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Everyone feeling better about the economy now?

August 24, 2012 3:37 pm

Author:

Mark Ferguson

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Last month it was announced that GDP had decreased by 0.7% in just one quarter – but today that growth forecast was revised up, leading some to suggest that the situation isn’t as bleak as first believed. That may well be the case – lets take a look.

Here is what we thought growth looked – since Osborne’s 2010 spending review – before today’s revision:

Here’s what we know growth over that same period looks like following today’s revision:

Now let’s take a look at those side by side:

Everyone feeling better about the economy now? Thought not…

http://twitter.com/johnringer John Ringer

Mark, I highly recommend reading “The Visual Display of Quantitative Information” by Edward Tufte – boring-sounding title, but it’s really readable and full of cool charts and images.

Tufte would tell you that a graph with one data point is absolutely verboten – sometimes a big number is just better!
markfergusonuk

I will certainly give that a look
- ovaljason
  
  Translation: I cannot find a single positive thing in France or NHS Wales to write about.
Mr Arthur Cook

The slight adjustment in GDP has seen a
drowning chancellor clutching at a slightly longer straw. Combined with this we
have the Tories organising a national street party to celebrate a ‘fall in
unemployment’. Rather than pinning up the bunting at this flood of ‘good news’ we
might reflect on the chancellor’s accomplishment of generating less ‘domestic
product’ by employing more people! As such, even if these figures are taken at
face value, they can be seen as indicating an ailing economy tended by an
increasingly desperate quack doctor who has, in his bag, only one bottle of ‘cuts
potion’. As the chancellor forces ever more of ‘George’s marvellous medicine’
down the throat of the patient the relatives standby muttering with each twitch
and gasp of the dying patient imagining that it is the first sign of recovery.
Quite simply, George’s promised miracle was based on the notion of an export
led recovery fuelled by a deregulated UK labour force cowed by
unemployment into accepting ever lower wages and poorer conditions. As such
this vision was based on an economic future modelled on ‘successful’ Asian
economies which generate huge wealth for a few but leave the workforce unable
to purchase the products they manufacture. For the majority of the British
people George’s ‘success’ for the majority would look very little better than
failure.
What must form the foundation of a Labour strategy on the economy is not a ‘recovery’
which means more of the same but a new deal which recognises the key dichotomy
which separates right and left. The right believes that the people are there to
serve the economy. Only by acknowledging that the economy is there to serve the
people will we move away from the neo-liberal and Blairite sirens of “New”
Labour.
This does not mean returning to wallow in the mire of clause 4 but looking
forward to a modern economy which generates and supports innovation and entrepreneurial
energy shaped and guided by principles of social justice.
Mr 0a

On a serious note it’s depressing how this kind of statistic is treated in the media. GDP itself is a very imprecise measure. A projected GDP number is even less precise.

A revision by 0.1% of a number that is likely to be inaccurate to another ‘actual’ number for a statistic that is itself dubious is therefore neither here nor there. We seem to get ‘ECONOMY DOING MUCH BETTER THAN EXPECTED’ headlines for minor positive revisions (and vice versa for minor negative revisions) when in reality all we have is statistical noise.

Perhaps GDP numbers should be published with some form of confidence interval to put them in perspective – eg GDP is expected to shrink by 0.7% (plus or minus 0.5%) in the next quarter to put this nonsense to bed.
Serbitar

If your glass looks half-full pour the liquid from the half-full glass into another glass with half the original volume and, presto, you have a glass full to the brim again!
MarcusTankus

This is all so divorced from reality , it would be comical if it wasn’t so desperately serious …..

All the figures we are fed, regardless from the cons or labour are highly massaged ….there is just so much off the books …PFI,public pension ponzi scheme , semi privatized banks counted as assets etc …..it all just renders it a joke ….

It took the UK until 2006 just to finally pay of its loans taken out to get us through world war two and its aftermath ……. (That was back in the days when $4.3bn was considered rather a lot of money…we will have printed a 100 times that by the next QE print run before Christmas)

All the party’s are just talking about is deficit reduction …which means the actual debt is still increasing and will still increase over the next parliament ……the numbers are truely beyond comprehension….

The euro zone… our major export market is going to implode , as its only political investment that’s keeping it together ….not economic . The CEB print run of half a trillion € last Nov is not enough to keep everything with even an appearance of solidity for another year ..

