The downfall of the FTX cryptocurrency exchange proves how much markets need rulesI’ve laboured hard not to engage with cryptocurrency, to turn the page on its scandals and file its many bin fires under “fools and their money being easily parted”. But this has been a mistake, because the story is just getting good.The PayPal cofounder Peter Thiel said in 2020 that crypto was one of two poles of technological conflict, the other being artificial intelligence. AI could “theoretically make it possible to centrally control an entire economy” while crypto “holds out the prospect of a decentralised and individualised world”. He concluded that AI is communist and crypto is libertarian; it was unnecessary to add which of those he thought was better.Zoe Williams is a Guardian columnist Continue reading...

But Bank of England’s Andrew Bailey says worker shortage may still pose major risks in cost of living crisisThe governor of the Bank of England has said there could be a “rapid” fall in inflation in Britain amid a drop in global energy prices over recent weeks but warned that a shortage of workers could still pose major risks amid the cost of living crisis.Andrew Bailey told MPs on the Commons Treasury committee that the UK’s rate of inflation could fall back substantially this year after hitting the highest levels since the early 1980s during the autumn after Russia’s invasion in Ukraine led to an increase in wholesale energy costs. Continue reading...

Worker shortages and need to adapt to tech changes given as reasons in survey as Davos meeting beginsAlmost two in five of the bosses of global companies fear their businesses will be unviable within a decade because of the struggle to find talented workers and the need to adapt to technological change.As the World Economic Forum got under way in Davos on Monday evening, a survey of chief executives by the consultancy firm PwC was released, showing a downbeat mood about the immediate global outlook and longer-term survival prospects. Continue reading...

Carol Wilcox and Tony Brauer respond to an article by James Meadway of the Progressive Economy ForumThere is little point in James Meadway regretting Keir Starmer’s lack of spending commitments while maintaining the fiction that “spending increases will have to be met by at least some tax rises” (Keir Starmer may win power, but he won’t be able to turn the UK around on the cheap, 9 January).The government creates new money by instructing the Bank of England to credit private bank accounts to pay salaries, benefits, grants, etc. It needs neither taxes nor borrowing (its own money) to do this. Taxes cancel some of that money, but they have other important purposes. Tax rises to accommodate a “fiscal rule” serve no purpose. Continue reading...

International Labour Organization expects to see workers pushed into informal employment in 2023More workers will be forced to accept lower quality and poorly paid jobs this year as a result of the global economic slowdown, according to a report from the International Labour Organization (ILO).In its latest assessment of the state of the labour market, the Geneva-based ILO warned that “high and persistent” uncertainty over the state of the global economy was depressing business investment, eroding real wages and pushing workers back into informal employment, which can involve street vending, housekeeping or picking through landfills. Continue reading...

Breaking out of a mindset is not easy, but this crisis, 10 years in the making, could have been avoidedBefore it became the meeting place for the global elite, Davos was known as a place where those suffering from TB came to be treated. Thomas Mann set his story The Magic Mountain in a sanatorium in the small Swiss town and rarely have the links with Davos’s literary past seemed more appropriate than now, with the global economy in rehab after a three-year sickness still not shaken off. There have been plenty of relapses since the start of the Covid-19 pandemic.The first couple of weeks of 2023 have seen a modest improvement in the short-term outlook but that doesn’t mean the long-term problems have been cracked. The structural problems facing the global economy – weak investment, poor productivity, the climate emergency, rising inequality, political fragmentation – are still with us. Continue reading...

With prices soaring but wage rises still well below inflation, employees in the UK are getting the rawest deal in EuropeSigns that corporate Britain is winning the inflation war can be found wherever you look.Gaze beyond the ailing independent retailers and small-scale manufacturers that dominate TV and radio news coverage to the sales and profits of our largest businesses, where robust performance is the norm and promises of bumper shareholder payouts are being kept. Continue reading...

Janet Yellen told Congress that ‘extraordinary measures’ would be taken to avoid default until legislation is passed to raise ceilingJanet Yellen, the US treasury secretary, has notified Congress that the US is projected to reach its debt limit on Thursday, 19 January, and will then resort to “extraordinary measures” to avoid default.In a letter to House and Senate leaders on Friday, Yellen said her actions will buy time until Congress can pass legislation that will either raise the nation’s $31.4tn borrowing authority or suspend it again for a period of time. Continue reading...

Blue-chip stock index ends week 1% off all-time best as markets across Europe rise amid falling energy pricesThe UK’s FTSE 100 share index approached a record high on Friday, as European markets were lifted by hopes that the inflation shock from energy prices is easing.The blue-chip stock index, which includes the 100 largest companies listed in London, hit its highest level in more than four years. It touched 7,864.95 points, less than 1% away from the record intraday high of 7,903 points set in May 2018, before closing at 7844.07. Continue reading...

