2nd Quarter Growth 0.2%

[beorhthelm]

Good news for interest rates then................

every cloud...

and inflation will probably drop significantly in 6 months, as oil and commodities aren't likely to rise another 30% from here and there'll be no additional VAT. so a years time the garden will hopfully be much more rosey, with a boost to the economy from the Olympics to boot.

 

[SeagullEd]

I think i made the point that these would be headwinds in the short-medium term not that China couldnt be considered to be the emerging force in world economy.

If you re-read your response you use the word 'likely' more than once in your response without really substantiating your views with any evidence. You've also failed to mention/consider when you suggest there will be huge net capital outflows, the trillions of pounds of money waiting to get into the country.

Hypothetically speaking (as its never going to happen in our lifetime) they completely relaxed all capital restrictions.

In addition to all the individuals and companies queuing up to invest in China, if you were a cash rich Chinese resident would you want to invest in a domestic economy with double digit growth or would you prefer 'to be seen to be participating in the world economy' even if this meant investing in countries floundering under large debt burdens, stagnated growth and zero interest rates. D

Lets not also forget that most of the countries experiencing decent economic growth outside of China also have hyper-inflation concerns and strict capital controls of their own so its unlikely you find a home for this huge amount of captial outflows that you talk about even if it wanted to get out.

You still haven't told me how to measure the 'true' value of a currency...

Don't start an 'evidence' game, you didn't use any 'evidence' either and as has been suggested the figures are notoriously suspect. Most of these arguments are from acreditted academic papers which I will find and link to you

Yes, there are capital inflows. A country with such high rates of investment will inevitably NEED capital inflows. China has huge reserves piling up. Longer term the trade balance of all the Western Economies show that we are indebted to the global economy... we do not have the cash to invest. Dissimilarly, china is a lender to the global economy and this is likely to continue. Residents in China are going to become increasingly wealthy and there is a lot of them.

Obviously this whole debate is hypothetical, but there are laws against inward investment by residents which would not have to be removed if we were to move to a freely-floating currency. This must be remembered.

However, according to your perspective the currency is hugely overvalued so if all of this were to take place (i.e. the currency became freely floating) then you said China would lose its competitive advantage... as such, vast sways of money wouldn't necessarily want to enter the country? A lot of capital inflow is already taking place, whilst it is restricted it is not nearly as restricted as capital outflows.

But I really would love you to answer what the true value of a currency is.

Also, your point about 'zero interest rates' is ABSOLUTELY ridiculous and actually contradictory in relation to the 'debt burdens' ... debt is only a burden because you have to pay back more, someone is lending you this money... hence there is a return to be had. Moreover, returns can be made on the stock market etc etc. Cash Accounts are not the only for of investment and most likely a Chinese residents wouldnt be allowed to hold one anyway.

Sorry for more edit, I just keep finding more things wrong with your post.

Remember, the US economy is still much much larger than the Chinese economy (trying to find the exact proportion but I swear I read it was 4 times as big or something in the Economist.

Economies experiencing growth firstly do not all have large worries about hyperinflation, cf Eastern Europe, and even China and India etc are not close AT ALL to the technical definition of hyperinflation. Doubt-digit inflation is to be expected and whilst worrying, doesn't seem to be that destabilising yet. Britain experiences similar level as we industrialised and grew.

 

[Tony Towner's Fridge]

And to cap it all the Greeks have just banned domestic production of Hummus and Taramasalata. Seems they are doing all they can to avoid a double dip recession!

TNBA

TTF

 

[Silent Bob]

im confused what "excuse" you are infering?

It's all Ed Balls fault for not agreeing with nice Mr Osborne.

 

[Herr Tubthumper]

The situation in the Euro and the USA is dire as well. The World economies are now China and India. China is now the new World order and what they say will go for the next few decades. They have the power, the growth, the money, its just the Amercians haven't realised it yet.

So why dont we start making stuff to sell to China and India? Germany has done this, and their economy is doing well. If I was Osborne I'd be encouraging/investing in some manufacturing. Why the hell is this not happening? Instead we loose a huge train contract to Germany. FFS.

