Japan jobless rate up to highest in 2 years

[Buraku]

more shitty economic news
but some of us were expecting this



Japan jobless rate rises, spending falls in June

July 29 (Reuters) - Japan's jobless rate rose in June to a near two-year high and household spending fell again from a year earlier, data showed on Tuesday, in a sign of further trouble for an economy already battered by surging energy costs.

But the data did little to alter the market view that the Bank of Japan will hold off on raising interest rates for the rest of this year or longer in view of economic uncertainties at home and abroad.

"As job market conditions stall, consumer prices are rising, hurting the purchasing power of households and worsening consumer sentiment," said Naoki Iizuka, senior economist at Mizuho Securities.

"These reinforce our view that the BOJ will likely leave interest rates unchanged for a while."

The seasonally adjusted unemployment rate stood at 4.1 percent in June, up from 4.0 percent in May and matching a high marked in September 2006. It was also slightly higher than a consensus market forecast for 4.0 percent. [JPUNR=ECI]

The Japanese government cut its assessment of job conditions, saying it would need to closely watch the outlook for the job market.

Financial markets, which largely expect the BOJ to sit tight on monetary policy for a while, reacted little to the data.

In a further sign of weakness, the jobs-to-applicants ratio for June was 0.91, meaning 91 jobs were available per 100 applicants. The ratio, in line with expectations, was down from 0.92 in May and matched a low marked in February 2005. Continued...

This will be a big test for the Yasuo Fukuda government
Politically I think Japan is in a much better position than it was some years ago but I'm not sure the fourteen other members are up to the task.

[halfnip]

more shitty economic news
but some of us were expecting this



Japan jobless rate rises, spending falls in June



This will be a big test for the Yasuo Fukuda government
Politically I think Japan is in a much better position than it was some years ago but I'm not sure the fourteen other members are up to the task.

See, dammit Lurker---you're fucking up the curve!

[Greji]

[quote="halfnip"]See, dammit Lurker---you're fucking up the curve! ]

Yup and that's Lurk doing his laundry. Third vinyl on the left....

[alicia454]

more shitty economic news but some of us were expecting this. This will be a big test for the Yasuo Fukuda government. Politically I think Japan is in a much better position than it was some years ago but I'm not sure the fourteen other members are up to the task.

Agreed, Japan is in a much better position to help weather this, than it was a few years ago. But Japan still has a number of economic challenges including decreasing US exports, an aging population, lack of increasing expensive resources, and the effects of climate change, that will still make it very difficult here.

Mind you, nearly every developed country will also suffer with this global economic crisis and especially with the collapse of the US economy (mostly due to large personal & government debt burdens, huge trade imbalances, and an energy inefficient society) which is likely to be worse to then collapse of the Soviet economy in the 1980's.

At least here in Japan, the per capital use of energy one of the lowest of any industrial nation. All thanks to a ubiquitous public transit system, dense urbanization, availability of efficient products, and years of high domestic energy prices. Which will come in handy when oil rises to over $200 per barrel in a few months, and likely over $500 in a few years. Now if something can be done here in Japan about the wasteful over packaging of goods. Does each individual cookie in a package really need to be wrapped up separately?

[Greji]

especially with the collapse of the US economy (mostly due to large personal & government debt burdens, huge trade imbalances, and an energy inefficient society) which is likely to be worse to then collapse of the Soviet economy in the 1980's.

I would buy a different financial newspaper if I were you....

[Doctor Stop]

Japan is dead, dead in the water, and there's no captain to pilot it out of the Sargasso Sea it has created. Don't believe the goverment numbers, they revise them down every six months.

[Jack]

Japan is dead, dead in the water, and there's no captain to pilot it out of the Sargasso Sea it has created. Don't believe the goverment numbers, they revise them down every six months.

Fuck, I so agree.

[nottu]

[nottu]

[FG Lurker]

more shitty economic news
but some of us were expecting this

"Some of us" (ie YOU) have been predicting the falling of the Japanese sky for many years. It still looks mighty blue up there to me, and I don't think it has gotten any closer either.

See, dammit Lurker---you're fucking up the curve! ]

Yup and that's Lurk doing his laundry. Third vinyl on the left...

It's GREAT to be unemployed. I hope to be gainfully unemployed for the rest of my life.

[FG Lurker]

[...] the collapse of the US economy [...]
[...]
Which will come in handy when oil rises to over $200 per barrel in a few months, and likely over $500 in a few years.

The US economy collapsed? When? Did it immediately rebound and I missed it?

Oil is going to hit $200 and then head on to $500 "in a few years"? How and why do you think oil is going to hit $500/barrel?

Please enlighten me, oh mighty economic guru Alicia.

[IkemenTommy]

The US economy collapsed? When?

I think Alicia meant when the US suffered the dot com crash in circa year 2000 and the Dow tumbled, which the Dow, by the way, is no way to measure the US economy.

[nottu]

[FG Lurker]

You may have been dining out that evening.

