Terry Smith Straight Talking

What’s the point?

There’s an old Red Indian, or perhaps I should say Native American, proverb which states that if you find yourself mounted on a dead horse, the best strategy is to dismount.

It is with this approach in mind that I have decided to cease commenting on the economy, climate change, the Eurozone and the EU. I am not planning any more blog posts or any more appearances on news media on these subjects.

It’s not that there isn’t plenty to comment on or that I don’t have lots of views, but rather that I have concluded that the exercise is futile. The process of commentary has become too politicised, too few people want to be told the truth, whilst much of the media has become totally unfit for purpose yet they are still believed.

I have been heading towards this conclusion for a while, but a few recent examples may serve to illustrate why I have decided to withdraw:

The IMF

I have commented before on my blog that the IMF is no longer an organisation which is fit for purpose or can be trusted. Under Christine Lagarde the IMF has become an instrument of French policy. Has anyone ever wondered why there have been a disproportionate number of French Managing Directors
of the IMF?

The Financial Times recently had as its “splash” headline the revelation that a senior Chinese auditor has said that Chinese local authority debt is ‘out of control’. This is indeed big news. However, in
another article on the same front page it quotes Olivier Blanchard (let me have a wild guess as to his nationality), the IMF’s chief economist, as saying that the UK government needs to consider reversing or softening its so-called austerity drive.

Apart from missing the point that there hasn’t actually been any austerity in the form of overall spending cuts yet, I find hard to fathom why the FT does not see fit to comment about:

1. The apparent contrast between what the Chinese official is saying and the course of action Monsieur Blanchard is advocating;

2. That in the full article on this IMF’s World Economic Outlook report on page 8 of the paper there is a table from the IMF showing that the UK economy is still forecast to perform better than the Eurozone; and

3. That the IMF far from acting like the world’s central bank by promoting financial stability and sustainable economic growth, which are unsurprisingly amongst its stated objectives, is now advocating continuance of the same policies which caused the current crisis.

It is a strange world in which the world’s central bank acts advocates that governments act with all the financial rectitude of a drunken sailor on shore leave and the world’s leading financial newspaper offers no comment. I thought its slogan was “No FT, no comment”.

The EU

I was out of the UK for a couple of weeks recently, but whilst I was away I note that Lord Mandelson has ‘become a key strategist’ for a pro EU movement called British Influence which intends to hold what it terms ‘the Dirty 20’ Eurosceptic politicians to account ahead of the proposed EU membership referendum.  As the press noted the group’s strategy ‘bears many of his [Mandelson’s] hallmarks.’

As Nigel Farage of UKIP pointed out this is classic Mandelson strategy: play the man not the ball. Note that the strategy is not to engage in debate with the Eurosceptics about the merits or demerits of EU
membership.

But then it must be hard for people like Mandelson and other vociferous supporters of the EU such as Ken Clarke, Richard Branson and others to engage in such debate given that they were also vociferous supporters of the UK joining the Euro which would clearly have been an unmitigated disaster as it is been for all the peripheral countries.

Somehow this lack of credibility goes unremarked and so does not lead them to shamefully withdraw from the debate. It merely seems to encourage more dirty tricks to which they resort because of their lack of substantive arguments, tactics which are tolerated by the pro EU media. It reminds me of the question: “Why do people take an instant dislike to Peter Mandelson?  Answer: It saves a lot of time.”

It seems not to have dawned upon the left wing supporters of the EU who admire its anti democratic tendencies, the imposition of suffocating regulation and EU desire for a large and interventionist government that their side has been hijacked by those who are in fact their natural enemies. Whereas in the 1975 EU referendum, Tony Benn and Denis Healey were prominent members of the anti EU camp, many in the pro EU camp seem not to have spotted that they are now marching side by side with Tony Bliar (not a misspelling), Peter “the Prince of Darkness” Mandelson, and the knighted bosses of some of the FTSE 100 and some of Britain’s largest private companies. Perhaps they should reflect on why that is and whether they are comfortable given the notion that you can judge a person by the company they keep.

Climate Change

I have long been a sceptic of the quasi religious belief that there is man-made global warming and more particularly that many or any of the measures such as carbon trading, wind farms, solar energy or electric cars would be of any efficacy if there was or in many cases are any more than an outright fraud. I have come in for some vituperative comment and action from “Warmists” for this stance, even though I have never said that I don’t think there is climate change, but that I would like some unadulterated evidence a) that it exists; and b) that it is man-made, and if that is provided, some
suggestions for dealing with it which might work rather than simply lining the
pockets of those who exploit this.

