Friday, April 03, 2009

G20 Results - In My Humble Opinion

I was detained by work yesterday, but to be honest I don't think I could add much to the commentary.

But my after thought is this. The G20 achieved what it should have; it is not going to be doing very much, and as such the markets will need to find a way to fix themselves. This would be good, except the stated objectives were towards government solutions (which I think would have failed in the long term). The lesson that should have been learned was that actions need to be targeted and in response to specific problems. We need to stop throwing money off of the roof.

The disappointing part is the sell of that outcome. It was presented like there is going to be fresh money where there will be very little. It looks like there will be a global crackdown on tax avoidance and evasion, but this consists of little more than naming where the money is.

There seems not to have been (from my remote position) any effort to stimulate the flow of money around the world. All of our cash is in Asia, because they have been making things that we have purchased in recent years, but as Europe and America are making less, and because most European countries can no longer negotiate trade deals (as this is an exclusive competence of the EU, step forward Baroness Ashton). Like a bad shop, if you don't have anything to sell, you can have no complaints if no-one buys anything.

With a Democratic President and a Socialist PM I was surprised to have not seen any mention in the commentary about what individuals and families can expect. Of course, that was not the purpose of the summit, but the fact is, all that came out of it was scant agreement on what is the best course of action; the initiatives that were announced will need to be paid for by the declining workforce through income tax. These are the people that are feeling the pinch the most.

There is an increasing number of people who are finding life very tough, the cost of food has gone up in the last year as have utilities and general household expenses. The number of unemployed is growing, and the number of available jobs decreasing. They have had their lives surveilled and regulated in sometime great detail by Government. That Government took an increasingly big slice of their income, and their pension and promised in return to fix our society and keep us all in jobs. The established mindset of individual responsibility has been replaced with state dependence where all of our options are perplexing limited.

These have seen their pensions raided, their banks nationalised, the jobs taken away. Yet, it is they who must now shoulder a £22k tax bill each. The irony is, it is the same people that Blair won over in middle England that are going to feel it the most.

Like I said before, the best thing that could have happened at the G20 was to limit that tax burden as much as possible. That was to a point achieved, but by accident rather than design. Frasier Nelson, who helps translate fiscal policy for the people that pay for it says that on the whole not a lot of new money was committed, this is reassuring. His column will have reassured the market more than the post-conference press announcements.

In my humble opinion, this recession will not get better globally until we can improve the global money flow. That in part means we need trade deals and initiatives for enterprising people and companies to get into Asia and trading - bringing back some of that money to this part of the world. We also need to get the banks operating independently again, and soon.

In the UK, we need to get a General Election out of the way. Support for anything the Government comes up with now will be thin, because no-one will know if initiatives will be reversed within a year. We need leadership from Government in the long term, not uncertainty. Until the UK has a General Election our economy cannot possibly hope to begin healing itself. If it was called for May, I suspect a narrow Conservative majority, but can not be sure. If it is to be May 2010, I think we all know it will be a comfortable Conservative majority.

1 comment:

Tory Poppins said...

A very good read Dan. And I agree with your predictions for May/10.