No chance of Gordon running the IMF

I’ve listened to David Cameron’s interview with Evan Davis of the BBC Radio 4′s Today programme. Evan Davis persistently interrupted Cameron, making the interview uncomfortable to listen to. But, I guess that’s the penalty we probably must accept when interviewers quiz politicians who are immensely well practised in answering questions. Never the less it was tiresome to listen to.

One question where Cameron was allowed a reasonably uninterrupted flow was when Evan Davis asked Cameron about “Gordon Brown emerging as favourite as the next managing director of the International Monetary Fund director …. “. Cameron’s replied

“I haven’t spent a huge amount of time thinking about this. But it does seem to me that if you have someone who didn’t think we had a debt problem in the UK when we self-evidently do have a debt problem, then they might not be the most appropriate person to work out whether other countries around the world have debt and deficit problems”.

…. it must be someone [to run the IMF] who understands the dangers of excessive debt, excessive deficit, and it really must be someone who gets that, rather than someone who doesn’t see a problem.

So that’s a big NO then. Thank goodness. Here’s a fuller review on what Cameron said about the IMF leadership.

UPDATE: Seems I’m in agreement with the heavyweight’s in our media over this morning’s interview between Davis and Cameron. David Hughes in the Daily Telegraph says Cameron gets a word in edgeways.

Don’t ignore national finances, they do matter: Part 2

Credit rating was the subject of Part 1, and how our performance in solving our financial crisis is watched by those rating agencies.

Now let’s look at how we’re doing on balance of trade and payments.  If we import more than we export we have to fund this by borrowing. Why choose this topic? Easy, look at the situation in the USA, who yesterday released poor trade deficit figures, resulting in an almost 2% drop in the US stock markets. There’s even talk about a downgrading of the USA’s credit rating, proving that even the world’s largest economy isn’t immune from critical assessment.

Meanwhile, there’s encouraging news for the UK, our January trade deficit narrowed, and is moving in the right direction. Still a deficit though. By lowering what we import and increasing what we export can double any improvement in our trade balances.

Looking at our balance of payments shows that we remain heavily in deficit in goods, importing much more that we export, but, we’re in healthy surplus in services. Services include all those things that the City and our financial services sector sells, a neat reminder that ‘banker-bashing’ will have consequences if they move abroad.

Don’t ignore national finances, they do matter: Part 1

Everyone is getting steamed up about the Police Pay Review and now Lord Hutton’s review of public sector pension provision. Trouble is as a nation we’ve been living beyond our means for quite a while. Do you remember, I’m sure you do, the last Labour Chief Secretary to the Treasury, Liam Byrne, leaving the following note for the incoming government,

“Dear Chief Secretary, I’m afraid there is no money. Kind regards – and good luck! Liam.”

The key Coalition policy is to reduce the deficit, and in doing so ensure that the financial markets see us as a well-managed and secure economy. Why is this important? Simply that we still need to borrow money to pay for our lifestyle, as we can’t yet pay for it out of what we earn as a nation.

Yeah, yeah, why not pay off our debts over a longer period to lessen the pain. Sorry, no can do. Can’t take that risk. This week one of the rating agencies downgraded Spain’s credit rating. Result, it will now cost them more to service their debt, cancelling out any policies to improve their financial situation.

We’ve all heard about the problems with Greece, Ireland, and Portugal. Now that Spain is now exposed to tougher borrowing conditions, it shows that bigger countries aren’t immune from being judged on their ability to solve their financial problems.

Spain’s credit rating was reduced a further notch to Aa2. In the UK we have a far, far bigger debt as a % of GDP than Spain, and we can’t afford to lose our triple AAA credit rating. Any increase in the cost of servicing our much larger debt would be crippling.

Let’s thank Tom Winsor for his efficiency

The Independent Review of Police Officer and Staff Renumeration and Conditions was released this week, and mightily impressive it is too, after only begun on 1st October last year. The Review’s author, Tom Winsor, deserves praise for delivery his report in a little over five months, which was over a winter period with poor travel conditions.

How we all must wish that other such reviews were completed as quickly. The Iraq Inquiry commenced on 30th July 2009, and is still on going, and that’s simply far too long, and no doubt eventually far too expensive.  The Bloody Sunday Inquiry began in early 1998, and it wasn’t until March 2010 that its final report was published, at a cost of over £100 million. If you’re interested in the content of the report, and I’ve skipped through it, I recommend these.

All roped together in the Euro

There’s much talk of Ireland in financial extremis.  Should we help our near neighbour by lending them money? Tough question. Possibly, but would they want it from us, all that shared history about their gaining freedom from us.

The problem for many countries in Europe is the single currency. Those in the Eurozone are, like mountaineers, all roped together. If one falls, they all fall as Herman Van Rompuy has said. That’s unless they cut the rope and cast some adrift, which the EU seem unlikely to do. I see a fudge coming.

The debt problems and hidden banking toxic debt of many European countries are huge, possibly insurmountable. Let’s review the list with the help of the wonderful FT Alphaville blog and others:

And that’s not including problems of the other smaller and newer nations in Europe, such as Hungary. Gloomy stuff I know. 

Now where’s my favourite economist, Liam Halligan, when I need him?

Fixing the deficit remains the main target

LUNF and TINA are two important message carriers. 

The deficit hasn’t gone away. It’s still with us, painfully so, as September’s government borrowing was £16.2 billion – the highest ever. All the government’s policy announcements about changes to our welfare system, the defence review, and spending cuts are to solve this most pressing issue.

So what are these message carriers, LUNF and TINA?

LUNF - let us not forget that eradicating the deficit is the main goal, and TINA - there is no alternative to spending cuts, no matter what Labour and the leftist intelligentsia say about relying on tax rises, they don’t solve the problem, they merely delay its resolution.

Don’t think that the deficit reduction is THE challenge facing us? Then I suggest you read this phenomenally good article by Morgan Kelly, Professor of Economics at University College Dublin, in today’s Irish Times. Not quite in Ireland’s plight, we were on our way towards it.  Just look back to HEREwhich was only in January this year.