A Future That Works

A Future That Works
NO2aTory/Liberal coalition - Vote with your feet for an alternative to a neo-liberal economy and neo-conservative state Yes2aLeftFront and a Red/Green Left Alliance

Friday, 5 August 2011

We are on the edge of a financial vortex

It’s not good enough when the Foreign Secretary William Hague says the Tory/Liberal Coalition Government is ‘‘fully functioning’’ despite the Prime Minister David Cameron his deputy Nick Clegg and the Chancellor of the Exchequer George Osborne all being on holiday as whilst the global financial markets closed for business after a week of losses equalling more than $2.5tn (£1.53tn) Wall Street has losses of over $2tn over the last fortnight. In Britain, yields on benchmark 10-year gilts fell to their lowest level since 1946 and the FTSE has fell for six days in a row losing more than 11% of its value equal to £164bn. There are increased fears that Italy and Spain, the Eurozone’s third and fourth largest economies may default on their debt repayments and require EU bailouts.


  1. ‘‘The jagged downward lines of share price indices pointed the way in which the world economy seems to have turned after a week that has left the financial system on the brink of another global crisis.’’

    (Larry Elliott, Economics Editor, The Guardian)

  2. ‘‘Europe's problems can only be truly understood in three dimensions: not just as a fiscal crisis but as a pan-European banking crisis - which started as, and continues to be, one of massive unfunded bank liabilities - and as a trans-continental crisis of low growth, in part the result of the euro's deflationary bias.’’

    ‘‘Together, and in lethal combination, these three problems threaten to create a tragic roll call, year after year, of millions of European citizens unnecessarily condemned to unemployment in a wasted decade.’’

    (Gordon Brown, Former British Prime Minister and Chancellor of the Exchequer)

  3. The USA’s credit rating has been downgrade from AAA to AA-plus, so we can expect more panic on Monday the 8th of August when the stock markets open again.

  4. Harry Reid Democratic leader in the Senate says that the downgrade from AAA to AA-plus underscores the need for a ‘‘balanced approach to deficit reduction that combines spending cuts with revenue-raising measures’’ such as doing away with tax breaks for the wealthy and oil companies. This is message that the British and European governments should take note of when looking at cutting the higher rate of tax and spending.

  5. Lesson of the 1930’s depression for 2011

    A CNN poll found that about 50% of Americans believe another Great Depression is likely in the next year. What are the lessons from the 1920’s and early 1930’s for the elite that rule the USA, Britain and our partner states in Europe?

    For the British and European Left parties what are the lessons of the 1930’s depression as to how to respond to the cuts in welfare and attacks on the living standards of the working and lower middle classes by the ruling classes?

  6. If we see a flat rate of growth continues into the autumn then Britain will officially be in a state of economic depression with a longer period of falling living standards than experienced in the infamous 1930’s depression.

    George Osborne Chancellor of the Exchequer and the Tory/Liberal coalition government are following the same economic policies that were pursued by the national government of the1930s.

    Today thanks to the Keynesian period of social-democratic welfare capitalism most people have a much higher standard of living and wellbeing than in the 1930’s, but will that be true if these neo-liberal/neo-conservative ideologically led policies continue?

  7. Lesson 1 Double-dip recession

    Between 1929 and 1933 there was recovery, then a second recession from 1937 to 1939.

  8. Lesson 2 Financial Crisis of 1929

    ‘‘Cause and effect run from the economy to the stock market, never the reverse. In 1929, the economy was headed for trouble’’

    In the 1920’s America’s economy had been weakened by ‘‘bad distribution of income... bad corporate structure... bad banking structure... dubious state of the foreign balance... and poor state of economic intelligence’’ trouble’’

    ‘‘The singular feature of the great crash of 1929 was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning. Nothing could have been more ingeniously designed to maximise the suffering’’ trouble’’

    (John Kenneth Galbraith Keynesian economist)

  9. Lesson 3 how long it took to recover

    The financial world is a mess ‘‘American economy is surely headed for a deep depression in 2011’’ (Warren Buffet, CEO, Berkshire Hathaway)

    1929 was only the beginning as was 2008 and it wasn’t until 1949 that a full recovery in the stock market, so if the economic cycle repeats itself in the manner that Marxist economist Nikolai Kondratiev suggested it could be 2027 before the stock market recovers from the crash of 2008.

  10. David Harvey says we have reached the point where capitalism may not be able to get over crisis and get back to a compound growth rate of 3% per annum needed to sustain the capitalist system, hence the growth of the financial sector and financial crises of 2008. John Bellamy Foster argues that finance capital has been taking more and more surplus value from the real productive economy leading to more than $51 trillion of debt by 2007 in the USA alone. Keynes wrote ‘‘the position is serious when enterprise becomes the bubble on a whirlpool of speculation’’. Neo-Keynesian economist Hyman Minsky said that ‘‘Capitalism is a flawed system in that, if its development is not constrained, it will lead to periodic deep depressions and the perpetuation of poverty’’. According to both Harvey and Foster restraints on the financial markets are impossible in the long run because the markets burst through the regulation, therefore capitalism will always lead to stagnation, depression and poverty.

  11. Five stages of the most serious crisis to hit the global economy since the Great Depression

    9 August 2007
    15 September 2008
    2 April 2009
    9 May 2010
    5 August 2011


  12. Chancellor of the Exchequer George Osborne to address the British Parliament about the state of the economy on Thursday the 11th of August.

  13. Thursday, 11 August 2011

    Investors have been acting on speculation that France could be the latest country to have its credit rating downgraded after the USA was downgraded last week from AAA to AA+. Mervyn King the Bank of England Governor gave a gloomy assessment yesterday of the effect on the British economy with lower growth forecast and fears of a 5% inflation rate.

