Sunday Times and Croissants - CEO's update 25th September

There is something special about Sunday morning, the Sunday Times, hot croissants with honey and butter, excellent. What a week! Headlines, the global economy is pushed to the brink according to the Saturday FT but within 24 hours the G20 announced a three trillion deal to save Euroland. Even the Greeks get to stay but with a haircut. David Smith suggests we should pick a pump to rescue recovery. Not more QE says DS, it is good call. 

This week, the LIb Dem conference. Vince Cable talks of a gear change in Whitehall, a reference to dress down Friday as opposed to any change in economic policy, as hints of an infrastructure spend are knocked back by the Treasury. We are in a crisis, says Cable, it is the economic equivalent of a war, building from the rubble, the people need to be told the truth, there is no Father Christmas. Ouch! Politicians can be so brutal.

According to Vince Cable, the world is in a difficult place. Plans are afoot to relocate to another part of the Galaxy, where the gravitational pull of sovereign debt on growth is much lower.

The head of the World Bank warned the world is in a dangerous zone thus ruling out relocation within the Milky Way as a short term solution. The IMF World Economic Outlook produced a down grade for growth in the world and the UK. The elegant Christine Lagarde gets the terminology right suggesting the world is in a difficult phase. Here but not forever.

Economics news this week, the borrowing figures were not great for the Chancellor, the worst August figures since the abacus was created. Targets will be missed, we need growth to make the numbers work. Otherwise, automatic stabilisers kick in, reducing tax receipts and pushing up spending. Why do they call them stabilisers when they just upset the debt reduction plan?

Hints from the Bank of England of more QE in November, as much as £50 billion. QE forces up bond prices, pushes yields lower, punishes savers, places more pressure on sterling, increases import prices, leads to higher inflation, greater pressure on real incomes, a reduction in household spending and possibly lower growth. What is the point of more QE, we might as well give the money to a group of UBS traders.
Policy makers genuinely believe that ever lower interest rates will stimulate investment. Not one, can ever have ever done a payback calculation, in which return on investment is a function of cash flows from a defined demand horizon in which cost of capital is irrelevant. Eliminate uncertainty, offer growth, only then will investment return.

What is happening to markets? The FTSE closed the week at 5067, marginally above the critical 5,000 level. Which way next, it is a fifty fifty call. (See what I did there?) Ten year gilts are 2.4% and thirty year gilts yield 3.5%. Something is wrong, it is like the tide receding from the beach before the Tsunami. A desiccation of yield and liquidity. Say no to more QE on planet ZIRP. Google - planet ZIRP - for more information.

By the end of the week, more economics humour as the Chancellor lectures Europe re inaction on debt and Greece. Osborne warns that patience is running out and the eurozone has six weeks to sort out the problem. He even asked on Friday where do the Europeans think the growth will come from? Now, that is a good question, not from net exports, the march of the makers and capital investment, that is for sure. Qui s’appelle la bouilloire noire, monsieur George?

Back to the day job, on Monday, Robert Chote Chairman of the Office of Budget Responsibility is with us for a private lunch which included Sir Richard Leese, Robert Hough and a trio of Chairman past, present and future of pro.manchester. The OBR revised forecast for the UK economy is due in November. Robert spoke candidly and off the record.

Tuesday a day off to meet with two old friends and former Coloroll Directors, Jeremy Sholes and Bill Dobie. Bill is 82 and recently had a severe heart attack and near death experience. Cholesterol - as a Scot and a great bag pipe player, Bill looked well as he tucked into Stuffed Mushrooms, Calves Liver and Onions, excellent. We reminisced and recalled great moments.

Wednesday and early start for an economics presentation at Colliers. Walter Boettcher chief economist depressing everyone with his overview. Walter placed some hope on QE2 for recovery but according to the Bank’s own dubious calculations, 50 billion would kick the economy by less than half of one percentage growth. Not sure Walter really believed it anyway.

Later a meeting and lunch with Chris Bagley from the Federation of Small Businesses. Chris will be a great ally for SME club. Lunch at Rossos, Forty Quid for two. Not bad.

In the evening, launch of the future pro·manchester Professional Innovator Challenge at MOSI, the Museum of Science and Industry. Mark Rock, founder of AudioBoo made the keynote presentation. Sponsored by Beever and Struthers the challenge promotes innovative flair in financial and professional services in the city. future.pro manager, Sam AudioBooth recorded the first pro.manchester boo ever. Great stuff.

Thursday, early start for the pro.manchester plenary board meeting at Deloitte. All over within the hour. Excellent. Time for a lie down before the BDO dinner at Manchester City in the evening. Hugely impressive venue and key Manchester City execs outline their international plans for the club and the brand over the next ten to fifty years. Thanks to Jeff Jones and the BDO team for the invitation.

Friday and it is the Marketing Manchester Tourism Awards lunch at the Lowry Hotel. A three hour session with fifteen awards. Drew Stokes and Paul Simpson presented with Eamonn O’Neal from MEN media anchoring the show. I am on a great table between Angie Robinson and the Linda Thomas, Deputy Leader of Bolton Council. Great fun. I am a thorn between roses. Excellent event, it is my first visit.

End of the day close of polling for the pro.manchester Business Conditions Survey, sharing the data with Brian Sloan from the Chamber of Commerce to finish the week.  Finally, a quick check on Google Earth to see if Greece is still there, it is.

Tennis on Saturday and later today, a family gathering for the christening of Emily, our first grand child. Should be a fun afternoon,

Hope all is well with all, more news next week,
John
John Ashcroft
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