Well, as we expected, here in benighted Britain, Teflon Tony, or Tory Blair as many have called him, pulled off an historic third term for New Labour.
What does it mean for Great Britain, economically and socially.
Now your writer rarely comments on social matters, however in this instance, the two are inexorably inter-twined.
In his very first Election Manifesto, Teflon, promised the introduction of Proportional Representation or PR, rather than perpetuate the hugely undemocratic “First Past the Post” system. Guess what? With such a huge landslide victory, the last thing new Labour then wanted was PR!
My own electoral ward is a very safe Tory seat: the Torys could put up a donkey and he would be guaranteed a win. On second thoughts, I think they probably did.
Us commentators still await the final election count. I know that my vote was a pointless and meaningless right. Whether I vote of not, a Tory would be returned to Westminster.
However, I am, as you know, more concerned with pragmatics and in particular the economy, so what are my immediate forecasts?
Mr Brown, the Chancellor of the Exchequer, has already gravely erred in his forecasts of the money necessary to fund the growing shortfall between government spending and total tax take. Indeed, this is so bad, that the UK is amongst a host of nations trying to sell the concept of a 50 year government bond to global capital markets. Never before, has an apparently successful economy, needed to tap such a long bond.
Retail sales, are slipping day by day: for the first time, a bell-weather stock, Matalan, has missed profit targets. This is extremely important and indicative of the problems ahead.
UK base rates are set to rise, inexorably. The concept of the 50 year long bond has sent worrying signals to the markets and it is obvious that once core interest rates rise, a series of inescapable realities will follow.
Sub-Prime consumer debt (mainly unsecured, floating rate) will mushroom into delinquency. This is not an insignificant amount. The last value was in excess of £1 trillion!
Rising rates will implode the UK housing market, as I have been forecasting for some time. In its wake, the massive spending on home improvements will cease, throwing tens of thousands of small businesses into bankruptcy.
Watch this space!
© Copyright 2005 by AxisofLogic.com
Michael C Feltham FCEA, ACPA, FSPA
Michael C Feltham is a columnist for Axis of Logic. See his bio and additional insights, analyses and forecasts at Feltham on the Economy. By professional discipline, an accountant, who specialised in international finance and economic analysis in the 1970s. Until December 2001, he was an External Examiner and Moderator to Ashcroft International Business School at their Cambridge and Chelmsford faculties at MBA level. He writes widely on technical finance and economic matters. Michael is Founder and CEO of a software company and CFO of a New Media company. You can reach Mr. Feltham at: Michaeleff@onetel.com.