Sunday, 21 February 2010

Hanging on in quiet desperation is the English way

The economic data coming out of the UK is unrelentingly abysmal with retail sales down more than expected, mortgage applications plummeting since the winding up of stamp duty relief on modestly priced homes at the end of 2009, the shock announcement last week from the Treasury that the UK had to borrow more than £4bn in January because of much weaker taxation receipts than expected coupled with increasing payouts in benefits and public sector programs.

In many quarters, even amongst those who should know better, there is an atmosphere of lethargic complacency about the current predicament facing the UK government’s balance sheet - which is just as bad, if not worse, that that that of Greece. However, pre-election spin and the ongoing ostrich economic policy so carefully followed by Gordon Brown and his government - are lulling a domestic audience into a false sense that it will all turn out alright thanks to the clever management of the financial technocrats at the Treasury.

External investors are far less sanguine and as the long term chart for GBP/USD reveals sterling is losing its grip with hundreds of pips of gains ahead for those that want to sell this currency pair.

The current climate in the UK has eerie similarities to that seen in the early 1970's and could just as easily end up with a sterling crisis and rescue talks with the IMF (at least the ECB/EZ can breathe a sigh of relief that the UK's version of a basket case economy is not part of its domain)

Somehow there are echoes in my head of a lyric from the classic Pink Floyd album released in 1973, Dark Side of the Moon

"Hanging on in quiet desperation is the English way. The time is gone, the song is over, Thought I’d something more to say."

Unfortunately, life does not imitate art, and for Mr. Brown there will be so much more to say as he wants UK electors to cast their minds back over the last thirteen years of his government's successes.

Some - but not many - politicians think out of the box, but far more should be locked up in a box and have the key thrown away.

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