QE and low interest rates have disproportionately created wealth in the financial sector and inflated asset bubbles. It has done little for the real economy. The rules of the market need to be rewrittenSeven years after the global financial crisis erupted in 2008, the world economy continued to stumble in 2015. According to the United Nations’ report World Economic Situation and Prospects 2016, the average growth rate in developed economies has declined by more than 54% since the crisis. An estimated 44 million people are unemployed in developed countries, about 12 million more than in 2007, while inflation has reached its lowest level since the crisis.More worryingly, advanced countries’ growth rates have also become more volatile. This is surprising, because, as developed economies with fully open capital accounts, they should have benefited from the free flow of capital and international risk sharing – and thus experienced little macroeconomic volatility. Furthermore, social transfers, including unemployment benefits, should have allowed households to stabilise their consumption. Continue reading...

Thinktank’s ‘green budget’ says the chancellor may have to cut spending or raise taxes to reach surplus by 2019-20

Former Standard Chartered chief says eliminating €500, $100, SFr1,000 and £50 notes would prevent corrupt payments

Health minister reveals Barts set to run up £134.9m deficit, as NHS sources say trusts cannot balance books due to poor fundingThe biggest hospital trust in the country is set to run up a £134.9m deficit this year – by far the largest ever overspend in the history of the NHS.Related: This is the NHS - sign up to follow the projectRelated: NHS could save £5bn a year on running costs and 'bedblocking', finds reportRelated: Hospitals told to cut staff amid spiralling NHS cash crisis Continue reading...

The death rate for white Americans aged 45 to 54 has risen sharply since 1999, but Montana officials wrestle to explain why the state has the highest rate of suicide in the US at nearly twice the national average – and it’s risingKevin Lowney lies awake some nights wondering if he should kill himself.“I am in such pain every night, suicide has on a regular basis crossed my mind just simply to ease the pain. If I did not have responsibilities, especially for my youngest daughter who has problems,” he said.Related: The Guardian view on American mortality: the price of a ruthless economy | EditorialI’m a very strong Catholic and I practice those values. No way is this from any immorality on my partIt’s to keep our head above water, to keep our kids in clothes and hot lunches. We make too much money to get helpRelated: America's poorest white town: abandoned by coal, swallowed by drugsThe power this traditional white male used to have is decreasing and they aren’t at the root of power anymore Continue reading...

The chancellor faces lower GDP and lower tax receipts as a result. So it’s vital that consumers’ desire to keep spending isn’t hit by a nasty shock from the BankGeorge Osborne might be running out of friends when next month’s budget arrives. Like every chancellor before him, he likes to distribute goodies to lift the spirits of his backbench colleagues. More than that, he will want to offset the worst effects of the Treasury’s austerity measures.This he did in spectacular fashion at last November’s autumn statement when higher GDP growth forecasts for the next five years allowed him to scrap planned cuts in tax credits. Continue reading...

The corridors of power contain sceptics about everything from Europe to austerity. But nothing flickers on the imperturbable Treasury facadeOne of the key negotiators of the terms of UK entry to the European Economic Community in the early 1970s went down in history as a loyal servant of prime minister Edward Heath, but himself had doubts about the entire venture.The man in question, who is, as they say, no longer with us, would no doubt have been of great interest to the present band of Eurosceptics whom David Cameron is trying, if not exactly to win over, at least to pacify. His view was simple, and could be broadly paraphrased as: “Why did we fight the second world war if we end up doing this?” Continue reading...

The United States added 151,000 new jobs in January, much less than expected and nearly half the figure for December. The sectors with the most growth were retail, food services and healthcare while manufacturing saw a downturn, with some pointing to the cold start to the year as a cause Continue reading...

US jobless rate dips below 5% for first time since February 2008 to overshadow news that January jobs report was weaker than expectedGlobal stock markets fell on Friday after the news that US wages picked up and unemployment fell to an eight-year low raised the prospect of another interest rate rise in the world’s biggest economy this year.The US jobless rate dipped below 5% for the first time since February 2008 to come in at 4.9% in January, the US Department of Labor reported. That fresh dip in unemployment and news that employers had increased hours for workers helped to overshadow a weaker than expected rise in new jobs in January.Related: US economy created 151,000 new jobs in January as jobless rate hits 4.9% - business live"We've recovered from the worst economic crisis since the 1930s." —@POTUS: https://t.co/oAm205Zui1 https://t.co/sdy9UTqLXiRelated: Stock markets suspect Federal Reserve has interest rate jitters Continue reading...

