalina Georgieva, the IMF’s managing director, said higher marginal tax rates for the better off were needed as part of a policy rethink to tackle inequality.What is the IMF? Continue reading...

Stephanie Kelton says Australia could ‘absolutely’ benefit from a program similar to the Green New DealAustralia’s unprecedented bushfires are a wake-up call to the world about the importance of tackling climate change, Bernie Sanders’ economic adviser said, and the country should consider implementing a green new deal to transition to a low carbon economy.Stephanie Kelton said Australia could benefit from an ambitious program of spending, similar to the one proposed by Sanders and others that aims to transform the US economy and help keep global heating below 1.5C.Related: 'This is war': actor Yael Stone gives up US green card and will now live in Australia to fight climate changeRelated: Should fossil fuels pay for Australia's new bushfire reality? It is the industry most responsible | Amanda Cahill Continue reading...

Chancellor promises to tackle regional imbalances by reforming how Treasury allocates fundsSajid Javid has pledged to use his first budget to kickstart a decade of renewal for the economy after announcing 11 March as the date for the delayed set-piece event.The chancellor said his package would focus on unleashing Britain’s potential after the country’s departure from the EU at the end of this month. Continue reading...

There should be a worldwide tax on emissions backed by help for developing countries to cut CO2While denizens of the world’s wealthiest economies debate the fate and fortune of the middle class, more than 800 million people worldwide have no access to electricity. And more than 2 billion have no clean cooking facilities, forcing them to use toxic alternatives such as animal waste as their main cooking fuel. Furthermore, per capita carbon dioxide emissions in Europe and the US are still vastly higher than in China and India. What right do Americans, in particular, have to complain as China increases production in smokestack industries to counter the economic slowdown caused by its trade war with the US? To many in Asia, the inward-looking debate in the west often seems both tone deaf and beside the point.Even if Europe and the US deliberately stall their capitalist growth engines – as some of the more radical policy proposals might do if implemented – it would not be nearly enough to contain global warming if emerging economies stay on their current consumption growth trajectory.Related: In 2020 the UK must seize the chance to lead the world on the climate emergency | Danny Sriskandarajah Continue reading...

We need less glorification of power and money, especially from overseas buyers, and more thought given to the wellbeing of citizensThe Conservative party manifesto promised that when the party was in power it would charge foreign buyers of homes in England an extra 3% on the purchase price in stamp duty. Such levies have been used in Canada, Singapore and Australia to tackle housing crises. However, no mention was made of the charge in the Queen’s speech. If it does not pop up in the budget the Conservatives would have missed a chance to show they understand how voters feel crowded out of the housing market while wealthy overseas buyers are crowded in.Estate agents say the proportion of homes in England and Wales let by overseas-based landlords rose to 11% during the first 10 months of 2019, the first year-on-year increase since 2010. Nearly one in five of London’s homes are rented out by people not based in the UK. The trend is not just visible in the capital. The east of England recorded the biggest jumps in the number of overseas landlords. People say they are being priced out of living in Manchester because of foreign cash. Continue reading...

Britain will be seeking to reboot productivity and redefine its place in a rapidly-changing worldAt the outset of the 2020s, the UK economy embarks on a new decade with little momentum. Growth has stalled, not least because Brexit uncertainty and a slowdown in the global economy has served as a handbrake on business investment. Meanwhile, consumers have begun tightening their belts and the job market boom of the past decade has petered out.For at least the duration of 2020 another groundhog year awaits thanks to the ongoing Brexit saga, despite the promise Boris Johnson made before the election. Continue reading...

Trading has been buoyant through recent turbulence, but tensions in Iran – or a rise in the base rate – might change thatSo much for the idea that bull markets in shares die of old age. This theory has been widely touted for at least the past four years and, 12 months ago, it seemed as if the naysayers were on to something. Global share prices, as measured by the broad MSCI World index, fell 3% in 2018, with much of the blame pinned on the brewing China-US trade war. But then came 2019: a surge of 24% in the same index.Life doesn’t seem quite as nice if you gaze solely at the FTSE 100 index – a fall of 12.5% in 2018 and a rebound of 12% in 2019. Still, last year was the best performance in three years for the London market’s blue chip index. Death by old age did not occur.A change in the interest-rate weather is the most common cause of a turn in stock markets Continue reading...

