You may remember me saying that official estimates for 2013 GDP growth were 1.4% which was corroborated by the IMF and the chancellor published it in Dec 2013. By that time, economists have seen strong growth and were predicting growth of 1.6% which I accepted; but others were even predicting growth of 1.9%.
Because I was setting a target of 3% for 2014, I was attracted to the 1.9% forecast. Late January 2014, the preliminary GDP growth for 2013 was published at 1.9% the high end of expectations. After celebrations, I forecasted that it may be reduced to 1.8%. The February report reduced it to 1.8% and I said even if it goes down to 1.7% in March, we'll still be on target for 3% in 2014. Well, here we are in march and it has been reduced to 1.7%; but it's still ahead of the consensus 1.6%.
Political shenanigans seem to be derailing this target vis-a-vis the Crimean situation. It looks like old world politics are still with us. Are we going to let this dampen our spirits? Heck no. The Chancellor had revised 2014 GDP growth from 2.4% to 2.7%; just as well in the current circumstances.
GDP growth does depend on international trade and business profitability. Political activities, such as the situation in Crimea, do limit that profitability as international trade is reduced. Whether we overcome it will depend on how long it lasts. The Crimea situation may not be the only thing that's hampering growth. Besides, we can't predict what shocks to the system we'll encounter during 2014.
The WPM does not change its targets no matter what happens. They just admit they were wrong and use the lessons to inform future targets. The WPM tries to solve the causes that make them miss their targets.
Friday 28 March 2014
Monday 24 March 2014
France surprises with return to expansion
"The preliminary estimate of Markit's composite Purchasing Managers' Index (PMI) for France was 51.6 in March, up from February's 47.9 reading and above the 50 level that indicates expansion."
Economists expected France to go through another month of contraction but it turned its economy around that surprised most people. This is a step in the right direction. Overall GDP growth for the Eurozone was 0.3% at the end of 2013, the first step in the right direction. Now that France has joined in, Eurozone growth is gaining traction.
This came after Francois Hollande was criticised for running down the French economy. Either he paid attention to the criticism or he's ignoring his monetary advisors. I believe that all countries should ignore their monetary advisors unless they regard money as a medium of exchange and nothing else. Money does not make money! People do.
It's possible for a number of people to make products or provide services without money and still make a profit. OK they'd need money for living expenses but it's not millions. I'm not talking about getting the means of production on traditional credit terms; I'm talking about getting into agreement with suppliers and distributors that they'll be paid after the products/services have been sold and the money received. This is a sort of partnership where all the players share the profits and the risks.
There seems to be that a paradigm shift is happening away from monetary policies - after all, it was monetary system that caused this financial crisis. This is closer to the WPM's dream of reforming the monetary system and getting rid of derivatives trading once and for all. We'll still use money as a medium of exchange but the focus will be on value production which is done by "we the people". Already some organisations are treating their employees as assets despite the fact that their accounts are putting the salaries in the liabilities column.
I read an article about Hyman Minsky who explained that the cause of instability is stability itself. Although this has its merits, I believe that the problem was caused by the use of mathematical models to determine the monetary make up of the financial system. Most managers and politicians didn't know how these complex instruments worked and enabled those that do to rig the system in their favour.
This is another reason to dismantle this system and a return to a value-based system without the rocket science that bamboozles everyone.
Economists expected France to go through another month of contraction but it turned its economy around that surprised most people. This is a step in the right direction. Overall GDP growth for the Eurozone was 0.3% at the end of 2013, the first step in the right direction. Now that France has joined in, Eurozone growth is gaining traction.
This came after Francois Hollande was criticised for running down the French economy. Either he paid attention to the criticism or he's ignoring his monetary advisors. I believe that all countries should ignore their monetary advisors unless they regard money as a medium of exchange and nothing else. Money does not make money! People do.
It's possible for a number of people to make products or provide services without money and still make a profit. OK they'd need money for living expenses but it's not millions. I'm not talking about getting the means of production on traditional credit terms; I'm talking about getting into agreement with suppliers and distributors that they'll be paid after the products/services have been sold and the money received. This is a sort of partnership where all the players share the profits and the risks.
