Osborne and Carney should enjoy their day in the sun

The UK fast becoming a stand-out developed economy performer. Growth is heading into 2014 at a healthy 3 to 4 per cent, even in the face of Osborne’s austerity.

If last week’s markets were quiet and range-bound due to Thanksgiving celebrations and a paucity of frontline data, this week could hardly present a more different proposition. Monday saw a strong US Manufacturing ISM survey, and yesterday the RBA decided to sit on its hands, but the committee was once again at pains to point out that they view the AUD’s strength as "uncomfortably high", with a "lower level of exchange rate likely to be needed to achieve balanced growth in the economy". They also highlighted that "public demand is forecast to be quite weak" and "considerable uncertainty surrounds this outlook" (for a pick-up in activity). More rate cuts are coming in Australia as Asia slows. The RBA are very perceptive - they realise that the Chinese 3rd plenum, although very constructive in the medium-term (10-20 years in Chinese terms!) implies slower growth in the short-term, as the economy rebalances away from export-fest to the kind of consumer-lead growth that is all too familiar to us in the UK.

We are entering a dangerous era of change for global growth, with the onus being passed to developed markets to take over as locomotives. Really?! With an economic block the size of the Eurozone destined to flatline for years to come, or implode, and a US economy that will struggle to reach escape velocity as the Fed removes the punch bowl, this looks like a vain hope. Just look at the effect on the US housing market of even the suggestion of tapering and a 100 bp rise in mortgage rates this summer-and the housing recovery has played a very significant part in what meagre growth we have seen thus far.

Against this backdrop, Messrs. Osborne and Carney are beginning to look pretty lucky (and smart actually) with the UK fast becoming the stand-out developed economy performer. Growth is heading into 2014 at a healthy 3 to 4 per cent annualized clip, even in the face of Osborne’s austerity, which is another good story. In his 5 December Autumn Statement, I expect Chancellor Osborne to be able to announce that the OBR has made a £13bn reduction in its official forecast for the 2013/2014 government deficit, compared to its March forecast, i.e. 5.8 per cent of GDP, rather than 6.9 per cent, and also to make reductions in deficit forecasts for the future. I would also expect upward revisions to growth prognoses.

Governor Carney seems to be fully on-board in helping out the Chancellor, with repeated promises that rates will stay lower for longer than recent positive data surprises would otherwise suggest. Last week’s decision by the Bank of England to restrict its Funding for Lending Scheme to the provision of cheap liquidity to banks for business lending, rather than also for household mortgages, also implies a concrete, and rather subtle, message that the Bank will use macro-prudential tools to cool parts of the economy if it deems this necessary - and not conventional monetary tightening. This having been said, I’d say this change in policy will have negligible effect on the UK housing market, as cheap liquidity is currently plentiful anyway, and the government’s two Help to Buy schemes will be the real policy drivers of the housing market - eventually achieving the Nirvana of increased home building, as well as the feel-good factor from higher prices that British homeowners crave like the next heroin high. I would be extremely surprised if Help to Buy was altered at all before the next election in May 2015.

The real question is whether the UK can continue to thrive in the face of headwinds from Europe, Asia and possibly the US.

Mr Osborne is starting to look pretty lucky. Photograph: Getty Images.

Chairman of  Saxo Capital Markets Board

An Honours Graduate from Oxford University, Nick Beecroft has over 30 years of international trading experience within the financial industry, including senior Global Markets roles at Standard Chartered Bank, Deutsche Bank and Citibank. Nick was a member of the Bank of England's Foreign Exchange Joint Standing Committee.

More of his work can be found here.

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What happens when a president refuses to step down?

An approaching constitutional crisis has triggered deep political unrest in the Congo.

Franck Diongo reached his party’s headquarters shortly after 10am and stepped out of a Range Rover. Staff and hangers-on rose from plastic chairs to greet the president of the Mouvement Lumumbiste Progressiste (MLP), named after the first elected leader of the Democratic Republic of Congo.

Diongo, a compact and powerfully built man, was so tightly wound that his teeth ground as he talked. When agitated, he slammed his palms on the table and his speech became shrill. “We live under a dictatorial regime, so it used the security forces to kill us with live rounds to prevent our demonstration,” he said.

