Old Labour Economic Theory. Tax and spend . Nu Labour Economic Theory. Spend and Tax then we can spend even more

As we kick off into a New Year the wise words of CynicusEconomicus provide a warning and state succintly what all people with experience of the real world - as distinct from Guradian readers, politicians, head massagers for the police service in Sussex . etc

[I]n the UK (and the same could be said of the US), there had been no real growth in what I considered to be wealth creating assets over the last ten years which could explain GDP growth; manufacturing, commodity extraction, export of services, and tourism (no net growth).

Instead I pointed to the growth in debt, and asset inflation (real estate) as the source of all of the GDP growth of the last ten years. This debt, in conjunction with the multiplier effect, along with upwards levers such as immigration, created an illusion of growth in wealth. It led to the 'post industrial', 'service economy'. My argument was that this was completely unsustainable, and that a collapse in asset prices would signal a self-reinforcing downward spiral in the economy, driven by a collapse in consumer sentiment (a massive belt tightening) leading to the collapse of the service economy, higher unemployment, more belt tightening and so forth into a downward spiral.

This unsustainable faux national economy cannot of course maintain the national tax (spend) base.

Such a service based economy cannot (and will not) survive because this type of economy depends on the velocity of the money supply - now virtually stalled - but the spending has been boosted beyond belief.

This all revolves round the incapacity of the policy makers, people like Balls, Brown, Darling (and Osborne , Boris and the rest of the Bullingdon Club) and the double first at the BOE to distinguish between GDP and wealth creation.

Also what the politicians don't (understand) and certainly don't explain is that the taxes they levy rely on the velocity of money. Every time it goes around the circle there is less money because of tax extracted from the system - balanced a little by a small amount going into cash savings.

The received wisdom (as per J K Galbraith) is that therefore we now have to get the consumer spending again! To ... er .... get the economy moving.

Guradian Darling renews effort to increase lending with cut in fee to banks ..."Darling said: "All these measures will continue to help ensure that we get bank lending going again."

Independent - Darling: Banks must go further to help businesses - "Mr Darling promised yesterday to push the banks on lending, as he told MPs on the Treasury Select Committee that a wider range of government guarantees to underwrite loans to companies and mortgages may also be implemented, as ministers make a determined effort to unfreeze the credit markets. "It's one of the range of things we are looking at," he said. He added that "we need to do much more" to restore lending to the economy.

Banks lend ...you spend ... we tax ... we spend .... altogether now ....

Pssst .. wanna buy a used car company .... just in time for the holidays ?

General Motors Corp. Chief Executive Richard Wagoner, Ford Motor Co.'s Alan Mulally along with Robert Nardelli of Chrysler LLC are scheduled to testify at a House Financial Services Committee hearing later today after telling a Senate panel yesterday that they need US$25 billion to keep operating. (They each turned up in their respective corporate jets)

Their shares reacted today - GM were down 15% @ US$2.63 - Market Cap US$ 1. 7BN and Ford were @ US$1.49 down 11.3% - Market Cap US$3.54.

So the US taxpayer stumps up US$25 Bn to keep them going to Christmas and yet they share a Market value of ... say US$ 10 Bn. ...tops ?

Since the first amphibians crawled out of the slime
We've been struggling in an unrelenting climb
We were hardly up and walking
Before money started talking
And it's sad that failure is an awful crime.
Well it's been that way for a millennium or two
But now it seems there's a different point of view
If you're a corporate titanic
And your failure is gigantic
Then in Congress there's a safety net for you.
I am changing my name to ChryslerI am going down to Washington D.C.
I will tell some power broker
What they did for Iacocca
Will be perfectly acceptable to me
I am changing my name to ChryslerI am headed for that great receiving line
So when they hand a million grand out
I'll be standing with my hand outYessir, I'll get mine.

—Tom Paxton, "I'm Changing My Name to Chrysler" (1979) (hear it sung by Tom on You Tube)

That's a picture of cars imported being held at Long Beach, CA...some of them have been lying around 3/4 months. ...

See GM makes you sick 18 / 3 /05 also Friday, February 24, 2006
Disembowelled US - 3 more years of Dubya

Will the last person leaving Michigan please switch off the lights.