The media on climate change is so biased it would be laughable if it weren’t for the fact that the subject and the waste of scarce resources on cons which pose as solutions are quite serious.

Then I read things like this: http://www.reuters.com/article/2013/04/16/us-climate-slowdown-idUSBRE93F0AJ20130416%20

Compare and contrast the massive coverage for the self confessed scaremongering of the climate change lobby with the low key coverage of findings such as this i.e. that there has been no significant increase in temperature this century and the Northern Hemisphere experienced unusually cold weather this winter. Snow cover last December was the greatest since satellite monitoring began in 1966. The United Kingdom had the coldest March weather in 50 years, and there were more than a thousand record low temperatures in the United States. The Irish meteorological office reported
that March "temperatures were the lowest on record nearly everywhere." Spring snowfall in Europe was also high. In Moscow, the snow depth was the highest in 134 years of observation. In Kiev, authorities had to bring in military vehicles to clear snow from the streets.

The Associated Press has assured us, though, that this cold spell is not only consistent with a warming globe, it is actually caused by global warming. National Geographic News informed us that "global warming is the main culprit behind this month's eastern U.S. snowstorms. The proffered explanation is that cold weather in Europe is a result of melting sea ice in the Arctic. If this special pleading strikes you as unusually tendentious, it is all in the best tradition of explaining away ex post facto any weather event that appears to contradict the global warming religious beliefs.

In 2000, British climate researcher and Intergovernmental Panel on Climate Change contributor David Viner told the Independent that "within a few years, winter snowfall will become a very rare and exciting event." Sadly, he predicted, "children just aren't going to know what snow is." In 2008, environmental activist Robert F. Kennedy Jr. wrote in the Los Angeles Times that "snow is so scarce today that most Virginia children probably don't own a sled."

Of course, faced with the evident lack of any actual global warming, the flying circus has begun to shift its ground to claim that what it really meant was that there would be increased extreme weather events. But not only has there been no increase in mean global temperature for 15 years, drought is not increasing, tornadoes are not increasing in frequency or intensity. Routine hurricanes such as Sandy and Katrina have been offered as evidence of climate change, but worldwide hurricane activity is near a 40-year low.

And this absence of evidence of the predicted dire consequences is not limited to weather. Over the
past 20 years, sea levels have risen by about five centimeters - an ominous trend unless you're aware that since the end of the last Ice Age, global sea level has risen 120 meters. At the end of March, the areal extent of sea ice in the Arctic was 3 percent below the 30-year average. Sea ice in the Antarctic, however, was elevated 24 percent. Global sea ice was above the 30-year mean and higher than it was in March 1980. Yet a study published in Nature Geoscience on March 31 concluded that the increase of Antarctic sea ice is caused by you guessed it global warming.

With each passing year, it is becoming increasingly clear that global warming is not a scientific theory but a political ideology or religious belief that has to be fiercely defended against any challenge and whose risible claims and contorted “explanations” are parroted by a media which has made its mind up before viewing any of the facts. Why would I waste my time arguing with people who had long since decided their beliefs?

Mrs Thatcher

During Baroness Thatcher’s funeral I had one of those increasingly frequent moments in which I had to switch the TV off as the alternative would have been the need to purchase a replacement after I had put my foot through it. As a result though I can’t tell you the name of the woman who was being interviewed on the BBC who said that the Big Bang reforms under Mrs Thatcher were to blame for the financial crisis as they had allowed risky behaviour by financial institutions.

I don’t think it’s easy to find a more outspoken critic of some of the behaviour and structure of the financial services sector from a person working in it than me. My Tacitus lecture last year had as its title “is Occupy right?”  But it is patently nonsense to suggest that the Big Bang reforms or indeed any of the many faults in the financial services sector was the fundamental cause of the current crisis. It was a collective desire to borrow and spend way beyond our means, which persist to this day. Rather the banks and others were simply instruments enabling us to do so.  Still I suppose acknowledgement of that would require a) some acquaintance with the facts; and b) a willingness to confront an unpleasant reality.

Syria

You probably won’t recall that I wrote on my blog that Western support for the Syrian rebels against the Assad regime might be misguided because Assad may be a bad man but his opponents are much worse.

