Welcome to a future built in BRIC

Please read the attached article by Jim O'Neill. It is a follow up to his original paper 10 years ago about his prediction of the potential growth of the BRIC Economies (Brazil, Russia, India and China). He makes us question the role of the G7, with China now the second biggest economy in the world and Brazil set to surpass France and Britain to become the 5th largest economy. Also Russia and India are bigger than Canada. The world order is changing as he states that by 2020 the GDP of the 8 Growth Nations will equal that of the G7. Whilst the European crisis is important for the future of the United Kingdom it is important not to neglect other parts of the world as O'Neill argues this may be where the future lies.

The Telegraph Article Here

UK economic growth cut to 0.1% for April to June

These figures released yesterday have led to the usual argument over potential policies. These are the usual demand management options. The calls are coming for the government to increase spending and for the Bank of England to adopt QE. It is important to remember the source for the financial downturn which is greatly influenced by the poor economic performance in Europe.

Guardian Article Here

Another GDP growth downgrade

It looks all gloom!

Dr Archer added: "The current softness of the economy and anticipated GDP growth of one per cent in 2011 and 1.5 per cent in 2012 is particularly bad news for Chancellor George Osborne as it is substantially below the OBR's projections of 1.7 per cent growth in 2011 and 2.5 per cent in 2012 on which the Chancellor based his target of reducing the Public Sector Net Borrowing Requirement to £122 billion in fiscal 2011/12."

Read the full article below.

http://www.myfinances.co.uk/news/2011/09/13/oecd-expects-faster-uk-economic-slowdown

US economy will affect UK recovery

It was once said that if America sneezed then Europe caught a cold. The phrase was based on the power of the US economy as a buyer of European goods.

If America goes into recession their demand for imports falls. That means European exports fall and so demand falls and jobs are lost here. The UK's biggest trading partner is the USA and so the fact that the US created no jobs last month is worrying. It suggests the US economy is very much weaker than thought and could return to recession.

This is more of a cause for concern for the UK than for other EU countries as the business cycle of the UK is much more closely aligned to the US than it is to the EU. While that is changing (60% of the balance of trade is accounted for by EU trade) America remains a key power in the world economy, roughly equal in size to the whole of the EU in GDP terms.

External factors are more and more important to the way economies behave. No government can fool itself that it has all the policy answers to its own economic problems.

The Guardian cover the US jobs crisis here

Plan B- the Portugeuse-style deficit and German Style interest rates

Increasing the British Opposition is asking the Government for a Plan B. They are claiming the economy rescue package is not working. Growth has been sluggish and forecasts have been downgraded. The Opposition has suggesting that this is because of the tight fiscal austerity package (tighter fiscal policy in order to control public debt). The Government, however claims that the low level interest rates (German style interest rates) are far more crucial than a few billion pounds in the budgets bottom line. This leads to an interesting discussion on which policy (fiscal or monetary) is best to deliver growth during a downturn. Please read the article below to get a greater understanding of the issue.

http://blogs.telegraph.co.uk/finance/jeremywarner/100010488/imf-maps-out-a-plan-b-for-the-uk-economy/