You obviously don`t read that awful Daily Mail Chris . They had a front page cover on this a couple of days ago. If you watch the BBC/Guardian you might think that Eurogeddon was not happening despite the Polls indicating utter disinterest in this epoch making “error of judgement , soap opera

Two choices for the Euro elite .Cut Greece off and maybe others or write a blank cheque.

I think we all know which way they will go

I see Hey Big Spender Balls is all up for this bond…sigh… and then what ?
Nationlalise the bond that underpinned the sovereign debt that nationalised the bank debt that financed rthe property bubble that paid for the spending that made the Hansel and Grettel sweety house the West built . Arrrgh!
We are living beyond our means and the closer the decisions get to a real budget the better.

So no Chris you are wrong ,only your media is ignoring reality the BBC whose 70% share of News has been the usual self interested farce for the last two weeks. Glad to see the investigation into media fixing will inlcude Fat old Auntie.

[1] Paul, can you confirm, for the record, that people divide into two categories:

- those who agree with you about the BBC, and
- vicious scum who should be taken out and shot.

Cheers.

Mike -I may adopt a bloggy sort of breezy /aggressive tone sometimes ,perhaps wrongly,but thats just for fun.
I `d hate anyone to think I disliked anyone I happened to disagree with though – not at all .My view is that the Guardian/BBC are getting hysterical and seriously disproportionate in their coverage of Murdochand Chris Dillow seems to agree

It is a second most importnat story and second by a very long way

Apology accepted, Paul. I spend far too much time over at Mike Smithson’s care home – some of the residents there are more than capable of the view I sought to father on you.

I suppose a medical analogy between the two stories would be a diabetic being stung by a wasp – obviously the diabetes is the main issue, but that doesn’t mean you can ignore the sting!

Given that more and more economic journalists, of all political persuasions and none, are comparing this crisis to that of 1931, it’s interesting that there are no parallel calls for the formation of a national government – after all, there was no majority for any single party in Parliament then, either.

I’m willing to accept the possibility that the media can become obssessed with stories that have no bearing on what people really want to hear about, and so can set an agenda disconnected with the real world. And I’m also willing to accept the possibility that the media merely reflects back to the public what the public wants, and that the media has no real influence, and whatever is, is right.

But not both at the same time.

Wanting to write about Euragnarök is, of course, sensible, but I don’t think it needs framing in such a way.

What we need is the media to wake up to the IMMINENT DOOM just around the corner for our economy. Yes! A bit more sensationalism never hurt anybody.

So let me check the ONS stats out today, there must be some IMMINENT DOOM in there. OK. Retail spending over the last three months is up 4.4% on last year.

Dangit, retail spending is going up pretty strongly! But, ah ha! Volume is flat because of all the prices going up. So this, truly, is a sign of an economy teetering on the edge of an abyss. Because all the prices have gone up, the GOVERNMENT MUST SPEND MORE TO AVERT IMMINENT DOOM. Does that work? You decide!

OK, public finances next. Tax revenues are up 6% in the year to June 2011 vs the year to June 2010, which is impressive considering last year’s £3.5bn boost from the one-off Bank Payroll Tax.

Tax revenue is going up! My god. It isn’t easy, finding the imminent doom, you know. I was going to make some argument here about how government austerity will result in lower tax revenue and they will not manage to cut the deficit and blah blah blah. But I can’t do that. Dangit.

Let’s just moan about the rest of the world blowing up instead. OK?

Europe is blowing up. THE GOVERNMENT MUST SPEND MORE. Go it? OK!

“Has the media forgotten about our teetering economy?”

Completely.
It’s the closet thing to “See no Evil, Hear no Evil” that I’ve seen in the UK.

Over the last two weeks a vast meteor could have struck the UK and it would have been hardly reported by the BBC – unless it had landed in Wapping, of course.

By comparison, Dianna’s death now looks like a modest affair.

(Though Tuesday did make me laugh a bit considering Yates (formerly in charge of counter-terrorism) appeared behind the same desk that Rupert Murdoch was attacked a few hours later. Had Yates not already resigned the story would have mutated into a witch-hunt for the top Police Officer responsible for security at Parliament and the Olympics – namely Yates).

It does make me wonder how the BBC will cover the implosion of the Euro. WIll it get more than a few minutes between Crimewatch and the Lottery Draw?

I don’t think ordinary people have forgotten .. it’s hard out there. Food is getting more expensive and so is fuel and the media only chase what sells papers anyway.

Never mind that, the staggering lack of coverage about Somalia in recent weeks has been deafening in its silence. (Granted that is changing now the UN has declared an “official” famine. I’m sure Somalians are greatful for the upgrade *rolls eyes*)

Peter Hansford, imminent doom just around the corner sells so in distressed or uncertain times the glass half-empty media is full of doomsters. Just comfort yourself with the knowledge that when the mainstream media spot a trend, the trend is ready to reverse. When the mainstream media is full of predictions about how bad things are going to be, go long on the opposite happening.

There are significant risks to the global economy if the EZ crisis is not resolved and we will be badly affected. No can deny that those risks exist and could make British firms reluctant to invest. I think the use of Apple is dubious. They are a unique cash generating firm who always have large sums on their balance sheet.

In general hoarding cash by firms is an inefficient use of capital. What can be a bad sign is if firms are returning capital to shareholders by share buybacks. That suggests that they can’t find investment opportunities for the capital. There are some signs of that happening. There are of course two valid ways to look at hoarding cash, which is increases in money of zero maturity compromising currency and instant-access deposits. Liquidity preference and risk-aversion or firms and consumers are preparing to significantly increase their spending and investment.