Warnings from the IMF and World Bank have been dismissed. But even if they are wrong, a demographic crisis loomsThe warning signs are clear. Debt is rising on every continent and especially in the business sector, which has spent the past decade ramping up its borrowing to previously unheard-of levels.Last October, the International Monetary Fund said that almost 40% of the corporate debt in eight leading countries – the US, China, Japan, Germany, Britain, France, Italy and Spain – would become so expensive during a recession that it would be impossible to service. In other words, tens of thousands of businesses, employing millions of people, would have gambled with high levels of borrowing and lost, making themselves insolvent.Without higher interest rates, everyone can keep merrily borrowing Continue reading...

Borrowers repay £100m in November, reflecting falling demand for consumer lendingUK consumers have made net repayments on their credit cards for the first time in almost seven years, as households across the country rein spending in and rebuild their finances after a boom in borrowing.The Bank of England reported the first monthly fall in credit card debts since July 2013, after borrowers repaid around £100m in November to reflect fading demand for consumer credit.Related: UK retirees' spending rockets as younger people spend less Continue reading...

Average price in December was £215,282, with London weakest performer, says NationwideHouse prices shrugged off Brexit uncertainty to end 2019 1.4% higher than at the start of the year, according to Nationwide building society.After 10 stagnant months, prices rose strongly in November and December to record the modest annual increase. The average UK house price in December was £215,282, Nationwide said. Property values edged up by 0.1% month on month. Continue reading...

Barriers to older people shopping and working holds economy back, say researchersSpending sprees by retirees are adding billions to the UK economy, researchers have found, while spending by younger people is falling.But although some pensioners are indulging themselves, barriers including inaccessible high streets, poorly designed products and age-discriminatory attitudes mean people aged 75 and over are not spending their wealth. Continue reading...

British Chambers of Commerce report says long-term uncertainty is impeding growthThe UK economy ended 2019 in stagnation, under pressure from long-term uncertainty, mounting business costs and a global economic slowdown, according to a business survey.The British Chambers of Commerce’s (BCC) latest quarterly economic snapshot, based on a poll of 6,500 firms across the country in November, painted a gloomy picture of the economy at the end of the last decade. Continue reading...

People’s Bank of China allows commercial banks to hold less capital in reserveChina’s central bank has acted to pump more liquidity into the country’s economy in an attempt to prevent growth slowing in 2020.The People’s Bank of China is allowing commercial banks to hold less capital in reserve, freeing up about 800bn yuan (£87bn) in new funds for loans. It will cut China’s banks’ reserve requirement ratio (RRR) by 50 basis points, to 12.5%, from 6 January. Continue reading...

Investors expect a strong year but the presidential race and trade wars could spring nasty surprises

Prospect of agreement lifts stock markets but experts question impact on long-running tensionsDonald Trump has said he will sign the first phase of a long-awaited trade deal with China on 15 January, in a move that de-escalates the tariff war between the world’s two biggest economies.In a tweet on Tuesday, the US president said “high-level representatives of China” would attend an official ceremony at the White House, adding he would also be travelling to Beijing for talks on the second phase of the deal.I will be signing our very large and comprehensive Phase One Trade Deal with China on January 15. The ceremony will take place at the White House. High level representatives of China will be present. At a later date I will be going to Beijing where talks will begin on Phase Two!Related: White House expecting agreement with China 'within next week or so' Continue reading...

Employees over 25 will receive a 6.2% pay rise equating to £930 a year for full-time workerAlmost 3 million workers in Britain are to receive a pay rise of more than four times the rate of inflation from April, after the government said it would increase the official minimum wage.In an announcement designed to woo low-paid workers in the immediate aftermath of Boris Johnson’s election victory earlier this month, the government said the “national living wage” for over-25s would increase from £8.21 an hour to £8.72 from the start of April. Continue reading...

From Syriza’s betrayal to the normalisation of austerity across Europe, it’s been a series of harsh lessons for progressive forcesThe financial crisis defined the European decade. It was the child of neoliberal policies, sketched by economists like Milton Friedman and rolled out by leaders like Ronald Reagan and Margaret Thatcher in the 1980s. A long wave of deregulation eventually gave rise to a financial tsunami, which put the system on the verge of collapse. In a few weeks during the autumn of 2008, money flows froze, paralysing trade and investment internationally, which trickled down to erode workers’ wages and employment conditions. The unfolding of events comforted the left’s ideological worldview. But it’s clear as day that the left’s politics did not prevail.In the first half of the 2010s, the tide was rising for progressive forces. The victory of Syriza in Greece, the surge of Podemos in Spain and the presidential campaign of Jean-Luc Mélenchon in France made it possible to believe that the future belonged to the left.Related: How a decade of disillusion gave way to people power | Rebecca SolnitRelated: This was the decade the US’s self-serving myths fell apart | Aziz Rana Continue reading...

