“Looking forward to retirement, Gordon?”So, the economic recovery is still a little slow in materializing. U.S. GDP grew by only 2.2% in the third quarter, less than the 2.8% the experts and Commerce Dept. predicted. Fear not.
“We are really starting to see the mechanisms for a sustained recovery come into place,” said Robert Dye, a senior economist at PNC Financial Services Group in Pittsburgh. “We are starting to see investment numbers come back.”
We’ll have to take your word for it. On the bright side, at least our economy is growing (after shrinking for a solid year), and corporate profits grew by even more than we expected. The same cannot be said for our Anglophone brethren on the other side of the Atlantic, which remains the last recessing economy in the universe.
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When I landed at Heathrow this morning, I had no idea that I was stepping into a country hurtling towards irrelevance. But if you’re looking for the economic future, it apparently isn’t here.
According to a new report, the British economy will be hardly worth talking about in a few years. Four years ago, Britannia had the fourth-largest economy in the world. But the Chinese, French and Italians (!) have surpassed it since then, and the country is set to drop out of the biggest top 10 list in business by 2015.
Coming on hard already are Brazil and Russia, which are likely to surpass old Albion in the next couple of years. But mark 2015 as the year the empire strikes back, as India and Canada are poised to take their place in the top 10, and the U.K. in the not top 10.
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Just in case you had not yet gotten your fill of the Cross Pond Classic, another event is introduced: The 400 meter stress-test hurdles. GO!
Analysts Olivia Frieser and Andrea Cicone concede the test is a “real one”, in so far as the parameters – 12 per cent unemployment, 50 per cent fall in house prices and a six per cent decline in GDP from peak to trough – are reasonably demanding:
The assumptions seem severe enough to us and therefore the stress test seems real…
However, they note:
…if we were picky, we would say that they remain static tests, and that these assumptions are merely in line with the base case of our admittedly bearish economists.
The US and the UK stress tests have two very different objectives [FT Alphaville]
We’re pretty sure we don’t know anyone who actually thought the Pound was going away (well, aside from a few newly minted INSEAD students we met at an Irish pub somewhere or another) but it was always good for a speculative laugh, or to tease the Germans about. Still, we thought we’d report the news anyhow: Clever investigative reporting reveals that Britain isn’t adopting the Euro.
All rejoice!
Britain’s respected Institute of Fiscal Studies, giving its traditional post-budget summing up of U.K. fiscal policy, said on Thursday that Britain faces “two parliaments of pain” living with the bitter taste of excess borrowing. It will take 20 years, the institute says, before national debt falls back to the 40% of GDP that the Labour government previously said was the maximum acceptable.
Even as a non-member of the single currency system that started in 1999, the U.K. plays a key role in European Union psychology — as a sometimes positive, but also a negative example for other countries.
The survival of the system requires countries’ continued willingness to submit to economic discipline. This applies both to current members and to candidates wishing to join from central and eastern Europe, such as Poland, Hungary and the Baltic states.
Alone because of this reason, the European Union could in no way afford to let in countries such as Britain now sitting in a dramatically exposed way in the fiscal sin bin.
Sort of scary when your country is mentioned in the same paragraph as the words “fiscal” and “Baltic states,” no?
Britain sticking with the pound [Marketwatch]
We would say we are surprised. But we aren’t.
Alistair Darling has announced a new top tax rate of 50% for those earning more than £150,000 from next April.
The chancellor unveiled the measure after delivering a stark Budget report on the state of the UK economy.
He said debt would hit a record £175bn this year and the economy shrink 3.5% – its worst performance since 1945.
This isn’t just some punish the bankers spanking tax, mind you, but a broad sweep. Imagine working for the government until the summer solstice. (You people in California and New York can skip this assignment). Then imagine gasoline is $9.00 per gallon and over 80% of that is tax.
How much of this do we think the UK can take?
Darling Unveils 50% Top Tax Rate [BBC News]
AIG has managed, probably despite all efforts, to keep itself in the news the last several weeks. Among other things, it’s been enough to attract the attention of authorities in the United Kingdom. To wit:
American International Group Inc.’s financial products unit, which brought the firm to the verge of collapse with bad bets on credit-default swaps, is being investigated by U.K. regulators for possible criminal conduct.
U.K. investigators are working with authorities in the U.S. who are conducting separate reviews, the Serious Fraud Office said today in a statement. The company is cooperating with the probe, which isn’t related to insurance operations, New York- based AIG said in a separate statement.
“We will use our full range of powers to seek information and to speak to those with an inside knowledge of the company’s operations,” said Richard Alderman, director of the SFO, in the statement. “It is right for us to look into the UK operations of AIG Financial Products Corp., to determine if there has been criminal conduct.”
Know about the inside workings of AIG but the Feds leave a metallic taste in your mouth? You have other options too.
AIG Financial Products Unit Probed by U.K. Regulators [Bloomberg]
You sort of knew it was percolating anyhow over in the UK, but it seems to have come to a boil (ahem).
Barclays announced a top-level review of its bonus structure on Monday, amid a growing political clamour in Britain over rewards paid to bankers in the midst of the credit crunch.
Gordon Brown, British prime minister, said he was “angry” that Royal Bank of Scotland – a part-nationalised bank – was preparing to pay out £1bn ($1.5bn) in bonuses. Other ministers urged bankers to forgo their rewards.
The start of the bank bonus season has provoked a wave of anger towards bankers in Britain. On Monday the former bosses of RBS and HBOS will be grilled by MPs on how they led their institutions to the edge of collapse.
After Dick Fuld and the SEC we find it hard to imagine anything would be more entertaining, but we haven’t seen Questions to the Prime Minister in a while.
Barclays to review bonus policy amid clamour [The Financial Times]
“Looking forward to retirement, Gordon?”So, the economic recovery is still a little slow in materializing. U.S. GDP grew by only 2.2% in the third quarter, less than the 2.8% the experts and Commerce Dept. predicted. Fear not.
