The Blog

Money - There's Too Much Of It About

In short, if economic experts actually knew what they were talking about, some of them might agree with each other. As they don't, let's assume they don't.

Sometimes I scare myself. Who would have thought by looking at me that I am a financial genius and not just someone who comes out with any old rubbish that flits across his tiny mind? Can you imagine my surprise when I discovered that I actually know what I am talking about? Even if it might appear that I latched upon my pronouncements through sheer dumb luck.

I have been banging on for an age about bubbles and shoots, which sounds like a game you would play on your phone while waiting for your cancelled train to show up, or might refer to a deviant sexual practice in cockney rhyming slang, or might be the new and exciting veterinarians' elephant tranquilliser that the kids take to spice up a night of disco dancing. However, in this instance, bubbles and shoots refer to the unsustainable expanding of asset prices, and the signs that things are getting better. Any expert economist will tell you that. They might also tell you that 6 times 8 is about 45ish and that we would all be better off out of the EU. Or better off in it. Or better off if we were in, out, in, out and shaking it all about.

In short, if economic experts actually knew what they were talking about, some of them might agree with each other. As they don't, let's assume they don't. But they talk a good game, appearing on television news programmes from their busy offices in their Saville Row suits and their silly bow ties, explaining to us denser mortals precisely what the latest economic news means and how to profit from it. They will bang on about liquidity and leveraging and GDP and the IMF and BRICS and B2B and all those other newly minted phrases and acronyms that amount to a giant pile of OTT BS.

They talk like that to obfuscate, not illuminate. This is the redoubt of the savvy professional - speak in a fluent stream of impressive yet indecipherable jargon and it will appear to the average listener that you actually know what you are talking about. Fortunately for them, they work in an industry where all of their contemporaries have no idea what they are on about either. In the financial racket, it is a great big comforting warm bath of concentrated nonsense that they use to bamboozle the innocent and expand their perceived worth. Like a bubble, they inflate their standing in the business with nothing more than hot air.

At least that is what I thought until I discovered that I myself am a proven financial expert. It turns out that I'm not as stupid as I look. If you wind back the tapes of my shows on LBC, you will hear me pooh-pooh the notion that this country's economy is on the mend. From the moment that those people were filmed on the news carrying their office possessions out of the building of some bank that most of us had never heard of, the Chancellor of the Exchequer has been spying green shoots. Maybe he's been at the absinthe, I suggested. What planet is he living on, I enquired.

You might have been able to spot green shoots in the organic fresh herbs section of the whole food, artisanally produced comestibles vendor were he lives, but for the rest of us, who shop at Aldi, you wouldn't have spotted them with a magnifying glass. Where were these green shoots of which he spoke? Not round my way, or yours, I bet. The thing with economic predictions, much like weather forecasts, is if you keep foretelling the same thing, eventually you will be right. And then you can say "I told you so". So, George Osborne kept up the mantra of a resurgent economy and in just six short years he acquired the figures to prove it.

And that would be good for George, except that it isn't really a recovery at all. As the popular singing combo Imagination put it in their 1982 treatise on false dawns after a banking collapse: It's just an illusion ooh,ooh,ooh,ooh ahhh.

I couldn't agree more.

It's an illusion, this recovery, because it is based on us buying things we don't need with money we don't have. It is a recovery built on the sand of debt. Add to this the intention of the government to help people who can't afford to buy a house. They need this leg up because housing is too expensive relative to incomes. The government's Help To Buy scheme is already making that problem worse because the number of those who can now buy a place has gone up but the number of properties has not. Even I can remember from my school boy economics lessons that those set of circumstances will lead to a further increase in prices, and the full weight of the government's scheme has not yet been felt. That will come to bear in the new year.

This is all pretty easy stuff. You might think that eventual calamity is so obvious that no minister would propose such a scheme, one that grants government support of sub prime mortgages, which is the exact same reason the collapse happened in the first place. A cynic might think that the scheme is less to help the young get on the housing ladder and more to do with increasing house values to appease the group that is likely to vote the most: householders. Short termism strikes again. There will be a brief feel good factor as people who are already home owners see their house is earning more than they are, they will be persuaded to vote Dave, and the Tories won't have to pay attention to the Lib Dems ever again.

But I can't take any credit for saying any of that. It's so obvious Stevie Wonder could see it. What I am amazed I got right is that it is not just house prices that are being affected by the enormous increase in credit and money. Absolutely everything is going up in price. No less an august institution than JP Morgan has said that there is too much liquidity sloshing about the world. In a bar that would be a good thing, in an economy, apparently, it isn't.

By "printing" more money (a bazillion jillian pounds at the last count) the banks and governments of the world have too much cash to play with. And like a crack addict with a cash card, they cant be trusted with it. They are letting us have some in the form of credit, and we REALLY can't be trusted with that.

The wash of money has put up the price of everything from a Gucci bag to a Brussels sprout. Bubbles are being inflated. When they go pop, as all bubbles do, they will take out the green shoots and everything else with them. That's more or less what JP Morgan said and they have just been fined $13bn by American authorities and yet are still in business, so they must know a little bit about money.

What is surprising is that I do too.