Trade adviser Peter Navarro suggests little more than translation of text is neededThe White House has signalled that a trade agreement with China could come within the next week, amid speculation that a delegation from Beijing will travel to the US this weekend to sign a deal.Peter Navarro, the White House’s trade adviser, said he expected a deal could be signed “within the next week or so”. Speaking on Fox News, he indicated that little more than translation of the final text stood in the way of a breakthrough in the bitter dispute.Related: How financial markets turned upside down in 2019 Continue reading...

Rolling coverage of the latest economic and financial news

FSB survey, taken before general election, shows few exporters expecting a pick-upAfter a year dogged by Brexit deadlock, political uncertainty and slow growth, optimism among small UK firms has slumped to an eight-year low.The Federation of Small Businesses’s confidence gauge fell in October-December for the sixth quarter in a row. Managers at firms across the UK reported worries about the domestic economy and pessimism about opportunities overseas. Continue reading...

Weak data used to send stocks down but the promise of never-ending cheap money from central banks means the only way is upWith one day of trading to go, 2019 is on course to be one of the strongest in the history of financial markets after shares around the world racked up record after record in another barnstorming year.On Wall Street the Dow Jones industrial average has gone up almost 25% having reached record highs day after day, while the broader S&P500 is up 30% and the tech-heavy Nasdaq has grown 40% in value. The FTSE100 in London is close to its record high, as is the Dax30 in Germany. In the Asia Pacific, the Nikkei is up 15% while Australia’s ASX200 is still close to its highest ever point (reached in November).Related: It's more than a decade since the financial crisis. Where's the recovery? | Larry ElliottAustralia's stock market is within 0.2% of an all-time high. Might get there today. So excitedRelated: 'Amazing deal' or 'capitulation'? Why the US-China trade truce may not lastRecession gets priced out by a stock rally for the record books. Very big years in markets rarely come right before recessions. Research finds stock returns lead S&P earnings by a quarter. https://t.co/pm0AfIWXze pic.twitter.com/sMqXjTLxH1 Continue reading...

Market including food, drinks, clothing and energy has risen almost fourfold in past 20 yearsEthical consumer spending has hit record levels in the UK, according to a new report that reveals the total market – including food, drinks, clothing, energy and eco-travel – has swelled to over £41bn.Total ethical spending has risen almost fourfold in the past 20 years and outgrown all UK household expenditure, which has been broadly flat, according to the new study from Co-op.Related: Christmas jumpers add to plastic pollution crisis, says charity Continue reading...

We’ve had plenty of difficult periods before, but they were temporary and explicableIt’s the dog days of 2009. Gordon Brown is prime minister, Alistair Darling is chancellor of the exchequer and Mervyn King is governor of the Bank of England.Britain has been through a tough two years. As a country heavily dependent on financial services, it has been especially hard hit by the banking crash of 2008. The economy has suffered some severe recessions since the second world war but the slump of 2008-09 has been the worst of the lot. Continue reading...

Britain is being urged to ‘move on’ – but the prospect of crashing out after a year is very realA funny thing happened to me last Monday. I was lunching with my friend Sir Samuel Brittan, the great Financial Times economics commentator, in advance celebration of his 86th birthday. It was he who, when we were colleagues on the FT, suggested that I specialise in writing about the economy.During the lunch, several anti-Brexit sympathisers approached our table to express approval of the slogan on my pullover. It was the present from one of my daughters that I referred to here two years ago, which proclaims in large letters: “All I want for Christmas is EU.”The loss of tax revenue likely to accompany the mere approach to Brexit makes Johnson’s electoral promises for the north look, well, ridiculous Continue reading...

