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Archive  |  Articles, Columns, and Op-Eds

Article  |  2019: Doomsday or Domesday?

New Statesman |  2 January 2019

In October, 2019, Mario Draghi is due to come to the end of his eight-year term as President of the European Central Bank.  He is in a race against time to avoid an unusual accolade for a central banker: never once to have raised interest rates during his tenure.

In decades gone by, central bankers expected to earn their spurs by their expert navigation of the ebb and flow of the business cycle, skilfully steering the economy between the Scylla of recession and the Charybdis of inflation with the finely-tuned tiller of interest rate policy.

For Mr Draghi, however, no such dexterity has been required.  All he has done is cut rates – eight times, from 1.5% to zero.  The reversal has never materialised.

He is far from alone.  The Bank of England’s Mark Carney has been even less busy.  In the sixty-six months Carney has been in post as Governor, the tiresome chore of adjusting interest rates has troubled him for only three of them – and the policy rate remains a mere quarter of a percent above its lowest level in three hundred years.

Yet the subdued activity levels at the ECB and the BOE are as nothing compared to the splendid lassitude of the Bank of Japan.  Not only has its current governor Haruhiko Kuroda (in office since 2013) never raised rates; his immediate predecessor Masaaki Shirawaka, whose term began in 2008, didn’t either.

This brief survey of three of the world’s premier central banks illustrates a striking fact about the current global economic conjuncture.

GDP growth, inflation, and unemployment in the world’s most advanced economies have long since recovered to historically normal levels following the crisis of 2008.  Yet their financial systems remain mired in a gigantic and unprecedented experiment – one which has resulted in a decade of monetary policy paralysis.

Recent turbulence on the world’s stock markets suggests that many investors are nervous at the prospect of the central bankers’ bringing this Great Monetary Experiment to a close.  Less fretted over – but no less problematic – are the consequences of allowing it to continue.

You can read what I think they are in my latest article in the New Statesman.

Column  |   The Global Economy: Status Anxiety

New Statesman |  27 April 2018

Last weekend saw 2018’s first big conclave of the global economic policy-making elite at the Spring meeting of the International Monetary Fund’s governing board in Washington, DC.  The world’s central bankers, finance ministers, and investors gathered to hear the global financial watchdog’s latest update on the state of the world economy.

The news was positive. World GDP growth is forecast to be just under 4 percent both this year and next – stretching the global expansion into its eleventh year.  China and India, the great juggernauts of the emerging world, should grow at around 6.5 and 7.5 percent respectively.  The US – the largest economy in the world – will start to benefit from President Trump’s opening of the fiscal floodgates, and as a result, seems set to break the 1991-2001 record for its longest postwar expansion.  Even in Brexit-beleaguered Britain, the unemployment rate has just hit its lowest level since 1975.

Yet rather than reveling in this bonfire of the economic record books, expert opinion in the US capital – like the public mood across many much of the West – was strangely full of foreboding.  Amongst the general public, statistics such as those just quoted seem curiously at odds with the lived experience of a joyless recovery hallmarked by austerity and uncertainty.  The experts themselves have more faith that the numbers reflect reality.  But amongst the professional forecasters too there is a nagging sense that the good times cannot last – that there is another downturn just around the corner, and that the longer we go without a recession, the more likely it is that there will be one next year.

Are these fears of false progress and impending doom misplaced, or are we indeed living in a fool’s paradise?  Where does this mismatch between perception and reality come from?  The answer is to be found, I think, in two critical features of the global recovery since 2008.

I explain what they are in my latest article in the New Statesman, available here.

Article  |   Bitcoin should serve as a wake-up call to our flawed financial systems

Daily Telegraph |  4 December 2017

The great American financial historian Charles Kindleberger used to say that after six decades of meticulous research into the origins of speculative bubbles, he had concluded that there was but a single constant: “There is nothing so disturbing to one’s well-being and judgement as to see a friend get rich.”

