Edmund Conway in the Daily Telegraph reports on one of economics’ ‘must see’ events:  Fathom Consulting’s quarterly press conference.  His report is interesting for a number of reasons:

  • The suggestion that QE is used for more private economy instruments – even buying houses directly (at these prices? If that isn’t stoking a bubble what is . . .
  • The idea that the savings ratio will hit 12pc.  Woah, hold it a mo.  Why?  Well, “in order to return UK household debt to 100pc of disposable income by 2018”.  Um, once again, why?  They should read Spencer Dale of the Bank of England on this one.  Way too gloomy.  I think 6-7pc will be fine.  Play with it on my spreadsheet . . .
  • They doubt the validity of recent GDP figures.  And given today’s very positive manufacturing survey data, who can blame them?
  • The view of the panelists (Buiter, Julius, Goodhart) that fiscal tightening will have to happen, whether or not it is sensible. “given the market’s concern about any government’s willingness to cut . . . the next government has little choice other than to slash the budget or face a “collapse”.  In which case buy Gilt puts.

This economist disagrees, like Duncan on Labourlist. We need a plan, but to quote a friend of mine, the plan needs to be ‘on a high shelf’.

trying to balance the budget in the face of the most severe recession since the 1930s would be an act of economic incompetence on scale not witnessed in 70 years. It would cause growth to fall and the budget deficit to actually widen on higher benefit claims and less tax revenue. Less growth, more debt. Labour, the Tories and the Lib Dems are now all talking about cuts – the difference is only the Tories seem intent on starting next year.

That is a major difference.  Timing is everything in a crisis like this.

Conway is right – the next MPC (and all the others) will be fascinating.


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