Economics

Gandhi would test his resolve by sleeping between two naked virgins, an avenue not really open to me, as my wife is an Anglican vicar: though Anglicanism imposes almost no constraints on your behaviour or beliefs nowadays, it still frowns on sleeping with naked virgins, especially if they are of the opposite sex. So my equivalent of this exercise is to try to go into certain shops for half an hour and emerge without buying anything. Lakeland is an especially tough challenge here, but the real Matterhorn for me is an airport branch of Dixons.

How do you sound clever and au courant in 2014? Easy. You talk knowingly about Capital in the 21st Century, the seminal, magisterial, definitive, landmark, pick-your-coverblurb-adjective book by French academic Thomas Piketty. It's all about the growing gap between rich and poor, you see, and inequality is all the rage. No wonder: it's fun to get all hot under the collar about the 'mega-rich' — especially if you're secretly cushioned by the knowledge that you've got a bit tucked away yourself. Piketty (who must himself be making a mint) even topped the Amazon.com bestseller list last week, not bad for a such a big book on such a heavy subject. But really, who is going to trudge through 700-pages on economic theory?

In his blog earlier today, Fraser Nelson argues: 'The UK jobs miracle is happening mainly due to radical welfare reform – the type Labour ducked in office..Under Labour, record numbers of people in work were celebrate as an end in itself – but most of the increase was accounted for by immigration. So more jobs did not mean less poverty – not if a quarter of Glasgow and Liverpool were still languishing on the dole at the peak of a boom. This time, it’s different. The welfare reforms are restoring the see saw link between jobs and dole queues.' I suppose I should by now get over the fact that intelligent, articulate journalists feel able to write with such certainty about data they simply don't understand.

If you are reading this article online, perhaps you could go to the comments section and let us know what single slightly unusual item you have bought which has brought you the most reliable and lasting happiness. Perverse answers are welcome, of course, but I am not so interested in suggestions such as ‘a Thai bride’ or ‘a brewery’ or ‘“The Concert” by Johannes Vermeer’. What I am hoping for is a list of slightly unusual domestic or practical items which you might have bought on a whim or as a slight extravagance but which subsequently you found surprisingly delightful or life-changing to the point of boring your friends about them.

Google ‘the bread market’ and you get 135,000 hits, mostly from specialist food industry websites. Google ‘the property market’, however, and you get over 180 million. ‘The financial markets’ nets you 282 million. Seen like this, it’s unsurprising that capitalism has a reputational problem. The likelihood that the word ‘market’ is attached to any area of commercial activity is in direct proportion to the degree to which that category is seriously messed up. The idea that all ‘markets’ are effectively the same is perhaps one of the stupidest economic errors of the past 50 years. For a start, asset markets are not like other markets.

It was back in 2001 that my good friend Jim O’Neill of Goldman Sachs coined the acronym ‘Bric’, short for Brazil, Russia, India, China. These were the emerging markets that were going to surpass the developed economies. And so they have. Well, nearly. I, too, am partial to a good acronym and it has always seemed to me very unfortunate that there isn’t a matching one for the four biggest established economies. According to the International Monetary Fund, these are currently the United States, Japan, Germany and the United Kingdom (based on last year’s GDP figures). I therefore propose ‘Juugs’. The rise of the Brics and the fall of the Juugs has a good ring to it.

 São Paolo It was back in 2001 that my good friend Jim O’Neill of Goldman Sachs coined the acronym ‘Bric’, short for Brazil, Russia, India, China. These were the emerging markets that were going to surpass the developed economies. And so they have. Well, nearly. I, too, am partial to a good acronym and it has always seemed to me very unfortunate that there isn’t a matching one for the four biggest established economies. According to the International Monetary Fund, these are currently the United States, Japan, Germany and the United Kingdom (based on last year’s GDP figures). I therefore propose ‘Juugs’. The rise of the Brics and the fall of the Juugs has a good ring to it.

Here is a graph that shows the four economic downturns Britain has been through (red lines) over the past forty years. What I find strking is that each downturn was preceded by the same thing: a surge in the growth of money (blue line). In other words, the bust followed an unsustainable credit-induced boom. The motives and justification behind monetary policy leading up to each boom/bust might have been different. In the early 1970s, monetary policy was shaped by Competition and Credit Control (CCC) reforms. In the late 1980s, those who decided monetary policy wanted to shadow the Deutschemark, then join the Exchange Rate Mechanism (ERM). After that unhappy experience, monetary policy was made in order to target inflation.

Despite 'the age of austerity', Britain still has a debt problem. That’s the conclusion of a new report from the Centre for Social Justice. It suggests that personal debt in the UK has reached a record high of £1.4 trillion, or 90 per cent of the UK's economic output last year. That’s not happened overnight; but the debt level has increased steadily over the last decade: Breaking this down, the CSJ says that the average household debt is now £54,000 (nearly double what it was a decade ago). Thanks to the increase in borrowing, 5,000 people were made homeless last year due to mortgage and rent arrears.

It takes a lot to make the subject of immigration respectable for liberals, at least if you’re pointing out its problematic aspects. But Paul Collier, an Oxford economist specialising in the world’s bottom billion, has, in the 270-odd pages of his new book Exodus, opened up the issue for the left — well, for all comers, actually. Which, for a book suggesting among other things that, left to itself, there is no natural limit to immigration, is quite something. ‘The overwhelming reaction I’ve had,’ he told me, from his Oxford berth at the Centre for the Study of African Economies, ‘is that people thank me for making the subject discussable.

The maths of America’s financial problems are fairly simple. Every year the federal government spends more than it brings in so must borrow to fill the gap. This is fine when you’re young and healthy, with great prospects and you are borrowing to invest. But one day your lenders look at you and realise you’re not young and growing any more. You’re middle-aged and knackered. You are borrowing simply to spend and time is running out for you to pay back your debts. It’s an ugly moment for anyone, especially the most powerful country in the world. There are economists like Paul Krugman who argue that America is not like a household or a person. It can borrow and invest in ways unique to sovereign powers. Countries do not simply age and die.