Well a couple of weeks ago one of the Syrian anti-Assad groups pledged allegiance to Al Quaeda. Now a couple of Syrian Christian bishops have been kidnapped by one of the rebel groups. A BBC correspondent reported an interview he conducted with a Salafist Jordanian who recruits jihadis to fight in Syria (in case you didn't know the Salafis are a kind of hard-core Wahabi Muslim group who make the Muslim Brotherhood look moderate). He said that the Assads were only the first stage, and that after they were done with them they would go after Nasrallah, the head of Hezbollah in Lebanon.

So as predicted, the Syrian "pro-democracy movement" now has a nakedly sectarian group in its vanguard whose primary aim is to ethnically cleanse the Shiites, Alawites and Christians from the Levant. Ironically, in so doing it will help the US and Israel by getting rid of Israel's most effective opponent in the area (Hezbollah).

Sadly, my uncomfortable and unconventional prediction has turned out to be the correct one.

So faced with this level of ignorance, indifference and prejudice I have decided to bow out for now. I have faced threats from banks over my views about the need to reform the banking sector, withdrawal of monies from my fund over my views on climate change, a FTSE100 CEO advising an entrepreneur not to invest in my fund because I disagree with him about the EU, and calls from individuals at fund management groups to become more involved in the EU debate whilst their colleagues at the same group castigate me over my outside interests.

I will be concentrating on my businesses and personal interests. I wish you all well and thank you for reading and participating in my blog. I hope that my views about what will happen are wrong, but sadly I doubt it.

 

Can America Innovate Its Way Out Of Debt?

Recently I was interviewed by Haydn Shaughnessy for his Forbes blog. We discussed the debt-driven plight of the US and UK economies, whether innovation and leadership can help get us all out of the mess we are in and the one thing that would make the difference to our economies which I firmly believe is facing up to reality and telling people the truth. You can read the full interview below or on the Forbes website (click here).

Forbes Blog by Haydn Shaughnessy
Can America Innovate Its Way Out Of Debt?

When companies like Google and Apple turn to their ecosystem to build apps, they are turning to a new organizational form. A decade ago we had very few, if any, ecosystems like this, loose associations of companies and individuals that would pitch their ideas and development time into a Darwinian soup.
In the days before the app developer community, ecosystems were disciplined, educated and controlled by companies like Microsoft that took a hierarchical view of their network.
The ecosystem has quickly become established as a new wealth creating mechanism. Now look around at companies like Ubiquity Networks, with $300 million in revenue and about a hundred employees.
American companies remain the most innovative in the world, with an ability to devise or adapt to new corporate forms and new technologies at frightening speed. But that gift is not translated into a better economy. Can it be?
I talked with Terry Smith about that problem. Smith is a London-based fund manager and many years ago co-author of Accounting for Growth. As an analyst earlier in his career he called companies out for accounting practices that exaggerated growth, and was fired for doing so.
He also writes the Straight Talking blog. I talked to him about the US economy and that of the UK. Can they innovate their way out of trouble ad as pertinently will the US ever lead the world economy again?

Terry let’s start with the US economy.  How significant is its loss of leadership, if at all. Will it ever lead the world out of recession again?
America’s loss of economic leadership takes three forms:
1.   A much-reduced share of the global economy, down from 50% in the immediate post-war years to about 19% today.
2.   The US, once the world¹s largest creditor nation, is now its biggest debtor.
3.   The US economic model, previously the world default position (and known as the Washington consensus), has suffered significant reputational loss through the credit super-cycle.
There is no likelihood of the US share of the global economy returning to 50%, or anywhere near that level. There is no likelihood, either, of the US reverting from leading debtor nation to leading creditor.
The US is most unlikely to lead the world out of recession again, because America has ceased to be the dominant economy.
Rather, we have a global economy in which no single country is dominant.

Many western economies assume they can maintain their debt burdens and meet their social welfare obligations. Could you comment on that from US and UK perspective?
The debt burdens of the US and the UK (and of other Western economies) are sustainable only if strong real growth (of at least 3% compound) can be assumed. Even growth at that rate might not be anywhere near enough.
In both the US and the UK, social welfare obligations are already unsupportable on any remotely realistic basis of forward projection. Governments have taken on unsustainable commitments because of:
(a) Over-confident assumptions of perpetual growth,
(b) The politicians responsible for taking on these obligations know that they will no longer be in office when the tab turns up.
(c) Politicians have learnt to buy votes by creating client voters who will vote for whomsoever is promising to pay them.