    Tory Chancellor of the Exchequer George Osborne has accepted that Britain's economic recovery will be ‘‘longer and harder’’ due to the international situation and conceding that the world faced a dangerous time ‘‘The whole world now realises that the huge overhang of debt means that the recovery will take longer and be harder than had been hoped…Markets are waking up to this fact and that is what makes this the most dangerous time for the global economy since 2008’’.

    The funny thing or sad thing really is that Marxist analysts could have told him this back in 2008, simply by applying historical dialectics as to how the capitalist system would act in reality rather than according to the neo-liberal theories that guide main stream assumptions about how the market should work according to the theories of Friedrich Hayek and Milton Friedman.

    George Osborne should start reading some of Karl Marx and David Harvey, and then he would have understood better and seen what was coming back in 2008 rather than making a belated realization now that all is not well within the capitalist system. Unfortunately he is still a follower of Hayek and Friedman rather than Marx and Harvey, so don’t expect a radical change of direction and an alternative political and economic strategy to emerge from the Chancellor of the Exchequer after today.

  14. Indicators of market fears for a second financial crisis

    The money markets liquidity may be healthier than in 2008, but appears to be deteriorating as data shows that the level of emergency overnight funds that banks borrow from the European Central Bank has increased to over €4bn (£2.4bn). The banks pay 2.25 per cent which is higher than the 1.5 per cent regular interest rate for ECB funding.

    The difference (or spread) between the overnight lending rates set by central banks and the rate at which banks lend to each other is increasing and is now at its highest since the first half of 2009 although still below the level it reached in 2008 when lending channels virtually dried up amid fears of an impending economic and banking sector collapse which is an indicator of the nervousness of the markets.

    The cost of insuring five-year debt issued by banks via credit default swaps.

    The concerns surrounding European lenders have focused minds on the swaps for French and Italian banks, which have climbed in recent months, according to figures from the data provider Markit.

    For example the price from Société Générale a European banking and financial services company rose to 340 basis points up from 135 basis points in June. BNP Paribas credit default swaps are now 236 basis points, up from a basis point of 109 and the Unicredit swaps rose to 382 basis points up from 170 and the cost of insuring sovereign debt against default has risen as a result of concerns about a possible default.

    The credit default swap rate for Italy rate was 365 basis points yesterday up from 160 basis points in June, giving an annual cost of insuring $10m in five-year Italian debt of $365,000 equivalent to the cost of insuring Spanish debt.
    The annual cost of insuring of insuring a $10m in five-year debt for France is now $168,000, compared with $72,000 in June. The credit default swap rate for the USA’s stands at 54 credit default swap and for Britain the credit default swap rate is 89 well below France, Italy or Spain.

  15. ‘‘It is better to think of the global economy as going through a 'second great contraction' (the Great Depression being the first) involving credit and housing and not just output and unemployment’’

    Kenneth Rogoff former Economic Counsellor and Director, Research Department for the International Monetary Fund, Board of Governors of the Federal Reserve System and Professor in the Department of Economics at Harvard University

  16. ‘‘The current crisis is a continuation of the 2008 crash…..This crisis of the capitalist world order has, as expected, after a two-year time lag hit jobs and investment creating a further twist of stagflation in many countries…With this comes a further exaggeration of inequality within and between nations’’

    Roger Seifert Professor of Industrial Relations and Human Resources Management with the University of Wolverhampton Business School former Professor of Industrial Relations and Director of the Centre for Industrial Relations at Keele University

  17. Today is another day of turmoil on the world’s stock markets and the worst fall since March 2009 for the FTSE

    World stock markets fall as fear grows that the world is sliding into a double-dip recession with the Dow Jones on Wall Street down 445 points at 10965, a fall of nearly 4%, in London the FTSE index fell 220 points, or 4.1%, equivalent to about £60 billion ($99 billion) off the British index at 5110.

    In Germany the Dax fell 6.3%, France the Cac lost 5.7%, in Spain, Italy and Portugal markets fell by 5.8%, 6.1% and 4.8% respectively. In Japan the Nikkei was down 1.25%, in Hong Kong the Hang Seng fell 1.2% and the Shanghai Composite fell by 1.6%.

    Banks the worst performers with the down 6.9% with Barclays, Royal Bank of Scotland and Lloyds Banking Group down by 11.5%.

    Morgan Stanley analyst Joachim Fels says the global economy is teetering on the brink of recession citing ‘‘recent policy errors’’ and the prospect of further austerity measures in 2012 with the USA and the Eurozone ‘‘hovering dangerously close to a recession over the next six to 12 months’’.

    Economic growth in developed world is averaging just 1.5% this year down from estimates 2.4%. The global financial and economic outlook means the Bank of England will probably need to consider a quantitative easing exercise and higher interest rates to control inflation as Britain continues to be trapped in a state of stagflation.

    The British economy showed a growth rate of 0.2% between April and June, German was just 0.1% in the second quarter and the French economic growth was zero whilst the USA managed 1.3%.

  18. Fear continues to haunt world markets, as the FTSE 100 Index fell 3% pushing it below 5000 at one point as banking stocks tumbled amid fears that they were running out of cash and borrowers would not repay debts. The FTSE 100 Index closed 51.5 points at 5040.8 at the end of trading. Today's falls mean the London market has lost 5% of its value this week, wiping £72.7 billion from the value of the UK's biggest companies.

  19. The Tory/Liberal economic strategy along with the European Union and IMF/World Bank for cuts and privatization will only make the recession deeper and increase the risks of a double-dip recession and deep depression. The theory and practices of neo-liberal economics and a neo-conservative state threaten the deepest crisis of capitalism for eighty years. Each time that new economic statistics appear the real economy defies the theory of neo-liberal ideology.

