tag:blogger.com,1999:blog-8764541874043694159.post3229860879173102485..comments2024-03-28T12:23:39.665+00:00Comments on Coppola Comment: Short-run effects of the Brexit shockFrances Coppolahttp://www.blogger.com/profile/09399390283774592713noreply@blogger.comBlogger19125tag:blogger.com,1999:blog-8764541874043694159.post-41596706634903890552016-07-11T04:59:25.866+01:002016-07-11T04:59:25.866+01:00We will buy British and go holidays at England !! ...We will buy British and go holidays at England !! We are the fan and listeners of John B Wells show at TexasAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-9050894552602084112016-07-10T13:27:59.109+01:002016-07-10T13:27:59.109+01:00https://www.change.org/p/uk-government-rename-brus...https://www.change.org/p/uk-government-rename-brussels-sprouts-to-sunderland-sproutsAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-73367494159192600372016-07-10T13:27:13.175+01:002016-07-10T13:27:13.175+01:00This comment has been removed by the author.Markoshttps://www.blogger.com/profile/00235830172089111112noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-15945258686529008732016-07-08T17:30:21.265+01:002016-07-08T17:30:21.265+01:00Heh, I've never been a fan of broken windows! ...Heh, I've never been a fan of broken windows! I wrote a post called "broken windows, broken lives", but that was about my mother's dementia. <br /><br />That said, I am something of a fan of short-term unproductive labour. I think I wrote about Sharp's Folly, which was a tower built by a clergyman to keep local stonemasons occupied and stop their skills falling into disuse. You could regard this as training, though. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-19740913555551480472016-07-08T17:23:09.031+01:002016-07-08T17:23:09.031+01:00On activity moving, some is doomed to come back as...On activity moving, some is doomed to come back as exports, and some as free capacity, that's all I meant to say. Still net negative for the UK probably, but perhaps not by as much as expected, as if people/companies who move out completely disappeared from planet Earth.<br /><br />I doubt there will be a major commercial property correction. I just had a look at property investment trust prices: the discounts are about 10-20%, and that's likely calculated on pre-Brexit NAVs as property isn't priced daily. If prices drop by that sort of amount -- which is pretty safe -- there's no discount left, so no distressed pricing here. In a property crash ITs go to deep discounts. So either the market is wrong (and we should all be short property ITs) or there won't be a major correction (however desirable that may be for other reasons). The open-ended fund closures may be a misleading indicator here, it may be that the first guy pulled the trigger preventively, and once one has done it and it's news, the others have to follow for obvious reasons, regardless of the scale of underlying pressure.<br /><br />Re broken windows, I thought I recalled a post where you were a fan from a few years back, but can't find it now (indeed found the opposite). Of course it's not productive in aggregate, but it can be better than nothing as a counter-cyclical tool, and by definition here it's a short-term measure given it's a one off task and these folks will be available again when they're done, and in the meantime they'll spend (some of) their income in the real economy.cighttp://commentisglee.wordpress.com/noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-58468578935348755072016-07-08T16:24:39.306+01:002016-07-08T16:24:39.306+01:00Hmm. Lots of ifs, buts and maybes here.
Yes, if ...Hmm. Lots of ifs, buts and maybes here. <br /><br />Yes, if the new UK government drops the insane austerity, then that might offset the Brexit shock. But it's going to be a Tory government, so don't hold your breath. BoE is pretty Keynesian already: I expect more monetary easing, but we've played this scene too many times before now. I am unconvinced that UK government action will be sufficient, and the BoE's toolkit has serious limitations. <br /><br />- Yes, if the shock forces the EU to sort out the awful Eurozone setup that is good for everyone. I am not convinced by this, either. <br /><br />- Activity moving from UK to EU is not necessarily good for the UK even though it is globally neutral. To suggest that it must be, is the fallacy of composition, I am afraid. <br /><br />- The stimulus from the broken window effect is entirely illusory. All the surgeons needed to separate Britain from the EU are fundamentally unproductive. They could be doing much better things with their time. Next time someone says "just look at all the work this creates for lawyers", I am sending them Flanders & Swann singing "The Gas Man Cometh". <br /><br />- CRE was a disaster waiting to happen and I for one am not sorry to see the bottom fall out of this particular market. It exhibited all the characteristics of an unstable bubble. Would have corrected eventually