The low take-up has continued in the second operation held this week. The ECB revealed today that banks borrowed only €130 billion. In other words banks have helped themselves to little more than half the amount that was available this year. This week’s lending operation does not end the offer. There will be six further tenders at quarterly intervals until mid-2016. But the terms on which the funding will be made available will be more onerous since banks will actually have to increase their net lending in order to be eligible.
The dark clouds around the silver lining
We are hosting a round-table discussion of the statement and the direction of British economic policy. Our final contributor is Matthew Whittaker, chief economist at the Resolution Foundation. RARELY have questions of household living standards and the shape of the public finances been so interwoven. The autumn statement—or, more specifically, the Office for Budget Responsibility’s economic and fiscal outlook—identified a £25 billion shortfall in tax revenues by 2018-19 relative to the projections in place at the time of the budget in March. This is a direct consequence of the disappointingly weak performance of pay in recent months and the expectation of sluggish recovery to come.
Two lost decades?
OVER the past few weeks, debates over British fiscal policy have been conducted under the shadow of George Orwell's "The Road to Wigan Pier", a powerful description of the poverty he found in the north of England in the 1930s. On December 3rd, George Osborne, the chancellor of the exchequer, in his Autumn Statement, announced plans to turn Britain's deficit, which stood at £108 billion ($169 billion) last year, into a surplus of £23 billion by 2020. Because the government does not want to raise taxes to fund these plans, public spending is forecast to fall from 41% of GDP today to just 35% by the end of the decade. That has prompted accusations that the government wants the country to go back to the late-1930s—and the Britain Orwell describes in his cri de coeur against poverty. The Office of Budget Responsibility, Britain's fiscal watchdog, stated that Mr Osborne's plans would force public spending down "below the previous post-war lows reached in 1957-58 and 1999-00 to what would probably be its lowest level in 80 years".... Continue reading
Thanks but no thanks
But try as I might, I cannot muster the same Panglossian enthusiasm as my colleague about the way policy is unfolding. This is not the best of all worlds.
How rich we really are
They have fallen sharply this year (nearly 20%) but still seem gargantuan. According to the central-bank website, in November Russia had $419 billion-worth of reserves. Even after this year’s drop, only a handful of countries have bigger reserves than Russia. But Russia’s official figures do not tell the whole story. About $170 billion of its assets sit in two big wealth funds, the Reserve Fund (worth about $89 billion) and the National Wealth Fund (worth about $82 billion).
What's really there?
It is the second of its kind; the first was published in 2012. The report, overseen by Sir Partha Dasgupta of Cambridge University, puts a dollar value on three kinds of asset: “manufactured” capital (roads, buildings, machinery and so on); human capital (people’s skills and health); and natural capital (including forests and fossil fuels). Statistical wizardry is required: to calculate human capital, for instance, the UN uses figures on average years of schooling, the wages workers can command and the number of years they can expect to work before they retire (or die).