Nick Clegg will be the next head of of global affairs at Facebook. He will be moving with his wife, Miriam Gonzalez and their three children to California. Ms Gonzalez will pack in her job as a partner at the international law firm Dechert. It must have been a tough decision.
According to the Times, two years ago Sir Nick said "I'm not especially bedazzled by Facebook". "I find the messianic Californian new worldly touchy feely culture of Facebook a little grating." It is suggested Nick Clegg turned down the initial approach.
It took a phone call from Sheryl Sandberg and a subsequent meeting at the home of Mark Zuckerberg to clinch the deal. Two hours in the garden with the Facebook founder must have been the turning point. Stock options and a hefty salary may have helped. The average pay of a senior FB exec last year was $25 million dollars. Sir Nick's salary has not been disclosed. He will surrender his UK £115,000 a year parachute after losing his seat in the latest election.
The social media giant faces several challenges in the geo-political sphere. Interactions with sovereign government are increasing in relation to taxation, data security and political message manipulation. It's a great move to bring in a politician, a former deputy Prime Minister of the UK as head of global policy and communications. Yes and he is even quite liked in Europe! What's not to like!
Borrowing falls ...
A great boost for the Chancellor this week. Borrowing fell at the half year stage to £19.6 billion. This compared to £30.6 billion last year. Despite the sluggish growth in the first half of the year, revenues were boosted by higher tax receipts. Spending plans were constrained, producing a radical improvement in the underlying financial performance.
For the year as a whole, borrowing could fall below £28 billion compared to almost £40 billion last year. It may even be lower if largesse is constrained in the budget statement later this month.
The Prime Minister has promised an end to austerity. The Treasury is challenged to find an extra £20 billion for the NHS. Government debt is around £1.8 trillion (84% of GDP). Despite the improvement in the borrowing figures, there is little scope for a radical boost to spending plans in the absence of significant tax rises.
The latest job figures confirm the economy is tracking well. Unemployment fell to 1.36 million in August. The unemployment rate held at 4%. The number of vacancies in the economy was steady at 833,000. Sector pressures were most evident in the hotel, food and beverage sectors along with retail, health and social care. It is entirely unclear how government immigration policy is set to address the fundamental structural problems in the UK jobs market.
Wages are increasing. Pay levels suggest 3% growth will be the norm into the final quarter. Good news for households, as the headline rate of inflation fell to 2.4% in September. Goods inflation and service sector inflation fell back from prior months levels. Real wage growth will boost spending in the run up to Christmas. Retail sales in September were up by 3% in volume terms and almost 5% in value.
The UK economy is holding up well. We expect growth of 1.5% this year. A boost to government current and capital spending would push the growth rate higher. An improvement in productivity would be the reward. And then of course, there is the rather difficult question of Brexit …
Round and Round we go ...
Sterling closed above the $1.30 mark this week. Strange really. Ten year US bond yields closed at 3.2%. The inflation data will make it difficult for the MPC to move rates in the short term. UK gilt yields fell to 1.5%.
The Fed will push US rates higher in December and through 2019. We expect 3.5% could be the level of US base rates by the end of next year. The yield curve will push bond prices lower. 4.5% will be the next US yield target. The Transatlantic spread should be pushing the "Greenback" higher and the Pound lower.
Sterling is floating on a Brexit Breeze, baffled by noises off. Positive news pushes the pound higher. Negative news places pressure on the rally. The $1.30 level holds. Barnier suggest a deal is 90% agreed. The Prime Minister has offered to stay within the Customs Union indefinitely. The transition process may be extended for a further year beyond the existing two year horizon.
Unfortunately, the Prime Minister, "Primus Inter Pares", is operating "Ultra Vires" in an attempt to get an agreement with the EU. It would appear neither cabinet, nor back benchers nor the opposition party are in agreement with May's moves.
"Backbenchers Tell May To Justify The 'Betrayal" the story line in the Times today. The Prime Minister will be hauled before the 1922 committee this week to explain concessions made to Brussels. Another tough week in office lies ahead. Perhaps a job as head of Global Affairs for Twitter could be the future, once the deal is done! Either that or a spot on Strictly Come Dancing. Life is just a preparation for what lies ahead ...
That's all for this week, have a great week-end, Don't Miss Our Monday Morning Update this week, we will expand further on our market views ...
The Saturday Economist
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