This autumn marks the anniversaries of two notable economic humiliations. But they are as nothing to what might happen if we leave the EUThis is quite an anniversary year for great British economic disasters. Last weekend saw the 25th anniversary of the ignominious exit of the pound from the European exchange rate mechanism – “the first Brexit”, and, I still hope, the only one.Then this November will see the 50th anniversary of the dramatic 14% devaluation of the pound – an episode from which the Labour government of Harold Wilson never quite recovered, not least because Wilson made the mistake of proclaiming that “the pound in your pocket has not been devalued” – based on a brief by Treasury officials which was aimed at explaining that, from the point of view of the pocket or purse, it was only the price of imports that were going up, and spending on imports was only a small fraction of total household spending. Continue reading...

Credit ratings agency warns hard Brexit would damage economy’s long-term health hours after Theresa May’s Florence speechThe Treasury has hit back at warnings by the credit ratings agency Moody’s that the likelihood of a hard Brexit and a squeeze on the public finances would damage the UK economy’s long-term health.Announcing its decision just hours after Theresa May gave her speech in Florence on the government’s Brexit strategy, the ratings agency said it had cut the UK’s credit rating to Aa2 from Aa1 partly in response to the looming prospect of the UK’s access to the European Union’s single market and customs union being reduced. Continue reading...

European and North American visitors lead the way in July, with spending also increasing, ONS figures showOverseas visitors flocked to Britain in record numbers in July and spent more than ever in response to the improved spending power offered by the low pound.Non-UK residents made 4m visits to Britain in July, an increase of 6% on last year and spent £2.7bn, up 3% on July 2016, according to the Office for National Statistics.Related: Pound slips against euro ahead of Theresa May's Brexit speech - business live Continue reading...

Quantitative easing allowed the wealthy to get out of cash and into assets, writes Martin London; the provisionally passed Ceta deal is TTIP by the back door, says John Airs. Plus letters by David Dodd and Paul NicolsonThe debt crisis Larry Elliott predicts (Borrowed time: Threadneedle Street is right to fear a bubble, 19 September), is the result of our failure to resolve the financial crisis of 2008. The credit crunch demonstrated that western economies were living beyond their means and that there was too much money and too much debt in the system. The required solution was for creditors to give up a considerable portion of their wealth, and return living space to debtors. Significant austerity was unavoidable.Governments chose quantitative easing instead, which allowed the wealthy to get out of cash and into assets, retaining or regaining any loss caused by the crash. The rest of us had to bear the brunt of austerity: cuts in benefits, the erosion of full-time jobs, the rise of the gig economy and increases in rents. Additional debt, funded by the liquidity of quantitative easing, enabled millions temporarily to retain a semblance of normal living: but the unequal distribution of wealth has not gone away. Continue reading...

Boost for government as Britain’s borrowing fell in August, as Ryanair faces critics at its AGM

Public finances still rising as a proportion of GDP despite unexpectedly strong figures for AugustBritain’s public sector spending deficit dropped to its lowest August total since 2007 after an increase in VAT revenues and a squeeze on local authority borrowing.The deficit in August stood at £5.7bn, down 18% compared with the same month last year, beating forecasts of £7.1bn in a Reuters poll of economists.Related: UK public finances beat forecasts, as Ryanair boss apologises over cancellations – business live Continue reading...

America’s central bank will begin unwinding its huge stimulus programme next month, as it leaves borrowing costs on hold

The sell-off of its $4.5tn portfolio, bought to keep interest rates down after the financial crash, is as unprecedented as the stimulus programme that came before

Retail sales rise by more than expected, particularly clothing and footwear, despite squeeze on household budgetsBritain’s consumers continued spending after the summer sales, despite the steepest annual growth in non-food store prices in almost three decades.Growth in retail sales volumes rose by 1% in August after the Office for National Statistics revised the figure for July up to 0.6%, beating analysts’ expectations for an increase of 0.2%. The pound leapt against the dollar on the figures, which add weight to a potential rate hike by the Bank of England for the first time in a decade.Related: UK growth will trail Italy, France and Germany next year, says OECD Continue reading...