America’s jobless rate has fallen to 4.9% after US companies took on 151,000 new hires in January, fewer than expected

Deputy governor says no signs yet that looming vote has hurt company investment plans but Bank of England is keeping a close eyeThe Bank of England has not seen any signs that UK companies are scaling back their investment plans because of uncertainty caused by the looming EU referendum, a top Bank official said.Deputy governor Ben Broadbent was asked how the referendum on Britain’s membership of the European Union, likely to be held in June, was affecting the economy.Related: Brexit could slash sterling by 20%, warns Goldman Sachs#Brexit campaign has its biggest lead (9pts) after voters reject Cameron deal on EU reforms. @YouGov for @thetimes pic.twitter.com/EenrkKvNjj Continue reading...

Economics is not a hard science, and mathematical models won’t explain why people behave as they do. A much broader perspective is neededThe Guardian recently asked nine economists whether we’re heading for another global financial crash and they gave many different answers. Yet still we turn to economists as if they were physicists, armed with scientific predictions about the behaviour of the body economic. We consumers of economics, and economists themselves, need to be more realistic about what economics can do. More modesty on both the supply and the demand side of economics will produce better results.Following the great crash that began nearly a decade ago, there has been some soul-searching about what economics got wrong. Probably the self-criticism should have been more far-reaching, both in academia and banking, but it’s there if you look for it. In particular, the economic thinkers loosely clustered around George Soros’s Institute for New Economic Thinking (Inet) have produced a telling account of what went wrong.Related: Are we heading for a crash? | Albert Edwards, Aditya Chakrabortty, Linda Yueh, Ruth Lea, Fred Harrison, Vicky Pryce, Dambisa Mayo, Yanis Varoufakis, Mariana MazzucatoThe dominant strain of academic economics failed to see the crisis coming, and actually contributed to it Continue reading...

Australia’s household debt is among the highest in the world, so why is there so much focus on our relatively low government debt?Contrary to the concerns about government delivering numerous budget deficits, it is the growth and acceleration of private debt we, alongside policymakers, should be worried about - not public debt, which amounts to little more than a neo-con scare campaign. This is because private debt drives asset price inflation (bubbles). These bubbles always burst, causing economic destruction and financial disruption.Just ask the Americans, Irish or Japanese. Yet, all we hear from the Coalition and ALP is the need to transition the budget back to surplus as this represents “fiscal responsibility”, while treating private debt as a no-go zone. Why? Because Australia’s household sector is the most indebted in the world and nobody wants the value of their homes and investment properties to sink. Continue reading...

Bank, which is being investigated by SFO over its fundraising during financial crisis, had argued that documents were protected by client-lawyer privilegeBarclays has agreed to hand over internal documents to the Serious Fraud Office in a change of approach towards the SFO’s investigation into its rescue fundraising during the financial crisis.The bank will give the SFO communications linked to the inquiry into whether Barclays and its leaders made false and misleading statements about a £7bn deal with Middle Eastern investors. Continue reading...

Rolling coverage of Mark Carney’s press conference, after the Bank of England cuts its UK growth forecasts and warns that the global economy is weakening

Protesters in Athens throw petrol bombs and stones at police during a demonstration against pension reforms on Thursday. Police fired rounds of teargas and stun grenades to repel the protesters. The main rally was largely peaceful with 50,000 Greeks marching to the parliament to demand an end to austerity reforms Continue reading...

Proving your social prowess these days is not about ostentatious displays of wealth but green credentials, a report suggests. Tell us how you make friends and influence peopleHow do you keep up with the Joneses in the modern age – buy a flashy car? Show off your tan (from an exotic holiday, of course)?If your answer is any of the above then you are probably a bit out of touch. That is, according to Ryan Murphy, author of a paper from the Adam Smith Institute titled The New Aristocrats. He claims that attempting to impress your neighbours with ostentatious displays of wealth is now out of fashion. Continue reading...