Well: if any of you have friends who got in early on Bitcoin – the price of which has quadrupled in the last six months – you must be suffering from a severe loss of mental equilibrium.

Yet it is worth looking past Bitcoin as the latest get-rich-quick scheme, and focusing instead on the deeper drivers of the global fascination with the crypto-currency phenomenon.  For if he were still alive, I am sure that Professor Kindleberger would judge Bitcoin to represent the ground zero at which three of the most important historical forces at work in the world today converge.

I explain what they are, and why Bitcoin might save – rather than displace – the traditional financial system, in an article in The Daily Telegraph published on December 5, 2017.

Op-Ed  |   Back to the Future on Inflation

Financial Times |  28 July 2017

Another month, another impressively low unemployment number, but another flaccid inflation print.  No wonder the US Federal Reserve is baffled.

Modern macroeconomic theory depends upon the famous Phillips curve, and its pressure cooker model of the inflationary process. Let the economy run too hot, and inflation is sure to follow. Let the pressure drop too low, and wage and price growth will ease.

Yet in the US, unemployment is at multi-year lows but inflation is nowhere in sight. In the UK it is hardly better. In Japan it is even worse.

Across the developed economies, the Phillips curve has gone ignominiously flat. The world’s leading central bankers are scratching their heads.

I explained why older and less fashionable theories of inflation may be a more useful guide to the future in today’s circumstances in an op-ed in the Financial Times.

Column  |   It’s the Young Wot Won It!

New Statesman |  4 July 2017

It’s the young wot won it!

All right, I know – Labour didn’t actually win the election. Nevertheless, it certainly felt like a loss for the Tories; and it’s equally certain that young people turned out in large numbers, and that age was one of the only characteristics reliably associated with the way people voted.

What is it that the young want from their representatives – and are the policies on offer from either main party likely to provide it?

I ask these questions in my latest article in the New Statesman.  It is available here.

Column  |   Brexit and the City

New Statesman |  12 February 2017

The City of London has always (and not accidentally) baffled outsiders.  But Brexit has draped a new question over its age-old mystique: is London’s financial sector the UK’s trump card, or its Achilles’s heel, in the negotiations over leaving the EU?

I explore this question in my latest column in the New Statesman.  It is available here.

Column  |   Basta!

New Statesman |  12 December 2016

What a difference four hours makes.

At six in the evening last Sunday, the champagne corks were popping in Brussels.  Norbert Hofer, the candidate of the far-Right Freedom Party, had just conceded defeat in the Austrian presidential election.

By ten o’clock, however, the bubbles were going flat.  The exit polls showed that in Italy, Prime Minister Matteo Renzi was going down to a heavy defeat in the referendum he had called and championed on constitutional change.

Together, these two results revealed a critically important truth about the rise of populism in Europe and its relationship to its troubled economic model.

I explain what it is in my latest column in the New Statesman.  It is available here.

Column  |   Mr Trump Goes to Washington

New Statesman |  19 November 2016

Donald Trump has won the US presidency with a campaign that broke all the rules. Is the stage therefore set for America’s economic policy to take off in an equally unprecedented direction – and should the rest of us be fearful or elated?

These questions cannot yet be answered with any certainty: so far, not much is known about who will take the most important economic posts in the new administration, nor what detailed policies they and the president-elect advocate. But we know enough from Trump’s campaign pledges and the Republican Party’s better-known conventional platform to make some educated guesses.

I make mine in my latest article in the New Statesman.  It is available here.

Column  |   Brexit: Less About the BOE, More About the EBI

New Statesman |  11 August 2016

As far as the economic consequences of the Brexit vote are concerned, the Bank of England has seen enough. Having held fire at its meeting in July in the immediate aftermath of the EU referendum, the Bank’s Monetary Policy Committee voted unanimously on 3 August to fire a three-barrelled stimulus bazooka.

