Cooking the books?

Sky News is bringing us another update on how good the economy seems to be. The reporters are so happy and so full of joy to voice the information on strong the economy is growing. It is a worrying turn of events. So, after the IMF had voiced on how George Osborne is playing with fire, now his vision will be bringing the UK a 2.4% improvement sending the UK back on par with the pre-crash numbers (at http://news.sky.com/story/1197837/imf-upgrades-uk-growth-forecast-above-rivals). The one part I do accept is that it is growing faster than its rivals, although, I do wonder how fast the German Economy would grow. Now personally I do believe that the status of the UK has always been correct (the fact that their economy was growing). My non-economic view had been in the area of 1%-1.5%, which would have been a pretty good result considering the mess most European nations were in.

In ‘A noun of non-profit‘ on May 15th 2013 I wrote “I personally join the group “Oh ye of little faith” on that one and if they are able to get the economy up to 0.2% positive in 2014 than they would have achieved quite the small miracle.” This was my view of the Dutch economy at that time. So far I am still to be proven wrong (at https://lawlordtobe.com/2013/05/15/a-noun-of-non-profit/).

The second quote in this regard is “It is the latest boost to the fortunes of the Chancellor, coming barely 24 hours after the Ernst & Young ITEM Club also increased its projection for UK economic growth this year. Although the Fund’s forecast for growth this year will be shy of the 2.7% predicted by the ITEM Club, the scale of the upgrade underlines how quickly sentiment about Britain’s economy has turned in recent months.”

I believe that we are being played! Let me be clear, the UK economy is getting back, it is stronger than most others and I think that this is a good thing. It is that 2.7% that I have a problem with. The number is way too high. I am not stating that the number is impossible, but it is extremely unlikely. (Feel free not to believe this non-economist blogger on this).

Why is this the view I have?

As I quoted in my blog ‘Cretan Independance‘ (on January 10th) “a senior policymaker in Brussels said: ‘The worst of the crisis is over. So the pressure to take tough measures is off. We’ve had enough of discipline, enough of sanctions, we’re sufficiently unpopular already. The worst is over, so let’s stop now.’”

This view seems to hold up, but when we consider the total of debts, whilst we consider the other debt issues I mentioned, we should consider that we are not out of the woods. The UK numbers seem too inflated to me. Even though there is general optimism (at http://news.sky.com/story/1198691/osborne-hails-new-imf-growth-forecast-for-uk), there is also too relaxed a view on the damage we are all still facing. The quote “The IMF forecasts that the world economy will grow by 3.7% in 2014, up from 3.6% in its last forecast.” is one of the most interesting ones.

There are two sides. The one side might mean that the economy is going up, which could be good. Yet, the negative side is the side of government overspending all over the place. Add to that the fact that big business still has way too many loopholes to fly through (avoiding the taxation the governments are already spending), which means that no matter how good the economy, government overspending means that you and me will end up with the combined tax invoice. As balance is lost in these matters, the economy looking up, does not mean that life will get any better for you and me for 16-24 months and even though BusinessWeek had ‘good’ numbers to mention in their article (at http://www.businessweek.com/news/2014-01-22/u-dot-k-dot-unemployment-drops-to-7-dot-1-percent-in-lurch-toward-boe-threshold). If we consider this quote “Unemployment measured by International Labour Organization methods declined to 7.1 percent in the three months through November from 7.4 percent in the quarter through October, the Office for National Statistics said in London today.” we could consider this as good news, yet, until the February numbers are known, any party-hat shown is for now one too many.

Do not get me wrong, I would love to be wrong in this instance. Yet, I have seen several outlets blasting away the good news left right and centre, and 2-3 months after that some unfortunate bad news is thrown our way. Some message like ‘we had expected slightly better news, yet it seems that the numbers for the immediate future will stagnate‘. At that point, you better believe that you are watching a bad news management routine. The UK is on the right track and that is really good, but to weaken resolve anywhere in 2014 is in my view a really bad idea. I prefer to see the UK coming out on top at the end of 2014. George Osborne has shown that his vision was right; I reckon that the UK will be a lot stronger at the end of 2014. There is additional supporting news in my favour in regards to the picture we are getting painted (at http://www.businessweek.com/articles/2014-01-09/investors-are-getting-hungry-for-pigs-debt-again).

It seems that the 4 biggest indebted nations are at it again. The quote “Europe’s having a bond rally and the PIGS are playing host. Portugal, Ireland, Spain—and even Greece, where Europe’s debt crisis began—are heading back to the bond markets and enjoying their lowest borrowing costs in years, as investors appear reassured that the region’s sickest economies are on the mend.” is a little colourful, but it seems to fit with the picture we are offered. First we see messages of the ‘sudden’ light at the end of the tunnel as well as the mention of easing from a senior policymaker in Brussels. I think it is all about the next wave. If these bonds fall through, who will bail others out? This is in my view the fear we should have and as such it is also the fear UKIP is playing on, which is why May 2014 could change the game for all concerned, because the Eurozone will see the shape of an entirely new nightmare, one that will haunt us all for a long time to come.

The Bloomberg article does bear a nice quote “The reduction in the risk perception, and this sort of market euphoria, is leading to a rerating of sectors and countries most penalized during the sovereign debt crisis.” This reads in two directions. The first is that it implies that perhaps the most penalized nations should not have been so and the reduction of risk perception. That is in my view the real fear. It is not just about the reduction that is implied, but the extra shifting of debts. But when payment is due, which will happen and payment needs to come from new debts, what will be left?

This is the one side no one wanted to deal with. Just move on! It just doesn’t work this way, because in the end the taxpayer gets that bill and as such we must make sure that the people realise that these games on the gambling green will cost us all. Politicians and corporations will not have to pay a dime of the debt they all happily bestow onto us, what will happen then?

The entire story becomes even more fun when we consider todays mention in the Guardian (at http://www.theguardian.com/business/2014/jan/21/imf-world-economic-recovery-outlook-weo). The second quote is “Blanchard confirmed the IMF had raised its UK growth forecast to 2.4% for this year, from a previous forecast of 1.9%. It was Blanchard, who last year warned Osborne has was playing with fire with his austerity drive, but the forecast for the UK is well ahead of Europe’s largest economy, Germany, where growth is forecast at 1.6%. France’s economy would grow by a much weaker 0.9% given ‘policy uncertainty is weighing on growth’, Blanchard said.” I stepped over the first quote on purpose. The events are not as they seem to me. The first quote was interesting “The global economic recovery will pick up pace this year but remains ‘weak and uneven’, the International Monetary Fund’s top economist has said.”

This is at the centre of my reasoning. The economy is weak, it is uneven and it will remain that way as long as nations keep their credit cards maxed out. That is at the centre of the issue. Those maxed out credit cards are great for the banks and great for the IMF, but you and me are only hurt by it as our utilities, our monthly costs will gain a rising momentum whilst our income rise remains nearly frozen.

Good for all except for us, the simple taxpayer! This is why I am so against the game that is getting played.