    Avinash Persaud, director of analysts Intelligence Capital has said ‘‘It's going to feel bad’’ and John Philpott, Chief Economic Adviser for the Chartered Institute of Personnel and Development says ‘‘if we were to go into another recession then that changes the game quite significantly. We'd be into something close to the 3 million mark’’ and that ‘‘the chances are that things could get a lot hairier, this autumn could be 2008 all over again’’.

    What’s the Tory/Liberal strategy for the crisis of capitalism, what do they propose, how will the coalition government archive a growth rate of 2.5% to 3% per year, which is what’s required to archive the deficit reductions that is at the heart of the Tory/Liberal economic strategy. Their neo-liberal ideology doesn’t allow for a Plan B, so they will stick to Plan A regardless of the consequences for the real economy just as the Tory government did in the early 1980’s and the national government of the early 1930’s.

    Prime Minister David Cameron, Deputy Nick Clegg and Chancellor George Osborne, don’t say that you haven’t been warned. It’s not just left-wing Marxists who are saying that the British, European and world economy needs a different plan to your neo-liberal and neo-conservative economic, social and political strategy. The right-wing project has had thirty years and the experiment is a failure, it’s time to look at an alternative to feral capitalism.

  20. Will a double dip recession turns into a 10 year Depression

    Most economists agree that the next recession will be worse than the last and pulling out of it will be very slow.

    ‘‘Going back into recession now would be scary, because we don't have the resources or the will to respond, and our initial starting point is such a point of weakness….It won't feel like a new recession. It would likely feel like a depression…It really does matter where the economy is when it gets hit by these shocks… If we all pull back on spending, that's a prescription for a long, painful recession.’’ says Mark Zandi Chief Economist at Moody's Analytics.

    The global economy is MUCH more vulnerable in 2011 with unemployment figures much higher than at the start of the Great Recession of 2007-2008.

    European Union 7.2% now 9.4%
    Britain 5.4% now 7.9%
    United States 4.6% now 9.2%

  21. Britain's economic slowed in the second quarter of 2011 as official figures estimating GDP growing at 0.2% as manufacturing and other production industries fell compared with the 0.5% increase in the previous quarter. British economic output has grown by just 0.7% over the year.

    Dave Prentis leader of Unison union says that the time has come for the Tory/Liberal government to change its failing economic policies ‘‘or risk plunging the country into a double-dip recession’’

    Bob Crow leader of the RMT union says ‘‘We stand on the brink of a double-dip recession while George Osborne, Vince Cable and the Cabinet stand idly by and allow thousands of skilled manufacturing jobs linked to the Bombardier train building plant in Derby to be killed off by their sheer impotence and ineptitude. British people face the prospect of the worst living standards since the end of rationing’’.

  22. Markets tumble again as growth stagnates and unemployment remains at 9.1% in the USA as fears grow that the world's largest economy is going back into recession. This news has caused further falls on stock markets around the world.

    ‘‘If there are any glimmers of hope in this survey, and basically there aren't, you could point to the smaller decline in the government sector as a potential slowing of public sector job shedding. You could also assume that this will have bolstered the chances of a new round of quantitative easing from the Fed before the year end.’’ (Rob Carnell, ING Financial Markets 02/092011)

    Economic for the second quarter revealed a growth rate of 1% far below the 3% required to markedly reduce unemployment and prevent the world economy going into a double dip recession. International economist Rob Carnell says these figures will provide further argument for those calling for easing of fiscal policy. The Federal Reserve is to discuss the possibility of reintroduction quantitative easing at its next meeting this month.

  23. Employment levels for the USA were flat for August which has caused traders to dump stocks, sending the FTSE 100 Index in London down more than 2% and the DAX in Germany and CAC 40 in France fell more than 3% as fears grow that the USA will lead the world economy back into recession and has undone most of the recovery that occurred on the markets over the past week.

    World Markets had dropped by up to 15% but had been recovering over the past fortnight until today's crisis of confidence. The Banks have been among the worst hit, reversing gains made after reports the sector could escape major reform until after the next general election with Barclays and Lloyds were both down 5%. Oil prices also fell after recent gains with Brent crude oil down 2% at 111.8 US dollars a barrel.

  24. If you thought the financial crisis was over

    Banks were at the centre of another stock market sell-off as concerns about global growth and the Eurozone’s debt returns, wiping £49bn off the value of blue chips shares on the London stock market a fall of 3.6%. The Germany's DAX fell by more than 5% to its lowest level in nearly two years. French and Spanish markets fell by 4.6% and the Italian index was down 4.8%. Royal Bank of Scotland shares fell by more than 12% and Lloyds lost 7.5% of its share value. Italy's biggest banks, Unicredit and Intesa Sanpaolo, fell by 7%.

  25. G7 economies ‘‘grinding to a halt’’

    The Organisation for Economic Co-operation and Development says that the world's major economies, including Britain are approaching zero growth. Britain economy is near stagnation if the OECD's of 0.3% annual GDP growth for the final quarter of 2011 is correct compared with 2.5% growth in the third quarter of 2010.The OECD assessment for Britain’s economic growth has downgraded the annualized growth rate for 2011 from 1.4% to 0.7% and 0.3% in the final three months of the year. TUC Brendan Barber General Secretary of the TUC says the Tory/Liberal coalition government's austerity measures have made the current economic forecasts worse than they needed to be saying ‘‘It looks like the best we can hope for is bumping along the bottom for years to come’’.

