The Truth about the News

The growth figures announced today have been glossed over by some, yet a closer look, suggests things are not promising at all: Given the fall in the exchange rate, you would have expected to see an upturn in exports, yet manufacturing output is down 10%. Construction is also slowing and this is often a sound indicator of future trends, for if people are moving into new homes they tend to spend more on goods and services. Minford has once again been brought forward by the BBC as a reliable commentator on the economy, yet he is a discredited economist. As a major adviser to Thatcher who strongly forced upon us the nonsense of monetarism, it is hard to understand why the BBC continue to turn to him. Typically today, as a Brexiteer, he put a particular spin on the data stating that the VOLUME of exports had increased. Since when have economists been too concerned about the volume of exports? It is clearly the value of exports that is significant. Increasing the Volume of exports can lea...

There was a great deal in the news yesterday concerning the fact that producers are reducing the size of their products, or reducing the quantities whilst maintaining the same price. What was not mentioned was the consequence of this for inflation. The authorities have greatly improved their methods for updating the basket of goods they use as a measure, so that there are not so many anachronisms, but, how good will they be at taking account of these current changes. What is likely is that we shall have an under-stating of inflation figures. That of course, will have repercussions for monetary policy decision making.

I have no wish whatsoever to diminish the concerns we should have regarding having Trump in charge of the most powerful country in the world. The man shows many of the symptoms of a high functioning psychopath (his self-delusional notion of the truth, and his obsessive need to control and manipulate others). But I do fervently believe that the real issue for us in the UK is that by focusing on Trump and his fake news, we increasingly are prone to overlook the re-writing of the modern history of our own country. By focusing so much upon a foreign leader, the press and significant commentators are able to deflect attention from the fact that the British people have been consistently fed a diet of fake history. In particular, the notion that the national debt was a function of the profligate overspending of the Gordon Brown government. It seems that however many times there are attempts to squash this distortion of the truth, the government, largely as a product of repetition strive to...

Contrary to the view propagated in much of the press, Margaret Thatcher was economically naive to suggest that a government should always seek to 'break even'. Borrowing to finance capital expenditure which leads to growth can make the borrowing self financing. This was the approach pursued by Gordon Brown (WITH GREAT SUCCESS). The debt that accrued at the end of his term of office was a result of the world financial crisis and was not a result of the previous years of fiscal policy leading up to that point. Each year, the growth that emanated in part from the Government spending, led to an increased tax yield that enabled him to meet the payments on the debt. One argument currently being pushed by some politicians and the press is that it is wrong to foist a debt onto the next generation. You tend not to hear the counter argument: If the borrowing is funding capital expenditure on things such as infrastructure (roads/railways/ broadband); education (new schools); and, healt...

The National Debt occurs when a government borrows money to fill the gap between its spending and the money it receives from taxes, etc. This debt is NOT the same as when you borrow money from a bank (eg. mortgage). What you have to remember is that the Government is representing you and the rest of the population, so, when it borrows money it is in essence borrowing from itself. If it then immediately spends this money in the economy, it is returning it to itself. So, a National Debt is not in itself a problem. Now for the 'but ifs': If the National debt becomes too big then the size of the repayments can become very large and affect a government's ability to spend on services such as education  and health. If foreigners lend money to the goivernment, the repayments go out of the country and therefore in future, there is relatively less money spent in the economy. Next time I shall attempt to explain why Thatcher was wrong to presume that to 'break even' was t...

It is the intention of this blog to explode some of the myths that are currently circulating regarding news items and political statements. My background is as an economist and my next post will examine the the truth about National Debt. It is my aim to simplify these issues as much as possible such that the non-specialist will be in a positon to make a rational decision rather than depend upon the biased views of politicians.