A week in Westminster ...
Proceedings in the House achieved a new low this week. Boris Johnson accused Corbyn of being a "Big Girl's Blouse" and a "Chlorinated Chicken". David Cameron was described by the Prime Minister as a "Girly Swot". The "Mogg" was reprimanded for sprawling over the front benches in a contemptuous display of arrogance and self importance.
It had been a tough week for Johnson. Oscar Wilde would be lost for words. To lose one vote is unfortunate. To lose three in two days is much more than carelessness. The Prime Minister lost his majority of one, when Tory MP, Phillip Lee crossed the house to join the Lib Dems.
Neutered in Parliament, the administration decided on the full chop, sacking Tory Rebels including Phillip Hammond, Ken Clarke and Nicholas Soames. The majority of one was reduced to a deficit of forty three with a careless coup. So much for love-bombing opponents. Two chancellors, the father of the house and the grandson of Churchill were thrown out of the Conservative Party. The lights are going out all over Downing Street. Johnson is achieving the chaos in government in just three weeks, to which Theresa May could only aspire in three years.
If Dominic Cummings has a playbook, it must be written in strange tongue. Forced to accept the decision of parliament to postpone the Halloween exit from the EU without a deal, the master stroke was to call for an election. Boris explained ...
"I don't want an election, you don't want an election, he or she doesn't want an election"
"We don't want an election. you (plural) don't want an election, they don't want an election".
Amo, Amas, Amat , Amamus, Amati, Amant ...
Johnson declined the verb, Corbyn declined the invitation. It was an invitation to jump into an elephant trap, covered by scant coverings of brushwood and a red flag. Somewhere in the Cummings playbook, there must be an outline of which way the votes would go in a rush to to the polls.
Not everyone will play with the rules. The Prime Minister has explained he would rather be dead in a ditch, rather than ask for an extension from the EU. Resignation is not ruled out in the play book, thrown in jail for failing to follow the ruling of parliament must be in appendix two.
The no deal option is now written into law. Johnson has a deadline to secure a deal by the middle of October. If no deal is secured, the exit is extended to January. The election no one wants may well take place before the end of the year.
Sound and fury of the hustings, a result signifying nothing may ensue, a hung parliament beckons and off we will go again as the EU looks on ...
A Decade of Renewal ...
The Chancellor of the Exchequer announced his spending review this week. A decade of renewal is in the offing. More money for education, the police, defence and the health service, more money for local government including almost £2 billion for social care and welfare services.
An extra £14 billion is on the table as the economy slows. Cynics may suggest this looks like a pre-election giveaway. To some it looks like a preparation for social unrest. More police on the streets, more money for water cannons, more money for riot shields and batons ...
Sajid Javid has confirmed the results will follow the fiscal guidelines. Borrowing never to exceed more than 2% of GDP, total borrowing to continue to fall as a percentage of GDP.
It may well be a challenging arithmetic. The economy is slowing. The latest surveys on manufacturing and construction are particularly pessimistic. Business confidence is flagging, stalling commitments to investment and job creation.
The latest data on borrowing confirms borrowing in the first four months of the year was up by 60% compared to prior year. Government borrowing could be over £35 billion this year. Add in the budget for decades of renewal and the 2% target will be tested.
The age of austerity is over as the decade of renewal begins. Decades of debt will follow. Expect to hear more of Modern Monetary Theory as the old fiscal guidelines are hung out to dry on the Magic Money Tree. MMT rules OK ... the beauty is there aren't any.
Trump's trade war hits manufacturing ...
Tough week for the President. Hurricanes hit the Bahamas, and Florida. The President played golf, then spent an inordinate amount of time explaining why he had been right all along to warn of the impending storm about to hit Alabama.
The week had begun with the announcement of a further round of tariffs on goods from China. Products faced with a 10% tariff were to face a further hike of 5%. The President was furious and angry about Chinese retaliation. Trump had wanted to double the tariffs. Aides and advisors advised against the move. Further damage to stock market sentiment and the economy would ensue.
It is now becoming pretty clear, the economy is slowing and Trump trade policy is to blame. The President has promised to revive the fortunes of the U.S manufacturing sector, bringing jobs back to his blue collar base.
Latest data suggest manufacturing output is falling for the first time in three years. Job growth slowed to 130,000 in August. The unemployment held at 3.7%. The job data may well be revised up. No time to call recession yet despite the yelps from the yield curve.
To the world it is becoming clear Trump tariff policy is damaging world trade and growth. The implications are widespread, not just confined to the U.S. and China. Growth in Australia and Singapore featured this week. Growth forecasts in Singapore are written to zero as trade with mainland China slows. In Germany the manufacturing sector is damaged by the double whammy of tariffs and Brexit.
For Trump, it is clear the Federal Reserve is to blame. "Where did I find this guy, Jerome?" the President asked of Jerome Powell Chairman of the Federal Reserve, "Oh well, you can't win them all" the tweet.
"You can't with them all but you can always blame others" the mantra of the 45th President of the United States.
That's all for this week, have a great weekend. We will be back with more news and updates next week!
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The Saturday Economist
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