Sharks can smell blood from miles out
Following yesterday's shameless expoitation of HM the Queen by the ghastly Gordo, we got the latest fix on government finances back in the real world.
As you will know, yesterday Gord promised to halve the government's deficit while simultaneously pledging to increase spending on such things as care for the elderly. We have no idea how would achieve that, and more to the point, neither has he.
Today we learn that government borrowing in the real world has continued to spiral. It now stands at £87bn in the financial year to date, over 150% higher than the comparable figure last year.
This reflects both the collapse in tax revenues - down around £30bn compared to last year - and a surge in spending - up around £20bn. Indeed, as we pointed out last month, things are now so bad, the cumulative current deficit literally disappeared off the ONS official chart sometime during the summer- it could be anywhere by now:
Despite previous official spin, Tyler's trusty back of envelope says HMG is now on track for 2009-10 borrowing well in excess of £200bn (as against the £175bn forecast in the April budget). The envelope says that by end-October last year the government had borrowed just 40% of its 2008-09 total. Applying that same percentage to the £87bn they've borrowed so far this year gives a total for the year of around £217bn.
Meanwhile, elsewhere in the real world, retail sales are booming. Sales are up 3.4% compared to last year, and 5.8% over two years - ie this is not simply a recovery from extreme weakness last year.
What should we read into that?
Well, zero interest rates are stoking up a further unsustainable spending binge (cf the bubbles we've seen in the housing and equity markets). It is the economics of short-term gain and long-term pain.
Unsurprisingly, consumer price inflation is picking up again. And despite the spin that it's all to do with fuel prices "stabilising" after a period last year when they fell, the truth is that the prices of 60% of the items comprising the CPI basket are are already rising at or above the government's 2% target. The CPI is only being held down by sharp falls in clothing and footwear (where sales are also down sharply), and smaller falls in gas and electricity prices.
Despite the consensus view that inflation is dead, plenty of pretty sharp operators are betting UK prices will push on up. This morning the Mail reports:
"Sharks off the British coast: Oil tankers refuse to unload until prices rise... keeping YOUR fuel costs soaring
Laden with fuel, three oil tankers sit idly within sight of the British coastline (pic above), playing a waiting game that is driving up petrol prices for hard-pressed motorists.
The Mail seems to be suggesting the Navy boards and orders them ashore. But we don't blame the sharks at all. Sharks are an essential part of the economic ecosphere. They're in the risk biz, and they will suffer if they turn out to be wrong about the outlook for petrol prices.They are part of a flotilla of ten vessels refusing to unload their cargo until market speculation has driven up its price to the level they want."
But sharks ain't dumb - everyone knows they can smell blood from miles away.