27 thoughts on “The UK trade picture is murky but the deficits continue to mount

  1. Hi Shaun

    An interesting, and faintly alarming, analysis of the relative FDI returns.

    I’ve spent the last few days in the Rhineland and I have to confess that, in some ways, I much prefer Germany to the UK; in my view the standard of living is noticeably higher.

    It’s always struck me that we are very adept at selling things off which yields an immediate large gain but then a long term outflow in the form of interests and dividends. Is there a point at which we don’t have anything more to sell, and the FDI return trend you mention continues getting worse. what happens then? I know we’ve been running these deficits since the Ark but there has to be a point at which they are indeed unsustainable and there is a run on the pound. Of course this may be what Carney is hoping for in that it will generate the much desired inflationary spike that we are all supposed to be praying for in order to reduce the real burden of debt. The fact that this will impoverish the population and only really works if wages take off as well is, of course, a mere bagatelle that we should all “look through” with unalloyed joy.

    • I am sure Mike “Serene” Carney has all the answers, he saved the UK single handed, after the Referendum, as Gordon Brown saved the World, after the Crash!

      • Carney’s hat is empty, especially when he’s wearing it.
        He’s a glib, opportunistic liar and he, and his appointers, know it.

        • ‘Carney’s hat is empty, especially when he’s wearing it.’

          One of the most brutal,’the truth hurts’ assessments I’ve read.I do wonder why we’re paying him so much.

      • You have to admit he has chutzpah. To claim that an interest rate cut and future QE, as he did, have saved us from recession in one month, is truly astonishing.
        My own view is that he forecast the four horsemen of the apocalypse on June 24th and, since this didn’t happen, his action must have prevented it.
        Since the alternative would be that he was wrong, who are we plebs to question his position?

  2. Are you suggesting the deficit when in doubt is more than actual.
    As to July I feel somewhat relieved it has come down a bit.
    On the wider issues it seems strange that there is no reported deficit and bop analysis. It just seems be drift along as a reported fact without much report on cause or cure. The primary income debits and credits diverged around 2012 near the time of the second eu recession. Somebody who puts in the time can get behind that.
    One other thing is that foreign companies seemed willing to invest in the UK for perceived good returns but UK companies did not.
    Also there are large companies registered in the UK who do not account in pounds and even pay divs in other currencies. Does that mess up our trade and bop.

    • Hi am

      My point is that we have run a reported deficit for around 30 years now and yet the world has not ended! These numbers have a habit of being revised a long time afterwards as in the 1967 devaluation was declared unnecessary in the mid-1980s.

      So yes I believe the fact we have run deficits but I sometimes wonder if they have been smaller and that is why they have been able to persist?

  3. The figures do show the extraordinary extent to which the Euro has helped Germany run these massive surpluses. As you say, the DM would have made it so much harder to maintain them.
    How things change – if I recall correctly, there was tremendous angst in Germany about joining the Euro, because it would be a weak currency leading to inflation (not apparently so popular in Germany). I believe that France supported the unification of Germany only on condition that they both joined the Euro, as France was worried about German domination (again).
    It is ironic that both were wrong:
    1. The Eurozone cannot even get any inflation going at all;
    2. By improving efficiency more than the French (etc), Germany has used the fixed Euro to dominate Europe as never before.

    • I suspect Germany would cope with a hard DMark. They have offshored lots of manufacturing to cheaper wage countries Eastward. Jobs went to Visegrad countries not the former DDR provinces. A hard DMark would increase this trend whilst giving bosses a bargaining advantage to push down German wages.

  4. Hi Shaun, your performances on TipTV are becoming more assured and you get your points across well. It is no surprise that you are now a regular guest.

    Imagine a post-EU scenario where 10% tariffs are introduced to our exports to Germany; we reply in kind, and BANG! £80m a week for the NHS!!!

    That’s why the EU will allow tariff-free trade with a post-EU UK, regardless of our stance on EU migration.

    • You are assuming the Eurocrats in charge behave pragmatically. UK might get to deal with some crazed sadist who is hell-bent on screwing the UK over. Just like they’re doing to Greece

      • The possibility of this just reinforces my belief that the EU deserves to die and that Brexit is the right course.

        As a “Remaniac”, to concur with ExpatinBG’s argument is a shocking admission.
        You want to stay in a union where policy is, or can be, made by “crazed sadists”?

        • And the UK isn’t? There is a ridiculous belief that the UK can go it alone and succeed. All the Brexiteers, will see how wrong they are in 10 years time but they will all explain it away in terms of it being a global slowdown (although the UK will be slowing a lot faster than it’s peers) and those nasty foreigners applying tariffs etc to UK exports, when it was always apparent at least to people like Expat and myself that this is exactly what would happen, otherwise why bother having an EU with a free trade zone!

          Frankly, as a “Remainiac” I don’t understand why formal notice wasn’t served under article 50 by noon 27/06/16 as in my world when you decide you want to do something you make a plan and as soon as you are able to implement that plan (the referendum result) you implement it.

          What you don’t do is demand something and when it’s given to you wander about aimlessly trying to work out exactly what it is that you actually want whilst simultaneously trying to develop a plan and then implement it creating immense uncertainty in the meantime. Currently, the UK looks like those drunken louts you see spilling out of Pubs bumping into each other looking around bleary eyed and trying to work out where they are going to go next – hardly impressive, more like a laughing stock. Unless May intends to call another referendum (which I would disagree with as the UK has spoken and now it must live with it’s decision) further down the line.

          In the meantime if you “Remain”your comfortable future is much more assured and you may hope to influence things your way.

          “Leave” and you lose any influence you may have had.