Pound’s Brexit slide has pushed up inflation and dampened purchasing power, says forecastItaly, France and Germany will grow faster than Britain next year as Brexit uncertainty continues to weigh on consumer confidence and deter much-needed business investment, according to the latest economic forecasts by the Organisation for Economic Cooperation and Development.The UK’s GDP growth will drop from 1.6% this year to 1% next year, in line with the OECD’s previous forecast, but Italy’s national income will grow by 1.2% in 2018, up 0.4 percentage points from the forecast in the June.

Forthcoming meetings offer critical opportunity to start serious discussion on rebuilding global consensusNext month, when finance ministers and central bank governors from more than 180 countries gather in Washington DC for the annual meetings of the International Monetary Fund and the World Bank, they will confront a global economic order under increasing strain. Having failed to deliver the inclusive economic prosperity of which it is capable, that order is subject to growing doubts – and mounting challenges. Barring a course correction, the risks that today’s order will yield to a world economic non-order will only intensify.The current international economic order, spearheaded by the United States and its allies after the second world war, is underpinned by multilateral institutions, including the IMF and the World Bank. These institutions were designed to crystallise member countries’ obligations, and they embodied a set of best economic-policy practices that evolved into what became known as the “Washington consensus.”Related: Five reasons why global stock markets are surging | Nick Fletcher Continue reading...

All the day’s economic and financial news, as global markets touch new record levels ahead of Wednesday’s Federal Reserve meeting

Growth and inflation are out of sync in most developed nations, causing bubbles and crisesSince the summer of 2016, the global economy has been in a period of moderate expansion, with the growth rate accelerating gradually. What has not picked up, at least in the advanced economies, is inflation. The question is why.In the United States, Europe, Japan, and other developed economies, the recent growth acceleration has been driven by an increase in aggregate demand, a result of continued expansionary monetary and fiscal policies, as well as higher business and consumer confidence. That confidence has been driven by a decline in financial and economic risk, together with the containment of geopolitical risks, which, as a result, have so far had little impact on economies and markets. Continue reading...

Bank of England governor says labour shortages could also raise wages in short term, but Brexit would have only modest impact on pricesA sharp fall in migrant workers coming to Britain as a consequence of Brexit could push up wages and cause a spike in inflation in the short term, according to the governor of the Bank of England.Mark Carney was setting out his view on inflation days after the Bank’s rate-setting panel indicated it could raise interest rates for the first time in a decade.Related: UK interest rates stay at 0.25% but Bank of England hints rise is looming Continue reading...

All the day’s economic and financial news, as world share prices touch new record levels

Investors are picking up on positive signals coming from US, China and Europe, and easing tensions over North KoreaGlobal stock markets are at record highs, with the MSCI All Country World Index reaching a new peak on Monday and both the Dow Jones Industrial Average and the S&P 500 heading for uncharted territory once more. European and UK markets are also attracting investors again, although they are below their best levels owing to the strength of the euro and the pound making exports pricier. Here are five reasons why investors are buying into shares.

Near-zero rates have spurred borrowing and left consumers, businesses and governments at risk, says Basel institutionA new warning has been issued about the growing risk of a “debt trap” if interest rates around the world stay near zero, which has encouraged borrowing by households, businesses and governments.The Bank for International Settlements – known as the central bankers’ bank – highlighted the vulnerability of consumer, business and government finances to interest rate increases in its 174-page quarterly report. Claudio Borio, the head of the monetary and economic department, described this as “a defining question for the global economy”.The increase in the percentage of firms unable to cover their interest payments with their earnings does not bode well Continue reading...

As Bank of England hints about a hike, stimulus from the government – including removal of the pay cap – could lead it to push further ahead on ratesWe’ve heard it all before. The Bank of England is putting debt-laden consumers on notice of higher borrowing costs, yet again.But this time, just maybe, interest rates could finally be on the march from as early as November after more than 10 years without a hike. While the first rise may simply serve to reverse last year’s emergency rate cut, there are signals that the Bank may then push still further ahead.Related: The eurozone strikes back – why Europe is booming againRelated: UK interest rate rise – what it could mean for savers and mortgage holders Continue reading...