The growth fairy just isn’t going to turn up , but the inflation monster will ..due to the incontinent printing..domestic borrowing against property as collateral (which fueled the last decades boom years) isnt going to happen as property prices are going into a hard protracted fall (look at northern Ireland )

We are facing decades of fiscal stress and social decline ahead of us ..a decade of boom thats going to take 40 years of repayment (minimum, as PFI bills from the last decade don’t run out until 2058 …and the conservatives have added to it )…..Uk tax payers that haven’t been born yet have already had their future revenue spent ….

we are in generational decline …and its the new norm ….get used to it

PS… Ringers right about 1 point graphs …pointless
Brumanuensis

“It took the UK until 2006 just to finally pay of its loans taken out to get us through world war two and its aftermath ……. (That was back in the days when $4.3bn was considered rather a lot of money…we will have printed a 100 times that by the next QE print run before Christmas)”.

The loans were at a fixed interest rate and payments could be suspended. They weren’t a normal form of government borrowing. Comparisons in the nominal value of present and past amounts won’t work, because you’re not taking inflation into account.

“All the party’s are just talking about is deficit reduction …which means the actual debt is still increasing and will still increase over the next parliament ……the numbers are truely beyond comprehension….”

Well, not exactly beyond comprehension. And increases in debt are only a problem if they increase relative to GDP. The absolute value of debt is a pretty meaningless figure, when used without any context.

“The growth fairy just isn’t going to turn up , but the inflation monster will ..due to the incontinent printing..domestic borrowing against property as collateral (which fueled the last decades boom years) isnt going to happen as property prices are going into a hard protracted fall (look at northern Ireland )”

I think we’ve had constant predictions of imminent hyper-inflation for years now. It hasn’t happened and won’t, unless something truly incredible occurs, happen in the future.
- MarcusTankus
  
  So what is now the “normal” form of borrowing ……? ..98% of Gordon’s first £200bn print run went into government gilts ……and that practice has continued for the last 4 years on subsequent print runs ….and they are coming faster and faster ,as a result of deminishing returns (Weimar) next one is due before Christmas .
  
  Government prints monoploy money out of thin air to buy government bonds (on the “open” market ) which are used to fund government overspend ….yeah that underpins a really stable economy doesn’t it ? …and when these bonds mature they will just get written off ..!
  
  “The absolute value of debt is a pretty meaningless figure, when used without any context.”
  I’m going to try that one on my bank manager …. I wonder how far I will get …!
  I guess the debt is meaning less when true liabilities are not included ..Just how are public pensions to be funded in the next decade on a declining wealth creative (private) base …hmmm ? more printing ?
  
  “I think we’ve had constant predictions of imminent hyper-inflation for
  years now. It hasn’t happened and won’t, unless something truly
  incredible occurs, happen in the future”.
  
  Inflation is caused by the oversupply of money …simple’s … the incredible has happended ….our government is being funded on monopoly money , the consequences are already coming down the track.
  
  the whole of the eurozone is dependant on CEB print runs …including the Germans (third party bungs ) ………
  the figures are being manipulated ….. the interest rate is being kept artificially low, so the low mortgage rate payments are hiding some big increases in the cost of say…. petrol and food staples …but now even the held BoE interest rate trick isnt going to work for much longer as tracker mortgages are now being decoupled from the base rate and are going up regardless.
  
  …….savings and pensions are being destroyed as a cost for maintaining our overspend and debt
  
  the future is a bleak place …… for the young, as the old have already spent what rightfully should be theirs ……for political gain !
ovaljason

Mark Ferguson has spent years telling us that we require proper left-wing solutions to our country’s problems.

There is now a full-on socialist government in France, and in Wales we have an NHS totally untouched by the Co-alition’s “evil dismantling project”.

Is it just me? I don’t recall any articles from Mark telling us how well both projects are going.

C’mon, Mark. Our two nearest neighbours have adopted socialism. It’s everything you’ve wanted.

But where are the glowing articles explaining how brilliantly it’s going?
markfergusonuk

Here’s the thing Jason – there aren’t many advantages to being a blogger, but one of them is that I get to choose what to write…
markfergusonuk

On the country, I’m a huge fan of the Welsh Assembly Labour Group and I’m an avid Francophile, but I’ve never written anything about India either – which is one of my great passions. You can’t please everyone…
Brumanuensis

‘Full on socialist government’.

