Tuesday, 31 July 2012

Financial snippets from Larry Elliott

Larry Elliot writes succinctly and always interestingly on the current financial debacle.
Forget for a moment that the ratings agencies forfeited their right to give advice to governments when they gave AAA ratings to the toxic waste spewed out by Wall Street and the City of London in advance of the financial crisis. Ignore the evidence that the sky has not fallen in when other countries have been downgraded. While these are important points to bear in mind, the real problem with allowing policy to be dictated by the ratings agencies is that it is so clearly at odds with the government's vision. This can be summed up quite simply: get the economy moving; meet the targets for deficit reduction; win the 2015 election. As things stand, none of these objectives will be achieved.

Sweden and the UK's response to current disaster:
Compare and contrast. Britain and Sweden are both members of the European Union. Neither is a member of the single currency. Both have large public sectors in relation to the overall size of their economies. Yet in the second quarter of 2012, when the UK was in the third quarter of its double-dip recession and output fell by 0.7%, Sweden posted quarterly growth of 1.4%.

Household income falls:

Ever since the latest figures for UK growth were released last week, there has been a concerted attempt to rubbish the data. The great and good from the business world has lined up to say that the 0.7% drop in gross domestic product in the three months to June was a rogue number and that the economy is actually not doing nearly that badly.
That is not the story painted by fresh figures out on Tuesday that provide a snapshot of the economic position of households, which show an almighty squeeze on spending power caused by rising prices and weak wages growth. This data relates to the first quarter of 2012 so is not entirely comparable with the GDP numbers – but it does help to explain why activity in the economy has been so weak...

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