The virtual currency’s success reflects the continuing lack of trust in traditional banking following the credit crunchWhen the boss of Wall Street’s biggest bank calls a bubble, the world inevitably sits up and listens, albeit with a sense of historically weighted irony: of course an investment bank boss would spot disaster after his industry presided over the last one. Jamie Dimon, the chief executive of JP Morgan, said last week that the ascendancy of the virtual currency bitcoin – which has risen in price from just over $2 in 2011 to more than $4,000 at points this year – reminded him of tulip fever in 17th-century Holland. “It is worse than tulip bulbs,” he said. “It could be at $20,000 before this happens, but it will eventually blow up. I am just shocked that anyone can’t see it for what it is.”Dimon’s comments are an open invitation for derision from those who, rightly, point out that although JP Morgan may be top of the Wall Street heap, that heap is far from being the moral high ground. Under Dimon’s leadership, it has agreed a $13bn settlement with US regulators over selling dodgy mortgage securities – the instruments behind the credit crunch – and its run-ins with watchdogs include a $264m fine last year for hiring the children of Chinese officials in order to win lucrative business in return. Continue reading...

Chris Riddell on the squadron of woes currently afflicting the government Continue reading...

Structural reforms since financial crisis are slowly but surely starting to bear fruit, with the lowest unemployment since 2009 and production ratcheted upIt was a story few predicted: the eurozone is growing faster than the United States. When Jean-Claude Juncker gave his annual state of the union speech on Wednesday last week, Europe’s booming economy was near the top of his list. Ten years since the crisis struck, “Europe’s economy is finally bouncing back,” the European commission president told MEPs. Detailing the economic resurgence, but also referring to the EU’s newfound unity after Britain’s vote to leave, Juncker declared: “the wind is back in Europe’s sails”.

Some on both sides of the Channel believe that trade and prosperity will win the day. But in the EU just as in the UK, politics now trumps economicsThere is a shared belief among Leavers and Remainers to the effect that when the Brexit cliff-edge comes into view, London and Brussels will hatch a face-saving compromise.It’s not entirely clear what kind of gleaming alloy can be forged from the fire of claim and counterclaim on either side of the channel, but there should be a way, they think, to cut through the noise and make something solid and lasting that shows neither side is entirely inept. Continue reading...

Jean-Claude Juncker believes Europe is starting to recover at last. But the picture from the union’s most fallible economy is very mixedIs the eurozone on the mend? Jean-Claude Juncker certainly thinks so. The EU president was upbeat in Brussels last week as he gave his annual state-of-the-union address, proclaiming that “the wind is back in Europe’s sails”.Juncker’s optimism appeared to match the view from Greece, the currency bloc’s problem child. In Athens only the previous week, the visiting French president, Emmanuel Macron, had been even more enthusiastic, declaring against the backdrop of the Acropolis that Greece’s prolonged crisis was over, and that therefore Europe’s was too.Related: Weakest eurozone economies on long road to recoveryRelated: The eurozone strikes back - why Europe is booming again Continue reading...

Bank of England MPC member says rising inflation and stronger household spending merit increase ‘as early as coming months’The prospect of the first interest rate rise in a decade has sent the pound to its highest level since the day after the Brexit vote and put debt-laden consumers on notice of higher borrowing costs.The rally in the pound against the dollar provided some relief for Briton’s travelling abroad and comes amid heightened expectations that the Bank of England could increase rates as soon as November.Related: UK interest rates stay at 0.25% but Bank of England hints rise is looming Continue reading...

The Bank of England has hinted the first rate rise in almost a decade is now likely, and soon. So how much will it cost?A member of the Bank of England’s rate-setting committee has fuelled speculation that interest rates could rise as soon as November. Gertjan Vlieghe put forward the arguments for a rise in rates “as early as in the coming months” in a speech to economists in London. Continue reading...

Study says spending cuts have encouraged rise of robots and AI and heightened job insecurity, particularly for womenAusterity budgets adopted by governments across the world since the 2008 financial crash are to blame for undermining the job security of millions of workers and threatening the progress made by women in the workplace, according to a UN report.The threat to jobs from the growing use of robots and artificial intelligence has been exacerbated by a lack of government investment and lack of state support for skills training, the report also said.Related: Two million UK families face £50-a-week cut in incomeRelated: We have the power to create the economy we want – let’s use it | Tom Kibasi Continue reading...