I was not in the City that day but in the Lakes, holidaying with a brilliant scientist friend who is a director of the European Bioinformatics Institute (EBI) in Cambridge­shire – one of the world’s leading centres for genomics research. I came away convinced that the true economic impact of Brexit has less to do with the short-term gyrations of interest rates and the financial markets and more to do with our long-term ability to maintain our position at the technological frontier. When it comes to Brexit, we should be worrying less about institutions such as the Bank and more about institutions such as the EBI.

In my latest Real Money column for the New Statesman, I discuss why the UK’s long term economic future depends not on the monetary tonics of the BOE but on maintaining our justified reputation as a tolerant society that is open to foreign trade, foreign capital, foreign ideas and the foreign people who come up with them.  You can read it here.

Column  |   No Economy is an Island

New Statesman |  22 July 2016

If you believe Mark Rutte, the prime minister of the Netherlands, the Brexit vote has plunged Britain into chaos. The UK, he concluded a few days after the referendum, “has collapsed politically, ­monetarily, constitutionally and economically”.

I can’t speak to politics or the constitution; but monetarily and economically, this view is wrong (or at least incomplete) in one crucial respect. It fails to see that no country’s economic fate is determined unilaterally. What happens next elsewhere – and in the eurozone especially – will be just as important as what happens in the UK.

In my latest Real Money column for the New Statesman, I discuss why.  You can read it here.

Op-Ed  |   There is life in sovereign bonds if you know where to look

Financial Times |  12 July 2016

Next year will see the 850th anniversary of one of the most important financial innovations ever conceived: the invention of the government bond.

It was in 1167 that the Republic of Venice became the first modern state to borrow from its citizens in a formal manner, taking a loan from ninety of its leading families.  Within a few years, the terms of such loans had begun to be standardised; and within a century, a lively trade in discrete tranches of the consolidated national debt was being carried on at the foot of the Rialto bridge.  The global government bond markets had been born.

Over time, such sovereign borrowing became a hallmark of the most economically advanced nations, and the most important means of affording individual citizens a share in their general prosperity.  By the end of the twentieth century, a vast financial infrastructure had been constructed furnishing pensions to the deserving retired, insurance to the daring entrepreneur, and income to the thrifty saver and the idle rentier.  It was all built on the foundations of government bonds: the risk-free asset, whose returns rely not on the shifting fortunes of any individual company, but on the health of the economy as a whole and the quality of the sovereign’s policies.

Since 2008, however, the feet of this mighty Colossus have turned to clay.  In the G10, the average yield on the benchmark 10-year bond has shrivelled from 4.3% in mid-2007 to 0.5% today.  Developed economy government bond markets are in a coma: nearly $12 trillion-worth of government bonds now trade at a negative yield.

Yet all is not lost for sovereign bonds.  Quite the opposite, in fact.

I explain how and why government bonds should remain central to the plans of income-oriented investors in an op-ed in The Financial Times published on July 12, 2016.

Column  |   Brexit: What Next?

New Statesman |  4 July 2016

England has just been ejected from Euro 2016 by Iceland.

Is this an early example of the hapless future that lies ahead for Britain now that we have opted for self-imposed exile from the richest economic zone on earth?  Or is it a demonstration of the mighty feats that even the tiniest of nations can achieve once freed from the EU yoke?

The debate on the economic implications of Brexit prior to last week’s vote was fuelled by fantastic claims of epochal economic disaster and transformative economic opportunity made by both sides.  What does a more sober assessment of our prospects look like on the morning after?

In my latest Real Money column for the New Statesman, I discuss the economic and political consequences of the UK’s vote to leave the EU.  You can read it here.

Column  |   Revolution at the IMF?

New Statesman |  5 June 2016

What has come over the International Monetary Fund?

Not content with playing the good cop to Europe’s bad in the ongoing Greek crisis – in which it has been arguing for more debt relief and less austerity – the Fund has just published an article in its in-house magazine by three of its leading researchers entitled “Neoliberalism: Oversold?”.

Their answer is “Yes”.