anyway, possibly a lot more disastrously. <br /><br />Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-60276764728230085312016-07-08T16:16:03.127+01:002016-07-08T16:16:03.127+01:00Depreciation does cause current account improvemen...Depreciation does cause current account improvement. Including primary income. But sterling would have to fall a lot more to close the deficit, and there are other costs from that - notably inflation, and as you say pain for people living and working abroad. <br /><br />I'm not very into hydraulic balance of payments theory ("if we devalue the pound, exports will rise and imports reduce"). It is a lot more complicated than that, especially for an economy which is dependent on imports, notably energy. If the cost of essential inputs to production rises, then any benefit from depreciation is wiped out. I've made this point previously. Frances Coppolahttps://www.blogger.com/profile/09399390283774592713noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-70462447239921093132016-07-08T12:18:03.476+01:002016-07-08T12:18:03.476+01:00http://www.shell.com/business-customers/trading-an...http://www.shell.com/business-customers/trading-and-supply/shell-shipping-and-maritime/about-shell-shipping.html<br />Last one.amnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-14950940399392662122016-07-08T11:38:00.811+01:002016-07-08T11:38:00.811+01:00http://webarchive.nationalarchives.gov.uk/20160105...http://webarchive.nationalarchives.gov.uk/20160105160709/http://www.ons.gov.uk/ons/dcp171766_422021.pdf<br />This is a bit dated on primary income(2015). It hangs a lot of the problem on Oecd ex countries and particularly Holland and Luxemburg as well as specific industries.<br />amnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-17088067952633983462016-07-08T11:27:27.216+01:002016-07-08T11:27:27.216+01:00I'm going to sound like a broken record, but c...I'm going to sound like a broken record, but can we see "Chart D" in cost of servicing to income terms?<br /><br />There are some other positive (short term) effects, which may balance the negatives you cover:<br /><br />- UK gov (including BoE) will certainly be more Keynesian than in the baseline scenario.<br /><br />- If the shell shock effect works on helping fix or at least improve the institutional setup of the Eurozone, this is good for everybody.<br /><br />- There's an EU private sector stimulus from some private activity moving to the EU (both firms and workers moving to the EU or not coming to the UK). While this is negative for the UK first order, it's neutral globally, which is good for the UK.<br /><br />- Broken windows stimulus effect: all the negotiators/lawyers/private compliance required will increase (world) GDP some (though it will also shrink the pie of real stuff first order).<br /><br />- How much CRE will really go down is not obvious to me. The bulk of UK commercial property is on long inflexible leases (structural reforms anyone?), so some of the yield chasing purchasing power may come back sooner than later (in that scenario the redemption suspension mechanism functions as a shock absorber).cighttp://commentisglee.wordpress.com/noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-7526856531237672942016-07-08T05:29:32.725+01:002016-07-08T05:29:32.725+01:00If folks read Krugman, Obstfelt and Melits on Inte...If folks read Krugman, Obstfelt and Melits on International Economics then they might not be doing so much handwringing. I get the impression that many remain economists have thrown the text books out of the window instead of going back to the lab and working things out.<br />They can take Krugman on, if they want, but they might come out of it very mauled. He has the advantage of being an international economist who knows plenty of macro whereas many are just domestic macro people who don't know much about the international side.<br />But my main point is that the IMF last year said the pound was overvalued by 6 to 15 percent. The IMF now includes Obstfeld, one of Krugman's co-authors. It isn't any more so we will see what that does to improve the situation.<br /> http://www.telegraph.co.uk/finance/currency/11768278/Sterling-is-overvalued-and-could-hold-back-UK-recovery-warns-IMF.html<br />Anyway my questions on the current account weren't answered so may be I should ask Prof Krugman.<br />amnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-21932901498439392262016-07-08T03:22:46.566+01:002016-07-08T03:22:46.566+01:00AEP this week, commenting on the same BoE report, ...AEP this week, commenting on the same BoE report, is much more upbeat about the prospects post Brexit-fiasco.<br /><br />The UK politicians were getting very complacent in their seats. They have now received a firm kick on the backside. Once the UK again has a competent leader, and Theresa May is my favourite, I am also positive that the sky will remain where it is.RPhttps://www.blogger.com/profile/17695303458973909485noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-55257700781010186482016-07-08T03:07:32.150+01:002016-07-08T03:07:32.150+01:00It is probably better to avoid Krugman. He is well...It is probably better to avoid Krugman. He is well past his sell by date.