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Come back Robert Peston, all is forgiven: and tell us who’s to blame this time

He’s the only one of a Dad’s Army of pundits no longer on hand to commentate on the looming financial crisis

23 January 2016

9:00 AM

23 January 2016

9:00 AM

‘Who’s to blame for financial crisis’ is a poem I wrote in 2012, rhyming ‘speculators, spivs and traders’ with ‘rich, -uncaring hedge-fund raiders’, while taking passing swipes at Gordon Brown and ‘Mervyn King, who really didn’t do a thing’. But it’s too early in 2016 to update my ditty, because the new crisis — if that’s what it is — hasn’t really hit us yet, except in share prices that clearly have further to fall. And the question of who’s to blame, never mind how to make them rhyme, is going to be a lot more difficult this time round.

‘It’s China’s fault,’ was the gist of bulletins about the loss of 750 jobs at Tata’s Port Talbot steelworks this week. Dumping of cheap Chinese steel on world markets, combined with falling Chinese domestic demand, has turned the rump of the UK steel industry from a marginal survivor with marketable specialist skills into what looks increasingly like a basket case which no government action could revive. It’s China’s fault too that stock markets are so jittery, taking their cue from the Shanghai exchange — which really is a fiefdom of ‘speculators, spivs and traders’, unrestrained by state intervention. But fault lies also with world trade negotiators for failing to stop the dumping, with western leaders (including George Osborne) for toadying fruitlessly to Beijing, and with a vast gallery of pundits for overhyping China’s prospects in the first place.

Is cheap oil bad?

As for oil, it’s Saudi Arabia’s fault that the price is so low, having kept pumping while global demand was faltering; but it seems harsh to make Iran share the blame for adding another half-million barrels a day to the glut, having been allowed back to market after meeting a promise to start dismantling its nuclear capability. That is, or should be, a step towards regional stability; and anyway cheap oil doesn’t provoke economic crises. Quite the reverse: every recession of the past four decades has been preceded by an upward spike in the barrel price — including its $147 peak in July 2008.

Economists who have relied on that model throughout their careers are now having to reinterpret ultra-low energy prices, not as a catalyst for further recovery, but as a harbinger of even lower demand as downturn takes hold. Beyond that, the dip below $30 has brought fears of bad debts for banks that have lent heavily to oil and gas players, particularly in US shale — and of critical energy shortages in a decade’s time because so many current exploration projects have had to be put on hold.

So it’s also the fault of oil companies, and banks that lend to them? Maybe, but hands up anyone who didn’t think the turmoil that followed the Arab Spring heralded an era of $100-plus oil and disrupted Middle East supply, to which US shale gas was a God-given answer. Which reminds us that ‘blame’ is best applied to those who behave badly, rather than those who guess wrongly.

Dad’s Army revival

Have our high-street banks, house–buyers and consumers been behaving badly? There’s a looming debt crisis abroad, we gather, but not here: Governor Carney says ‘this is not a debt-fuelled recovery’ even though ‘vigilance is required’ in relation to rising household borrowings. Our banks have been busy rebuilding their balance sheets, and if they deserve stick it’s for not lending enough to smaller businesses. Our house prices keep bubbling, but that’s because of foreign cash at the top and too few houses at the bottom, not crazy mortgages. When blame does come to rest in the financial world this time round, I suspect it will be on central bankers like Carney for keeping rates too low for too long, and distorting asset prices with too much QE.

But let’s watch and listen: the Dad’s Army platoon of financial-disaster commentators is reporting for duty again. Here’s Danny Blanchflower on Skype from New Hampshire; Lord Turner is in the radio car; Paul Mason of Channel 4 News has grown a grisly beard, the better to resemble an Old Testament prophet. Only one familiar, swooping, vowel-strangling voice is missing, having last been heard rambling on ITN about the Corbyn reshuffle. Come back Robert Peston, your country needs you.

A new tension

Economic change is about conflicting forces: supply versus demand in oil, steel and every-thing; local heroes versus City villains and Westminster blunderers; domestic momentum versus global headwinds. In relation to the last of those, I’m cheered by a forecast from the well-respected Ernst & Young Item Club that the UK economy is still capable of growing at 2.6 per cent in 2016, boosted by exports, and that with low inflation and eased welfare cuts, consumer spending will increase by 2.8 per cent. But three weeks into a year in which forecasting is clearly going to be an even more dangerous game than usual, I sense a new conflict on the home front: between the reinvigorated and the demoralised.

Everywhere I see established businesses that were strong enough to ride the recession now doing well, many taking on more staff; entrepreneurs energised by new ventures; housebuilders going hell for leather; the voluntary sector, strengthened by necessity, doing good work on all fronts. Then I see public services (whether or not still in public ownership) traumatised by funding cuts, restructurings, insensitive top-down decision-making and the blame culture: libraries and post offices under threat, local government in retreat, doctors striking, taxpayer dissatisfaction rising like the flood waters to which the state’s response looked so inadequate.

That second trend threatens to overwhelm all the feelgood that might have come from the first, so that we might find the peak of the recovery has passed before we even noticed it. How is it where you live? Do tell me:

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Show comments
  • busguyuk

    That’s an excellent snapshot of the world as it is, and most parts of the UK in particular. I can see real unrest here soon, and we need someone nearer to ‘a Trump’ to start telling it how it is, and not ‘a Corbyn’ promoting the return to the dark ages of a doomed philosophy.

  • Frank

    I always read your articles, but nobody needs Robert Peston.
    Your last two paragraphs sum up the current situation in Britain well. Another summary might be that this country has had deeply inadequate Governments for decades and the chickens are now roosting. Westminster probably doesn’t understand / notice the taxpayer dissatisfaction you mention (Cameron / Osborne don’t care and Labour is self-obsessed) – one has to hope that we get through without a major flare-up!

  • Flintshire Ian

    Pesto has a really annoying voice and mannerisms. Keep your hands still or move to the radio! Unwatchable for me I’m afraid.

    • King Kibbutz

      The annoying voice, without the visual explanation of its pattern, becomes actually amusing, dare I say, endearing?

  • The Masked Marvel

    If you want Peston to tell us who’s to blame this time, just reread his articles on previous crises, as he always blames the same people and policies.

  • Jonathan Tedd

    Get real MV Dubya…this is another credit fuelled boom. Bigger and nastier the outcome will be (Yoda voice).

    “There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved.”

    – Ludwig von Mises

    I urge readers to visit Tim Morgan’s surplus energy economics blog – an oil analyst by trade but his take on the state we’re in is compelling indeed.

  • Landphil

    Life is tooooooooo short to listen to Rooobbeeeeeeeeeeert Peston.

  • Johnny Foreigner

    I want to sign the petition and never hear Peston speak again. Twice.

  • Ipsedixit

    Only an organisation with the resources of the BBC could have turned someone who can’t speak intelligibly into a radio celebrity and only the BBC lacks sufficient shame to promote one of their own crowd in that way.