Pounds jumps 1% as governor says Bank is ‘beginning to shift’ on when to raise rates, with a rise possible ‘in coming months’ to stem inflationThe Bank of England has raised the prospect of an interest rate rise as early as November, in an attempt to relieve the squeeze on living standards from surging prices and sluggish wage growth.On Thursday, Threadneedle Street left interest rates at their record low of 0.25% amid fears over Brexit, but dropped a heavy hint that the first increase in the cost of borrowing for a decade may come sooner than expected if the economy continues to strengthen.Related: Bank of England leaves rates on hold, but hints that hike is coming - business liveRelated: Northern Rock investors' compensation claim just doesn't stand up | Nils Pratley Continue reading...

Upbeat chairman says situation is less challenging than six months ago and that Brexit-fuelled fall in pound and resultant price rises will start to ebbNext said the outlook for sales was brighter than its previous gloomy predictions as it reported a near 10% fall in first half profits.At the start of 2017, the Next chief executive, Simon Wolfson, warned of a tough year ahead but on Thursday he softened his stance: “While the external environment looks set to remain difficult, from where we stand today our prospects appear somewhat less challenging that they did six months ago.”Related: John Lewis profits halve as chairman warns over Brexit uncertainty Continue reading...

Dunbar’s bleakly funny tale of a menage a trois captured 80s austerity. What can her defiant heroines tell audiences today?

Hyperglobalisation has concentrated massive wealth in a few hands, boosting the cult of materialism that the great civil rights campaigner warned us aboutFifty years ago, at New York’s Riverside Church, Martin Luther King made a passionate plea for a more equal, more just, more peaceful and more dignified world. Calling for “a radical revolution of values”, King concluded: “We must rapidly begin … the shift from a thing-oriented society to a person-oriented society. When machines and computers, profit motives and property rights are considered more important than people, the giant triplets of racism, extreme materialism and militarism are incapable of being conquered.”Related: No, wealth isn’t created at the top. It is merely devoured there | Rutger BregmanRelated: No alternative to austerity? That lie has now been nailed | Owen Jones Continue reading...

Though it might be deserved, the chance of campaigners securing reparation through suasion is extremely lowOne sympathises, of course, with the former shareholders in Northern Rock who are still campaigning for compensation a decade after the bank’s nationalisation. They are not faceless City institutions. Many are small shareholders who had invested substantial sums, presumably in the belief the Rock was a solid north-east institution run by a competent board, and lost the lot.The problem with the compensation idea, however, is that it doesn’t stand up. Yes, it is probably true that the Rock was not insolvent, just suffering an extreme liquidity crisis. After all, the Treasury is set to make a clear profit from the run-off of the mortgage book. But those profits are not evidence of unfair confiscation. Taxpayers assumed a risk the Rock was unable to bear because it had been running a risky and reckless funding model that couldn’t withstand the crisis. For a bank, lack of liquidity can be a life-threatening event.Related: Darling: Brexit would not have happened without banking crisis Continue reading...

Fixing our financial system will be the key not only to stable growth, but also to stable politicsIt’s an amazing fact that a decade on from the financial crisis, Americans are still arguing about how to reform our financial system. Even as the Trump administration argues for a roll-back of the hard-won Dodd-Frank banking regulation, it’s worth noting that disenchantment with Wall Street is, paradoxically, one of the things that brought the president to office.

The Tories claim to be the party of economic stability yet are driving the country to a cliff edge. A Labour push for a pragmatic Brexit could be pivotalWill Brexit become the Conservative party’s Iraq war? It is in many ways a poisoned chalice: its effects are incredibly complex and capable of causing bitter divides among ministers. It is being negotiated haphazardly and will demoralise the party for years to come.I don’t write this as an embittered “remoaner”. I used to be a hard Brexiteer – I even worked on comunications close to the heart of Vote Leave. But I’ve now converted to a soft Brexit position. My version of our departure from the European Union is largely based around the Flexcit pamphlet, comfortably the most useful and comprehensively researched body of work on Brexit yet produced. As a result I fall into what appears to be a niche category of leave campaigner: I try to be as pragmatic as possible about our departure.Related: Tory Brexit is doomed. Corbyn has a chance to build the Europe he wants | John Palmer Continue reading...

