Another week, another mountain range, and a really big lake. I am writing this in Burlington, Vermont, looking across Lake Champlain toward the Adirondack mountains to the west. It is stunning. To this point I have had no sighting of "Champ", the lake's equivalent of the Loch Ness monster.
There was, of course, that other rather bigger mountain range gathering in the news this weekend, where the world's central bankers met in Jackson Hole, Wyoming, in the Teton range. Despite the speculation that Ben Bernanke would hint at further quantitative easing, the biggest news from there was more about what was not happening there, rather than what was – because Mario Draghi, president of the European Central Bank, bowed out at short notice, apparently because he had too much work.
An excuse not to be believed of course, given that this speech had been in his schedule for ages and was among his most important, if not the most important speech of the year. So we should infer that some announcement is coming shortly regarding the developing mess in Spain in general and Catalonia in particular and/or another bank in trouble. Most likely the ECB is planning on resuming buying government bonds. When bankers cancel speeches at short notice, that is a big signal something bad is up.
The other big deals in the US this week were, first, Hurricane Isaac, which hit New Orleans exactly seven years to the day that Hurricane Katrina killed 1,500 people. Even though Isaac packed a much smaller punch, big federal spending on a new system of levees and pumps meant disruption was minimised. Just like the London Olympics, these storm defences were mostly paid for out of public funds.
Second, there was the Republican convention in Tampa, to crown their very wooden and totally uninspiring candidate, Mitt Romney.
The first day was cancelled due to fears that Isaac was headed their way, but in the end it just delivered a sideswipe.
Interestingly, the main theme was "private sector good, public sector bad", which seemed rather inconsistent with what was happening several hundred miles to the north-west at the mouth of the Mississippi river.
A great deal of animosity was directed at President Obama, although most of the claims that were made seemed to have little acquaintance with the truth. Not least because the Republicans in Congress tried to block everything Obama tried to do at every turn. The most egregious calumny was by Vice-Presidential candidate Paul Ryan, whose inverse Robin Hood budget plan would take from the poor to give to the rich. So the Romney/Ryan plan is designed to make Mitt Romney richer. This despite the massive growth in both wealth and income inequality that has occurred over the last couple of decades. The gap between money raised by cutting spending is trillions less than the money to be handed out to the rich in tax cuts, so this is deficit financing. No mention of wealth or mansion taxes here, actually no new taxes or tax increases at all. The Ryan budget would also cut huge amounts of money from emergency assistance to states like Louisiana, Missouri and Mississippi that were hit hardest by Isaac.
I find it hard to understand why the middle class would vote for something like this that is clearly against their best interests. That is why Ryan didn't talk about his plan at all in his speech, as it is likely to be hugely unpopular.
In his speech Ryan suggested that Obama was to blame for the closure of a GM plant in his hometown of Janesville, Wisconsin. "My home state voted for President Obama. When he talked about change, many people liked the sound of it, especially in Janesville, where we were about to lose a major factory. A lot of guys I went to high school with worked at that GM plant. Right there at that plant, candidate Obama said: 'I believe that if our government is there to support you, this plant will be here for another hundred years.' That's what he said in 2008. Well, as it turned out, that plant didn't last another year. It is locked up and empty to this day."
The factory actually closed before Obama took office.
Put simply, Ryan's plan is to boost the US economy with a large Keynesian fiscal stimulus that will raise the debt by trillions. Just as Reagan didn't practise Reaganism although Thatcher did, the Romney/Ryan plan bears no resemblance to the Coalition's ludicrous and failed austerity plan. In fact it is exactly the opposite. Austerity in both countries, though, is just for the poor.
That brings me back to the flagging UK economy. Two business organisations who astonishingly still continue to say that austerity is the greatest thing since sliced bread, the CBI and the British Chambers of Commerce (BCC), both lowered their growth forecasts. The CBI cut growth estimates for 2012 to minus 0.3 per cent, and 1.2 per cent next year, while the BCC is braced for minus 0.4 per cent and for 2013 it also pencils in 1.2 per cent. David Kern, their chief economist, even suggested this now means that there will be an overshoot in borrowing of some £14bn to £17bn in each year until 2015, equivalent to 1 to 1.2 per cent of GDP. Meeting the fiscal mandate of eliminating the structural current deficit, Kern argues, will probably take two to three years longer to complete than the Chancellor envisaged last March. What a mess.
There's more. Nick Moon, managing director of Social Research at GfK, says "confidence has never been so low for so long – even during the dark days of the 2008-2009 recession.... there has been an Olympic uplift but it has been cancelled out by the grim economic outlook.... It's clear that consumer confidence is trapped in a spiral of depression and it doesn't look like improving any time soon."
How about an unfunded Keynesian stimulus in the UK, focused on big tax incentives for the poor and the disabled? Thanks Ryan for the idea.