First Snow in London and Eastern Seaboard

Greek Yoghurt, a freshly plucked and sliced fig, a drizzle of honey and warm Mediterranean sunshine......aaaahhh !!!

DTI continue to whistle in the dark over North Sea Oil production

The DTI Oil production figures for Q2 2006 have been made available as an Excel spreadsheet here.

The headline information appears to have escaped the attention of the Financial press and media generally - the picture it presents is deeply worrying for UK energy consumers (see pic). The scenarios so long forecast by "Forthcoming UK Energy Deficit" (FCUKED) seem to be coming perilously close.

OIL & OIL PRODUCTS 26th October 2006
Table 3.10 Indigenous production, refinery receipts, imports and exports
Oil production in the period June 2006 to August 2006 was 12.1 per cent lower than a year ago.
In 2005 Total Crude oil imports 52,211 thousand tonnes Exports 52,106
In 1st Qtr 2006 Imports 13,668 Exports 12,426
In 2nd Qtr 2006 Imports 13,187 Exports 10,469

In 2005 Total Crude Production 84,721 thousand tonnes
In 1st Qtr 19,795
In 2nd Qtr 17.391

The Government's Energy Review of July stated the UK would not be a net importer until 2010.

These figures show however the U.K. was a net oil importer of 1.6 million tons in the second quarter of 2006 compared with being a net oil exporter by 1.1 million tons in the same period in 2005.

In a remarkable report at cattlenetwork in early October a DTI spokesman (Nick Turton - no Press Statement appears to have been issued) ) said this was partly due to a fire last August at the Schiehallion oil field in the North Sea which knocked out 120,000 barrels a day for most of the month, and several other factors which helped push the U.K.'s oil output to its lowest level for 16 years.

DTI spokesman Nick Turton is quoted saying.

"The DTI expects the U.K. to return to being a net exporter in 2007 before becoming a permanent net importer in 2010."

He added the new Buzzard oil field should offset any losses from declining North Sea oil output from older fields between 2007 and 2010. The field is estimated to produce 200,000 bpd when it comes online.

According to DTI data, U.K. North Sea oil production declined 218,000 b/d in 2003. Since 2004, the depletion rate has remained mostly steady at 230,000 b/d. Now we find in the last Quarter it declined by an unprecedented 12.1%.

Yeah! Yeah! Whatever.

Lies, Damned Lies and Government Oil Production Forecasts?

Posted by Cry Wolf at the Oil Drum provides a fine detailed and well informed review of this excesive optimism (which is reflected by their Norwegian counterparts as he relates).

The DTI review also shows the lower forecast range for production in 2006 is around 1.5 mmbpd . But the Actual figures for production in August shows indigenous production of oil as 4.730 million tonnes along 0.483 million tonnes of NGL. Using the DTI conversion figures of 1 tonne = 7.5 bbls for crude oil and 1 tonne = 11.5 bbls for NGL this comes out as a mere 1.323 million barrels/day.

Whist these may appear the sort of blips one expects from a large industry with many competing factors, including the weather, threatened strikes by divers etc., the lower expectations have a massive impact on the Balance of Trade / Balnce of Payments.

Cry Wolf points out that The UK and the EU are very vulnerable, as the EU is already recording rising energy imports - much of it reliant on gas imports from Russia who are once again playing fast and loose with customers , this time Georgia.

Identifying the time lag that bad news always takes time to surface he says it is only a matter of time before news of oil imports giving rise to a deteriorating UK trade balance hits the news headlines in the UK.

It is difficult , he says to tell whether UK and EU parliaments are aware of the energy peril that faces them. The official pictures painted by UK authorities are optimistic whilst the reality for the EU is increasing competition for oil in a shrinking international oil export market.

EU wide energy outages overnight only serves to highlight the increasing perilous energy security situation the UK and the EU by years of inattention, supreme optimism. Sleepwalking.

Sleepwalk, talk
Faster and faster
One of these talking birds
Sleepwalk away from disasters
Like they never occured.

Too much devotion
Keeps me apart

Sleepwalk outta my heart

LYRICS © John Cooper Clarke.

On Sunday evening the BBC Panoram programme had a lengthy report about the reliance of Europe on the pipelines from Rissia though Ukraine and and an explanation of the events last New Year.