    OECD chief economist Pier Carlo Padoan has admitted world economic growth was turning out to be much slower than the body thought it would be three months ago, saying ‘‘There's a clear drop in confidence in both business and households which reflects what they see as lack of policy response from governments’’. The OECD has said that there is a risk of high unemployment becoming entrenched and that governments need policies that will create employment. Of the G7 nation states Germany was seen as the country to lead the European Union out of trouble but its economic growth levels have dropped to 0.2% GDP in the second quarter of 2011.

    The National Institute of Economic and Social Research is also forecasting a sharp slowdown in in economic growth for the last three months of the year in Britain and the Chancellor of the Exchequer George Osborne has acknowledged that official forecasts for the British economy will be downgraded after the latest economic figures saying ‘‘The forecasts we got from the OECD today show that this is a problem for many advanced economies, there was a revision down in their forecast for growth for virtually every developed economy’’ and that ‘‘Any suggestion that the downgrade in the UK growth forecast was due to flawed Government policies compared to those pursued in other countries such as the US which have continued fiscal stimulus, was "for the birds….I think Britain has put in place the right policy mix’’.

  26. After a bout of quantitative easing due to fears over the deepening debt crisis the world's central banks pump US dollars into the system from the 12th of October 2011 in order that the markets recover and support to the global banking system. As a result the FTSE 100 index moved up 125 points to 5352, up by 2.5%, the Dow Jones index went up 1.2% to 11385 and the euro gained just over 1% against the dollar standing at $1.3886.


  27. British and European economic outlook for the end of 2011

    The European Commission is predicted lower growth and higher inflation for Britain in its autumn economic forecast with inflation up from 4.1% to 4.4% this year and annual growth rate down from 1.7% to 1.1%.

    Europe's Economic and Monetary Affairs Commissioner Olli Rehn says growth across the EU is slowing down and will remain ‘‘subdued’’ in the second half of the year before reaching "a virtual standstill" towards the end of the year as theoutlook for the EU economy has deteriorated.

    Olli Rehn said ‘‘the sovereign debt crisis has worsened, and the financial market turmoil is set to dampen the real economy’’

    EU wide growth is revised down from 1.8% to 1.7%, with no change for the Eurozone at 1.6%. Inflation for the EU-27 was put at 2.9% and 2.5% in the Eurozone.

    ‘‘Uncertainty about the economic outlook remains high. Some of the downside risks considered in the spring forecast have now materialised. In particular, the global economy has slowed down, and hopes that the sovereign debt crisis would gradually dissipate have been disappointed. The risks to growth remain tilted to the downside. Conversely, risks to the inflation outlook have now abated somewhat since spring and are considered as balanced.’’

  28. The USA’s treasury secretary Tim Geithner has joining EU talks to tackle debt crisis, indicating concerns that the world could be facing a new global credit crunch as the Federal Reserve, Bank of England, European Central Bank and others gathered to ensure that the banking system does not run short of dollars. This is another short term fix and doesn’t address what David Harvey would call the systemic failure of the financial system and global capitalism.

  29. EU finance ministers gathered in Wroclaw, Poland, for a private dinner late Thursday ahead of two days of talks centred on a new Greek rescue package that was agreed by eurozone leaders in July but has yet to be implemented.

    The IMFchief Christine Lagarde has said that the USA and Europe need to take action to rescue their economies, warning indecision and ‘‘political dysfunction’’ would put them back in recession. Christine Lagarde said that the developed economies are in a ‘‘dangerous new phase’’ with deepening uncertainty, ‘’If the advanced economies succumb to recession, the emerging markets will not escape. Nobody will’’.

  30. European Union finance minister in Wroclaw, Poland have sign off new budget rules that make it easier to put sanctions on governments that breach the EU's limits on debts and deficits against the advice of the USA’s treasury secretary Tim Geithner.

  31. Tim Geithner told European finance ministers how important it is that Europe doesn't face a protracted period of weakness to us and that ‘‘you don't want the future of Europe to rest in the hands of those who provide financing to the IMF’’. Unfortunately Europe seems to be listening to the advice of the likes of George Osborne not Tim Geithner, so we can expect things to get much worse over the next few months.

  32. The Left must make its case for an economic and political change of direction?

    ‘‘make no mistake - what is being imposed on Britain, Europe and elsewhere is a structural adjustment programme of that kind, not merely some unwelcome cuts that will be reversed after a few years of growth, for growth is the last thing that the austerity-mongers are talking about.’’

    ‘‘this kind of austerity dogma, which tipped the world into the Great Depression of the 1930s’’

    ‘‘what has already been called a depression threatens to gain a capital letter and become something akin to the Great Depression’’

    (George Galloway Morning Star Friday 16th September 2011)

  33. Christine Lagarde, head of the International Monetary Fund has welcomed President Barack Obama's US job-creation plan and says we are living through times of great economic anxiety warning of the dangers facing the global economy as growth is downgraded at its annual conference this week in Washington. The IMF is expected to say the world economic outlook has deteriorated and problems in Europe and the USA have undermined the prospects for recovery and are expected to affect China, Japan and developing nations over the next six months.
    Christine Lagarde the former French finance minister is expected to repeat her warning that the leaders of Europe and the USA must act to prevent the global economy deteriorating further next year. Lagarde said in a thinly veiled warning to British Chancellor of the Exchequer George Osborne and right-wingers in the USA of the danger to cutting government spending too quickly which risks pushing the world back into recession and worsening prospects for employment. Christine Lagarde warned that policies that favour the rich in society could trigger social unrest.