UK economy beat forecasts with 0.1% growth in November, as food and drink businesses benefited from the FIFA World Cup

From political dysfunction to economic turmoil, the evidence of Brexit as a great problem-creator is all around. No wonder European support for leaving the EU has tanked since 2016We’re good Europeans at last. Nearly seven years after we voted to leave, Britons are finally doing their bit for the European Union. Diligently and with dogged devotion to duty, we are strengthening the ties that bind the 27 remaining nations of the EU – though not quite in the way anyone would have wanted.Take a look at the Europe-wide survey, published yesterday , which showed that support for leaving the EU has tanked everywhere since 2016. In every EU member state where data was available, from Finland to the Netherlands, Portugal to Hungary, pro-leave sentiment has fallen through the floor. Even Europe’s most hardcore anti-EU parties have abandoned the goal of actually leaving the EU – no more talk of Frexit or Italexit – aiming instead merely to reform the union from within.Jonathan Freedland is a Guardian columnist Continue reading...

Jeremy Hunt is not getting carried away by November growth, and monthly GDP moves can be erratic

Figure comes as people began Christmas shopping, while World Cup gave pubs and bars a boost

Bloomberg estimates Bank made profit of £3.5bn after intervening to prevent run on pension fundsThe Bank of England has finished unwinding the emergency bond-buying scheme it launched to calm the financial markets after Liz Truss’s disastrous mini-budget last autumn.Threadneedle Street said it had completed the sale of £19.3bn of government bonds three months after it was forced to intervene in markets to halt a run on pension funds. Continue reading...

Investec predict UK energy bills will average £2,500/year in the second half of 2023 year, as US consumer price index falls to 6.5% in year to December

Retailer boasts biggest share of clothing and homeware market in seven years, as Tesco hails festive boom

Exclusive: council bids for tax breaks and liberalised planning rules axed as government dismantles Liz Truss’s agendaHundreds of bids by councils to be granted tax exemptions and liberalised planning rules under the “investment zones” scheme have been killed off, as Rishi Sunak’s government dismantles another of Liz Truss’s projects.Sources said ministers were trying to scale down the scheme, which was a key part of the previous government’s growth strategy, while salvaging some aspects of it as a sop to the former prime minister and her allies. Continue reading...

Blue-chip share index is approaching its record high set over four years ago

Warning comes in annual global risks report for next week’s World Economic Forum in DavosSoaring prices for energy and food could persist for the next two years, hurting global efforts to combat poverty and the climate crisis, a report prepared for next week’s World Economic Forum in Davos, Switzerland, has warned.The WEF’s annual global risks report found the international cost of living crisis unleashed by the Covid pandemic and Russia’s war in Ukraine topped the list of concerns in a survey of more than 1,200 global experts, policymakers and business leaders. Continue reading...

Fraud and error have left ‘eye-watering’ amount owed to HMRC, says public accounts committeeThe government has been criticised for failing to collect £42bn in unpaid tax from businesses and individuals amid concern over the strain on the public finances as the UK’s economy stands on the brink of recession.The cross-party Commons public accounts committee (PAC) said that an “eye-watering” amount of tax was owed to HMRC, while also criticising tax collectors for lacking ambition to tackle fraud and error. Continue reading...

A project to revive the economic fortunes of former mill towns can be a model for the rest of the countryThe inventor of the flying shuttle, the 18th-century innovation that transformed textile production and helped Manchester earn the nickname Cottonopolis, actually came from Bury. By the late Victorian period, John Kay’s home town and neighbouring Rochdale and Oldham were all renowned hubs of textile manufacture, while Manchester had become a globally important cotton trading hub. What contemporary economics would call an agglomeration effect – a kind of virtuous circle of growth driven by new methods and investment – spread growth across the region.The contrast with modern Greater Manchester is stark. Partly as a result of a property investment and services boom, much of the city of Manchester has thrived in recent years. But the end of coal and cotton in the 20th century saw former mill and mining towns struggle to find a new role, and too much work in such places remains restricted to low-wage, low-skill jobs. Continue reading...

Campaigners say bank should rush to rescue countries facing recession – but can it do so without resulting in mass debt write-offs?Not since the early 1990s has the world faced such a period of low growth.Discounting the havoc caused by the financial crash of 2008 and the initial impact of the Covid-19 pandemic, the World Bank says that by the end of 2024 it will have been 30 years since the global economy grew at an average of less than 2% a year. Continue reading...