        • Ask Greece about their “comfortable future”.
          As for crazed sadists making policy, are you saying that getting rid of one lot isn’t a positive?
          Because of the UK’s EU-opt-outs, I cannot think of one way in which the EU has benefitted me, that wouldn’t otherwise have happened outside the EU.

        • Last time I checked the UK wasn’t in the same position as Greece even though it is an EU member, you are comparing apples with pears – the UK is not in the EZ. It is the Euro which has been a great contributor to Greece’s woes although they brought it on themselves initially.

          In terms of “crazed sadists” and ” I cannot think of one way in which the EU has benefited me, that wouldn’t otherwise have happened outside the EU.”.

          It al depends on which lot are the most crazed, consider the Human Rights Act which the UK “crazed sadists” complained about bitterly as it came about as a result of the European Convention on Human Rights by those other “crazed sadists” in Europe even though it contained safeguards re rights to no discrimination on various grounds including colour, language, sex race , national or social origin, or any other status including marital status or sexual orientation etc.. many of these were already protected by UK law, to a very limited extent but the Human Rights Act extended those protections way beyond the original UK legislation.

          I consider these to be excellent protections for minorities, although, of course, the UK cannot remain in the EU and ban immigration as this would be a clear violation of the European Convention on Human Rights and it will of course have to repeal parts of it’s own Human Rights Act before it can legally ban immigration. However, I guess as a Brexiteer you feel this to be “a good thing” as you socially engineer the UK creating a restricted labour market into the bargain just as Greece had, although theirs was about internal restrictions which was compliant with EU law whereas the proposed UK immigration ban breaks EU law.

          Moreover there are numerous UK projects entirely or partly funded by EU grants or loans of 50 billion Euro over the last 10 years from the European Investment Bank such as the Humber Gateway.

          So, on reflection, I think you are right, that as (I guess) a non minority person, not involved in any work or having used any infrastructure, social housing or renewable energy financed by the EU, there is no EU money and few EU laws that benefit you. There is, however, EU money creating and maintaining employment for UK citizens alongside infrastructure etc for their benefit no matter where they originated from and there are many EU laws that benefit vulnerable minority groups.

          By the way, I replied to you on the September 8 post about zero hours contracts on September 9 which, if you read it in conjunction with this post you may begin to realise the enormity of the mistake the UK has made as it readies itself to create a distorted protectionist labour market whilst ignoring the true causes of it’s economic malaise. Indeed, many on here rightly criticise Governments and Central Banks for creating distorted Equity and Bond markets but are deafeningly silent when it comes to creating a distorted UK labour market. History shows that whenever distorted markets are created they will correct themselves, usually in a very violent and unforeseen way

  5. Shaun,

    Off topic, but did you see our ol’ mucker, Charlie Bean, who’s just been nominated for the OBR (aren’t they deliciously right for one another), saying that economic forecasts should be taken with a “pinch of salt”? So why are you going to work for the OBR since all they seem to do is create a forecast and then they miss it completely. If they’re to be taken with a heavy dose, why issue them in the first place? And what do you, Charlie boy, say to those who have taken heed of such advice? “If I don’t follow them, you shouldn’t either, you fools”! You couldn’t make it up.

    • Hi Robert S

      Yes the Charlie Bean situation is an odd one as after retiring from the Bank of England with a very large pension he still seems to want more money. Perhaps he is like a punch drunk boxer who hopes he will finally win a fight?! Or if he buys enough lottery tickets….

  6. Hi Shaun thanks again for your the information and education you provide,you cut to the chase and make the issues easy to understand,sadly this probably means you will not be appearing on main stream media very often.
    Was it Reagan who said “deficits don’t matter” well if your expenditure exceeds your income for a significant period of time you will have a problem the US debt is now approaching $20T
    Old Ron might have wanted to revise that thinking if he were still with us.
    As you alluded to there is now way out of the money creating ,bond buying ,dead end that the politicians and central banks have got us into.
    FIAT currencies always fail as they are debased by overspending and that leads to money printing that leads to hyperinflation….They never learn they always say it’s different this time.
    The Talking Heads…same as it ever was,same as it ever was,

    • Hi PrivateFraser and thank you

      Every time is different until it turns out to be “same as it ever was” and then that state of play was so “unexpected” it could not have been forecasted. Even if others did….

  7. I see the FT refers to Charlie as ‘an expert in macroeconomic forecasting’. Odd description of somebody who says economic forecasts should be taken with a pinch of salt..

    • Hi Bez

      Well if you look at the track record of the FT you see that compared to it virtually everyone is “an expert in macroeconomic forecasting” . The recent post referendum changes of tone ( up was the new down) should have been more mea culpa like.

  8. So pleased to see imputed rents haven’t been left out.I was worried for them.

    I mean,what on earth could go wrong,positioning a country,partially on the basis of what it’s second home owners are believed to be receiving in rental income from abroad.

    It’ll be imputed foreign taxi fares next,when you could have taken a cab but drove yourself…

    • Hi Dutch

      Yes where would we be without imputed rents? 🙂 More seriously there is a problem here where we get bits of information and there is no consistent flow. I recall the imputed rent numbers being bad for the balance of payments initially and now it has all been revised. That is far too common frankly in all the various imputed rents series.

      Oh and imputed coke and hookers,oh hang on we have them already..

  9. Shaun I enjoyed your TV which I watched as I queue to Join a ferry to France for some hot surfing In Biarritz. I shall do my best to avoid spending too many pounds and worsening the trade deficit. I was intrigued by your answer on Hyperinflation as a conclusion to QE, You could argue we had hyperinflation in house prices, like the tulip bulbs it just needs a shock or realisation that they may not be worth for the prices to reverse. There’s no IR ammunition to push them up through conventional lending now….

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