    Ed Balls Labour Shadow Chancellor of the Exchequer says ‘‘the chancellor's insistence that there is no alternative to his austerity is sounding less credible by the day. He is politically boxing himself in to an economic plan which is simply not working. The sooner he listens to advice not just from Labour, but his friends at the likes of the IMF and the OECD the better.’’ So it’s not just the Marxist Left that are saying the neo-liberal and neo-conservative medicine isn’t working the cautious Labour Shadow Chancellor and head of the International Monetary Fund are starting to question the theory and practice of right-wing ideology.

  34. We can expect another bumpy week on the global markets as finance ministers and central bankers gather at the International Monetary Fund's annual meeting in Washington. Stock markets fell sharply today amid growing tensions over the EU's failure to resolve the Greek debt crisis, In London the FTSE 100 index closed down 109 points or 2% at 5259, Wall Street was down nearly 200 points or 1.7% at 11309 after a clash at the weekend between European leaders and Timothy Geithner Treasury Secretary for the USA, who told them to stop ‘‘loose talk’’ that was damaging the Eurozone and bringing ‘‘catastrophic risk’’ to global financial markets.

    Shares in French bank Société Générale tumbled more than 6% in Paris, making SocGen the biggest faller among European banks. In London, Royal Bank of Scotland, Barclays and Lloyds Banking Group all fell by more than 5% as investors braced themselves for another week of turbulence. Japan's Nikkei was closed for a national holiday, Hong Kong's Hang Seng lost 2.4% and markets in Taiwan, Seoul, Singapore, Shanghai and Jakarta were down more than 1%.

  35. USA and Europe risk double-dip recession according to the latest assessment by the International Monetary Fund unless they tackle problems facing the two biggest economies.

    The IMF says that the global economy is ‘‘in a dangerous place’’ and that its forecast a slow, bumpy recovery which could be jeopardised by Europe's sovereign debt crisis or attempts to rein in the USA's budget deficit to quickly. The IMF has said that ‘‘Global activity has weakened and become more uneven, confidence has fallen sharply recently, and downside risks are growing’’ and has reduced its forecasts for economic for 2011 and 2012.

    ‘‘The structural problems facing the crisis-hit advanced economies have proven even more intractable than expected, and the process of devising and implementing reforms even more complicated. The outlook for these economies is thus for a continuing, but weak and bumpy, expansion’’. It also advised George Osborne to ease the pace of deficit reduction in Britain as it reduced growth forecasts for the UK economy.

    Chancellor of the Exchequer George Osborne is determined to continue with the Tory/Liberal coalition’s austerity measures even though the economic forecasts are now much lower than were predicted a year ago.

    Olivier Blanchard the IMF's economic counsellor says there is ‘‘a widespread perception’’ that policymakers in the euro area had lost control of the crisis. Economic recovery after 2008-09 has stalled due to government cuts in budget deficits which haven’t been compensated for by the private sector.

    Olivier Blanchard says ‘‘Lower growth makes fiscal consolidation harder. And fiscal consolidation may lead to even lower growth. Lower growth weakens banks. And weaker banks lead to tighter bank lending and lower growth’’, resulting in a ‘‘clear downside risks’’ to the IMF’s forecasts.

    The developed world’s economies are forecast to grow slightly faster than the 1.6% previously forecast by the IMF for 2011. This assumes that the European Union manages the debt crisis in the Eurozone area that USA balances support for the economy with medium-term fiscal consolidation and weaknesses in global financial markets do not escalate. The IMF expects the USA to grow by 1.8% and the Eurozone by 1.1% in 2012.

    The International Monetary Fund forecasts for economic growth in Britain has been revised downwards to 1.1% in 2011, compared with 1.7% predicted last year and for 1.6% in 2012, compared with its previous estimate of 2.3% fall behind projections for Germany at 2.7%, France at 1.7%, the USA at 1.5% and Canada at 2.1%.

  36. Back on the 17th of August 2011 the FTSE index fell 220 points 5110 on the 18th it fell 51.5 points at 5040.8. By the15th September the FTSE index had recovered to 5352 points after a bout of quantitative easing. On the 18th it started to slip again at 5259 points and today stock markets fell as investors digested the latest economic figures as the latest stimulus failed to the economy in the USA failed to calm financial markets.

    4.7% or 246.8 points lower at 5041.6 wiping £64 billion from the value of Britain's largest companies and the biggest points fall since November 2008. and European markets also suffered heavy losses. On Wall Street the Dow Jones index fell 3% in early trading, down 346 points at 10,778 after the Federal Reserve unveiled a $400 billion (£260bn) bond-buying plan to ward off a double-dip recession.

    Joshua Raymond, Chief Market Strategist at City Index says ‘‘The negative tone struck by the Fed in terms of the serious headwinds and downside risks facing the US economy sent a ripple through the markets’’. The European Central Bank is under pressure to take action after worse figures for the service and manufacturing sectors which indicate any economic recovery is over.

    The Federal Reserve warns that there are ‘‘significant’’ risks to the world's biggest economy following disappointing manufacturing figures from China and Eurozone. Clem Chambers, Chief Executive of European stocks and market website ADVFN says ‘‘The markets may bounce back, but unless the governments of Europe find a solution fast the FTSE will find itself heading quickly towards 4500, on its way to 4000 and perhaps beyond’’.

  37. President of the World Bank Robert Zoellick warns that the global economy is entering the ‘‘danger zone’’ and Christine Lagarde head of the IMF tells the world’s leaders to do more to prevent another lurch towards the abyss. Today we see the stock markets continue slide with the FTSE 100 index down below the 5000 mark at 4967.4 points as fears of a global recession/depression continue, after poor projections from America's central bank and manufacturing figures for China and the Eurozone increasing the call for a third package of quantitative easing.

