Oh what a tangled web central bankers weave when they practise to deceive...
Wednesday night’s panic in Tokyo, where the Nikkei dropped a stomach churning 7pc, kicking off a global chain-reaction that saw the FTSE fall 143.48 points, demonstrates just how difficult it is going to be for the world’s central banks to exit their loose money policies.
It’s not even as if Ben Bernanke, chairman of the Fed, said he was planning to exit; in fact, initially he said the reverse, in testimony to Congress. It was only in the Q&A, and in minutes to the last meeting of the Fed’s Open Markets Committee, that a clear bias emerged to slow the pace of asset purchases “in the next few meetings”, so long as the economic data were strong enough.
What the subsequent violent gyrations in markets indicate is that any hint of applying the brakes risks generating a fresh financial crisis, which, in turn, would render the economic recovery still-born.
Both financial markets and the real economy have become addicted to “quantitative easing”. So much so that they cannot do without it.
The upshot is that we are going to see financial repression of the type being practised in virtually all the major advanced economies including, if only to a more limited extent, the eurozone continue into the indefinite future.
There are only three ways to deal with a big debt overhang. The hard way is to try to work your way out of it, or to cut your cloth according to your circumstances. More often than not, this proves self-defeating. The austerity required ends up shrinking the economy, thereby further increasing the size of the debt burden.
You can also default, but it will take years, even decades, to win back the confidence of capital markets after such an event, or you can do what Britain, and now Japan, are attempting, and inflate your way out of it.
Central bankers dream of getting back to “normal” normal interest rates, a normal balance sheet and so on but that point isn’t going to come any time soon. They are stuck on a money printing treadmill and there appears no way off.
= We need more CEOs to hit back at politicians =
“I know a lot of people in my industry and others who have gone to private equity simply to avoid the vitriol that is poured upon successful businesses,” he said after unveiling his company’s 14th consecutive annual rise in adjusted profits.
And, for good measure, he revealed that he had frequently been approached with such job offers by firms who were astonished when he turned them down because “everyone else wants out of the limelight”.
It should be said that Mr Marchant has had a particularly turbulent time of it recently: his company was at the centre of a mis-selling scandal that saw more than 20,000 customers duped into paying more for their energy. Rightly, the chief executive and his senior managers were docked 40pc of their bonuses.
However, Mr Marchant was making a broader point that must not be ignored. We are facing a crisis in business leadership. Talk to the CEO of almost any public company and they will tell you the same thing talented colleagues reach a senior position in the business and are afraid to go any higher because they don’t want to put their heads above the parapet. They are scared that public exposure will lead to opprobrium; that they will become easy targets for grandstanding politicians or populist pressure groups.
This cannot be a healthy state of affairs. Business leaders should have an influential voice in public discourse; they should be contributing to political debate. Instead, too many have retreated from public view, preferring to keep out of the headlines rather than risk making the wrong sort.
With little more than a month left in his job, Mr Marchant took the opportunity to hit back at politicians, whom he feels have heaped too much vitriol on too many British companies. If only more of our CEOs felt able to fight their corner while still firmly entrenched in office.
= Skills shortfall laid bare by North Sea oil industry =
The North Sea oil industry, long written off as in terminal decline, has been showing all the vital signs of health of late. While the oil and gas that sustain it are finite, technological advances, sensible tax breaks and high oil prices together appear to be giving it a new lease of life.
Industry body Oil & Gas UK has forecast that capital spending will hit £13bn this year, the highest for 30 years. On Thursday, it revealed that oil services companies generated revenues of £1.9bn in 2012, the highest since records began in 1996.
This is self-evidently good news. With insatiable global energy demand keeping prices high, it would be lunacy for Britain not to extract the last drops of its own resources.
It could also provide a much-needed boost to the wider economy. Projects approved over the past two years could eventually generate £100bn for the economy and £25bn of tax receipts. Outgoing Bank of England Governor Sir Mervyn King expects that North Sea oil output, which has slumped 30pc over the past two years, will recover in the short-term, helping the trade deficit and Britain’s growth.
But a threat looms. The skilled engineers and technicians who drilled the oil boom of the 1980s are fast approaching retirement age. A survey by oilandgaspeople.com, the industry jobs website, on Friday reveals that 70pc of North Sea oil companies are struggling to recruit quality workers.
The industry will need to recruit and train 125,000 new staff over the next decade to fill the gap left by the retirees and deliver the promised boost to the economy.
Oil & Gas UK is working with the Government to address the skills shortfall so that the North Sea can compete with other booming oil and gas provinces around the world.
Britain needs to redouble efforts to encourage the next generation of scientists and engineers, to ensure it does not find itself in this predicament again.
With China a major new investor in the North Sea and home to a wealth of scientific talent, it is all the more important that remaining problems with the visa system are urgently resolved.