Online shopping giant announces consultation to shut warehouses at Hemel Hempstead, Doncaster and Gourock

Washington-based body cuts 2023 growth forecast amid threats from inflation, interest rates, Covid and warAny fresh setback to a global economy already rapidly weakening as a result of high inflation, interest rates and war could result in a second recession within three years in 2023, the World Bank has warned.In its half-yearly health check, the Washington-based institution said it had cut its 2023 growth forecast from 2.9% to 1.7% after the risks it identified six months ago all materialised. Continue reading...

Chief economist says risks remain despite fall in wholesale energy prices and UK on brink of recessionThe Bank of England’s chief economist has warned high rates of UK inflation could persist for longer than expected, despite a fall in wholesale energy prices in recent weeks and the economy on the brink of recession.Huw Pill said the slowdown in the British economy and sharp fall in European gas prices could help to take the sting out of the highest rates of inflation in more than four decades. Threadneedle Street forecasts headline inflation – which was running at 10.7% in November – will ease from the middle of this year. Continue reading...

Rolling coverage of the latest economic and financial news

Impact of reduced state support with company power bills could prompt job cuts, warns industry bodyAlmost two-thirds of manufacturers in Britain fear blackouts this winter amid the fallout from the energy crisis, according to an industry survey, as concerns grow about government plans to cut financial support for businesses.As the chancellor, Jeremy Hunt, prepares to announce a sharp reduction in industry support, the trade body Make UK said the impact from sky-high energy costs on manufacturers showed no sign of abating. Continue reading...

Resolution Foundation says UK only halfway through two-year cost of living crisis, with only very richest likely to see income rise in 2023-24British households are only halfway through a two-year cost of living crisis, with average incomes likely to fall by more than £2,000, a leading thinktank has warned.Typical disposable incomes for working-age family households are on track to fall by 3% in this financial year, and by 4% in the year to April 2024, according to the Resolution Foundation. Continue reading...

Exclusive: 182 experts say only debt cancellation offers chance of recovery but private investors are playing hardballSome of the world’s most powerful hedge funds and other investors are holding up vital help for crisis-hit Sri Lanka by their hardline stance in debt-relief negotiations after the Asian country’s $51bn (£42bn) default last year, according to 182 economists and development experts from around the world.In a statement released to the Guardian on Sunday, the group said extensive debt cancellation was needed to give the economy a chance of recovery and that Sri Lanka would be a test case of the willingness of the international community to tackle a looming global debt crisis. Continue reading...

The Fed is putting people out of work to reduce workers’ bargaining power and reduce inflation. They’ve got it all wrongJob growth and wages are slowing. Employers added 223,000 jobs in December, the labor department reported on Friday – lower than the average in recent months.Average hourly wages rose by 4.6% in December, according to Friday’s report. That’s a slowdown from 4.8% in November.Robert Reich, a former US secretary of labor, is professor of public policy at the University of California, Berkeley, and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.com Continue reading...

Whether it’s Labour plan for renewal or the Tory path to recovery, both remain hostage to circumstance in 2023Think back 12 months to January 2022. Boris Johnson was prime minister and had resisted calls for a lockdown in response to the Omicron variant of Covid-19. It was assumed inflationary pressure from post-pandemic supply-chain bottlenecks would soon abate. Russia’s invasion of Ukraine was still several weeks away. There were rumblings of discontent in the Labour party at Sir Keir Starmer’s failure to register a commanding opinion-poll lead.All of which is a way of making the point that a lot can happen – to the economy and in politics – in the course of a year. And given that the next election is not going to be held until 2024 it would be unwise to assume the next year will be any more predictable. Continue reading...

Wealthy people who own home outright will avoid higher costs and benefit from better return on savingsHomeowners with mortgages will be among the biggest losers from the cost of living crisis in 2023 due to interest rate rises, while the wealthiest UK households will benefit from better returns on savings and investments, according to analysis by a leading thinktank.The Resolution Foundation said the way the government had tackled the spike in inflation this year – relying heavily on the Bank of England’s interest rate rises – put “mortgage households at the heart of the Britain’s income squeeze”. Continue reading...