It is now clear that interest rates won’t rise for some time, perhaps two years, but the Bank’s mixed messages dent its credibilityThe Bank of England goes to considerable lengths to explain its thinking. Once a quarter, it publishes an inflation report (pdf) running to almost 50 pages and the minutes of the latest meeting of the Bank’s monetary policy committee. When inflation is more than one percentage point away from the target, as it is now, it also releases an exchange of letters between the Bank’s governor, Mark Carney, and the chancellor, George Osborne.It is not really necessary to wade through all the analysis, though, because the late, great David Bowie summed things up in six words: always crashing in the same car. Wages and growth forecasts have been cut. Once again, the MPC has pushed back its estimate of when inflation will hit the 2% target. Carney is readying himself to send more missives to Osborne throughout the course of the year. Threadneedle Street thinks that the next move in interest rates will be up, but it is not 100% sure. The Bank’s sole hawk, Ian McCafferty, has given up the fight for the time being.Related: Bank of England cuts growth forecasts and leaves rates on hold - live updatesRelated: Has the Bank of England governor been caught bluffing on interest rates? Continue reading...

Prospect of UK rate rise recedes further as Bank cuts forecasts for economic growth, wages and inflationThe prospect of a UK interest rate rise has receded further after the Bank of England cut its forecasts for growth, wages and inflation. However, the governor, Mark Carney, warned borrowers against getting too comfortable with rock-bottom rates.

US bank predicts decision to leave would interrupt foreign capital inflow and put pressure on current account deficitAnalysts at Goldman Sachs are warning that sterling could fall by up to 20% if Britain votes to leave the European Union.The US investment bank believes Britain will remain in the EU, but its macro markets strategy team has looked at what would happen to the pound if the vote goes the other way.Related: UK better inside EU, says GlaxoSmithKline chief Continue reading...

PMI rises to 55.6 in January, but expectations for next 12 months fall to three-year lowBritain’s service sector surprised the City with stronger growth last month, but worries about financial market turmoil and the possibility of “Brexit” pushed business confidence to a three-year low.The Markit/Cips services purchasing managers’ index edged up to 55.6 in January from 55.5 in December, confounding expectations of a dip to 55.3. The figures come ahead of the latest Bank of England interest rate decision on Thursday, which is expected to see rates kept at the current level. Many economists do not expect a rate rise any time soon, while traders on money markets have pushed back their expectations to early 2018.

Blanchflower and Machin argue labour market must tighten further before pay growth picks up, something Bank of England consistently fails to acknowledgeEven a stopped clock is right twice a day so there will come a point when the Bank of England’s forecasts for rising wage inflation will be vindicated. But not for a while.That’s the main conclusion of the latest paper from Danny Blanchflower and Steve Machin, which argues that the labour market will need to tighten substantially further before pay growth starts to pick up.Related: UK's productivity plan is ‘vague collection of existing policies’ Continue reading...

Labour’s plans for a 1p income tax hike in Scotland would provide an alternative to austerity and help the party reclaim the torch of social justice from the SNPPolitics is often as much about sentiments as substance. Few political forces understand this better than the Scottish National party. It has successfully portrayed the Scottish Labour party as the establishment, even though the SNP booted Labour out of power in 2007. It has cultivated an image of being firmly on the left and opposing cuts even though – with the commendable exception of limited land reform – it has thus far failed to redistribute wealth and power. The independence referendum politicised Scotland, and the SNP has harnessed that energy: the party is exciting and inspires its supporters. Its fired-up grassroots base passionately defends its record from all criticism, including, undoubtedly, this one.Related: Labour pushes 1p tax rise in Scotland Continue reading...

Rolling coverage of the latest economic and financial news, as China’s factory sector contracts again and European growth slows

Former US secretary of state speaks on impact of Syrian refugee crisis as IMF chief Christine Lagarde adds she does not think world is entering new recessionTackling issues such as global inequality and the Syrian refugee crisis is difficult, former US secretary of state Madeleine Albright said on Sunday – even more difficult than fighting the cold war.Albright, who served as ambassador to the United Nations and was secretary of state under Bill Clinton, spoke as part of a panel at Wellesley College. The divisions brought out by the Syrian refugee crisis, she said, highlighted the issue of global inequality.Related: Obama outlines rules for closing gender pay gap and giving women 'fair shot' Continue reading...

Filmgoers who try to pursue Michael Burry’s route to wealth, as portrayed in Adam McKay’s Oscars frontrunner, might end up morally and financially bankruptAre you as greedy, selfish and nasty as the financial wizards somehow portrayed as heroes in The Big Short? If so, now could be the time to emulate your role models.Related: The Big Short review – Ryan Gosling and Christian Bale can't save this overvalued stockRelated: How historically accurate is The Big Short?Related: The Big Short: how Wall Street's crimes have been portrayed by Hollywood Continue reading...

