A classic `time to bury bad news’: just ahead of the Christmas holidays. Suddenly, there it was: the biggest deficit in the UK became the current account of the balance of payments at £100 billion.
It is even bigger than the budget deficit! But who in the UK has a clue about what the “current account deficit” is, and does anyone even care? Certainly not the Prime Minster or Chancellor.
A quick Google of their names and the technical term does not reveal a long history of strong comment. In fact, the only major reference is actually the speech delivered by Shadow Chancellor Osborne in February 2010 (see selected extracts below). It set out his philosophical approach to economic management and focussed - naturally enough - on the catastrophic budget deficit that he was about to inherit.
However, he recognised very fully the role of markets in forcing dramatic economic change but seems to have focussed only on the markets for government bonds, and overlooked the foreign exchange markets. For seasoned observers, this oversight could become his legacy in history as his “new economic model” has not produced the necessary re-balancing of the economy. The foreign exchange markets may soon do that once they eventually focus on the frightening trend deterioration in the current account.
© Graham Bishop
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