Francois Hollande is, by French standards, a pragmatist whose economic platform had relatively few differences with Sarkozy’s. Which is why since his election the left have been growing progressively more agitated about his ‘u-turns’ on European austerity.
Brumanuensis

“Inflation is caused by the oversupply of money …simple’s … the incredible has happended ….our government is being funded on monopoly money , the consequences are already coming down the track”.

Where? Where is this phantom inflation I hear people talking about? I see an increase in future months due to growth in food and fuel costs, which are by-and-large unrelated to QE. If the government printed a lot of money during normal economic conditions, there would be a reasonable risk of higher inflation. We are not in normal economic times. We have become mired in a liquidity trap, meaning monetary policy no longer has a significant effect – or arguably ‘any’ effect – upon inflation. As I pointed out to another poster on this website recently, comparisons between the UK and Weimar do not stand up to scrutiny.

“I’m going to try that one on my bank manager …. I wonder how far I will get …!
I guess the debt is meaning less when true liabilities are not included ..Just how are public pensions to be funded in the next decade on a declining wealth creative (private) base …hmmm ? more printing ?”

If you have an annual income of £100,000 and debts of £15,000, your bank manager won’t worry. If you have an annual income of £15,000 and debts of £100,000, you are – depending on the type of debt – probably on the verge of bankruptcy. That’s my point about the absolute value of debt. It means nothing without context.

“the figures are being manipulated ….. the interest rate is being kept artificially low, so the low mortgage rate payments are hiding some big increases in the cost of say…. petrol and food staples …but now even the held BoE interest rate trick isnt going to work for much longer as tracker mortgages are now being decoupled from the base rate and are going up regardless.

…….savings and pensions are being destroyed as a cost for maintaining our overspend and debt”.

Actually the BoE reckons that many pensioners have done no worse under QE, as the value of equities and bonds has been pushed up, off-setting declines in the value of annuities. There is also the point that protecting savings and pensions at this time would be harmful to young people and those with debts. You might argue that it is wrong to ‘penalise’ savers to help those people out, but economics is not a morality play. The best policy for savers would be deflation and that would be a disaster for the wider economy. Savers are not the be-all and end-all of society.
- PeterBarnard
  
  And of course, Brumanuensis, there was Nigel Lawson’s Mansion House speech in 1985, labelled as the ‘death of monetarism.’ He said inter alia (how do I do italics?) that, in the 1980s £M3 had grown twice as fast as prices (84% vs 43%).
  
  Added to which, HM Treasury never quite knew what “class” of money it was “best” to “target” : £MO, £M3, £M4 … or even £M5.
  
  And added to that was the high priest of monetarism’s (the late M Friedman) comment to the Treasury Select Committee in 1980 that ‘… there is no necessary relation between the Public Sector Borrowing Requirement and monetary growth.”
  
  Mr Friedman wrote to the TSC, “I could hardly believe my eyes when I read … the principal means of controlling the growth of the money supply must be fiscal policy … and interest rates…”
  
  Nigel went on to monitor the exchange rate, particularly the £ : DM rate (which he subsequently ‘shadowed’ as a means of controlling inflation). He was pulled up, almost summarily (and almost as a public rebuke), when Thatch announced in the HoC that ” … you can’t buck the market.”
  
  As I have said before, this remark (“can’t buck the market”) was possibly the most damaging public remark ever made by a UK Prime Minister. Financial markets were placed on a pedestal, the participants therein became both “masters of the universe,” and almost “the untouchables,” and we all know the results.
  
  Lord Lawson (as he is now) turned out to be something of a discredited Chancellor : with good cause – interest rates nearly doubled in the 12 months – 7.5% up to 14% – following the 1988 Budget that had Tory MPs going orgasmic, they were 15% when he resigned, and 12 months after he resigned, inflation was north of 10%.
  
  Unkind souls would call him something of a “dud” ; but here he is nowadays, called out to radio and TV studios for his comments, as if he was a man of sound economic achievements ….
  - Brumanuensis
    
    Exactly Peter. The 1988 budget should have gone down as one of the worst in recent British history. Nick Budgen, the monetarist MP for Wolverhampton South West, openly rebuked his fellow Conservative MPs when they were celebrating after the budget, saying “It is the most irresponsible budget I have ever heard, it will be downhill from now on. In one fell swoop Mr Lawson has squandered five years of responsible economic management”.
    
    Interestingly, Lawson was probably following the US Federal Reserve when he took his decision over M3, as the Fed had abandoned monetarist targeting a year earlier, with no effect upon inflation.
    - PeterBarnard
      
      Thanks, Bruamensis.
      