Average property in borough has leapt by 429%, as Newry, Northern Ireland, records slowest risesA former down-at-heel corner of east London, the borough of Newham, has witnessed the steepest rise in property prices in the UK this century, according to data from Halifax, while the slowest increases have been in Newry in Northern Ireland.The average house price in Newham has leapt by 429% since the start of the century, from £75,762 in 2000 to £400,574, a gain of 429%. The borough encompasses Stratford, home to the 2012 Olympics, and is peppered with new glass and steel residential towers, as well as some of the most deprived wards in the UK. Continue reading...

It was the decade of austerity, fracking, populism and internet lies. But not everything about the 2010s was terrible Continue reading...

Brexit uncertainty and snap election put investment on hold as high street spending stalled

Each month we look at key indicators to see what effect the Brexit process has had on growth, prosperity and trade

Two former members of Bank of England’s rate-setting committee on Britain’s economic prospects

Chairman of the US Federal Reserve Board in the 1980s who saw off inflation and later criticised financial deregulationPaul Volcker, who has died aged 92, was the most eminent financial statesman of his generation, the sworn enemy of the abuse of finance in any of its manifestations. That could be indulging inflation as the financial outcome of governments and society living beyond their means, or investment banks deluding themselves they had uncovered the alchemy of risk-free lending through the issuance of ever more complex financial derivatives.His twin mantras were that finance should be the servant not the master of economy and society. And that good government is an indispensable component of a good society, in particular keeping the temptations of clever-clever finance at bay. Sound money and good government went hand in hand. He practised what he preached, seizing the opportunity to embody his beliefs when the moment arrived. Continue reading...

Rolling coverage of the latest economic and financial news, on the final trading day before Christmas

Our film American Factory shows the damaging effect of reverse globalisation. British Steel should take heedFor Jill Lamantia, driving a forklift was the easy part of a hard life. Like countless other industrial workers in our hometown of Dayton, Ohio, Lamantia was excited that Fuyao Glass – a major Chinese company – had bought and reopened our abandoned General Motors factory. She had a job again.In her new role, after clocking off at the end of each shift, Lamantia retreated to a small brick house. Clutching spare keys, she would shut the front door and descend the stairs, squeezing past cleaning products on a mop rack. This Midwestern grandmother and former homeowner was living in her sister’s basement. Fuyao is the world’s leading automotive glassmaker. Based in China’s Fujian province, the company surprised many by exporting Chinese jobs to, of all places, America. In 2014 its billionaire founder, chairman and owner, Cao Dewang, saw the symbolic power in buying the gutted GM factory and rehiring scores of former employees such as Lamantia to make glass for the windscreens of motor vehicles manufactured in the US.Related: The Obamas' first film: will American Factory be the biggest documentary of 2019?Related: American Factory review – a sobering documentary by the Obamas Continue reading...

Brexit, climate change and the next recession mean central banking is in danger of becoming a failed paradigm that needs replacingThe appointment of Andrew Bailey as governor of the Bank of England is a safety-first move. The central banker knows his way around the City and it is reasonable to assume that he can stand up for the finance sector in the coming years of tough negotiations with Brussels. Mr Bailey has made a point of saying that Britain, home to Europe’s largest financial centre, must not become a “taker” of EU rules after it leaves the bloc. Tellingly, he is viewed by former Treasury chiefs as “one of us”. But is this enough, given the age we live in? The last three Bank of England governors have been big figures on the international stage, with the incumbent, Mark Carney, being a central banker whose words move markets. Mr Bailey, for all that he is an insider’s insider, is not in the same mould. Britain ducked its chance to hire such a transformational figure, which is strange given what lies ahead. We are all born with imperfect foresight, but there are three dangers to the country’s economy clearly visible on the horizon: Brexit, climate change and the next recession. We know next to nothing about Mr Bailey’s thoughts on how to deal with these.Since 2016 Mr Bailey has run the City watchdog, the Financial Conduct Authority. While his predecessor fined banks billions of dollars for trying to rig interest-rate benchmarks and foreign exchange markets, Mr Bailey took a softly-softly approach to the City. A key review into banking culture seen as core to restoring trust in banks disappeared with this new outlook. Earlier this month, a representative of victims of a City mini-bond scandal walked out of a meeting with Mr Bailey, accusing the FCA of not holding to account the financial firms it regulates under his stewardship. Whistleblowers say he failed to investigate alleged wrongdoing in high-street banks. He also was criticised by MPs for allowing banks “to continue to rip people off” when the regulator’s review of high-cost credit fell short of capping onerous rates. The view is that he backed the City over the consumer. Continue reading...

