Brian Groom, FT business editor, assesses the reaction of business to the conference after a year of financial crisis.

Follow the link below: Continue reading "FT video: What does business make of the conference?"

Okay, it’s not the same Fred Goodwin. This one works as an analyst at Nomura, apparently.

But the Tories have seized upon Goodwin’s report which suggests “the prospect of a UK fiscal crisis is a clear and present danger”. The report suggests that a fiscal crisis is “far more likely” in the UK than in the US - because the dollar is a reserve currency.

“The UK fiscal dynamics are unsustainable. The fiscal balance is plunging deeply into the red in a spectacular and frightening way. Who will fund it? Without QE (quantative easing) the possibility of failed auctions is not trivial.”

Apparently the government’s mega-programme of gilt issuance (selling bonds) has not yet been fully tested - because it has been exceeded by QE (buying bonds).*

When the government turns net seller we will see whether there truly is a market appetite for UK gilts.

George Osborne described the Nomura report as a “wake-up call” with Britain’s “international reputation” at stake. Privately, however, the Tories must be as worried as the government is - given that the situation may still be with us in eight months.

UPDATE

The exact figures are as follows:

* As of September 10 there has been £145bn of QE (assets purchased by the creation of central bank reserves), of which £143bn has been gilts. The process began on March 11.

* Since that date the Debt Management Office has sold £95bn of gilts.

He finally said it. There will be cuts. But Gordon Brown waited until he was nearly half an hour into his speech to admit it. (Bottom of page 7 out of 8).

And he wedged the stuff about deficit, hard choices, sustainable finances, cutting costs into a handful of paragraphs. The rest of the speech was the usual glorious talk about saving the global economy, the national economy and the range of initiatives which Labour has thrown out in the last year. And - to be fair - there were two genuinely big policy pledges.

More paternity leave and the swift implementation* of the temporary workers directive will please unions and, you’d have thought, workers. The business lobby might not be so happy but neither concept is exactly a surprise (the only question on the directive was its exact timing).

*UPDATE

My eagle-eyed colleague Jean Eaglesham points out that the government is only putting the temporary workers directive on the statute book in the next Parliamentary year. This is not the same as the implementation date. We still don’t know when that is going to be. In other words, this may not be much of a gift to the unions (and temps) as it sounded at first.

I suspect this quote by Brendan Barber may appear in tomorrow’s headlines:

“Last time we suffered slash and burn economics we had riots in the streets here in Liverpool. I make no prediction that this would happen again, but it would take us back to the days of a deep North-South divide and once again hollow out whole areas of the economy.”

In an earlier blog today I described how rising unemployment could stop the (GDP) recovery feeling like a recovery.

Throwing out statistics about how the technical recession may have ended could provide little solace to those who have lost their jobs.

Expectations are for a Gordon Brown “recovery” speech on Tuesday when he faces the TUC Conference in Liverpool.

For all the (slightly) better economic/financial data out there, there is still an obvious dichotomy that Britain faces. Do you define the downturn by GDP figures (the formal definition of recession beging two quarters of contraction) or on unemployment figures?

With the dole queue set to grow for years to come, it’s a vital question.

Brendan Barber, head of the TUC, made the point this morning on the BBC’s Politics Show:

I don’t think that’s a real recovery until we begin to see unemployment coming down, and I fear that we, we’re a long way off that.

Alan Johnson was on similar ground, albeit in a slightly garbled way:

I don’t think we’re through the worst of the recession, I, I mean it’s a matter, I think Alistair Darling has led us through this, with Gordon Brown, in, in, absolutely calling every single turn of this the right way. When, when we look at this now, there.. I don’t think we can say that we won’t get any more bad labour market figures, I don’t think we can say that we’re in a situation now where manufacturing is going to recover completely, what we can say, I think, is we’ve seen the early signs, in the construction industry, in consumer confidence, in my own constituency here we’ve seen that the, that the increase in unemployment has kind of levelled off. Now I’d like to think that’s the early signs, but I think there’s a long way to go and what I think the British public need to do as we approach the next Election is listen to the various … plans of the parties for how to get through this…

Of course, no minister wants to prematurely call the recovery. Spotting green shoots is a risky business, as Baroness Vadera found out earlier this year.

Precisely how Mr Brown will address this question on Tuesday will be fascinating to watch. I suspect there will be more rather more about how Labour prevented a financial catastrophe than premature optimism about the imminent future.

According to Sky the speech will include this:

Today we are on a road towards recovery - but things are still fragile not automatic and the recovery needs to be nurtured. People’s livelihoods and homes and savings are still hanging in the balance, and so today I say to you: don’t put the recovery at risk.

“Road towards recovery” is a phrase which covers all options pretty well. It could be a swift road - but also a long and winding one with many potential setbacks etc etc

It’s not every day that I’m accused of “incompetent journalism in its most insidious form” by a (more) famous author*.

But it seems that Nassim Nicholas Taleb is unhappy with the way his comments from yesterday have been reported by the British press. Here is his critique.

I’m still not sure why he included the FT.

Firstly he says he is not a climate change denier (I never said he was).

I wrote instead that he “suggested that climate change was not necessarily man-made.”

This was his precise quote: “I don’t want to mess with Mother Nature..I don’t believe that carbon thing is necessarily anthropogenic (man-made)”.

Is there any difference?

Secondly he argues that he has been misquoted to say he loves crashes.

“Another statement made backwards concerns my position on ‘robustness’. I said that free markets generate fads, crashes, massive movements. Attempts to control the cycle proved futile - what we need is citizens to become ROBUST to them, to be immune to their impact. My point is that we cannot predict Black Swans, but we KNOW their impact and can be prepared for them. Again taken backwards: “Taleb loves crashes.”"

Except Taleb also said, verbatim: “I like crashes. I just like the world to be robust about them.”

Paul Waugh is another journalist to have recorded the quotes, with a dictaphone I should add.

* joke

UPDATE

Incidentally, Taleb did make one interesting point about the crucial role of debt in crashes. The collapse of the dot-com boom did not have major repercussions on the global economy because it involved people betting primarily with equity (ie buying shares in tech companies), he argued. The latest crash was gruesome because of the huge amount of leverage in the system. Absolutely right.

FURTHER UPDATE

Channel 4 have deployed a broadcaster to question Taleb.

My favourite question: “Do you find because your ideas are complicated they are easily mis-represented?”

FINAL UPDATE

Another Taleb spat on FT Alphaville today

In case you’re wondering what lessons Taleb could hold for politicians, here is one attempt to answer the question on Huffington Post