      I forgot to mention that, in his memoirs “The View From No 11,” Lawson remarked that he hoped that one of the effects of the 60% to 40% reduction in the top rate of income tax would be to act as a restraint on CEOs and directors awarding themselves extravagant increases in income ….
      
      Well, that didn’t quite work out, either.
      
      Another hoped-for effect was that now that the top rate of income tax was reduced to a “reasonable level,” then those on high incomes would willingly pay their “fair share,” and not resort to tax avoidance measures.
      
      Another hope that didn’t quite work out as intended …
  - jaime taurosangastre candelas
    
    “You can’t buck the market” (Thatcher).
    
    “…possibly the most damaging remark ever made by a UK Prime Minister” (Peter Barnard).
    
    Both true. The essential clash between an economic and political perspective on the same problem. Adherents of both views will find endless data to support their passion. In between, all sorts of historical “weaselling” and adding 2+2 to make 5 if you close one eye and hope a lot try to “square this circle” as a matter of “pragmatism”. I do not imagine anyone ever has squared the circle.
    
    It does not help that, in sporting terms the economists are playing rugby, and the politicians playing football, which have different rules, and that the economists view is that the game lasts for one century or longer, and the politician’s view that is is all over in 5 years at the next election.
    - PeterBarnard
      
      Maybe, Jaime, but as President Harry S Truman (like Attlee, he was much under-rated at the time, but history has shown them both to be “at least good” leaders of their countries) remarked, “Can someone send me a one-armed economist?”
      
      “What do you mean, Mr President?”
      
      “Well, every one of these fellers tells me, ‘on the one hand you could do this, with this set of results, and on the other hand, you could do that, with that set of results … ”
      
      Jaime, the world has never been so full of economists in every institution – government, business, banks, “think tanks,” political parties, media - and the bu$$ers still can’t agree and we are in the biggest balls-up since the 1930s. It’s a good job that these people weren’t put in charge of something serious, such as (i) putting a man on the moon, or (ii) eliminating small-pox.
      
      If that’s science, I’ll eat my hat (and I do wear one – it comes with age).
      
      Of course, what has dominated since 1979 is neo-liberal economics (Ricardo, Malthus and Alfred Marshall), not to mention a generous helping of Samuel Smiles, and the bits of Adam Smith/”Wealth of Nations” that the neo-liberals like.
      
      These just-mentioned “economic recipes” did not improve the condition of the people, in aggregate, in the 19C, and they haven’t improved the condition of the people, in aggregate, since 1979.
      - jaime taurosangastre candelas
        
        Peter, if you are measuring since 1979, it really is too soon to tell (© Zhou En Lai)
        
        BTW, you enquired elsewhere about italics. Type your text into the comment box. Also works for bold with your text, and to strikeout ~~an intentional derogatory comment about Gordon Brown that you do still want people to read~~
        
        B****. That’s going to make that text italic, bold or strikeout and not be informative to you. Try this. Put at the front of your text that you wish to emphasise a left angle bracket , followed by the text you wish to be emphasised. At the end of your desired emphasis, type left angle bracket <, then forward slash / , then the same code letter or word (ie i, b, or strike), then right angle bracket. Leave no spaces in between angle brackets and the code letters or word.
        
        Sounds more complex than it is. On my little bluetooth Mac keyboard it does however require me to nearly dislocate my fingers as the keys are all in different places. Normal keyboards are easier.
      - PeterBarnard
        
        Testing, Jaime :
        
        testing
        
        By the way, “left angle bracket” and “right angle bracket” are actually the mathematical expressions for “less than” and “greater than?”
        
        Let’s see if it works out … but thank you, I appreciate it.
        
        Re Mr Zhou En Lai – for me, the 19C was a long enough period ; otherwise, how come that the Labour Party actually came about?
      - PeterBarnard
        
        And it did (work out), Jaime. I have written down the technique.
      - jaime taurosangastre candelas
        
        I think it only works on the internet with “html” codes. It does not work in a word processor. There are other codes to embed little hyperlinks but with plain text, such as Mark does in the red links in the main articles, but you need a teenager to explain how to do that. It is not a feature of my everyday life, so I do not learn it.
      - PeterBarnard
        
        I have no idea who you may be thinking of, Jaime ….
      - Brumanuensis
        
        That’s slightly unfair on Alfred Marshall, Peter.

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