The Global Economy: why is nobody asking the basic questions?

I studied Economics to A Level and received a 'B' grade - not insignificant.

I don't recall much of it now of course. I remember graphs of demand and supply lines meeting at the optimum price point. I remember micro economics being quite straightforward, but then being floored by the concept of macro economics (once I'd realised that it had nothing to do with calculating the cost savings to be made if you shop at the wholesale discount store Macro).

In particular, I remember only ever having a minimal understanding of the interplay of exchange rates, inflation, interest rates and why, if one went up, it meant the others went down.

I remember strange discussion about people "buying" currency, without ever really understanding if there were currency shops around that I had never noticed before (I was aware of course of the Bureau de Change counter at Thomas Cook, but somehow this seemed to belittle the idea that our teacher was attempting to convey).

To say then that my knowledge of what has happened in the global markets recently is limited is perhaps to understate the issue, but it seems to me that in all the reporting and analysis, a certain section of the reading and viewing public have been ignored. To me, there seem to be certain fundamental questions that are basic in nature, but have gone largely unexplained. For instance:

1. If the UK has borrowing levels of around £21bn at present, how does the PM unilaterally announce that borrowing will increase to around £70bn over the next few years? Where is this money being borrowed from? Who are the lenders? What are the repayment terms? Were any loan terms agreed in contractual form?

If you go to the bank and ask for a loan, the bank will want to know when you will be paying the money back, will want to charge interest, and will want collateral. What does the Government, already heavily in debt, offer to satisfy lenders on this? And, if it is nothing, and they have managed to obtain the loans on the basis of nothing in writing, and with no collateral, what right-minded individual approved this as a good deal?!

2. The US budget deficit is even worse than the UK's? How does this happen? If the US owes so much, how come it has cash to fund defence, healthcare, indeed anything? Again, where is it getting this money from? And does the budget deficit, that has been hanging around for so long, really matter at all given that no-one really seems that keen to tackle it and clear the deficit. If it is merely numbers in a ever lengthening series of news reports which, no matter how big teh deficit gets does not prevent the US government from continuing to spend, then what relevance is the budget deficit? Why even acknowledge it?

3. If the dominant Western countries of the world are all in debt, then doesn't that mean that some countries somewhere have significant budget surpluses? For every billion that the UK owes, some other country presumably had that billion kicking around and available to lend? Why are not hearing who these cash rich countries are (it is surely not just the Arab states), and why are they not being encouraged to solve the global debt problems?

4. Again, if the US government is in debt, where did it suddenly find $700bn for a bailout package? One week it was business as usual, the next the Government has had to put in place a cash rescue package that a few days earlier it had no warning it would need to implement? Where does one suddenly find $700bn?

Reports were stating how the bail out was going to cost each American family around $3,000. Why report this when in reality everyone knows that the Government is not going to come knocking on doors to collect this amount from each American family? There are presumably many families in the US who simply won't have an additional $3,000 to donate to the Government to help pay for a package they had no say over. There is no way the Government will be able to recover this money from taxpayers. And in any event, why should they? Why can't they just announce an increase in borrowing, thereby saving the need for taxpayers to worry, and just add the $700bn to the already colossal but unimportant budget deficit?

And then you have even more basic questions which I'd love to know the answers to:

5. If people are afraid of inflation, why don't all Western goverments collectively decide now that no item anywhere should be allowed to increase in price by more than, say, 2% this year. Just while things stabilise. People will say "you can't stop market forces" but somebody somewhere must be controlling the actual price of, say oil. Investors rely on the big screens at the stock exchange to update them of share prices and oil prices. The papers are full of stockbrokers and bankers staring at big screens of evr changing numbers. Who is actually sitting behind these screens entering the information? Who decides that the FTSE lost 300 points today? If prices of goods in a shop go up, it is because the shop keeper decided that should happen. He went round with his price gun and changed the prices himself. Who is the shopkeeper for the FTSE? Who decides whether oil goes up or down and precisely by how much?

6. And what of confidence? Why can't everyone now collectively agree that they should be confident again. Start buying, stop selling. And everything returns to normal quite quickly. And everyone is happy.

7. And above all else (albeit that it might be all very well for me to sit in my little Dubai bubble saying this), but is the real man on the street actually affected by any of this? Governments bailing out banks - who cares? As long as savings are secure (which they are in the UK up to £35,000 per account, which is probably more than ample preotaction for most people), OK you may have lost a bit on some shares, but by and large I fail to see how most people's average lives aren't continuing exactly as normal. Why all the doom and gloom?

Happy to be enlightened on all of the above.

Life, liberty and the pursuit of happiness

Which is the best TV show ever?

Without a moment's hesitation, I would argue that it is The West Wing (buy all 6720 minutes of it here for the unbelievably low price of £49.99). Outstanding value.

I cannot recommend this show enough. You need not be interested in American politics (but I am, which made it that much more enjoyable), but the scripting, the casting, the pace, the wealth of issues covered, and just the way that every element of the show fits together to make a complete whole surpasses the quality of anything else that has been on TV ever. Fact. Not even worth debating.

The Good and the Bad of Bond

More exciting this month than even my birthday (on 24th) is the release (on 30th), of Quantum of Solace, the next Bond film.

The trailer looks awesome.

The theme song, however, neither looks nor sounds anything other than awful. Shame that.