 

[Herr Tubthumper]

So why dont we start making stuff to sell to China and India? Germany has done this, and their economy is doing well. If I was Osborne I'd be encouraging/investing in some manufacturing. Why the hell is this not happening? Instead we loose a huge train contract to Germany. FFS.

Mind you we need to make something good. I've just been forced to buy a foreign washing machine as I cannot trust British manufacturing.

 

[APACHE]

A currency's worth is jugded by who wants it. We don't product goods in the amount needed to meet our own need and therefore import more. It's what got us into this downturn, spending and borrowing that which we haven't earned. 1st the £ then the $ were the world currency of choice, now the $ hangs on with China's backing. This country must get it's industry back making the goods we need but there seems little in investment and real push from Gov. to get this going.

 

[beorhthelm]

It's all Ed Balls fault for not agreeing with nice Mr Osborne.

ah. i didnt say it was Balls fault (though with his time at the treasury some say he had a hand in things). i dont expect him to agree, though i do expect some sort of policy to propse an alternative, not just a slogan. "nice" Mr Osborne isnt doing anything much to help the growth side, but Balls doesnt seem interested in point out this flaw, presumably because it doesnt fit into the nice sound bite slogan. so i wasnt making any excuse for anyone.

 

[beorhthelm]

Instead we loose a huge train contract to Germany. FFS.

because some clever chump set a condition of the bidding that the company finance the cost of the trains, and only the German company could afford to do so. personally i believe one should make key infrastructure spending decisions in such a way to ensure a bredth of engineering and industrial knowledge is retained in the country, but thats difficult to do and get high quality, competitive bids, and practically impossible within the confines of EU law (forgein governments either ignore the law or structure bids cleverly to favour local companies)

This country must get it's industry back making the goods we need but there seems little in investment and real push from Gov. to get this going.

it would also require us, the consumer, to pay alot more for their goods. simple economics hold that if you can get the labour for 1/10th the cost somewhere else, then you will make the goods there. note we do still do quite alot of industry and enginneering, mostly what the labour costs are not high proportion. we need to invest in training and high-tech industry, not the cheap stuff we need.

 

[SeagullEd]

The idea of returning to manufacturing goods is very suspect. I really don't understand why people call for that.
1) we won't be able to do it more cheaply than Asia. Pretty much fact.
2) in terms of economics value, it is services which have the highest value added - it's very much a service economy
3) we don't have a distinctive skill in manufcturing that will make it a champion industry for us
4) a return to protectionism, the classic import-substitution idea, is not the solution. Development economists proposed this for Asia, they didn't do this but traded. Thats the way forward.

We need to look very carefully at what we can do better and what we're good at:
Our entertainment and arts industry is phenomenal, we're the scond-biggest exporter I believe. Yet arts funding is cut...
High-skilled manufacturing could potentially be a source of prosperity... but the government cut university funding and deter universities from the more expensive science courses.

I strongly believe this government is NOT helping Britain. As has been said above, we need investment. We will grow, possible next year, as has been suggeted previously... but we shouldn't put this down to the governments success in my opinion. The economy was going to grow after recession (it wasnt a depression) but we're only pottering along. Perhaps this is text-book ideas about the 'political cycle' mucking up economic policy; suppress growth until you near election by which time (we hope) the economy will be growing 2- 2.5 % as catch-up but it will make the government look good. They will use the fact it took so long to suggest they were incredibly skilled in engineering the growth inthe fact of such a situation.

 

[beorhthelm]

3) we don't have a distinctive skill in manufcturing that will make it a champion industry for us

did you mean this, or something slightly different. no one has a distincive skill in manufacturing once mass production comes into it, thats rather the point about it being shifted overseas as any average intellegent person can be trained to operate or oversee a machine. we do have ditinctive and distinguished skills in within particular industries though, but they are R&D, low unit (relativly) or creative as you point out.

Our entertainment and arts industry is phenomenal, we're the scond-biggest exporter I believe. Yet arts funding is cut...

art funding is for fringe "highbrow", which isnt commerically successful enough to be self sufficient, not really the same thing. maybe the successfull entertainment and arts companies could pay a special levy to fund this if they believe it vital to underpin their operations.