The European focus of British firms does leave us badly placed. Even without the uncertainty over the EZ debt crisis, the poor demographics of the whole European area means our firms will not be growing market share in that region. We really need our firms to develop more a global perspective.

How the mood swings of crowd psychology consistently leads to making a fool out of the ‘consensus’ view.

http://www.investopedia.com/articles/trading/07/psychology_reversal.asp#axzz1SkUSYV7x

If only they would pass a law abolishing Keynesian economics all would be well. [joke]

“Just comfort yourself with the knowledge that when the mainstream media spot a trend, the trend is ready to reverse. When the mainstream media is full of predictions about how bad things are going to be, go long on the opposite happening.”

Just a mo’, how come the slump in the 1930s then?

By 1933, the height of the Depression, [US] unemployment had risen from 3% to 25% of the nation’s workforce. Wages for those who still had jobs fell 42%. GDP was cut in half, from $103 to $55 billion. This was partly because of deflation, where prices fell 10% per year. By 1933, world trade plummeted 65% as measured in dollars and 25% in total number of units.
http://useconomy.about.com/od/grossdomesticproduct/p/1929_Depression.htm

The recent recession in Britain’s economy following the financial crisis of 2008 was the worst since WW2. Eternal vigilence is the price of avoiding another major depression.

Bob, nice quote at the end of that page:

“The current thinking is that a Great Depression could not happen again because the global economy is much more integrated” [2004]

Good luck with that, eh?

The Depression lasted so long because people thought that leaving the gold standard would lead to IMMINENT DOOM in the form of hyperinflation. So I think that nicely makes Richard’s point about popular consensus not being a good leading indicator.

And there is a very good parallel to the UK currently: there is probably a good chunk of popular opinion which thinks think inflation is too high – which is the Bank of England’s fault, and real GDP growth is too low – which is the government’s fault. And that chunk of popular opinion would be bonkers.

http://econlog.econlib.org/archives/2011/07/the_power_of_fo.html

@13: “Bob, nice quote at the end of that page: The current thinking is that a Great Depression could not happen again because the global economy is much more integrated” [2004]

The internal integration of the American economy in the 1920s and after didn’t prevent the deep and pervasive depression there, the world’s largest economy and a monetary union.

Increasing protectionism from beggar-thy-neighbour trade policies spread the depression from one country to another in the 1930s. But note that the economies of Britain and Germany performed relatively well during the later 1930s compared with most other industrialised economies.

Britain came off the Gold standard on 19 September 1931. The Pound depreciated by 25% as a result but freed from any obligation to maintain the Gold parity of the Pound, the Bank of England could reduce interest rates – by June 1932 Bank Rate was down to 2% and stayed there until August 1939:
http://www.bankofengland.co.uk/statistics/rates/baserate.pdf

Low intererst rates led to a speculative construction boom in the South of England and much of the Midlands but not in the North of England or Wales and Scotland
http://en.wikipedia.org/wiki/Great_Depression_in_the_United_Kingdom

Germany kept the Reichsmark on the Gold standard but the Nazis in power after January 1933 brought in exchange controls along with import licensing as well as controls over prices, wages and investment.

With an extensive new public works programme, unemployment sharply declined: ” . . from 6 million in October 1933 to 4.1 million a year later, 2.8 million in February 1935, 2.5 million in February 1936, and 1.2 million in February 1937.” [CP Kindleberger: The World in Depression 1929-1939 (Allen Lane, 1973) p.240]

The worry now with the Eurozone is the risk for banks in Germany, France and – to a lesser extent – Britain, if Greece defaults on its sovereign debt. The call for greater economic integration in the Eurozone is really code for more EU Commission intervention to ensure greater fiscal discipline by EU member states.

“So I think that nicely makes Richard’s point about popular consensus not being a good leading indicator.”

Judging by what has been recently happening with business investment in Britain, the business community here evidently doesn’t have much optimism so far about prospects:
http://www.statistics.gov.uk/cci/nugget.asp?id=258

In terms of fundamentals, what matters is whether consumer expenditure, business investment and net exports will increase sufficiently to compensate for the cuts in public expenditure underway.

Bob: capital investment was the biggest positive contribution to real GDP growth in 2010; +2% for the year in the GDP(E) stats. That is not so dire. Will it continue? Who knows. The reason the household consumption stats look bad is because of high inflation, not low demand. Rising prices should spur on investment in the supply side… hopefully!

@15: Peter

Even so, successive GDP forecasts by independent agencies have been lower and lower – which usually means tax revenues are less than expected so public borrowing is higher than expected.

On the matter of whether a prevailing public consensus is usually flawed, a few years back there was a book: The Wisdom of Crowds, which argued that aggregate opinion often turns out to be more accurate than individual opinion:
http://en.wikipedia.org/wiki/The_Wisdom_of_Crowds

Of course, crowds can and do get it wrong, hence an earlier book: Extraordinary Popular Delusions and the Madness of Crowds
http://en.wikipedia.org/wiki/Extraordinary_Popular_Delusions_and_the_Madness_of_Crowds

Here we have two rival hypotheses but how do we test to find which is correct?

That isn’t easy. Consider the hypothesis: It is unlucky to walk under ladders.

If I walk under a ladder, I can be pretty sure that sooner or later something unfortunate will befall me but was that because I walked under a ladder? We can certainly find examples where the consensus has been proved demonstrably wrong – such as restoring the Gold Standard at the pre-war parity in 1925. But how about abandoning the Gold Standard in September 1931 or the landslide victory for the Conservatives in the election of November 1935 which backed the then government’s decision to start rearmament? There are times when the consensus proved correct.