Do you see scope for the US economy to innovate its way back to significant growth?
Innovation is critical. However, three vital points need to be borne in mind:
- Technology uses energy ­ it does not create it ­ and the US seems dangerously complacent about future energy availability (and shales are not the answer-they are not as energy efficient as previous oil and gas discoveries).
- The US all too often makes a free gift of its technology to competitors such as China, most notably through joint ventures with technology-transfer strings attached. See companies like Caterpillar for details.
- The US education system produces too few science and engineering graduates, with colleges being biased towards law and graduates attracted to finance rather than industry.
 
How about the UK? In both cases I am amazed by the lack of policy innovation. Like them or loathe them the Thatcher and Reagan governments gave us privatization, urban regeneration and similar initiatives. Now there seems to be nothing.
In economic policy, we are trapped in a debate between ultra-free-market economics and Krugman-style neo-Keynesianism.
The weaknesses of neo-classical free market economics have been exposed by the credit super-cycle, whilst the likelihood of a return to Keynesian management is remote (not least because of existing burdens of debt and welfare commitments).
Of course proponents might argue that the only reason these policies have failed is because we have not tried them to their maximum. The neo-Keynesians say that with regard to the poor performance of these policies so far a) matters would have been worse if we hadn’t applied them; and b) we just need to borrow and spend more. B) certainly looks unlikely given the diminishing returns from this since long before the crisis, and in any event it is clear that they have spoilt their pitch by forgetting to run a  surplus in the boom, as Keynes suggested.
I have more sympathy with the view that free market economics is not to blame as it was never really applied. The crisis was caused not by free markets but by interference with free markets: Clinton’s policy on mortgage lending to those who could not afford to service it, the ‘Greenspan put’ which meant that market operators were always saved by the Fed, Chapter 121 which has keep zombie companies alive, etc.
 
Do you have any sense of why there is a policy vacuum?
The political structures of both the UK and the US are not fit-for-purpose, mainly because of a bias which favours short-term popularity over strategic thinking. This has been typified by the way in which the Simpson-Bowles warnings have been ignored in the US, and by Britain¹s failure to cut public spending more markedly.
Increasingly, politicians lack real-world experience, and are controlled by media consultants whose focus does not stretch beyond the next headline or sound-bite.
My personal view is that no one should be allowed into high political office unless they satisfy two conditions: a) served in the armed forces or played a full contact team sport; and b) worked in a successful for profit enterprise.
 
Tim Morgan’s recent paper (see a summary here) was gloomy for the future prospects of what we used to call the advanced economies. What in your view is the end game?
Tim is trying to move the debate onwards by highlighting the ultimately physical (energy) nature of the economy, and the widening chasm between the physical and the financial economies.
Logically, the next stage in the end-game will be hyper-inflation as we try to accommodate the monetary structure to the physical economy. The fact that inflation has been explicitly targeted by the Bank of Japan, that the Fed’s QE programme is targeted at unemployment and the new Bank of England Governor elect wants to scrap inflation targeting suggests where this will end. None of the current generation of political leaders or central bankers have any experience of high inflation. They do not realise that once the inflation genie is out of the bottle he may not go back in on cue.
 
At the same time that his paper came out Bain and Co published a paper that said there has never been a better time for long term investment in innovation because borrowing costs are so low and opportunities for a return are so skimpy. Isn’t this a time to be bold with industrial policy?
They are entitled to their view. Tim calls such rosy forecasts flat-earth economics, because these projections assume a business-as-usual economy delivering steady growth, and ignore the physical constraints emerging in energy-related economic research.
Specifically, low borrowing costs are likely to become incompatible with escalating inflation. Actuarial studies point to a severe squeeze on capital if slow economic growth continues to undercut the economics of pension schemes.
Moreover, investment can only earn satisfactory returns if we assume adequate consumer purchasing power in the future. If the proportion of consumer incomes required for essentials continues to increase, the scope for discretionary purchases will be squeezed.
Remember that the majority of the consumer spending of the pre-crash years was debt-funded.
 