Ah, maybe it happened when I was in Tokyo on the 9th. Had a great dinner -- the last one paid for by the company before I quit.

[james]

Does each individual cookie in a package really need to be wrapped up separately?

sure. do you have any idea just how many people are employed to wrap cookies? the economic fallout of a move, such as no longer individually wrapping said cookies would be nothing short of catastrophic.

[alicia454]

The US economy collapsed? When? Did it immediately rebound and I missed it?
Oil is going to hit $200 and then head on to $500 "in a few years"? How and why do you think oil is going to hit $500/barrel?
Please enlighten me, oh mighty economic guru Alicia.

I was implying a FUTURE tense. I meant that the US is heading towards an economic collapse within a few years that will be worse than the Soviet crash in the 1980. The fundamentals in the US are really bad: large personal & government debt burdens, retiring baby-boomers, huge trade imbalances, energy inefficient society, shrinking middle class, increased foreign competition, etc. This will be made worse by climate change (especially in the south-west and midwest), global population explosion, resource scarcity (including peak oil and increased demand from emerging nations), etc.

Many experts believe that oil reserves in many nations, including Saudi Arabia, have been over estimated, and that global production will continue to drop. In 2007, global oil production actually fell 0.2 percent, the first decline since 2002.

http://www.hemscott.com/news/static/tfn/item.do?newsId=65116001155592
http://www.guardian.co.uk/business/2007/oct/22/oilandpetrol.news

So far, global consumers, industry, and utilities are not ready to replace a majority of their petroleum consumption with alternative sources in the short term. So it is not unrealistic to expect $500 per barrel within a few years, especially with increased consumption in emerging nations, from just simple "supply and demand" economics. BTW, I did not make up the $500 a barrel oil price within a few years. Even a principle member of OPEC's governing council has stated it recently:

http://www.belfasttelegraph.co.uk/business/business-news/opec-warns-oil-prices-could-rocket-to-500-a-barrel-13922597.html

Military/war and prison expenditures are also taking their toll on the US economy and taking away money from much needed repairs and improvements to crumbling US infrastructure.

http://www.uschambermagazine.com/content/0807_6.htm

The US is also incarcerating one in four prisoners worldwide, prisoners make up approximately 1% of the US adult population.

http://www.timesonline.co.uk/tol/news/world/us_and_americas/article3466849.ece

It is also unrealistic for the US to expect continue racking up huge multi-trillion government debt, massive debt among consumers, and huge trade deficits for one decade after another, without some really bad long-term consequences. Otherwise we would all just live off off our credit card.

Mind you, I am not saying that the US will disappear. The US did recover from its great depression in the 1930's, thanks to Roosevelt. And Russia did recover somewhat from the Soviet collapse, and is benefiting from high commodity prices. But the US will lose ground and influence relative to other countries, in the same way that Russia did.

You are welcome to disagree with me, and also disagree with countless experts and analysis. That is you opinion, and I have given you mine.

If you have some specific and legitimate criticisms against my comments that you can back up with credible references, just like I did above, then please post them, I would like to read it. Otherwise don't bother, since I am not in the mood to read more childish insults and sexual abusive comments thrown against me by others in this forum, as was the case in the recent past.

PS. I am not a expert, nor do I claim to be. But there is nothing wrong in reading from experts and referring to their expert opinions.

[nottu]

[FG Lurker]

Alicia, I’]
No no nottu, you've missed it! You see, you're just not as smart as she is so you can't see the hidden true meaning of her links. In fact, I think Alicia might just be the smartest person I've come across in a long long time.

You may also want to take a look at what geological experts and economists say about world oil supplies, US oil supplies, etc in order to get a more balanced view

That's nowhere near as much fun as babbling on about "peak oil" though! I have to say that is an expression that I haven't heard for a helluva long time -- even the FUD artists seem to have stopped using it. I guess I haven't heard it recently because I'm just not smart enough to read the opinions of the true industry experts like Alicia.

[Mulboyne]

Alicia is mixing up a lot of viewpoints from opinion pieces which aren't consistent so they certainly can't support the scenario she outlines. Having said that, if she's reading the international press widely then its not hard to see why she feels America is headed for crisis because there are a lot of pundits arguing exactly that. Here's one book I just picked up:



"The Credit Crunch - Housing Bubbles, Globalisation and the Worldwide Economic Crisis"

...Graham Turner shows that the housing bubbles in the West were deliberately created to mask the damage inflicted by companies shifting production abroad in an attempt to boost profits. As these bubbles burst, economic growth in many developed countries will inevitably tumble. The Japanese crisis of the 1990s show that banks and governments may struggle to contain the fallout. The problem has not been limited to the US, UK and Europe: housing bubbles have become endemic across wide swathes of emerging market economies. As the West slides, these countries will see an implosion of their credit bubbles too, shaking their faith in the free market...