Years of austerity, and then the Truss-Kwarteng fiasco, have compounded the self-inflicted isolation of leaving the EUI did not get where I am today making forecasts about how the economy will perform in a new year. But I do feel it is my duty to emphasise the tangle into which this benighted government has got itself and us, and the connection between the three macroeconomic policy errors that have made us what we are – namely the “sick man of Europe”, with an economic performance worse than any other member of the G20 economies apart from Russia.What prompted me to do this was a BBC Today programme last week, guest-edited by Dame Sharon White, chairman – her own preferred term – of the John Lewis Partnership. White took the opportunity to invite other economists to discuss the present UK economic malaise. What struck me was the way they agreed that, after the fiasco of the brief Truss-Kwarteng “fiscal event”, the prime macroeconomic objective of the UK – which in this case means the government and the Bank of England – was to restore “credibility”. Continue reading...

This week the chancellor performs his latest Scrooge act with a revamp of the energy bill relief scheme – and the signs aren’t good“Can I cut it?” asks Jeremy Hunt, in a clip set to A Tribe Called Quest’s 1990 song Can I Kick It?. “Yes you can,” responds Rishi Sunak in a satirical video recently released by left-leaning social media publisher PoliticsJoe.This week Hunt will enact the latest cut of his short tenure as chancellor – one which has been typified by moves to rein in the work of his bulldozing predecessor Kwasi Kwarteng. Hunt plans to announce a revamp of the energy bill relief scheme, which subsidises all “non-domestic” gas and electricity customers, from businesses and charities to hospitals, schools and care homes. Continue reading...

223,000 new jobs created in US last month, more than expected, while slowing wage growth cheers Wall Street

When the World Bank set its mission to a ‘world free of poverty’, it was ‘Martin’s definition and Martin’s measure’Martin Ravallion, an Australian economist who devoted his career to fighting poverty, occasionally found his reputation preceded him to remote parts of the world.In 2016 the Dutch publication De Correspondent described a 2005 field trip Ravillion took to the southern Chinese province of Guizhou – one of the country’s poorest – where he asked the county statistician what approach he used to calculate how many people in the region were poor. Continue reading...

Continued strength of jobs market comes as Fed struggles to cool hiring and bring down inflation by raising interest ratesThe US jobs market ended 2022 on a high note, adding another 223,000 jobs in December, the department of labor reported on Friday. The unemployment rate dipped to 3.5%, back to its pre-pandemic low.The continued strength of the jobs market comes as the Federal Reserve has struggled to cool hiring and bring down inflation by raising interest rates at a pace unseen in a generation. Continue reading...

First Abu Dhabi Bank confirms that it had considered a possible offer for FTSE 100-listed Standard Chartered, but is no longer doing so

With inflation on the rise and the era of ultra-low interest rates over, there could well be a systemic crisisThe fact that the world did not experience a systemic financial crisis in 2022 is a minor miracle, given the rise in inflation and interest rates, not to mention a massive increase in geopolitical risk. But with public and private debt having risen to record levels during the now-bygone era of ultra-low interest rates, and recession risks high, the global financial system faces a huge stress test. A crisis in an advanced economy – for example, Japan or Italy – would be difficult to contain.True, tighter regulation has reduced risks to the core banking sectors but that has only led to risks shifting elsewhere in the financial system. Rising interest rates, for example, have put huge pressure on private equity firms that borrowed heavily to buy up property. Now, with housing and commercial real estate on the brink of a sharp, sustained drop, some of those firms will most likely go bust. Continue reading...

The prime minister cannot be honest about Britain’s problems without repudiating 12 years of Tory ruleTo govern in difficult times, a prime minister needs a candid account of problems matched with credible solutions. Rishi Sunak provided neither in what had been billed as a significant policy speech on Wednesday. He referred fleetingly to Covid and the war in Ukraine as causes of the present difficulties, but there was no critical analysis of the way Britain has been governed in recent years.Of course there wasn’t. To speak honestly about public services would have meant admitting that budget austerity has depleted provision and demoralised staff. To explain the economic malaise, the Tory leader would have had to acknowledge Brexit as national self-sabotage. Continue reading...

Last century investment, innovation and greater equality led to a huge rise in productivity. Policies to encourage those are vital nowGreat things were expected of the 2020s. After the disappointments of the previous decade, this was to be the time when the global economy powered up and got going again. There would be a flowering of new technologies and a colossal boom. It would be the roaring 20s all over again.It hasn’t worked out like that. Instead, the world faces the grim prospect of a second recession in three years. The three biggest economies – the United States, China and the European Union, which between them account for roughly half of all global output – are slowing at the same time. That’s unusual and troubling.Larry Elliott is the Guardian’s economics editor Continue reading...

Spending higher than year earlier, with World Cup football pushing up beer salesHouseholds in the UK spent £1.1bn more on groceries in December than a year earlier, taking Christmas spending to a record £12.8bn, but got fewer items in their baskets as rampant inflation hit home.In a clear indication of how soaring prices are hammering household budgets, the latest monthly report from retail analysts Kantar showed that despite the overall amount shoppers spent rising more than 9%, the volume of sales was down 1% on the same month in 2021. Continue reading...