What one thing would make a positive difference to the US and UK economies?
Well, there are several specifics, but the big one would be facing up to reality. That way, we could tailor our welfare expectations to fit our likely future economic resources. Tell people the truth. As Abraham Lincoln said I am a firm believer in the people. If given the truth, they can be depended upon to meet any national crisis. The greet point is to tell them the facts.

The NHS Squid

My colleague Dr Tim Morgan has just blogged on the subject of the cost and dysfunctional behaviour of public sector services in general and the NHS in particular:

The menace of the Vampire Squid

I have been writing and talking about the dysfunctional nature of the NHS and the need to curb its spending  rather than treat is a  sacred cow at least since writing the following article for The Daily Telegraph in April 2009:

http://www.telegraph.co.uk/finance/budget/5188649/Too-much-stimulus-could-spell-disaster-for-Dr-Darlings-ailing-patient.html

In it I said ‘At some point someone is going to have to confess that the NHS can only deal with items such as A&E, pregnancy and cancer. Everything else will have to be privately insured. Those who are government employees will have to lose their jobs and/or take pay cuts (not to mention pension cuts). But I doubt Chancellor Darling will be telling us this on Wednesday.’

I hope that the current furore over Mid Staffs NHS disaster may have punctured some of the ridiculous adulation of the NHS. The fact is that better care is available in a number of other countries which have not opted for the NHS free at point of use model: for example France, Holland and Singapore all have superior performance.

Tim Morgan is right. Ironically, seemingly limitless spending and staff has not improved the NHS performance, it has made it worse. But then any decent manager in business could tell you that granting wishes for limitless capital expenditure and/or staffing will make an organisation’s performance worse not better. My favourite anecdote from the NHS farce which illustrates this is the NHS procurement quango whose purpose included saving money and which went about this by leasing luxury cars for its staff including a BMW convertible, an Audi TT and Range Rovers:

http://www.telegraph.co.uk/health/healthnews/9370075/NHS-staff-drive-fleet-of-taxpayer-funded-luxury-cars.html

As the saying goes, if you made it up, no one would believe you.

Perhaps not coincidentally this NHS quango is funded by the Scottish Government.

But my views drew the usual knee jerk from those who would support any aspect of the welfare state or Labour policy no matter how ludicrous. My favourite was the senior Labour politician I met towards the end of 2012 who told me that my views on the NHS were derived from The Daily Mail. It is hard to see how that is possible given that I don’t read The Daily Mail, but I wonder if his strident and mindless defence of the NHS has suffered any revision as a result of recent events. Sadly, probably not, after all why spoil an opinion by considering the facts.

 

Why I disagree with Jeremy Warner

In today’s Daily Telegraph, Jeremy Warner takes issue with my colleague Dr Tim Morgan’s recent research report “Perfect storm: energy, finance and the end of growth”.

Let me begin by making three points:

1.    First and foremost, Tim Morgan’s report is independent research. I do not tell Tim what to write or edit his work. When I worked as an analyst I encountered many examples of people trying to suppress independent research, often with spectacular and very public results so I never interfere in Tim’s work. However, I have worked with Tim for much of the past twenty years across three firms, so clearly I respect his work.
 
2.    I usually agree with Jeremy Warner’s views, although not on this occasion.
 
3.    I would be happy if Tim is wrong as we would all be much better off. However, I doubt that is the case.

Jeremy’s critique seems to me to get little beyond the stance of the characters in Monty Python’s Life of Brian who sings “Always look on the bright side of life” whilst being crucified.

I note that Jeremy says only ‘Space prevents me taking the report apart bit by bit’. Obviously there are limitations of his column but if he wishes to write a full length rebuttal, I would be happy to publish it on this blog. I have a word of advice if he does so, in his article he says that Tim makes three main points. No he doesn’t. Page 10 of his report says ‘trend #3 - an exercise in self-delusion’ and a full chapter - ‘part four: loaded dice’ - devotes 16 pages to distortion of data on inflation, growth, GDP and unemployment’ which also needs to be covered. It’s hard to see how you can rebut Tim Morgan’s conclusions if you ignore his, in my view, vital point that policies are being guided by distorted data.

As for some of the other points Jeremy makes:

•    ‘If you were to accept Dr Morgan’s figures at face value - that for every £1 of growth in GDP between 2001-2 and 2009-10 Britain added £5.40 of public debt - then you would indeed want to slit your wrists’: the trouble is that Jeremy does not then say why we should not accept those figures.
 