With neoliberalism in crisis, it’s time to emphasise the importance to people of belonging and co-operation, argues this optimistic call to actionThat which is dangerous can also be thrilling. Many liberal democracies are engaged in something dangerous, as questions of identity, community and nationhood are being asked with a fresh urgency, with some of the answers turning out to be deeply disturbing. But is there also something thrilling going on? The capacity for democracy to throw up surprises, such as Britain’s 2017 general election result, is mesmerising. Brexit may be a famous act of economic self-harm, but something new will be born one way or the other. Still the danger persists and may be growing.That this is happening now, as opposed to 10 or 20 years ago, is a direct consequence of the disintegration of the economic policy framework that has held sway in Britain, the US, the European commission and many multilateral institutions for much of the previous 40 years. That framework is often referred to as “neoliberalism”, even if the term irritates a certain class of pundit, for whom it is some sort of swearword without any clear referent. Its disintegration is producing conflicting sympathies, as many on the left come to realise the xenophobia that can be unleashed in the absence of stable market-based rules.Related: Neoliberalism: the idea that swallowed the world Continue reading...

UK chancellor hints he won’t tolerate protectionist measures from EU aiming to lure business awayThe UK will not water down rules to protect its financial services sector in the wake of Brexit, the chancellor said on Wednesday as he sent a message to his counterparts in the EU that he would not tolerate protectionist measures being imposed to lure business way.Philip Hammond also told his audience of financiers in a set-piece speech in the City that his priority was to devise policies that would allow the UK to retain its place as a leading global financial centre. Continue reading...

The rising tide of rough sleeping and families ending up in temporary accommodation should have alerted the government to the effects of its policies. It’s shocking that no one seemed curious about this hardshipThe National Audit Office report into homelessness lays bare the legacy of human waste caused by the callous indifference and intellectual vacuity of Compassionate Conservatism, a Tory creed – promoted by David Cameron – where responsibility shifted from the state to individuals, families and communities.Looking at the NAO’s assessment of the cack-handed way that the housing safety net was handled, this “philosophy” appears an empty political slogan designed to shield the Tory party from the charge it was balancing the budget on the backs of the poor. It’s no surprise that a mixture of high rents and welfare cuts put people out on the streets. Rough sleeping more than doubled since 2010. The numbers of households in temporary accommodation rose by 60%. Continue reading...

Former chancellor admits government lost control for a few days 10 years ago and says people have felt ‘badly treated’ sinceThe UK would not have voted for Brexit had it not been for the banking crisis that began 10 years ago with the run on Northern Rock, according to the former chancellor Alistair Darling.Lord Darling admitted the Labour government “lost control” for a few days around this time 10 years ago when customers were queuing outside branches of the lender to withdraw their cash, and said the consequences were still being felt today.Related: UK's high street banks are accident waiting to happen, says report Continue reading...

Britain’s unemployment rate has hit a new 42-year low, but economists are worried that wages are still failing to keep up with inflation

Study predicts huge and growing gulf between white US households and everyone else could be disastrous for future of America’s middle classGrowing up in the projects of Baltimore in the 1980s, things like savings accounts, stocks and bonds were completely foreign to Mysia Hamilton. Asked if her parents could have passed along some money to help her buy a car, go to school or put into a house, she can’t help but chuckle.“No, that wasn’t there. There was no wealth. My mother was working, she was providing – we weren’t on the street begging – but there was no money in terms of ‘here you go’. No money to pass down.”Three years from now, white US households are projected to own 86 times more wealth than black householdsAfrican-American households are making ​​‘middle-income money’ – but have the wealth of a white high-school dropoutRelated: TV made America's bail system famous. Now reformers want to end it Continue reading...

Workers see real-terms fall in living standards as rise in self-employment pushes unemployment to 4.3%Wage rises in Britain have failed to keep pace with inflation, according to the latest official figures, despite a buoyant labour market that saw unemployment fall to its lowest level since 1975.Average earnings increased by 2.1% in the three months to July compared with a 2.6% increase in inflation in July that left workers suffering a 0.4% real-terms fall in the value of their pay packets.Related: UK households 'at breaking point' as real wages continue to fall - business live Continue reading...