Headline PMI hit 52.9 in January on the back of a rise in domestic ordersBritish factories enjoyed a pick-up in activity last month but the flagging global economy took its toll on exporters and the manufacturing sector shed more jobs.A closely watched measure of manufacturing, the Markit/CIPS Purchasing Managers’ Index, beat economists’ expectations and rose to a three-month high. The headline index hit 52.9 in January, up from 52.1 in December and well above the 50-mark that separates expansion from contraction. Economists had forecast a slowdown and a reading of 51.7, according to a Reuters poll.Markit/CIPS UK Manufacturing #PMI at 3-month high of 52.9 in Jan'16 (52.1 in Dec'15) https://t.co/W0Jm2mDC8j pic.twitter.com/Fu05AiuxkH Continue reading...

A process known as ‘reflexivity’ is a powerful force in financial markets, especially during periods of instability or crisisJanuary is usually expected to be a good month for stock markets, with new money gushing into investment funds, while tax-related selling abates at the end of the year. Although the data on investment returns in the United States actually show that January profits have historically been on only slightly better than the monthly norm, the widespread belief in a bullish “January effect” has made the weakness of stock markets around the world this year all the more shocking.But the pessimists have a point, even if they sometimes overstate the January magic. According to statisticians at Reuters, this year started with Wall Street’s biggest first-week fall in more than a century, and the 8% monthly decline in the MSCI world index made January’s performance worse than 96% of the months on record. So, just how worried about the world economy should we be?Related: Why is the global economy suffering so much turbulence? Continue reading...

January figures in benchmark purchasing managers’ index are weaker than expected and mark a sixth straight month of contractionActivity in China’s manufacturing sector contracted at its fastest pace in almost three-and-a-half years in January, missing market expectations, an official survey showed on Monday.The official purchasing managers’ index (PMI) stood at 49.4 in January, compared with the previous month’s reading of 49.7 and below the 50-point mark that separates growth from contraction on a monthly basis. It is the weakest index reading since August 2012. Continue reading...

Business secretary Sajid Javid’s 2015 plan is ‘not worthy of the name’, says Commons committeeA committee of MPs has attacked the government’s productivity plan for lacking clear goals and original ideas on how the UK can catch up with other advanced economies.Productivity, often measured as the amount produced for every hour worked, has grown only slowly since the financial crisis, placing Britain even further behind its peers.Related: How to boost British productivity and save the NHS all at onceRelated: UK economic growth slows in 2015: what the economists are sayingRelated: Are we heading for a crash? | Albert Edwards, Aditya Chakrabortty, Linda Yueh, Ruth Lea, Fred Harrison, Vicky Pryce, Dambisa Mayo, Yanis Varoufakis, Mariana Mazzucato Continue reading...

In open letter to PM, more than 120 leading economists including former UN and World Bank officials say UK can do far moreMore than 120 leading economists, among them former government, UN and World Bank officials, have lambasted the UK government’s response to the refugee crisis, calling it seriously inadequate, morally unacceptable and economically wrong.In an open letter to David Cameron, the economists argue that as the world’s fifth-largest economy, the UK “can do far more” and are calling on the government to take a “fair and proportionate share of refugees, both those already within the EU and those still outside it”.Related: Syrian children need an education – rich countries must give $1.4bn to fund it | Malala Yousafzai and Muzoon AlmellehanRelated: Europe’s immigration bind: how to act morally while heeding the will of its people | Kenan Malik Continue reading...

Mark Carney has been dealt a weak hand and his forecast that borrowing costs would soon rise exposed as a bluff. A move into negative rates are more likelyIt will probably be “no change” at the Bank of England this week, with policymakers expected to keep interest rates at their historic low again.The monetary policy committee meets on Thursday and in all probability will sit on its hands for the 83rd straight month. Most likely the MPC will keep the base rate at 0.5% for the rest of the year.Related: Is it a bird? Is it a plane? No, it’s Super Thursday Continue reading...

The Bank of England’s monthly interest rate announcement is all a lot more exciting than it used to be. Not that rates are very likely to be raised this monthThe fusing of the Bank of England’s announcement of its decision on interest rates with the unveiling of its quarterly inflation report is a relatively new phenomenon.It has been dubbed “Super Thursday” by economists who don’t have much else to get excited about, and has been structured in this way to either (a) allow the Bank to “take a deeper look at inflation prospects and give it a fresh perspective on the monetary policy”; or (b) because there’s been so little to say about rates for seven years that the Bank’s press office has got a bit embarrassed. Continue reading...

