Six things from the last few weeks you should be really angry about

Forget Snowden.

For those people who prefer to live their lives in a state of permanent opposition to pretty much everything, Edward Snowden’s decision to leak classified information through The Guardian newspaper about US and UK government internet surveillance techniques has been manna from heaven. No matter the rights and wrongs of Snowden’s actions it keeps the idea going that there is another ‘Watergate’ moment out there if only we could find it.

But to me, if you really do want to live your life in a perpetual state of internet-based emotional froth, then there is plenty enough truly shocking information out there, released every day, to have you bouncing up and down on your chosen hand-held or desk-based device whilst punching the air and exclaiming "I told you so!!!!" without you necessarily having to go down the road of believing that the moon landings were fake. 

So here are six things from the past two weeks you should really be puce with indignation about, but probably aren’t.

  1. Venezuela is falling to pieces Inflation is nearly 50 per cent, driven mainly by food prices, and President Nicholas Maduro is slipping back into old school South American Marxist language. ‘Yankees go home’ he proclaimed in a television broadcast last week. Rich Venezuelans have reacted to the lack of US dollars by going to the US and borrowing currency on credit cards and bringing it home to buy goods. The economic chaos is worsening as Venezuela increases its dependence on oil – a suicidal policy in itself.  But it is the urban poor who have been hit hardest as food prices rocket. The last time this happened, in 1989, 2,000 people died in the ensuing "Caracazo".
  2. Follow the Yellen Brick Road Job creation in the US is trundling along at a predictable pace and by the end of April 2014, at the current trajectory, all of the jobs lost in the 2007-2008 melt down will have been regained. Should Janet Yellen survive the process of becoming the Chair of the Federal Reserve then her first task may be to consider whether to signal the end of US pump priming known as Quantitative Easing. It may have already occurred by then of course but given the appalling mess that the Fed made of their last attempt to test the water in the disastrous May/July period this year, sending mortgage interest rates up by 1.5 per cent and stopping bank lending in its tracks, you would expect them to be a bit clearer next time.
  3. The financial crisis has moved to its fourth stage It started in personal finances, moved into the banks, caused local government to contract and now finally it is reaching national governments. Watching the US go through the ritualised partisan wrangling over increasing the debt ceiling reminds us that the loudest echoes of the financial crisis have not faded, we have just been deafened to them. This new form of democracy – one with a gun to its own head – seems to be saying "Give me what I want or I’ll shoot" to the financial markets. One day someone will miscalculate and this will go very wrong. 
  4. The markets are calmer when there is no information being released It’s been rather pleasant doing this job in the past couple of weeks. Days go by and nothing major happens because many of the data gathering and releasing departments in the US are shut. Stock markets, bond markets and currencies still move but with nothing like the ferocity seen in the past. It is a reminder of how reactionary markets and news sensitive the system has become. It almost feels like an argument to reduce news flow rather ‘increase transparency’ which is the modern mantra and one that appears to do little but "increase anxiety".
  5. Help to Buy has nothing to do with helping people to buy houses The UK needs another housing bubble like it needs a hole in the head. The fact is the UK banking system is shrinking and no capitalist system based on borrowed money can propel itself without a fully functioning banking system. If you add together the outstanding loans of Barclays, the Royal Bank of Scotland and Lloyds then you can see that although deposits continue to rise, the value of loans is declining. To be fully functioning, systems like ours need both trust and confidence which just so happen to be the two major ingredients missing from our society. Help to Buy is a psychological scheme designed to get people back into the idea of borrowing money from banks.
  6. The Bank account of China swelled to USD3.7trn last month Whilst we have been tightening our belts as part of the latest of our episodic crises, China has continued on with its 30-year plan.  Their collective bank account swelled by another $165bn last month. UK Chancellor George Osborne has announced he is going to relax visa application rules to make it easier for Chinese visitors to come to the UK  - you can understand why given our own collective bank account is empty.

I shall now return to my hollowed out volcano somewhere in the South Pacific to discuss the future with John F Kennedy, Jimmy Hoffer and Lord Lucan and hope the US and UK governments aren’t hacking my router. It would be embarrassing to know they can see me catching up on "Strictly – it takes two’".

Photograph: Getty Images

Head of Fixed Income and Macro, Old Mutual Global Investors

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The Autumn Statement proved it – we need a real alternative to austerity, now

Theresa May’s Tories have missed their chance to rescue the British economy.

