Matthew Lynn

The pound has not collapsed. You can still trade shares, bonds and currencies in the City of London. And inflation, while still high, at least doesn’t come with ‘hyper’ as a prefix, at least not yet. If the Governor of the Bank of England Andrew Bailey wants to celebrate today's fifth anniversary of taking charge of the UK’s central bank he can at least reflect on a few modest achievements. The trouble is, they are very limited. In reality, Bailey has proved a poor if not catastrophic Governor – and everyone in the City knows it. When Bailey took over, he was the antithesis of his predecessor.

Growth has ground to a halt, manufacturing is collapsing, and the government is desperately scratching around for ways to save some money so it can balance the books. There is not much to make anyone feel optimistic about the state of the British economy right now. Except, that is, for the healthy performance of the UK’s traditional, mid-market retailers. Marks & Spencer and Tesco are both in rude health. Now, John Lewis, which has reported a rise in pre-tax profits of 73 per cent to £97 million, is the latest retailer to demonstrate its ability to bounce back.  After years of steep losses under the hapless leadership of the former civil servant Dame Sharon White, John Lewis has finally turned the corner.

There ‘could be a recession’, said President Trump over the weekend with the kind of nonchalant shrug that suggested he was not too bothered one way or the other. He was even going to buy a Tesla to help out his ‘first buddy’ Elon Musk as the company’s share price collapsed. The markets had assumed there was a ‘Trump put’ – that is the President would always ride to the rescue to keep the bull market running. But there is no sign of it. Instead Trump seems perfectly relaxed about the huge losses, even encouraging the sell-off. Of course, it might just that he does not know what to do. But it is also possible that he wants a correction if not a full-blown crash, and is happy to see the indices fall. It has been a very rough few days for Wall Street.

Germany has finally decided to join the party – but Europe may come to regret it. After two decades of limited borrowing and fiscal restraint, Europe's biggest economy is finally joining the high-debt club. Incoming chancellor Friedrich Merz will borrow €800 billion (£670 million), and perhaps much more, to pay for extra spending on defence and infrastructure. Sure, Germany needs to spend more on its armed forces and on restructuring its economy. But it will also likely mean the euro-zone no longer has a single solvent member to anchor it. It is hard to see how this situation will end well for Europe. Merz is a centre-right, pro-business leader, but you might not know that from his decision to start borrowing on a massive scale.

President Trump was very bullish about his decision over the weekend to create a 'crypto reserve'. It will legitimise crypto currencies, he said. It will turn the United States into the global hub for trade. And it will build the national wealth. In effect, the American government will build up a stock of Bitcoin and other digital currencies, much like the gold held in Fort Knox. But Trump's promise is too good to be true: it is a dangerous scam. Trump's crypto reserve will be wide open to market manipulation by the tech tycoons around him 'I will make sure the US is the Crypto Capital of the World,' Trump wrote on Truth Social. 'We are MAKING AMERICA GREAT AGAIN.

It would encourage digitally savvy entrepreneurs. It would be a hub for artificial intelligence. And it would encourage a wave of new companies, replacing the ageing giants of French industry. When Emmanuel Macron became president, turning the country into ‘le start-up’ nation was central to his mission to modernise the economy. In fairness, he had some success. And yet with one of the world’s most punishing wealth taxes passed by the National Assembly last week it is about to be killed stone-dead. It was always slightly implausible for a country best known for its long lunches, short working week, endless holidays, and generous early retirement ages, but Macron was determined to create a start-up culture in France.

The Labour government was pinning everything on an ambitious industrial strategy to boost growth. It was meant to make the UK the fastest-growing economy in the G7, reboot the economy, raise real wages and generate all the extra tax revenues that were going to pay for improved public services. The trouble is, there is not much sign of it. First we were told that it would be published in the spring, and now it has emerged that we will have to wait until June to finally see it. It is increasingly hard to avoid the conclusion that it may not actually exist.  Today’s GDP figures will have come as a small reprieve for Chancellor Rachel Reeves. A 0.1 per cent expansion for the last quarter was at least a positive figure, even if only just.

Electricity bills are going up. Netflix is adding a couple of pounds a month to the price of a standard subscription, and council tax is going through the roof. Most of us are probably struggling with the cost of living. There is, however, one piece of good news: the sub four per cent mortgage is back. The only catch is that it won’t be around for long. Santander will this week start offering two- and five-year fixed rate mortgages at just 3.99 per cent, the first time any of the major lenders have been willing to lend money to homeowners for less than four per cent for several months. A price war may be about to break out, with the big lenders competing to offer better and better deals. Chancellor Rachel Reeves will no doubt be hoping that lasts.

They won't have liked the message or the messenger. With characteristic bluntness, the American vice president J. D. Vance tore into the European Union’s smothering regulation of artificial intelligence today.  Still, Europe’s leaders should listen. Vance happens to be absolutely right. When President Macron convened an AI summit in Paris this week, he was probably hoping for the usual platitudes from world leaders about ‘transformative technologies’ and ‘empowering change’ – along with a few billion euros for some data hubs in France. Unfortunately, no one told Vance how these things are meant to work. In his speech he spoke his mind, and tore into his hosts.

The wait is over. After six months in government, Chancellor Rachel Reeves has decided that today is the day to step forward and pull the big lever marked ‘growth’. In a widely-trailed speech, she has outlined all the different ways her government is going to get the economy moving again. There is just one snag. The lever isn’t attached to anything. In reality, Reeves doesn’t have a clue where growth comes from – and that means her big speech this morning won’t change anything.  Reeves has, at least, finally got round to detailing how she plans to make the UK the fastest-growing economy in the G7. Cynics might wonder why she has been keeping it all to herself for so long, and why she didn’t include any of the new measures in her Budget. Still, never mind.