In my latest article in the New Statesman, I explore why – and whether the IMF’s mea culpa will finally win over its critics in the emerging markets or not.

Column  |   The Coming Storm

New Statesman |  21 February 2016

When does a stock-market slide become a crash? And when does a financial crash spark an economic crisis? At the end of last year, few investors were giving much thought to such nice distinctions. Less than two months into 2016, with the leading global equity indices having dropped between 10 and 25 per cent at their worst, these questions are on everyone’s lips.

In my latest article in the New Statesman, I discuss why I think we are entering a precarious period for both markets and monetary policy.

Column  |   The Market’s New Year Blues

New Statesman |  13 January 2016

This year’s January sales seem to have extended to the world’s stock markets. A week in to 2016, you could buy the FTSE for 6 per cent less than on New Year’s Eve. It is the worst start to the year in at least two decades.

What is behind these New Year blues?  My latest Real Money column in the New Statesman discusses the answers given by Martin Taylor, one of the most successful investors of the past two decades, as he decided to close his Nevsky Fund this month.

Op-Ed  |   Do not discount a run on sterling

Financial Times |  28 October 2015

Is sterling riding for a fall?  The UK’s current account deficit is certainly worryingly large.

But the real reason for sterling’s vulnerability lies not in the current account deficit itself but in its cause.  Exploring what that is leads to a less conventional perspective on currency valuation, but one that is vitally important in today’s financially globalised world.

You can read more in the Markets Insight column I published in the Financial Times on October 28, 2015.

Column  |   Stumbling Stock Markets: The Toils of Perversity

New Statesman |  26 August 2015

The steep and synchronised falls in the world’s main stock markets on Monday, August 24, 2015 caught investors by surprise.  Yet in light of the disappointing economic fundamentals of the past few years, the real question is perhaps not why markets stumbled but why asset prices were so high in the first place.

The answer to that question is simple – but ultimately paradoxical.  You can read what it is in my latest Real Money column in the New Statesman.

Column  |   Greece and the Future of the International Economic Order

New Statesman |  9 July 2015

What is really at issue in the Greek crisis, and what do the latest developments mean for Greece, Europe, and the rest of the world?

I offer some answers to these questions in the July 9, 2015 issue of the New Statesman.

You can read the article here.

Op-Ed  |   Watch out for whales

Financial Times |  16 February 2015

The US — finally — is back. Strong growth, falling unemployment, rising confidence and a buoyant stock market all say so. The rest of the world, meanwhile, seems stuck in the doldrums. Should this divergent dynamic concern investors?

I think it should.  You can find out why in the Markets Insight column I published in the Financial Times February 16, 2015.

Column  |   The Oil Price Collapse

New Statesman |  29 January 2015

The past few months have brought a spree of frightening developments in the global economy. There’s been the slow crash of the Chinese property market, the eurozone’s slide into deflation and the relentless strengthening of the US dollar, to begin with.

But there is no doubt what the biggest and most baffling development of all has been: the collapse in the price of oil, from more than $100 per barrel as recently as last September to less than $50 per barrel today.

Why has it happened – and what does it mean?  You can read my best guesses in an Observations piece I just published in the New Statesman here.

Column  |   Secular Stagnation: What is it?

New Statesman |  23 October 2014

What is behind the prolonged economic slump in the Eurozone?  Economists tell us it’s because of something called “secular stagnation”.  But as I explain in my latest Real Money column in the New Statesman, that’s just another way of saying we don’t know the answer…

Column  |   Flash Boys and the Law of Unintended Consequences

New Statesman |  24 April 2014

Michael Lewis’s new book Flash Boys is quite rightly generating a lot of attention because it argues that High Frequency Trading is a scam.

I think that Lewis’s story holds an even more important lesson, however, concerning one of the seminal problems of our age: the unintended consequences of technological innovation.

You can read why in my latest Real Money column in the New Statesman.