    Plan ‘A’ or Plan ‘A+’ isn’t enough to stop the British, European or global economy from going over the edge into the vortex of a global recession/depression. What is needed is for the left parties and labour movement to lead the demand for an alternative, free market capitalism has failed. We either see a return to a neo-Keynesian form of managed welfare capitalism Plan ‘B’ extended beyond the developed nations to the developing nations as the progressive option for capitalism or further regression into the economics of the 1930’s and a rise of the far-right fascist parties.

    If the social-democratic parties fail to revive the Keynesian model of welfare capitalism and extended it to the developing world then we may truly be in the final and highest stage of capitalism as Vladimir Lenin and Rosa Luxemburg put it one hundred years ago. The future is either socialism or barbarism, David Cameron, Nick Clegg and George Osborne and the coalition government want to follow the policies followed by the British national government of the 1930’s, these would result in a long depression which it could take ten to twenty years to recover from.

    This has to be socially unacceptable to the people of Britain, Europe and Scandinavia and why the European Conference Against Austerity & Privatisation being held on 1st of October in London called by an initiative from Pierre Laurent, the national secretary of the French Communist Party should be attended by the leadership of all the left parties and major unions. The crisis of global capitalism requires an international response from our political leaders. Anything less is an abdication of their duty and of the dialectic-material reality which we face, this is where we pursue a Plan ‘B+’ which leads to Plan ‘C’ which follows a British and European road to socialism.

  38. At the close of trading the FTSE 100 closed at 5066.81 down 5.62% having fallen as low as 4928.14 at one point.


  39. David Cameron, Nick Clegg or Ed Miliband, all three adhere to the neo-liberal/neo-conservative consensus and believe that capitalism is the only possible choice and that somehow the 3% growth that the system requires to maintain itself will miraculously materialise. None of them can contemplate the prospect that it’s no longer physically possible and the growth rates of the last thirty years were based on fictitious capital and borrowing, exactly the opposite of what neo-liberalism and neo-conservatism is supposed to be about. It’s been a con trick from the start just like the emperor’s new clothes and only the stupid or incompetent couldn’t see how beautiful the neo-liberal economic model was and had to have a neo-conservatism state. Then in 2008 it became obvious to all but the ruling elite that it’s all a fiction, just like the Emperor’s new clothes.

    Just as in the story by Hans Christian Andersen, I suspect from Maggie Thatcher and Ronald Reagan to Tony Blair, David Cameron, Angela Merkel or Nicolas Sarkozy and Barack Obama, they all knew just as the Emperor new but didn’t dare to say because it doesn’t suit the political and capitalist elite to admit that the capitalist system is broken and cannot be fixed. It’s not a Greek, a Eurozone or a Federal Reserve problem but a systemic problem as the planet has reached the physical limit where experiential growth based on capital accumulation is no longer possible. So the recession may not be double-dip recession, but a long depression which could last fifteen to twenty years. The question is after fifteen to twenty years can a new cyclical phase of growth occur as has in the past after a depression, or will this be the last phase of the system we call capitalism?

  40. Worst quarter since 2002 as the global economy teeters on the edge of a depression

    FTSE 100 Index fell 68.4 points down more than 1% today after the latest figures for China and the USA’s economic data. London's blue chip shares have fallen 13.7% in the third quarter of 2011, the worst quarter since 2002 when the dot-com boom ended and Britain’s biggest companies have lost £212 billion off their value in the past three months.

    Add this to the fears about the Eurozone debt crisis, as Prime Minister George Papandreou presses EU leaders to release the next €8 billion (£7 billion) bailout instalment for Greece. Global Markets fell, in Germany's Dax lost more than 2%, the Cac-40 in France shed 1.5%. The Dow Jones Industrial Average in the US was down 0.5% as the London market closed.

  41. Britain’s GDP figure of 0.1% growth in the last quarter compared with 0.4% for the previous quarter, shows it was on the brink off a double-dip recession even before the euro panic gripped financial markets in July as the economy stagnates. There is a real risk now that political paralysis could push the UK economy over the edge.

    Spending contracted by a painful 0.8% in the second quarter, the biggest squeeze since 2009, then Britain was in the depths of recession after the credit-crunch as output decline by 7.1% after the British economy shrank 1.3%, 2% and then 2.3% in the final quarter of 2008. Economists say it’s a matter of time before the Bank's Monetary Policy Committee increases its £200 billion quantitative easing programme to stimulate the British economy.

    Tory Chancellor of the Exchequer George Osborne will come under increasing pressure over his plans for tight spending cuts. Labour Shadow Chancellor Ed Balls says ‘‘David Cameron and George Osborne urgently need to realise that spending cuts and tax rises which go too far and too fast have hit consumer confidence, killed the recovery and pushed up unemployment’’ as figures showed the economy had been stagnating well before the current Eurozone crisis.

  42. The Bank of England has today released £75 billion as a renewed emergency measure of quantitative easing (QE2) to support the British economy as part of a total of £275 billion quantitative easing (QE) programme and hold interest rates at 0.5% as Britain teeters on the edge of a financial vortex.

    David Kern, chief economist at the British Chambers of Commerce, says the latest increasing QE was not enough on its own ‘‘In the face of the risks facing Britain's recovery, it is important to make every effort to underpin business confidence and avoid a setback. However, higher QE on its own is not enough, and we urge the MPC to look at other radical methods’’.

  43. Confidence in Britain’s financial sector fell after Moody's Investor Service agency slashed the credit ratings of Britain's biggest banks after the government reduced its support. Lloyds Banking Group, Santander UK, Royal Bank of Scotland, Co-operative Bank, Nationwide and seven smaller building societies have had their debt downgraded which triggered a fall in value of banking shares on the London Stock Exchange.