 

[Pavilionaire]

This is not all just about spending money or making cuts. It's also about cutting red tape and encouraging people to either start up in business or take people on as employees.

I've just got back from a meeting with a client who is using sub-contractors on a part-time basis. They're thinking of offering those sub-contractors employment contracts. Yet Employees NI is 3% higher than Class 4 NI for the self-employed, there's 13.8% ON TOP of gross salary for Employer's NI, there's holiday pay and sick pay for days not worked, obligatory pension payments to make from April 2012.

Overall, the client is going to have c 20% increase in costs by employing the same person to do the same amount of work. And government legislation means once a point has been reached they're OBLIGED to employ them.

This is one of the real reasons why the economy isn't growing.

 

[SeagullEd]

did you mean this, or something slightly different. no one has a distincive skill in manufacturing once mass production comes into it, thats rather the point about it being shifted overseas as any average intellegent person can be trained to operate or oversee a machine. we do have ditinctive and distinguished skills in within particular industries though, but they are R&D, low unit (relativly) or creative as you point out.

art funding is for fringe "highbrow", which isnt commerically successful enough to be self sufficient, not really the same thing. maybe the successfull entertainment and arts companies could pay a special levy to fund this if they believe it vital to underpin their operations.

I did mean, as you suggest, that we dont possess the same advantages in terms of laws and regulation which make it cheaper for others to manufacture. However, there is skill in even mass manufacturing. Japanese TQM approach for instance, was about skill. There is skill in how you arrange the production process etc. Minor point, however.

If you look into the Arts Council it is actually quite profitable, but also raises the profile of the UK.

 

[Herr Tubthumper]

because some clever chump set a condition of the bidding that the company finance the cost of the trains, and only the German company could afford to do so.

This is not entirely true is it? We simply do not play the game as well other nations. As an example, other nations often include a line about having some form of previous experience and/or knowledge of the work...which tends to favour the host nation's companies.

 

[Pavilionaire]

The recent Evan Davis programme all about UK manufacturing showed that we CAN still design and produce top quality products and sell them abroad. The example about bicycles to China was particularly uplifting.

 

[Herr Tubthumper]

The idea of returning to manufacturing goods is very suspect. I really don't understand why people call for that.
1) we won't be able to do it more cheaply than Asia. Pretty much fact.

True, but we can sell them the capital machinery they require to make the stuff they make so cheaply. Germany is doing wonderfully well in this area. We can then make the stuff they will want to buy with their new found wealth e.g. cars, domestic appliances etc. Again, an area Germany is doing very well at. Audi have incredibly strong record sales at the moment because of this.

 

[SeagullEd]

True, but we can sell them the capital machinery they require to make the stuff they make so cheaply. Germany is doing wonderfully well in this area. We can then make the stuff they will want to buy with their new found wealth e.g. cars, domestic appliances etc. Again, an area Germany is doing very well at. Audi have incredibly strong record sales at the moment because of this.

Completely agree, as I said lower in that post high-skill manfucturing we can still do. I'd say capital equipment is more of a light-medium thing which eventually Asia will be able to do for itself. I believe progression towards doing this is in Malaysias 5 year plans for the future.

 

[Herr Tubthumper]

The recent Evan Davis programme all about UK manufacturing showed that we CAN still design and produce top quality products and sell them abroad. The example about bicycles to China was particularly uplifting.

This. We also need to get away from the idea that engineers do not make good business men as well. Mr Dyson was quite scathing about Lord Sugar's comments along these lines.

 

[Scampi]

I think the point Pavilionaire makes is very important. One of the mantra's of the government is that reducing the public sector is going to allow the private sector to grow, but there is never any explanation of how they are helping this happen. Interestingly on the radio this morning the body representing small and medium businesses was claiming that the banks were still not lending money to their members and this was slowing any recovery.

 

[Pavilionaire]

Here's one thing that the government can do to cut the red tape that embroils the self-employed, and that's get rid of Class 2 NI.

Where's the sense in making the self-employed pay £130 per year in 12 monthly payments AND make them pay 9% Class 4 NI via Self-Assessment as well? It's bad enough to have to pay tax and NI, but tax and 2 types of NI??