Crisis.......what crisis?

I have been trawling the financial pages to try to make sense of it all. Not easy!

In the US there has been something approaching euphoria (especially in the O camp) that the economy is showing fresh buds. But we must remember that ‘rough winds do shake the darling buds of May’. The fact that only 121,000 private sector jobs were added in March puts a bit of a dampener on it. And I guess that the unemployment figures of c.8% are only job-seekers, not the unemployed who have given up. The true figure of those out of work must be much higher.

What’s going on?

Well, according to Irwin ‘Alka’ Stelzer, there are some very good signs.

One is ‘on-shoring’ – bringing back jobs that had been off-shored  to lower-cost areas especially China. GE, for example, is repatriating its appliance manufacturing operations. As I have previously predicted, China’s rocketing labour costs have brought them more into line with US costs, and foreign firms are also getting increasingly fed-up with intellectual property theft which is rife in China. One reason for the increase in labour costs is that the regime is desperate to avoid civil unrest, although I suspect that the genie is already out of the bottle.

Another is that retailing is doing better than expected.

New car sales are doing very well. In March they were the highest for 5 years. Accustomed as we are to believing that Americans swop their cars almost as quickly as they change their socks, I was amazed that the average age is 10 years. Petrol at $4 a gallon (less than half the UK price) is encouraging Americans to trade-in their old bangers for smaller and more fuel efficient transport. Low interest rates make HP more affordable.

More (very) good news is that the housing market is now stirring. The main reason for this is that whereas historically rental costs were about 10% lower than to buy. Now the ratios have swopped places, with renting about 15% more expensive than buying, plus the fact that low interest rates make mortgages cheaper.

Another factor is that there has been an influx of foreign buyers of holiday homes or as investment. There has also been capital flight from Europe in the wake of the euro-crisis. Truly it’s an ill wind…….! And there has been substantial investment buying as groups snap up as many as 1000 houses in a single deal at fire-sale prices.

So what’s the problem? Well, it’s the usual one – the wretched politicians who insanely refuse to make the required compromises over tax cuts, payroll relief, and spending cuts.

Back in the UK, it’s difficult to make head or tail of it all.

Depending on which set of figures you believe, we are either in recession, stagnation, or growth. The OECD, the ONS and private surveys all tell a different story. The overall picture is that there has been modest growth over the past 3 years.

If things are as bad as Ed Balls claims, how come the UK has added 700,000 private sector jobs in the last 2 years?

And finally…………what to make of the disgraceful farce surrounding the appointment of a new boss for the World Bank?

The obvious candidate is the ex-Finance Minister of Nigeria. She is widely respected for her financial acumen, has the right experience as a former deputy at the World Bank, and is thoroughly acceptable especially to the emerging economies.

However, O is sticking to the convention that the World Bank is an American fief. He has nominated a candidate who does not appear to have a single qualification apart from working on AIDS in the WHO.

An observer has described it as ‘shameful and self-destructive’.