    Moody's stressed its review did not reflect a deterioration in the financial strength of the banking system or the Government. In fact, the agency upped the ratings on the basis of stand-alone financial strength for five institutions Co-op, Nationwide, Santander and Yorkshire and Principality building societies. The smaller building societies affected are Newcastle, Norwich & Peterborough, Nottingham, Principality, Skipton, West Bromwich and Yorkshire.

    Elisabeth Rudman, senior vice president of the financial institutions group at Moody's said ‘‘Moody's has lowered the amount of support it incorporates into the institutions' ratings to reflect the overall weakening support environment’’. The downgrade comes after the British government removed support for the seven small institutions and reduced support for the larger ‘‘more systemically important’’ institutions.

    The Government is ‘‘likely to continue to provide some level of support’’ to bigger banks but ‘‘more likely now to allow smaller institutions to fail’’ if they get into financial difficulties. Chancellor George Osborne said the move reflected the British Government's shift away from guaranteeing all the UK's banks. Lloyds which is 40.2% state-owned stressed that its stand-alone rating had not changed. It is understood Royal Bank of Scotland, which is 83% state-owned, could be liable for another bailout from the government if it fails a rerun of European banking stress tests.

  44. The G20 summit in Cannes has ended in disarray as the threat of a world depression increases as hopes that the German representatives would relent and allowing the European Central Bank to become lender of last resort for the euro failed to be accepted. The Greek government sits on the precipice of collapse and an uncontrolled default.

    There had been hopes that the G20 would agree to increase IMF resources by as much as $250billion (£156bn) to more than $1trillion, but any decision has been left to a meeting of G20 finance ministers in a week’s time.

    Barack Obama, under pressure from his own Congress, was deeply reluctant to contribute to an expansion of IMF funds without clearer signs that the Eurozone was sorting out its problems. Obama urged the Euro area to start putting resources into its European Financial Stability Fund agreed at the European summit on the 27th of October.

    The Italian prime minister, Silvio Berlusconi, was summoned to a late-night hotel meeting with Merkel, Sarkozy, the IMF director general Christine Lagarde and Obama, where he was instructed to bring Italy under quarterly IMF surveillance to ensure he implements tough austerity measures, including changes to the labour market, pension reform and the sell-off of state assets.

    British officials have admit that fear of an economic collapse in Italy is the single biggest concern gripping world leaders ‘‘We need some action’’.

    The UK government will support extra cash for the IMF and David Cameron said he would not need UK parliamentary approval to do this since the Commons had already voted to sanction an increase that would cover the proposed UK additional contribution. The European Financial Stability Fund has €440 billion available to lend and about half will go to Ireland, Portugal and Greece.

  45. The Bank of England has warned the British economy is grinding to a halt by the middle of 2012 and would only reach 1% for the whole of 2012 and some recovery in 2013.

    Unemployment in Britain stands at 2.62 million at a 17-year high and youth unemployment is at 21.9% braking through the 1 million mark. Add to this an inflation rate of 5% and wage rises of just 1.7% on average the cost of the global meltdown economically falls squarely on the working classes of the nation

  46. Debt fears send markets falling again as the FTSE 100 dropped 140 points, as the latest country to asked for IMF and the EU help is Hungary and Spain set to announce further austerity and labour market reforms and in Washington the super-committee set up to cut the deficit in the USA officially admits its have failed.

  47. The supercommittee was asked to reduce the deficit by a minimum of $1.2tn over the next 10 years. Democrats offered some cuts in benefits programmes demanded by the Republicans but only in return for tax rises.

  48. Democrats said Republicans were refusing to budge on Bush-era cuts that provide tax breaks for wealthier Americans and that expire in 2012. Democrats want to see the cuts at least scaled back, while Republicans want to extend them.

  49. Republicans said Democrats were refusing to budge on cuts to "entitlement" social welfare programmes. And once again the world teeters on the edge of a financial vortex as the crisis of global capitalism continues.

  50. The Organisation for Economic Co-operation and Development says output for the final three months of 2011 and the first quarter of 2012 in Britain will fall. Growth will be 0.5% in 2012 as a whole but the two consecutive quarters of contraction fulfil the technical definition of a recession and warned that unemployment would rise to 9.1% by 2013, exacerbating social problems and leading to a rise in homelessness. It has warned the Government should be prepared to pump more money into the banking system if the financial crisis worsens. The OECD says it expects 0.2% growth in the Eurozone next year and added that concerns about sovereign debt sustainability were widespread. Unless the problem was addressed, the contagion could spread to countries thought to have sound public finances, causing a massive escalation in economic disruption.

  51. IMF warning Thursday 15 December 2011

    Are we heading for another Great Depression?


    The world risks sliding into a 1930’s style slump


  52. Christine Lagarde, the managing director of the International Monetary Fund says ‘‘retraction, rising protectionism, isolation. This is exactly the description of what happened in the 1930s and what followed is not something we are looking forward to’’. But are we really heading into a second Great Depression?

  53. The global financial system has been exposed to s a giant pyramid selling scheme, dodgy loans against an inadequate capital base. The global economy is panning out the way Marx said it would, in a race to the bottom as the owners of capital look for ever-cheaper sources of labour to prevent profits falling, leading eventually to class war. The stresses and strains in the global economy are symptoms of a planet operating well beyond its carrying capacity.

  54. Christine Lagarde at the State Department in Washington said ‘‘There is no economy in the world, whether low-income countries, emerging markets, middle-income countries or super-advanced economies, that will be immune to the crisis that we see not only unfolding but escalating. It is not a crisis that will be resolved by one group of countries taking action. It is going to be hopefully resolved by all countries, all regions, all categories of countries actually taking some action.’’