British productivity is still in the doldrums. What if the simple reverse application of Parkinson’s Law could solve it?‘It is a commonplace observation that work expands so as to fill the time available for its completion.” So wrote C Northcote Parkinson in jest about postwar bureaucracy in 1955. But his musings resonated far and wide, and now, 60 years on, what became known as Parkinson’s law is worth exploring in a country where productivity remains mired in the doldrums.What if solving the productivity puzzle is simply a case of fitting the same work into a shorter time? Continue reading...

Societies must learn to use economics to help provide purpose and fulfilmentReal men don’t eat quiche. Real economists don’t ask questions about happiness. The economy pumps out goods and services, all of which create jobs and incomes. There is no value judgment in such a statement, no view of what constitutes the good life. Even to invite such a question of an economist is to risk ridicule. The task of economists – a value-free quasi-science – is to make sure that as little as possible gets in the way of turning inputs into more outputs.But around the developed world consumers seem to be losing their appetite for more. Even goods for which there once seemed insatiable demand seem to be losing their lustre. Last week, mighty Apple reported that in the last three months of 2015 global sales of the iPhone stagnated, while sales of iPads tumbled from 21m units in 2014 to 16m in the same three months of 2015. In the more prosaic parts of the economy – from cars to home furnishings – there are other warnings that demand is saturated. Continue reading...

We need an estimated $1tn per year to stay below a global temperature rise of 2C. Creating new money might be the only way to meet this financial challengeThe international community has agreed on an ambitious agenda to curb climate change. Some 195 countries have decided to try and cut greenhouse gas emissions to a level that will limit the rise in average global temperatures to well below 2C. The question we now face is: how are we going to finance the changes needed to reach this goal? Quantitative easing – creating new money – might just be the answer.Related: Wanted: unprecedented collaboration to solve poverty and climate changeA percentage of that spent to bail out private banks could pay for investments needed to stabilise the world’s climateRelated: UN urges business leaders to double investment in green energy by 2020Related: $100bn? A drop in the ocean, says environment minister Amina Mohammed Continue reading...

Institute for Fiscal Studies report urges governments to scrap corporate tax system and write new rules for multinationalsGoogle’s £130m tax deal with the UK reveals the need for a radical overhaul of the international tax system, according to Britain’s leading authority on tax and spending.The Institute for Fiscal Studies (IFS) said governments should consider going back to the drawing board to develop a tax system that accommodates multinationals which currently escape making corporation tax payments in some countries.Related: Google's tax deal with the UK: key questions answered Continue reading...

2016 has seen some dramatic falls already, but Bank of Japan’s negative interest rates put some hope back into the global economyGlobal markets have ended a difficult month on a stronger note after the Bank of Japan stepped in to boost its economy with negative interest rates.However, weak economic growth figures in the US underscored the scale of a global slowdown that has rattled investors. Continue reading...

Stock markets rally thanks to Bank of Japan interest rate cut but the signs are the global economy is still feeling fragileIt would be easy to think that the worst is over, at least for the time being. Watching world stock markets rally after the Bank of Japan cut interest rates gave a sense of relief to many in the financial community. Oil prices, which slumped to just $27 (£19) a barrel a fortnight ago, stood at $34, up 40 cents on the day.Yet the reverse is true. If anything, investors are worried that governments and central banks have failed to realise how weak the global economy still is, seven years after the crash. Dangerous levels of private debt in China, bad debts lurking in Europe’s banking system, nervous consumers everywhere: it’s a nuclear device that needs careful handling.Related: Investors love cheap money – and hate optimistic central bankers Continue reading...

Markets also boosted by Bank of Japan’s surprise move to negative interest rates. French economy slows in fourth quarter while Spain powers ahead.

Threadneedle Street wants banks and building societies to be able to continue lending in times of stressBritain’s biggest lenders will be required to hold more capital than smaller rivals to ensure they can keep credit flowing into the economy, under proposals from the Bank of England.In the latest effort to avoid another taxpayer bailout of the banking system, Threadneedle Street will require the divisions of banks involved in lending to businesses and individuals to keep some capital in a “systemic risk buffer”. Continue reading...

Deals worth nearly €40bn were struck during the Iranian president’s four-day visit to Europe after the lifting of sanctionsAimed at renovating its ageing air fleet struck by years of sanctions, Iran Air has ordered 118 commercial passenger planes including 12 Airbus A380s, the world’s largest jet airliner. Other models on the list include 21 A320ceo, 24 A320neo and 27 A330ceo jets. Continue reading...