After six wasted years of failed Conservative austerity measures, Philip Hammond had the opportunity last month in the Autumn Statement to change course and put in place the economic policies that would deliver greater prosperity, and make sure it was fairly shared.

Instead, he chose to continue with cuts to public services and in-work benefits while failing to deliver the scale of investment needed to secure future prosperity. The sense of betrayal is palpable.

The headline figures are grim. An analysis by the Institute for Fiscal Studies shows that real wages will not recover their 2008 levels even after 2020. The Tories are overseeing a lost decade in earnings that is, in the words Paul Johnson, the director of the IFS, “dreadful” and unprecedented in modern British history.

Meanwhile, the Treasury’s own analysis shows the cuts falling hardest on the poorest 30 per cent of the population. The Office for Budget Responsibility has reported that it expects a £122bn worsening in the public finances over the next five years. Of this, less than half – £59bn – is due to the Tories’ shambolic handling of Brexit. Most of the rest is thanks to their mishandling of the domestic economy.

 

Time to invest

The Tories may think that those people who are “just about managing” are an electoral demographic, but for Labour they are our friends, neighbours and the people we represent. People in all walks of life needed something better from this government, but the Autumn Statement was a betrayal of the hopes that they tried to raise beforehand.

Because the Tories cut when they should have invested, we now have a fundamentally weak economy that is unprepared for the challenges of Brexit. Low investment has meant that instead of installing new machinery, or building the new infrastructure that would support productive high-wage jobs, we have an economy that is more and more dependent on low-productivity, low-paid work. Every hour worked in the US, Germany or France produces on average a third more than an hour of work here.

Labour has different priorities. We will deliver the necessary investment in infrastructure and research funding, and back it up with an industrial strategy that can sustain well-paid, secure jobs in the industries of the future such as renewables. We will fight for Britain’s continued tariff-free access to the single market. We will reverse the tax giveaways to the mega-rich and the giant companies, instead using the money to make sure the NHS and our education system are properly funded. In 2020 we will introduce a real living wage, expected to be £10 an hour, to make sure every job pays a wage you can actually live on. And we will rebuild and transform our economy so no one and no community is left behind.

 

May’s missing alternative

This week, the Bank of England governor, Mark Carney, gave an important speech in which he hit the proverbial nail on the head. He was completely right to point out that societies need to redistribute the gains from trade and technology, and to educate and empower their citizens. We are going through a lost decade of earnings growth, as Carney highlights, and the crisis of productivity will not be solved without major government investment, backed up by an industrial strategy that can deliver growth.

Labour in government is committed to tackling the challenges of rising inequality, low wage growth, and driving up Britain’s productivity growth. But it is becoming clearer each day since Theresa May became Prime Minister that she, like her predecessor, has no credible solutions to the challenges our economy faces.

 

Crisis in Italy

The Italian people have decisively rejected the changes to their constitution proposed by Prime Minister Matteo Renzi, with nearly 60 per cent voting No. The Italian economy has not grown for close to two decades. A succession of governments has attempted to introduce free-market policies, including slashing pensions and undermining rights at work, but these have had little impact.

Renzi wanted extra powers to push through more free-market reforms, but he has now resigned after encountering opposition from across the Italian political spectrum. The absence of growth has left Italian banks with €360bn of loans that are not being repaid. Usually, these debts would be written off, but Italian banks lack the reserves to be able to absorb the losses. They need outside assistance to survive.

 

Bail in or bail out

The oldest bank in the world, Monte dei Paschi di Siena, needs €5bn before the end of the year if it is to avoid collapse. Renzi had arranged a financing deal but this is now under threat. Under new EU rules, governments are not allowed to bail out banks, like in the 2008 crisis. This is intended to protect taxpayers. Instead, bank investors are supposed to take a loss through a “bail-in”.

Unusually, however, Italian bank investors are not only big financial institutions such as insurance companies, but ordinary households. One-third of all Italian bank bonds are held by households, so a bail-in would hit them hard. And should Italy’s banks fail, the danger is that investors will pull money out of banks across Europe, causing further failures. British banks have been reducing their investments in Italy, but concerned UK regulators have asked recently for details of their exposure.

John McDonnell is the shadow chancellor


John McDonnell is Labour MP for Hayes and Harlington and has been shadow chancellor since September 2015. 

This article first appeared in the 08 December 2016 issue of the New Statesman, Brexit to Trump