British Retail Consortium figures come amid concern over economy and rising cost of energy billsUK food price rises soared to a record rate in December, figures show, as retail industry bosses warned that high inflation would continue in 2023 amid the fallout from surging energy bills.Annual food inflation jumped to 13.3% in December, up from 12.4% in November, according to the latest monthly report from trade body the British Retail Consortium (BRC) and the data firm Nielsen. The BRC said this was the highest monthly rate since it began collecting data in 2005. Continue reading...

People with disabilities more likely to cut back on energy use and food, Resolution Foundation saysDisabled people in the UK are much more likely to struggle to heat their homes and cut back on food this winter, according to a report highlighting “massive” income gaps amid the cost of living squeeze.Research from the Resolution Foundation found people with disabilities had an available amount to spend that was about 44% lower than that of other working-age adults, exposing them hugely to the rising cost of essentials. Continue reading...

Fawzi Ibrahim on why printing money doesn’t have to cause a rise in inflationAnne McElvoy is right (‘It’s the economy, stupid’ says the US campaign slogan. Starmer would do well to learn it, 26 December); Labour has to move beyond “simply redistributive ideas, to those that move the needle on growth”, but she fails to confront one essential component to achieve this. Taxation and borrowing from the private sector remain central to any government economic policy. So far, “borrow to invest” has conditioned even leftwing thinkers to accept the unequal distribution of wealth.But there is an alternative that will also aid redistribution: print and regulate. The opposition to the government printing money is that it would cause inflation by increasing demand on resources. But this is only true if private finance is allowed the same capacity to invest. If the latter’s investment capability is restricted by the same amount as increased public spending, then demand for resources would remain unchanged and inflationary forces contained. Continue reading...

Despite the gloomy predictions, an extended period of lower energy prices could bring some cheerTypical. After a round of new year prediction punditry that made one think that 2023 could only be bleaker and weaker than 2022, the FTSE 100 index charged off in the opposite direction. It was up 180 points after two hours of trading to a shade over 7,600, enough to bring the all-time high (7,877, in the faraway pre-Ukraine, pre-Covid days of 2018) into view, a prospect that did not feature heavily in most “what to expect” checklists.By the close, the gain was a more modest 102 points but still out of tune with the general diagnosis that a third of the world would be in recession this year (the IMF) and that the UK’s downturn was likely to be the worst and longest in the G7 (a Financial Times poll of 101 UK economists). Never mistake share price for the real economy, but it’s worth asking the question: is it possible that 2023 could be a tale of muddling through, as opposed to a story of unmitigated financial gloom? Continue reading...

Energy crisis piles pressure on small and medium-sized businesses that are struggling with other costs

Demand for credit is waning among UK’s leading companies, according to accountancy firm DeloitteThe UK’s leading companies are less inclined to borrow now than at any point since the financial crisis of 2008, a survey of directors has found.Demand for credit is flagging among chief financial officers, with barely a quarter of those polled at FTSE 100 and FTSE 250 companies expecting to increase borrowing in the next year. Continue reading...

Joblessness is such a waste of resources that no one interested in efficiency can be complacent about itThe misguided attempts by some central banks to reduce inflation by raising interest rates and generating unemployment seem to be about credibility. Their reputations as anti-inflation fighters must be preserved despite the heavy cost. Even when the Nobel laureate and prominent monetarist Franco Modigliani renounced this theory in 2000, central banks continued to follow the creed he abandoned. More pain is being inflicted on the public through rate rises while the evidence stacks up that this is unnecessary suffering.Last October, the Peterson Institute for International Economics produced a paper looking at 11 advanced economies and said the “little noticed dark side” of low inflation before the Covid pandemic was that “unemployment was almost continuously higher than needed to keep inflation low. Unless central bankers change their economic models, the world is likely to return to chronically excessive unemployment in the years after the [current] inflation surge.” The problem is that central bankers see economies running hotter than they actually are – and hike borrowing costs when there is no reason to do so. Continue reading...

Wall Street predicts turbulent first six months but growing optimism at ebbing inflation, slowing pace of rate hikes and China’s reopeningInvestors should brace for another turbulent year in the financial markets, economists have warned as central banks fight inflation, China reopens its economy after Covid-19 restrictions and the Ukraine war pushes the global economy towards recession.The first half of the new year is likely to be choppy, according to Wall Street predictions, after global markets suffered their biggest fall since the 2008 financial crisis last year. Continue reading...