BROAD SPECTRUM

Saving Soars as Spending Slumps

Saving Hits Record High as Mortgage Lending Collapses

Cautious Britons are saving at a record rate, as the stark reality of economic contraction begins to crystallize in the public consciousness.

Deposits held by households jumped a record £25.6 billion in May, adding to a significant savings stockpile accrued in the preceding months, latest Bank of England data has revealed.

Concomitantly, mortgage approvals declined to a record low of just 9,300 in May, (for context, UK mortgage approvals average 60,000 to 70,000 a month) while consumers continued to reduce outstanding debts, paying down £4.6 billion in credit card and other lending during May, following an unprecedented £7.4 billion the previous month.

The Deceptive Dichotomy

Markets and the Real Economy are Sending Very Different Signals

After a brief hiatus, global stock markets have resumed their upward trajectory. Reports of yet further expansion in government spending and variants of central bank intervention finding favour in preference to hard data, despite the news in fact being speculation or belated, previously proclaimed intervention.

‘Wired’ Wall Street is Hooked on QE

US Stocks Distended on Fed’s Wall of Money. US Citizens Disquieted by Wall of Worry

Bulls Buy on Fed’s Unbridled Balance Sheet Expansion

The US economy faces tremendous turmoil: a pandemic proliferating a virus for which there is no vaccine, an apparently fathomless global recession, prodigious levels of unemployment, spiralling national debt, central bank debt monetisation masquerading as stimulus, a controversial and capricious presidential election, escalating trade and diplomatic tensions with China and deeply divisive domestic social and racial enmities.

Judging by the price action of US stock indices, these tumultuous conditions represent a mere bagatelle.

Sleepwalking into Catastrophe.

Suspended Economic Reality is Drawing to an Imminent Conclusion. The True Scale of UK Unemployment is on the Cusp of Revelation.

Never Before Has the Entire Global Economy Been Subjected to a Total Cessation in Activity

Chancellor Rishi Sunak’s furlough programme has, by the metric of its stated purpose been an apparent success, hitherto preventing a dramatic increase in unemployment during lockdown.

A disconcertingly prodigious 8.4 million workers currently fall under The Coronavirus Job Retention Scheme; the government creating a state of economic suspended animation, in an endeavour to protect livelihoods until economic activity could broadly resume.

The scheme was envisaged as a temporary solution, (originally scheduled to end in June) providing state sponsored shelter from a global tempest, the sheer magnitude of its cost equating to a limited period of viability. Thus the announcement delineating the chronology of its termination.

The End of British Diplomatic Ambiguity

As US-Sino Tensions Escalate, Post-Brexit Britain Must Definitively Choose a Side

The British Government Must Align With Democracy and the Rule of Law

When, on the 23rd June 2016 the BBC’s veteran political broadcaster David Dimbleby declared ‘we’re out‘, as the result of the the British-EU referendum, the economic and geopolitical landscape was one of flourishing world trade, established globalisation and apparently benign diplomatic relations between the the world’s only superpower and the twenty first century’s rapidly emerging counterpart, with Britain straddling the interstice.

Four years on and Britain has officially, if belatedly left the European Union, finally due to extricate itself from the trammels of transition on 31st December. The international situation however, has been drastically and detrimentally altered by the coronavirus pandemic.

What Price Democracy? EU Commission Seeks Unparalleled New Powers.

The EU Stands On the Cusp of a Momentous, Democratically Deficient Decision. Ultimately, Who Will Be Answerable to Whom?

At its nadir, the 2008 financial crisis threatened to tear the European Union asunder, yet the wealthier (Northern) nations determinedly resisted pleas to embrace collectivised debt. This time however, the coronavirus pandemic has proven so economically deleterious, it has induced EU leaders to contemplate an unprecedentedly significant response, one with far-reaching consequences hitherto considered politically untenable.

The European Commission, the EU’s executive branch, has perceived opportunity in a crisis, proposing a dual expansion of its remit in the guise of an economic recovery plan: the authority to borrow €750 billion and the power to levy its own taxation.

The Recovery in Southern European Bonds is Built Upon a Foundation of Empty Rhetoric

Merkel and Macron held a joint video-conference

Just over a week ago, Germany and France pushed for another EU recovery fund, this time announcing a proposal to disperse €500 billion. Reports on the day suggested this was a boost for efforts to create a coordinated European fiscal response to the coronavirus pandemic. The fact estimated costs of relieving the crisis already stood at over €1 trillion went unaddressed.

German chancellor Angela Merkel and French president Emmanuel Macron revealed the initiative with a flourish via a joint video-conference, suggesting funds would be raised by the European Commission borrowing on capital markets, (a process only currently undertaken on a modest scale), and used to facilitate grants to struggling EU member states, as opposed to prevailing loans to national governments – more of which later.

Brexit: Deleterious Delay Must be Avoided.

End of June Legally Binding Deadline Fast Approaches

Remember when every inch of newsprint, every television and radio report, each social media post was apparently devoted to Brexit? The epoch of calamitous prophesy. The period sardonically described by ex Bank of England Governor Sir Mervyn King as a “collective nervous breakdown”. Insightful, how a genuine crisis has driven the previously all consuming subject from the public consciousness. The Covid 19 pandemic is an authentic emergency, as opposed to a confected cataclysm, one which represents an existential threat to our health and economic condition.

Stepping Through the Looking Glass: Bank of England Contemplates Negative Interest Rates

Bank of England Looking More Urgently at Negative Rates

Andy Haldane, Bank of England Chief Economist has spoken publicly in the aftermath of the Bank’s latest despondent forecast, in which it predicts the deepest economic contraction in 300 years (-25%) and a sharp rise in the unemployment rate toward 9% (the highest since 1994). Mr Haldane says he fears the impact of the pandemic could be more significant than the Bank’s already pessimistic prognostications, owing to what he describes as “dread-risk”: a self reinforcing negative feedback loop made manifest by apprehensive households and businesses simultaneously disengaging from economic activity, leading to a perpetual deterioration.

Britain’s Debt Dilemma.

National and personal debt stand at record levels

As Covid 19 ravages the economy and the concomitant costs of mitigation continue to spiral, the debt debate is prompting paroxysms of anguish. Opinion is firmly divided, each side becoming more entrenched and more certain of the other’s inefficacy.

Leaked confidential Treasury assessments of the coronavirus crisis estimate a cost to the Treasury of circa £300 billion in 2020. The ‘market sensitive’ document reveals a ‘base case scenario’ where Britain will face a budget deficit of £337 billion this year, compared to the £55 billion forecast at the Budget.