The MLP is part of a coalition of opposition parties known as the Rassemblement. Its aim is to ensure that the Congolese president, Joseph Kabila, who has been president since 2001, leaves office on 19 December, at the end of his second and supposedly final term.

Yet the elections that were meant to take place late last month have not been organised. The government has blamed logistical and financial difficulties, but Kabila’s opponents claim that the president has hamstrung the electoral commission in the hope that he can use his extended mandate to change the rules. “Mr Kabila doesn’t want to quit power,” said Diongo, expressing a widespread belief here.

On 19 September, the Rassemblement planned a march in Kinshasa, the capital, to protest the failure to deliver elections and to remind the president that his departure from office was imminent. But the demonstration never took place. At sunrise, clashes broke out between police and protesters in opposition strongholds. The military was deployed. By the time peace was restored 36 hours later, dozens had died. Kabila’s interior minister, claiming that the government had faced down an insurrection, acknowledged the deaths of 32 people but said that they were killed by criminals during looting.

Subsequent inquiries by the United Nations and Human Rights Watch (HRW) told a different story. They recorded more fatalities – at least 53 and 56, respectively – and said that the state had been responsible for most of the deaths. They claimed that the Congolese authorities had obstructed the investigators, and the true number of casualties was likely higher. According to HRW, security forces had seized and removed bodies “in an apparent effort to hide the evidence”.

The UN found that the lethal response was directed from a “central command centre. . . jointly managed” by officials from the police, army, presidential bodyguard and intelligence agency that “authorised the use of force, including firearms”.

The reports validated claims made by the Rassemblement that it was soldiers who had set fire to several opposition parties’ headquarters on 20 September. Six men were killed when the compound of the UDPS party was attacked.

On 1 November, their funerals took place where they fell. White coffins, each draped in a UDPS flag, were shielded from the midday sun by a gazebo, while mourners found shade inside the charred building. Pierrot Tshibangu lost his younger sibling, Evariste, in the attack. “When we arrived, we found my brother’s body covered in stab marks and bullet wounds,” he recalled.

Once the government had suppressed the demonstration, the attorney general compiled a list of influential figures in the Rassemblement – including Diongo – and forbade them from leaving the capital. Kinshasa’s governor then outlawed all political protest.

It was easy to understand why Diongo felt embattled, even paranoid. Midway through our conversation, his staff apprehended a man loitering in the courtyard. Several minutes of mayhem ensued before he was restrained and confined under suspicion of spying for the government.

Kabila is seldom seen in public and almost never addresses the nation. His long-term intentions are unclear, but the president’s chief diplomatic adviser maintains that his boss has no designs on altering the constitution or securing a third term. He insists that Kabila will happily step down once the country is ready for the polls.

Most refuse to believe such assurances. On 18 October, Kabila’s ruling alliance struck a deal with a different, smaller opposition faction. It allows Kabila to stay in office until the next election, which has been postponed until April 2018. A rickety government of national unity is being put in place but discord is already rife.

Jean-Lucien Bussa of the CDER party helped to negotiate the deal and is now a front-runner for a ministerial portfolio. At a corner table in the national assembly’s restaurant, he told me that the Rassemblement was guilty of “a lack of realism”, and that its fears were misplaced because Kabila won’t be able to prolong his presidency any further.

“On 29 April 2018, the Congolese will go to the ballot box to vote for their next president,” he said. “There is no other alternative for democrats than to find a negotiated solution, and this accord has given us one.”

Diongo was scathing of the pact (he called it “a farce intended to deceive”) and he excommunicated its adherents from his faction. “They are Mr Kabila’s collaborators, who came to divide the opposition,” he told me. “What kind of oppositionist can give Mr Kabila the power to violate the constitution beyond 19 December?”

Diongo is convinced that the president has no intention of walking away from power in April 2018. “Kabila will never organise elections if he cannot change the constitution,” he warned.

Diongo’s anger peaked at the suggestion that it will be an uphill struggle to dislodge a head of state who has control of the security forces. “What you need to consider,” he said, “is that no army can defy a people determined to take control of their destiny . . . The Congolese people will have the last word!”

A recent poll suggested that the president would win less than 8 per cent of the vote if an election were held this year. One can only assume that Kabila is hoping that the population will have no say at all.

This article first appeared in the 01 December 2016 issue of the New Statesman, Age of outrage