There's That Wolf Again!

FRIDAY, AUGUST 08, 2008

There's That Wolf Again!

Forewarned is forearmed

Yet more from the Doom Industry this morning (see previous blogs eg here, andhere, and also Scared to Death by Mssrs Booker and North). The government has published its Risk Register, listing its Top Ten risks facing us, "so we can prepare" (good news for plague doctor mask producers).

There's tempest, fire, flood, plus of course plenty of pestilence. Top of the pops is our old friend, the flu pandemic. That's expected to kill 750,000 of us.

Blimey! 750,000!!!

No... wait... wait... there's some small print down here in a footnote... can't quite read it... ah, I see now... apparently it "could" kill 750,000 of us. Could kill. So why stop at 750K? Surely, if it could kill 750K, it could just as easily kill 760K. Or 800K. Or maybe 2m. Or 10m. Or maybe... well, how do they know any of us would survive?

As we blogged here, we have no idea how many people our long promised flu pandemic would actually kill. In fact, we have no more idea than does the Doom Industry itself.

But what we do know is that none of the last century's pandemics killed anything like that many. Here are the numbers:

So HMG's forecast of UK deaths from this new pandemic - that hasn't yet happened - is an extraordinary 25 times the number who actually died in the last two. And it's three times the number who died in the catastrophic 1918 outbreak.

Plus, these days most of us are much healthier than we have ever been. And plus, medical science has advanced immeasurably, even since 1968.

So why does HMG bother to produce and publish such wibble?

You know why - this is the main output of an industry which provides many well paid tax-funded jobs.

Take another note George - here be savings. And to help things along, the Major has volunteered to provide his own replacement risk analysis pro bono. Here's his first stab:

Major Risks facing the UK

1. 170,000 premature deaths every decade caused by sub-standard healthcare - the risk that our hopeless state healthcare system kills thousands who would otherwise live (see this blog)
2. 100,000 plague deaths every decade caused by filthy hospitals - the risk that our hopeless state healthcare system kills thousands who would otherwise live (eg see this blog)
3. Up to 250,000 drug related deaths - the risk that our hopeless state healthcare system kills thousands by refusing them specialist cancer drugs etc.
4. Economic melt-down - the risk that our hopeless Big Government crushes the last vestiges of life out of Britain's wealth producing sectors
5. Breakdown of law and order - the risk that our hopeless wibbling criminal justice system loses control completely
6. Social catastrophe - the risk that our hopeless welfare state consigns yet more millions to Britain's underclass
7. Big Freeze - the risk that our hopeless eco-wibbling statist hippy gah brown-out black-outs...

That's actually as far as the Major could get before he fell over. But he'll definitely finish it when he's had his nap.

THURSDAY, AUGUST 07, 2008

Happy Anniversary Darling

It don't smell so good

As we've been hearing all day, today is the official first anniversary of the KreditKerrunch. The FT is celebrating with a special souvenir edition, and the BBC has been running edited highlights of themselves announcing fresh disasters for capitalism - the ones they love so much.

So what's the score? And given that it was caused by those global forces totally beyond the control of our innocent victim rulers, what have Gordo and Darling done about shielding us from its effects?

First up, the global score is much better than the headlines and our politicos would suggest. When last sighted (Q1), average growth across the G7 economies was still running at an annualised rate of 2%. Even the much predicted US recession still hasn't arrived, with Q2 growth annualising at 2%. And unemployment, while increasing, was still only 5.7% - significantly lower than the average for the noughties as a whole. True, inflation looks more worrying, with year-on-year CPI inflation kicking up to 3.5% (year to May). But globally, this ain't yet the 1970s, let alone the 1930s.

So with such a pussycat global background, how have Gord and Darling been doing? Let's run through some of their triumphs over the year:

• Disaster at the Crock - dithering and wishful thinking turned a regulatory malfunction into a blank cheque drawn on taxpayers, and undermined confidence in our banks (and don't forget who "designed" that hopeless regulatory system in the first place)
• Fiscal Horlicks - dithering and flip-flopping on the 10p tax rate, fuel duty, and VED have made a looming fiscal crisis even worse; and as George keeps saying, there is nothing put by for our rainy day
• Housing melt-down - Darling's latest genius idea was to drop heavy hints he was going to cut stamp duty, thus putting the final boot into a market already doubled up in agony on the floor: he's now flip-flopped, but of course the damage has been done. Doh. The Halifax house price index is now clocking an 11% fall year on year - the biggest fall ever recorded.

Bad, bad, bad.

Unfortunately we ain't through yet.

The IMF yesterday warned of some seriously bad times just around the corner, with UK growth down to 0.8% (yoy) by year-end. More worrying still is their outlook for inflation, with our CPI hitting 5%, against the official target of 2%. No wonder the Bank of England voted not to cut interest rates today.

Tellingly, the IMF report highlights the following two panel chart (click on chart to enlarge):

They have placed their digit on the Key Test for Gord and Darling. That sharp acceleration in inflation expectations is getting out of control. The very worst thing the government could do now would be to loosen/abandon their fiscal rules. But all too predictably, that is precisely what they are intending to do.

Of course, this IMF is the same IMF to which we were forced to crawl during the last Labour government. So let's record their warning to this Labour government in full (paras 8-10):

"If the inflation anchor looses its moorings, the management of immediate macroeconomic challenges will become even more difficult andthe burden on monetary policy will rise, likely impeding net exports, rebalancing, and eventual recovery. Moreover, the cost of subsequently restoring credibility will be high.

Accordingly, on fiscal policy, the planned medium-term fiscal consolidation—namely the cumulative structural adjustment of 1 percent of GDP in 2009 and 2010—should be regarded as a minimum. It would take an adjustment averaging ¾ of a percentage point of GDP per year from 2009 to 2012 to set debt on a path to return under the ceiling by 2012; frontloading, to the extent possible, would underpin the credibility of that path. In any event, and in addition, any slippage from the cyclically adjusted balance objectives for 2008 announced in the March budget should be made up in 2009.

In this context, any revision of the fiscal rules should support the credibility of the recommended fiscal stance. The 40 percent net debt ceiling should be retained, notably through adoption of a clear and short horizon to bring debt back under the ceiling following a breach. Given the premium on fiscal credibility, accountability should be emphasized over flexibility in any redesign of the rules. This adds to the case made in the staff report to emphasize nominal expenditure ceilings."

Translation:

• The growing belief among we ordinary punters that inflation is back, is the expressway return to a 70s style wage/price spiral (and if you're too young to remember, it goes like this - we all demand a pay rise to compensate for higher anticipated inflation, employers grant the rise because they anticipate being able to pass it on, inflation therefore rises, we all demandanother pay rise... etc etc etc)
• That spiral must be stopped right now
• If the stopping is left entirely to higher interest rates imposed by the Bank, rates will have to go through the roof, the economy will take a serious whack, sterling will ramp up, exports will slump, and unemployment will soar
• Fiscal restarint must play a full part: the government must not make unfunded tax cuts: there must be severe restraint on public spending
• We therefore desperately need a third fiscal rule to limit public spending directly (see many previous blogs eg here)

As we've said many times, Labour governments always end like this. They keep flushing our money down the bog until there's an horrific blowback. At which point we all get covered in ordure and have to get the emergency plumber, at £200 call-out, plus £200 per hour.

So.

Who voted for these pathetic clowns again?