<br /><br />The UK rarely gets through a decade without wild and sudden devaluations of the currency. It is the short term "Get Out of Jail Card". The GBP is still, even, now considered to be overvalued.RPhttps://www.blogger.com/profile/17695303458973909485noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-23614627127809521762016-07-07T16:32:24.113+01:002016-07-07T16:32:24.113+01:00I read in a book by Krugman et al that depreciatio...I read in a book by Krugman et al that depreciation causes current account improvement though it can take a bit of time and also there are qualifications to the improvement depending on complex things like the Marshall and Lerner rule on import quantitities and values.<br />But you mention primary income does the depreciation not also improve that part of the current account.<br />My other point is why did British business not pull out of Europe if there returns were so poor since 2008.<br />You are to be congratulated on taking this subject on in some detail and also your payrise. An expat paid in pounds sterling living and working abroad is in the opposite situation to you. Quite painful really.<br />amnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-78746805537650942472016-07-07T10:08:39.795+01:002016-07-07T10:08:39.795+01:00As you yourself note: there was a giant bubble bef...As you yourself note: there was a giant bubble before Brexit, which was already starting to show signs of deflating/popping. So what should the Bank of England (+ govt) have done, several years ago? Obvious: stop the bubble from growing to dangerous levels. What did they do? The opposite! They actively intervened to blow additional air into the bubble through QE, through supporting first time buyers, through policies for attracting foreign 'flight-to-safety' capital. <br /><br />That makes it completely ridiculous to start claiming 'victory' over having predicted the consequences of Brexit. These consequences were created by blowing the bubble! Of course they knew the bubble would pop, the BoE actively co-created the asset bubbles!<br /><br />And Brexit is now doing what govt + BoE should have done: reset housing prices in London to more long-term affordable and stability enhancing levels, bring the Pound more in line with a proper valuation (anyone travelling through UK + Ireland + NL/Germany could see the pound was ridiculously overvalued at 1.40 to the Euro).<br /><br />They should be thoroughly ashamed, humble and saying 'sorry' for messing up so completely. Start with admitting the mistake of excluding house prices + cost of acquiring pension savings from measuring inflation. Start with admitting the QE support of asset prices went way over the top and should have stopped as soon as asset prices were stopped from falling below long-term fundamental value-trends.<br /><br />Yes that will hurt homeowners that borrowed to the max, but at least it is honest, and it is long overdue. Don't blame Brexit, blame the ones inventing the Giant Bubble-gum.Erikwim Duringnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-12833748849244709732016-07-07T02:05:08.361+01:002016-07-07T02:05:08.361+01:00Ferking hellFerking hellAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-38399633852554842732016-07-06T17:44:57.465+01:002016-07-06T17:44:57.465+01:00I think this also includes certain types of tempor...I think this also includes certain types of temporary workers, like seasonal workers. In any event this item makes up less than 1% of primary income flows.Nick Edmondshttps://www.blogger.com/profile/15342983814699700396noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-73099016609757863182016-07-06T16:37:30.652+01:002016-07-06T16:37:30.652+01:00Do you think there is a connection between foreign...Do you think there is a connection between foreign earnings from exporting to the UK and foreign spending on London property.Dinerohttps://www.blogger.com/profile/14632385731642361211noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-2784733685645528462016-07-06T12:49:15.046+01:002016-07-06T12:49:15.046+01:00"The Bank of England notes that this is made ..."The Bank of England notes that this is made up of compensation of employees (Brits working abroad cost us more than we receive for foreigners working here, despite what UKIP may think)"<br /><br />That compensation of employees is not exactly that. Brits working abroad are residents of the place they are working. <br /><br />The item is for things such as an American working at the British embassy in America. <br /><br />British embassy in the US is part of the UK region. However it employs people who are residents of the US. So "compensation of employees". Ramananhttp://www.concertedaction.comnoreply@blogger.com