  55. As the global economy teeters on the edge of the financial vortex and risks sliding into a 1930’s style depression the political elites of both Britain and France and both conservative government are playing tit for tat childish games playing to their right-wing nationalist electoral base. This creates an opportunity for the European Left to propose an adult and educated alternative to the infantile politics of David Cameron and Francois Fillon.

  56. Voice of the Daily Mirror

    All in it together

    The cross-Channel bust-up between Britain and France would be funny if it wasn’t so tragic.

    David Cameron’s Entente Cordiale with Nicolas Sarkozy has crumbled into a bitter recriminations in the face of the eurozone crisis. They rubbed along just fine when they were seeking glory through military action in Libya but when it comes to the biggest financial test since the 30s they aren’t even on the same page.

    That is a disaster when the world is teetering on the brink of a new monetary maelstrom and, while flag-waving patriots won’t want to hear it, much of the blame lies here.

    The PM made matters much, much worse with his botched decision to wield a veto as Europe’s leaders gathered to try to stitch together a rescue deal.

    The latest round of hostilities come despite a warning from the IMF chief Christine Lagarde that the world must pull together to avoid a repeat of the Great Depression.

    Time is running out. Statesmanship, not petty squabbling, is needed to save us from catastrophe.


  57. Update on the Economic Crisis

    European shares fell in early trade. Britain's FTSE 100 lost 0.2% to 5,689.47, Germany's DAX fell 0.6% to 6,128.62 and France's CAC-40 was down 0.9% to 3,217.26

    Wall Street was set to open lower, with Dow Jones industrial futures down 0.6% at 12,217.56 and Standard & Poor's 500 futures slipping marginally to 1,271.10

    Japan's Nikkei 225 showed renewed life as it posted a 1.2% gain to 8,560.11

    Australia's S&P ASX 200 rose 2.1% to 4,187.80. Markets in Singapore, Taiwan, Indonesia, New Zealand and the Philippines also rose

    Hong Kong's Hang Seng Index and South Korea's Kospi slipped after strong gains a day earlier. The Hang Seng fell 0.8% to 18,727.31, while the Kospi was down 0.5% at 1,866.22

    Bank of England will decide whether to increase its quantitative easing programme.

    Inspectors from the European Commission, the IMF and the European Central Bank (IMF/EU/ECB) troika to check on Greek progress towards resolving its debt crisis and debt write off and to deliver a report at the end of January.

    A Deloitte survey of finance directors of FTSE 100 companies, large private firms and UK subsidiaries of major foreign businesses found that 54 per cent believe the UK will suffer a double-dip recession. As finance chiefs warn a break-up of the euro poses the biggest single threat to their companies in 2012

    The manufacturing sector suffered its worst quarter for nearly three years despite an “encouraging” performance in December, figures showed today. The Markit/CIPS purchasing managers' index (PMI) survey, where a reading below 50 indicates a contraction, rose to 49.6 in December, from 47.7 the previous month. The City had been expecting a fall to 47.3. The index has now shown a decline for five out of the past six months, fuelling fears the manufacturing sector will lead the British economy back into recession.

  58. International Monetary Fund slashes global growth forecasts expecting GDP growth of 3.3% in 2012, down from the 4.1%. Growth in Britain for 2012 is predicted to be 0.6%, a sharp reduction from the 1.6% the IMF was previously projecting. Predicted GDP for the 17 Eurozone states is expected to contract by 0.5% in 2012 as it enters a recession down from the 1.1% growth it was expecting.

  59. International Monetary Fund marks down global growth forecast 24/01/2012

    IMF says global recovery expected to stall, risks to intensify

    Euro area expected to fall into mild recession, rest of world to slow

    Comprehensive package needed to restore financial stability

    Countries should avoid too rapid tightening of fiscal policy


  60. The Greater Depression

    ‘‘the figure shows how far real GDP was below its previous peak in various British recessions; the red line is 1930-34, the black line the current slump’’

    ‘‘I believe that when I began criticizing the Cameron government’s push for austerity, some right-leaning British papers demanded that I shut up. But the original critique of austerity is holding up pretty well, if you ask me.’’


  61. Britain's unemployment rate has remained at its highest level since 1995 8.4% as the flatlining economy takes its toll on the labour market.

  62. Official figures released on Wednesday showed that the number of people out of work was up by 48,000 on the previous three months to 2.67 million, on the International Labour Organisation measure.

  63. Germany's economy slipped into reverse in the last quarter of 2011, with gross domestic product falling 0.2%, according to adjusted figures.

  64. The German government is predicting a return to 0.1% growth in the first quarter of 2012, and expects 0.7% growth overall for the year.

  65. World Bank is forecasting that the eurozone economy as a whole will contract by 0.3% this year. Greece spirals into a catastrophic depression and “The middle class is being wiped out,” says Fotis Kouvelis, the leader of the newly formed Democratic Left party if GDP falls by 25% or more in 2012.

  66. National Institute of Economic and Social Research (NIESR) figures show this recession is now worse than the 1930’s


    ‘‘Unfortunately for the UK economy, the Bank's latest projections for economic output in 2012 of zero growth, and of average growth thereafter of around 2.5pc per year, while weaker than in the last Inflation Report in May, still almost certainly lie on the optimistic side.’’ (Neil Prothero, Senior Economist at the Economist Intelligence Unit)

  67. Data out today shows it has declined by 0.7% on the last quarter as construction output fell by 5.2% between the first and second quarters of 2012 and industrial production by 1.3% and service sector by 0.1%.


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