Morning Economics Roundup – Thursday 31st December 2009

December 31st, 2009

Data to be released today;

Bank of England Quarterly Credit Conditions Survey – at 9.30 am – available from here.

Big themes of the day;

House prices up annual 5.9% – House prices rose for an eighth consecutive month in December to end the year nearly 6 percent higher than they started it, mortgage lender Nationwide said on Thursday. see Reuters.

UK standard of living drops below 2005 level – “The recession has pushed living standards in Britain to below the 2005 general election level, a leading thinktank says as it warns that the country faces a “new age of austerity”.Although many economists think the economy probably returned to growth in the quarter just ending, the deepest recession in decades has punished everyone, according to a report by Oxford Economics”. – see report by Ashley Seager and Biba MCaul in The Guardian here. Original Oxford Economics press release pdf here.

Iceland approves £3.4bn Icesave losse deal – “Iceland’s parliament has agreed to pay back €3.8 billion (£3.4 billion) lost by British and Dutch savers when its banking system collapsed, in a move that is likely to boost the country’s bid to join the European Union”. – see The Times here.

Comment and blogs of the day;

The economic ‘experts’ who stopped making sense. Edmund Conway in the Telegraph marvels at how economists have had a bad year and got away with it – “2009 ought to have been the year that economists well and truly fell from grace. There is surely adequate ammunition to explode any remaining faith in their powers of prediction: the scale of the economic slump, the rise in unemployment, the fact that a small number of extremely rich people have been getting richer while the majority have suffered. But bizarrely enough, it hasn’t happened. Sure, there has been plenty of muttering about economists’ shortcomings; the groans at their failed forecasts (for instance, the fact that house prices, far from falling by 10 per cent this year as predicted, have actually risen by around 3 per cent) are louder”. see here.

The recovery of the housing market: A year of two halves – “This time last year, the headlines were full of doom for the housing market. Prices had already dropped sharply following the collapse of Lehman Brothers in autumn 2008, and all the indications were that they were poised to fall even further — with the gloomier analysts expecting declines, in percentage terms, of at least double figures. Well, what a difference a year makes”. Lucy Denyer in The Times here.

That was the noughties. “We were promised no more boom and bust. We were told Labour would be kind to manufacturing. It would all be so much better than the Thatcher years. We know the claim of no more Boom and Bust proved to be the most absurd. We lurched from super boom to mega bust. What is less well known is just how bad a decade it has been overall, despite the boom”. John Redwood MP’s diary here.

New economics of christmas, a review of the Scroogenomics book by Joel Waldfogel – “Waldfogel is right to question how much just producing precious commodities adds to social welfare. In trying to adjust measures of exchange value to better reflect the worth of things he comes close to much of the work that nef has been pioneering. At the same time, Waldfogel suffers from a bias that is not untypical to people of his profession”. Aleski Knuutila at the New Economics Foundation blog here.

144 years on, the Jevons Paradox has never been more valid

December 15th, 2009

Writing on Western Europe’s most successful political blog today – , I explored one of the themes I developed from the EPC’s launch paper – SECURING OUR ENERGY FUTURE – Why and how it must be done – Energy Efficiency and why it ultimately increases energy consumption. This is a very old idea put forward by Economist William Stanley Jevons in 1865. Yet today, received opinion wants to spend bilions and billons on energy efficiency. So meet William . . .

And read my article here;

Dan Lewis: More energy efficiency will ultimately increase, not reduce, demand for energy

It just shocks me sometimes how much our political class has been so blindingly taken in by the energy efficiency lobby . . .

SECURING OUR ENERGY FUTURE – Why and how it must be done

December 14th, 2009

SECURING OUR ENERGY FUTURE – Why and how it must be done

Download here.

In the launch paper of a new think tank, the Economic Policy Centre, a radical overhaul is called for in UK Energy Policy, as featured today in The Engineer and in an op-ed by Dan Lewis in the Yorkshire Post.

The paper calls for;

i) A return to basics – putting energy security first

ii) Scrapping of wasteful programmes – smart meters, carbon capture levy, government-financed R&D

iii) Creation of Clean and Secure Energy Obligation – based on Renewables Obigation but with 100% target by 2060 at a much lower buyout price and the inclusion of big impact technologies nuclear, large hydro, interconnectors and Severn Tidal Barrage / tidal lagoons

iv) Keeping coal-fired stations open beyond 2015 until new clean and secure plants come onstream

v) A new annual ranking system that keeps track of the energy security footprint and to create a competitive merit order

vi) Creation of clear lines of political responsibility for energy security

Says author and Chief Executive of the Economic Policy Centre, Dan Lewis;

Britain has too much energy policy and it is back to front – it’s crazy to go on over-rewarding low impact, intermittent technologies while failing to secure investment for big impact, long lifespan, clean and secure technologies like large hydro, nuclear, interconnectors and a Severn Tidal Barrage or Tidal Lagoons. This will only lead to even greater future dependence on expensive, tight supplies of imported gas and very possibly, power cuts from the middle of the next decade. All this because government has failed to prioritise and factor in the energy security footprint of its own policy“.

No country ever got rich by driving its rich people away . . .

December 13th, 2009

Deep down, I think most governments understand this, they just don’t know where to draw the line. So news today that Britain’s financiers and entrepreneurs are quitting the UK at a rate of 10 a week to avoid Labour’s new 50% taxes ought to be cause for alarm at HM Treasury.

And then again, I do wonder a bit. When looking at the mobility of  individual wealth, you have to factor in inertia, family ties, moving costs and generally economically irrational behaviour. I keep thinking about Jeremy Clarkson’s insightful and as ever humorous piece  from a month ago, who despite his obvious disgruntlement with Britain declines to emigrate, stating;

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The UK Recession – it wasn’t meant to be like this . . .

December 8th, 2009

I’ve been making a little mental list of ways in which this recession has turned out differently to that expected. Now that output is down 6% down on a year ago and we are very possibly emerging into a relatively sunny  period of regrowth, it’s  time to write those thoughts down. Here goes;

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