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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Gordon Brown Mission Accomplished, Labour General Election Plan a Magnificent Success

ElectionOracle / UK General Election May 12, 2010 - 12:22 AM GMT

By: Nadeem_Walayat

ElectionOracle

Best Financial Markets Analysis ArticleGordon Brown Mission Accomplished as he leaves office by delivering a bankrupt scorched earth UK economy to a weak Conservative / Liberal Democrat coalition government that will sooner or later rip itself apart in the face of deep rooted ideological differences between the two which sows the seeds for a series of landslide Labour election victories possibly as soon as 2012 despite talk of an agreed fixed 5 year term.


The mainstream tory press chooses to ignore the obvious that those that win this election will pay a heavy price at the NEXT general election. Even the incompetent Governor at the Bank of England, that repeatedly fails in its primary objective of keeping UK inflation at 2% (3.4%) recently warned that "this would be a good election to lose", in the light of the highly unpopular policies that have to be implemented to cut the unsustainable budget deficit that stands at 12% of GDP which is more than that of Greece or Spain.

So, as David Cameron rushed in the dark for a photo opportunity outside the door of Number 10, here is a timely reminder from my article from May 2009 (31 May 2009 - Labour Governments Bankrupt Scorched Earth UK Economy for the Conservative Government) as to the strategy that Labour settled upon in when it realised that it could not win the next election which was to kill off the Conservatives for another generation.

The consequences of all this deficit spending and growth in liabilities is highly inflationary as printing money eventually leads to hyperinflation as 1920's Weimar Germany found out, so Britain IS sowing the seeds of much higher inflation, maybe not this year and for the first half of 2010 as recent inflation analysis illustrated, but there will be a deficit spending and quantitative easing day of reckoning in terms of economic stagnation coupled with high inflation that will land on David Cameron's lap.

In conclusion, the Labour government's primary objective now is to deliver David Cameron's Conservative government a scorched earth economy whilst at the same time engineering a debt fueled economic bounce to maximise the number of seats the party will be able to muster in opposition, therefore current opinion polls and projections of seats at the next election grossly under-estimate the actual number of seats Labour will win.

Labour Engineered Funeral for Conservatives and Liberal Democrats

The Labour party has to be commended for engineering an outcome that has succeeded beyond any party members wildest dreams, that has not only delivered an economy in a disastrous state to a Conservative government, but that Conservative government is in such a weak state that it has been forced into coalition with Labours other arch rival the Liberal Democrats, "Kill two bird with one stone" ? Appears so !

Labour Was Never Serious About Lib-Lab Pact

Labour was never serous about doing a deal with the Liberal Democrats early yesterday as illustrated by various Labour and Liberal Democrat statements -

The Mirror

Labour insider - “The rest of the party didn’t want it. They were about 70 to 30 against it,” “Ed Balls also feared the Labour team would sign away the party’s birthright to the Lib Dems.”

At an emergency Cabinet meeting on Monday night Andy Burnham led the revolt against a pact.

The now ex-Health Secretary broke ranks to warn of a backlash from voters if the Government tried to cling on to office with Mr Clegg’s support.

He reportedly told the meeting the electorate would never forgive Labour if it “concocted such an unstable alliance” and Labour had to “respect the results of the general election”.

Last night a Lib Dem spokesman accused Labour of not talking the talks seriously. “Certain Labour Cabinet ministers were determined to undermine any agreement,” he said. “Some people see opposition as a more attractive option.”

Senior Labour officials including those tasked with negotiating with the LIberal Democrats ensured that the talks with the Liberal Democrats would amount to nothing as the Liberal Democrats were left with no illusion that the Labour MP's had no real intention of wanting to stay in power in any form during the economic crisis that would unfold over he next few years which will rip the coalition apart.

Furthermore the seats arithmetic never supported a Labour / Lib Dem Pact which would have resulted in a disaster for Labour and the country as tiny minority parties would hold the government to ransom as my Saturday analysis illustrated (08 May 2010 - UK General Election Result, Opinion Polls Forecasts Analysis, What's Next?)

The election is over but Britain still waits to find out who will form the next government. The outcome has resulted in a just about as hung a parliament as one could have expected. As things stand clearly the two parties that are most likely to form a coalition government are the Conservatives and Liberal Democrats with a combined total of 364 (307+57), well above the 326 seats necessary for an overall majority.

Meanwhile the picture for the Labour party does not look so good where the Labour and Lib Dem total would just achieve 315 seats (258+57), which means that a coalition would need to involve the SNP, Plaid Cymru AND some Ulster Unionists which would definitely result in a weak chaotic government that would pander towards these small minority party demands that the markets would not accept.

Therefore probability favours a Conservative / Lib Dem Government.

11 May 2010 - Hung Parliament Disaster for Britain

A Labour / Lib Dem / SNP / Plaid Cymru / Ulster Unionists coalition would be a complete disaster for the country that the markets would punish severely as the tail would wag the dog and England would be forced to bear all of the spending cuts whilst Scotland, Wales and Northern Ireland would escape virtually scot free, is that democracy ?

Britain's Huge Government Budget Deficit Crisis

The government is spent an estimated £677 billion on the public sector (2009-10), that is currently running an ANNUAL £167 billion deficit, i.e. the government spends £167 billion a YEAR more than it earns in revenue which is contributing towards igniting Britains inflationary debt spiral that is feeding the accelerating trend towards an hyper inflationary bust leaving savers with worthless paper and the economy in ruins, i.e. bankrupt.

The above Government spending graph illustrates the amount Labour has plowed into the public sector annually over the past 13 years over and beyond inflation. For instance when Labour came to power government spending was at £318 billion which allowing for inflation would today stand at £408 billion. However Labour is spending an extra £270 billion over this as Labour continued to run a budget deficit even during the boom years which has today left the country with an annual budget hole of £167 billion. To say that the public sector has become bloated under Labour is an understatement as it is probably 25% larger than it should be i.e. government spending should be in the region of £508 billion instead of the current £677 billion. Out of control public spending by the Labour government is illustrated by Britains sacred cow, the NHS.

As you can see, the Conservatives proposed £6 billion of spending cuts this year amounts to a mere pin prick against the £167 billion budget deficit black hole.

More on Britain's budgetary crisis that will cripple the Conservative / Liberal Democrat government in the in-depth analysis - Britain's Accelerating Trend Towards High Inflation and UK Debt Default Bankruptcy

Source: http://www.marketoracle.co.uk/Article19408.html

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-10 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on UK inflation, economy, interest rates and the housing market and he is the author of the NEW Inflation Mega-Trend ebook that can be downloaded for Free. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 500 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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