Donald Trump promises that a US-China trade pact will be signed ‘very shortly’A pre-Christmas rally fuelled by hopes of waning trade tensions have pushed share prices to a fresh high and on course for their biggest rise in a decade.Donald Trump’s promise that a US-China trade pact would be signed “very shortly” sent the MSCI gauge of stock markets around the world to new record levels.Related: Trump's lack of strategic vision is going to make China great again | Nouriel Roubini Continue reading...

Rolling coverage of the latest economic and financial news, as China gives the world economy a festive gift and Dennis Muilenburg is removed from Boeing

Low borrowing costs led to 14,500 additional babies being born in 2009, researchers sayNew research by the Bank of England has shown that its efforts a decade ago to prevent a 1930s-style depression had the spin-off effect of boosting Britain’s birth rate.The Bank’s study found that the emergency slashing of interest rates in the winter of 2008-09 cut the household bills for families on floating rate mortgages and made having children more affordable. Continue reading...

The US needs to work closely with allies to bring its model of society and economy into the 21st centuryFinancial markets were cheered recently by the news that the US and China have reached a “phase one” deal to prevent further escalation of their bilateral trade war. But there is actually very little to cheer about. In exchange for China’s tentative commitment to buy more US agricultural (and some other) goods, and modest concessions on intellectual property rights and the yuan, the US agreed to withhold tariffs on another $160bn (£124bn) worth of Chinese exports, and to roll back some of the tariffs introduced on 1 September.The good news for investors is that the deal averted a new round of tariffs that could have tipped the US and the global economy into recession and crashed global stock markets. The bad news is that it represents just another temporary truce amid a much larger strategic rivalry encompassing trade, technology, investment, currency and geopolitical issues. Large-scale tariffs will remain in place and escalation may well resume if either side shirks its commitments. Continue reading...

Productivity growth has fallen to 0.3% – we’ve named it the statistic of the decade. Targeted government action is now vital

Royal Statistical Society lauds figure that illustrates declining UK productivity as ‘capturing spirit of biggest issues’

Key economic measures swing positive for the first time since Brexit referendum, says IoDBusiness confidence in the British economy has leaped to its highest level for more than three years following the Conservatives’ election win, according to a survey of company directors.For the first time since spring 2018, firms have become optimistic about the economic outlook, with a key confidence measure swinging into positive territory and hitting 21% in December, up from -18% in November. Continue reading...

Central government should play a small role and let spending decisions be taken locally“Let’s sort this mess of a town out,” says a voter in Leigh, a former Lancashire mining and mill town on the edges of greater Manchester, writing on the Facebook wall of its first ever Conservative MP.“Like Labour have done anything for Leigh over the last 100 years apart from grind it in to the ground,” says another. Continue reading...

Middle-age workers may be more productive, but don’t expect them to launch companiesAgeing changes us all. What we do and how we do it shifts as the years tick by, affecting our lifestyles and economies.Here’s an example. The US prides itself on being a dynamic economy. But fewer firms have been springing up. Policy failures are partly responsible, with unnecessary occupational licensing making it harder to start a new business. Continue reading...

A large and growing share of older people vote Tory. This is a problem Jeremy Corbyn’s successor needs to solveFor the third election in a row, the ageing baby boomer generation played a major role in securing a Tory victory.According to the pollsters YouGov, Labour’s share of the vote fell among the over-65s by even more than last time – to under 20% in 2019 from 24% in 2017. In 2010, Ipsos Mori said that 31% of over-65s voted Labour. This time, the Conservatives’ vote share among the over-65s was more than 60%.When looking to issues beyond Brexit, older people put cultural issues higher than economic ones Continue reading...

He may be less high-profile than Mark Carney, but his to-do list will be every bit as demandingAndrew Bailey takes up the post of Bank of England governor on 16 March following more than two years of speculation about who will succeed the Canadian incumbent, Mark Carney.Bailey is a home-grown replacement, from Leicestershire, whose CV appears in stark contrast to that of Carney, the former Goldman Sachs banker. Most of Bailey’s career has been spent at the central bank’s neoclassical Threadneedle Street headquarters, most prominently as chief cashier, with his name on every banknote. He was head of the Bank’s supervisory body, the Prudential Regulation Authority, when in 2016 George Osborne, then chancellor, asked him to take over at the industry consumer watchdog, the Financial Conduct Authority. Continue reading...