Column  |   Bitcoin is Pointless as a Currency, but it Could Change the World Anyway

Wired |  31 March 2014

Sovereign governments everywhere are petrified. An ingenious new invention that allows people to make payments across borders without leaving a trace in the official monetary system is spreading like wildfire. Its workings are so clever that few understand them. It’s backed by some of the leading entrepreneurs of the day. The embattled establishment is warning that the state’s right to regulate finance is being undermined.

Bitcoin, 2014?

Indeed.  But as it happens, this was also precisely the playbook for the birth of modern banking in sixteenth century Europe.

You can read here what I think this Old World precedent has to teach us about the prospects for bitcoin in an opinion piece I published in Wired on March 31, 2014.

Column  |   A Forgotten Scotsman’s 300-Year-Old Solution to Alex Salmond’s Money Problems

New Statesman |  12 December 2013

What have a forgotten Scots genius and the partisans of Bitcoin got to teach Alex Salmond?

Find out in my Real Money column in the New Statesman.

Column  |   Is Britain Really Booming?

New Statesman | 30 January 2014

Sort of.  But the economy is still smaller than it was six years ago.

In my latest column for the New Statesman I explain that recent economic data have indeed been looking up – but that the bigger picture is much less encouraging.

Article  |  Time for the Direct Approach (with Robert Skidelsky)

New Statesman |  1 March 2012

On March 1, 2012, Robert Skidelsky and I published an article in the New Statesman arguing that printing money and cutting taxes – examples of the indirect approach to promoting growth currently favoured by the government – are not enough.  The Chancellor should use his 2012 budget to try an alternative: upgrading the Green Investment Bank to a full-scale British Investment Bank that can provide a direct stimulus to the recovery and rebalancing of the UK economy.

The article was No.1 on PoliticsHome‘s Top Ten Political Must-Reads on March 1, 2012.

You can read it here.

Op-Ed  |  Urgently needed: a Plan C to save Britain’s economy (with Robert Skidelsky)

Financial Times |  24 November 2011

On Thursday, November 24, 2011, Robert Skidelsky and I published an op-ed in the Financial Times, arguing that QE has not done much to help the UK economy, and looking forward to the Chancellor’s Autumn budget statement next Thursday.

You can read it here.

What could a Plan C look like?  One idea that we believe could both boost demand and assist the long term rebalancing of the UK economy – all without damaging the government’s credibility on fiscal matters – is the establishment of a new British Investment Bank.

The Centre for Global Studies recently published practical proposals for what such a bank would look like and do.  You can read them here.

Article  |  Cold turkey is the only option for the developed world

Investment Week |  25 August 2011

On August 10, 2011, Mervyn King delivered an eloquent diagnosis of recent global economic developments at the press conference for the Bank of England’s August Inflation Report.

On August 25, 2011, I published a column in Investment Week discussing Dr. King’s analysis, and asking what policies are required for things to turn out better.

You can read the article here.

Op-Ed  |  Osborne’s austerity gamble is fast being found out (with Robert Skidelsky)

Financial Times |  2 August 2011

On Monday, August 2, 2011, Robert Skidelsky and I published an article in the Financial Times questioning whether the financial markets are changing their tune on austerity, and what this means for the UK – the pioneer of austerity as the mainstay of ecomic strategy in the post-crisis era.

You can read it here.

Article  |  For a National Investment Bank (with Robert Skidelsky)

New York Review of Books |  28 April 2011

Robert Skidelsky and I have an article in the April 28 2011 issue of the New York Review of Books proposing that President Obama should establish a National Investment Bank in order both to promote the long term development and rebalancing of the US economy, and to help offset the effects of coming fiscal retrenchment.

You can read it here.

Op-Ed  |  A way out of Britain’s growth dilemma (with Robert Skidelsky)

Financial Times |  21 March 2011

On Monday, on March 21, 2011, Robert Skidelsky and I published an op-ed in the Financial Times, arguing that the UK government should establish a National Investment Bank in order to promote the growth and rebalancing of the UK economy and to help stabilise confidence and demand.