Coincidentally, Bill Gross from PIMCO, the world’s largest bond fund manager, makes the same point in his Investment Outlook note for February which is titled “Credit Supernova!”: ‘there may be a natural evolution to our fractionally reserved credit system which characterizes modern global finance. Much like the universe, which began with a big bang nearly 14 billion years ago, but is expanding so rapidly that scientists predict it will all end in a big freeze trillions of years from now, our current monetary system seems to require perpetual expansion to maintain its existence. And too, the advancing entropy in the physical universe may in fact portend a similar decline of “energy” and “heat” within the credit markets… Each additional dollar of credit seems to create less and less heat. In the 1980s, it took four dollars of new credit to generate $1 of real GDP. Over the last decade, it has taken $10, and since 2006, $20 to produce the same result.’

•    ‘Losses on UK mortgages and other forms of British household lending have been negligible’: I wonder if that has something to do with the fact that interest rates have been at a 300 year low for four years and the banks willingness to forgive breaches of debt service in order to avoid recording further losses? What might happen if rates have to rise when Mr Carney starts targeting nominal GDP growth (a euphemism for ignoring inflation) I wonder?
 
•    ‘Unfunded future pension and welfare commitments’: It’s a pity that governments do not do accrual accounting unlike companies and so their promises on welfare do not appear on a balance sheet. You can tell how this distorts the true position when the government transferred £35bn of liabilities and £28bn of assets from the Royal Mail pension fund to the Treasury. The assets went to reduce the government debt, the liabilities seem to have simply been vaporised. Is Jeremy seriously suggesting that the future liabilities of a country or company have no bearing on its solvency?
 
•    ‘If the future pensions promise can’t be met it won’t be’: I quite agree, but there are some grave consequences to this glib statement for those relying upon these benefits, some of whom I suspect may also only be able to service their mortgage because of the aforementioned record low interest rates.
 
•    ‘America’s shale gas revolution, which has substantially reduced some costs’: I look forward to Jeremy’s rebuttal of Tim Morgan’s concept of Energy Return on Energy Invested (“EROEI”) and how an EROEI of 5:1 for shale gas ‘reduces costs’ compared with previous energy sources.
 
•    ‘Globalisation...has helped lift hundreds out of poverty at fairly limited cost so far to Western lifestyles’: Precisely because the West has been living beyond its means, borrowing to maintain consumptions and with the expansion of the State also on borrowed money disguising the loss of jobs.
 
As I said at the outset, I would be happy for Jeremy to be right and for Tim to be wrong, but for me to believe that’s likely would require a much better effort from Jeremy than we’ve seen so far. Like Jeremy I agree with Winston Churchill expressed views on many things, but Jeremy’s views on this seem to have more in common with Monty Python than Winston Churchill.  Churchill never seemed to base his actions on a misrepresentation of the gravity of the situation. Rather than the quote he uses from Churchill he might look at this one from 13th May 1940 - Churchill’s first speech in the House as Prime Minister, when he famously said:

"I have nothing to offer but blood, toil, tears and sweat."

But his next sentence was:

We have before us an ordeal of the most grievous kind. We have before us many, many long months of struggle and of suffering.’

We will rise above this ordeal, but not by denying how grave the situation is.

The Perfect Storm

My colleague Dr Tim Morgan has just published this piece of research “Perfect storm: energy, finance and the end of growth”:

It is disturbing, and although it is 82 pages long I recommend that you take the time to read it.

Tim covers the end of the credit super cycle and the diminishing impact which increasing amounts of credit have had on economic growth; the negative impact of globalisation for the developed world; the self delusion and ignorance of our true plight which has been caused by the corruption of data for critical items such as inflation and GDP; and last but by no means least the deteriorating equation for Energy Return On Energy Invested or EROEI.

It should cause some pause for thought about some of the panaceas being proposed for the current crisis, most particularly ever increasing amounts of government borrowing and spending, and even the efficacy of the much vaunted US shale gas rush.

Tim has been questioning the expected economic growth rates from very early in this crisis and I have seen his work dismissed by many including some in government who have subsequently looked shocked and surprised when the growth that they expected has not materialised.

I also expect Tim’s thoughts will continue to fall on deaf ears for the neo Keynesians who maintain that the reason for the lack of growth is simply that we have not stimulated by borrowing and spending enough.