The perpetual quest for growth drives our economics. That’s why our environment and financial system lurch from crisis to crisis

Bank of England’s stress tests are not gruelling enough, says report to mark 10 years since run on Northern RockThe UK’s high street banks are an accident waiting to happen and could struggle in another financial crisis, according to a report published on Wednesday to mark the 10th anniversary of the run on Northern Rock.The report criticises the annual health checks – stress tests – that have been conducted by the Bank of England since the crisis and concludes that the methodology used by Threadneedle Street is flawed and the tests not gruelling enough. Continue reading...

The chancellor insisted police and prison officers’ rises will come from existing budgets – and they are well below inflationPhilip Hammond’s re-emergence as a power in the cabinet can be seen clearly as the battle rages inside government over the thorny question of public sector pay.There may have been a green light from No 10 to rip up the current cap and give the police and prison officers a 1% rise plus a 1% bonus for 2017-18, but the Treasury has made sure the bonus is not part of workers’ consolidated, pensionable pay and is funded from within existing budgets.Related: Public sector pay cap to be lifted next year, No 10 says Continue reading...

Graduates do not get as good a return on their investment in English system as in other OECD countries, says Andreas SchleicherA leading global education expert has intervened in the row over student tuition fees in England, warning about value for money as earnings for graduates become more volatile.Andreas Schleicher, the education director of the Organisation for Economic Co-operation and Development (OECD), endorsed the English system in which students pay annual tuition fees of £9,000 through loans, saying it had provided sustainability to the sector which had been able to expand as a result.Related: Coming soon, a university where students could set their own tuition fees Continue reading...

The 2016 census report underlines the strength of the economic recovery Obama oversaw after the worst recession in living memoryAmerican incomes rose significantly for a second year in a row in 2016, bouncing back after the lost decade that followed the last recession.The census report covers 2016, the last year of the Obama administration, and underlines the strength of the economic recovery he oversaw after the worst recession in living memory.Related: Obama's labour market report card: not bad, could have done better Continue reading...

British households face a cost of living squeeze after inflation jumped in August, driven by more expensive clothing

More expensive petrol, clothing and food fuel rise in CPI as unions call for pay rises and end to public sector pay capThe squeeze on Britain’s living standards worsened last month after the increased cost of importing fuel, clothes and food pushed inflation back up to 2.9%, from 2.6% in July.Women’s clothes were among the items to jump in price in August as the low value of the pound earlier this year pushed up the prices in sectors heavily dependent on imported goods.Related: Public sector pay cap to be lifted next year, No 10 saysInflation is when prices rise. Deflation is the opposite - price decreases over time - but inflation is far more common. Continue reading...

The chancellor may continue to predict the long-term direction of the public finances as if Brexit were not happening – but it is unsustainable and harms democracy

The stock market may care only about the growth rate, but most Americans should worry about how growth is achievedDonald Trump has boasted that his policies will produce sustained 3%-4% growth for many years to come. His prediction flies in the face of the judgment of many professional forecasters, including on Wall Street and at the Federal Reserve, who expect that the US will be lucky to achieve even 2% growth.

With a dynamic new leader in France and a fresh mandate in Germany, there would be a chance to correct monetary union’s flawsWith Emmanuel Macron’s victory in the French presidential election and Angela Merkel’s Christian Democratic Union enjoying a comfortable lead in opinion polls ahead of Germany’s federal election on 24 September, a window has opened for eurozone reform. The euro has always been a Franco-German project. With a dynamic new leader in one country and a fresh popular mandate in the other, there would be an opportunity for France and Germany to correct their creation’s worst flaws.But the two sides remain deeply divided. Macron, in longstanding French tradition, insists that the monetary union suffers from too little centralisation. The eurozone, he argues, needs its own finance minister and parliament. It requires a budget in the hundreds of billions of euros to underwrite investment projects and augment spending in countries with high unemployment, Macron insists.Related: UK economy 'treading water' as eurozone stretches ahead, says BCC Continue reading...