There seems to be that a paradigm shift is happening away from monetary policies - after all, it was monetary system that caused this financial crisis. This is closer to the WPM's dream of reforming the monetary system and getting rid of derivatives trading once and for all. We'll still use money as a medium of exchange but the focus will be on value production which is done by "we the people". Already some organisations are treating their employees as assets despite the fact that their accounts are putting the salaries in the liabilities column.
I read an article about Hyman Minsky who explained that the cause of instability is stability itself. Although this has its merits, I believe that the problem was caused by the use of mathematical models to determine the monetary make up of the financial system. Most managers and politicians didn't know how these complex instruments worked and enabled those that do to rig the system in their favour.
This is another reason to dismantle this system and a return to a value-based system without the rocket science that bamboozles everyone.
Saturday 8 March 2014
Update on 2013 Repossessions
Sorry about the delay - I didn't realise the figures were published on 14th Feb.
Anyway, it was widely predicted that the repossession figures for 2013 would be <30,000. I wanted to set targets for the next 5 years so I assumed a figure of 29K. Take that away from 2009's 46K and you get 17K in 4 years. Take that away from the assumed figure of 29K and you get 12K in 4 years. All we then need is to reduce it by a further 3K to achieve a target of 9K.
Well on the 14th of February the preliminary report showed that the actual repossessions in 2013 were 28,900. Hence our forecast stands. 2012 figures were 33,900 that's a reduction of 5K. We would've wanted more because it gets progressively harder to reduce the repossession rate as the numbers get smaller.
Besides, we were only able to make these reductions because of the forbearance of the lenders but that can only last so long so we have to replace it with sustained growth. The strong growth of 2013 is the start of better times to come. The focus now is on repaying or rather reducing the debts mentioned in the structural imbalance report: household debt, commercial debt, national debt, and balance of payments deficits.
In order to do this, industry has to create enough wealth for the people concerned to pay down their debts as explained in my article about the Economic Fractionating Column.
For this to happen, we need to have growth of 3% in 2014 and an average of 3.5% for the following 4 years. This is in keeping with the WPM's original target of reducing national debt to 45% of GDP by 2018. European Governments are saying that 60% of GDP would be sustainable. This implies that 45% cannot be met by 2018.
Since it's the people who create the wealth, if they're given the opportunity, anything can be achieved including 45% by 2018 providing there's sufficient demand within Europe and overseas. The keyword here is sustainable development - we can achieve any target but can we sustain it? and at what cost? The WPM is prepared to change the time goalpost say till 2020. We can review this closer to the time. The problem with changing goalposts is that it introduces complacency and this cannot be tolerated.
Anyway, it was widely predicted that the repossession figures for 2013 would be <30,000. I wanted to set targets for the next 5 years so I assumed a figure of 29K. Take that away from 2009's 46K and you get 17K in 4 years. Take that away from the assumed figure of 29K and you get 12K in 4 years. All we then need is to reduce it by a further 3K to achieve a target of 9K.
Well on the 14th of February the preliminary report showed that the actual repossessions in 2013 were 28,900. Hence our forecast stands. 2012 figures were 33,900 that's a reduction of 5K. We would've wanted more because it gets progressively harder to reduce the repossession rate as the numbers get smaller.
Besides, we were only able to make these reductions because of the forbearance of the lenders but that can only last so long so we have to replace it with sustained growth. The strong growth of 2013 is the start of better times to come. The focus now is on repaying or rather reducing the debts mentioned in the structural imbalance report: household debt, commercial debt, national debt, and balance of payments deficits.
In order to do this, industry has to create enough wealth for the people concerned to pay down their debts as explained in my article about the Economic Fractionating Column.
For this to happen, we need to have growth of 3% in 2014 and an average of 3.5% for the following 4 years. This is in keeping with the WPM's original target of reducing national debt to 45% of GDP by 2018. European Governments are saying that 60% of GDP would be sustainable. This implies that 45% cannot be met by 2018.
Since it's the people who create the wealth, if they're given the opportunity, anything can be achieved including 45% by 2018 providing there's sufficient demand within Europe and overseas. The keyword here is sustainable development - we can achieve any target but can we sustain it? and at what cost? The WPM is prepared to change the time goalpost say till 2020. We can review this closer to the time. The problem with changing goalposts is that it introduces complacency and this cannot be tolerated.
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