Turner is a good economist and, as far as I know, not given to wild conspiracy theories. One striking feature of the current market ructions is that there's a sizeable minority of "expert opinion" which is markedly more apocalyptic in tone than I've seen before. Some of the comments on Mark Thoma's blog reflect that.

[nottu]

[nottu]

[Mulboyne]

A crisis is one thing and a total collapse of society is something else.

Agreed, but Alicia did say she was talking about a US economic rather than societal collapse which is the kind of talk I hear every day so, while I think her logic is out to lunch, she hasn't grabbed that conclusion out of thin air.

I also agree that the US is in the crisis rather than heading for it but there's a lot of action without any connecting policy. That's certainly better than Japan managed but if "getting back to where we were" isn't going to be a possibility for the US - it rarely is - then there has to be some idea of what you protect and what you leave to fend for itself. The US has demonstrated several times that it can regenerate itself but the flipside of that is the country has also experienced serious slumps. All told, the UK is probably in a worse position because we don't naturally generate new entrepreneurs at the rate of the US but we have structured our economy around them.

[nottu]

[FG Lurker]

I was implying a FUTURE tense. I meant that the US is heading towards an economic collapse within a few years that will be worse than the Soviet crash in the 1980.

I'd like to hear more about this Soviet crash in 1980. Once you're through explaining that to my simpleton self please explain why you think the US economy is going to implode and why&how it will be worse.

The fundamentals in the US are really bad: large personal & government debt burdens,

Debt is just a number that is by itself basically meaningless. For example, I have a $400,000 house loan. For me, that is manageable. For some that would be impossible. For others $400,000 is pocket change, less than 2 weeks' income. Less than a day for others. The amount of debt has no meaning until you put it into perspective based on earnings and assets. Even that is simplistic when looking at things historically. If you look at debt from 1950 or even 1980 you need to consider the effect of inflation when looking at spending for 2008.

Here is a 300+ page PDF that has a ton of information with some good hard facts:
http://www.whitehouse.gov/omb/budget/fy2007/pdf/hist.pdf

Now I can't vouch for the exactness of that data -- it does come from the Whitehouse after all, not a place that is always known for the truth. That said, on page 130 you can find historical data showing the debt held by the US government as a percentage of GDP. Perhaps that isn't the absolute best way to calculate but it is a fairly common method. Here are a few highlights:

1940: 44.2%
1946: 108.6% (post WW2)
1950: 80.2%
1960: 45.7%
1970: 28.0%
1980: 26.1%
1990: 42.0%
2000: 35.1%
2005: 37.4%

There is no data after 2005 but there are some estimates. Even assuming the estimates are wildly low it is unlikely to hit 42%, 1990 levels.

Ah yes, but the war is costing so much money. Have a look at 1946 (post WW2) figures, 108.6%! It took until 1960 to really recover from that. I wasn't around then but I don't think I have read about a US economic implosion during the late 1940s and through the 1950s.

retiring baby-boomers, huge trade imbalances, energy inefficient society, shrinking middle class, increased foreign competition, etc.

I do not see how any of these (or all of them together) would lead to the sort of implosion that you are predicting. However if you have sources please provide.

This will be made worse by climate change (especially in the south-west and midwest),

Ah yes, everyone's favourite, the spectre of "climate change". No, I don't think the climate changing is going to lead to the end of the world -- or even an economic collapse. Assuming it is real (which is in serious doubt) then it will lead to great economic stimulus as we rush to adapt.

global population explosion,

Sorry, this doesn't fly. Don't you remember, the world couldn't handle 4 billion people!

resource scarcity (including peak oil and increased demand from emerging nations)

Peak oil... That's a blast from the past if there ever was one! We are not running out of oil. We may have used a decent percentage of the cheaply extractable oil that we have found thus far but that is only a very small percentage of the total oil available to us. At $100/barrel it is economic to extract a huge amount more oil than it is at $40/barrel.

Personally I think we should be focusing 110% of our efforts towards fusion. Everything else is merely a stop-gap, fusion is the only real solution to present and future energy problems.

"resource scarcity" is an interesting one. Care to elaborate a bit? There are a lot of resources that we use. Which ones are we running out of?

etc.

Yes, the best word ever for people who like to pull facts out of their asses. "I have a lot more I could say but I'm not going to." Yeeeeeah.

Many experts believe that oil reserves in many nations, including Saudi Arabia, have been over estimated, and that global production will continue to drop.

As mentioned above, we do not face oil shortages. We may (but this is not at all clear) start to see a decrease in the availability of light sweet crude that we can pump out of the ground from easily accessible locations and refine very easily into what we want. There are many sources of oil though and at $100/barrel it is economic to get at just about all of it. Undersea oil, tar sands, and oil shale are all very underutilized. There are also regions of earth such as the Arctic that have been too difficult and expensive to explore in that become a lot more attractive once the price of oil hits $80 to $100/barrel.

The US is also incarcerating one in four prisoners worldwide, prisoners make up approximately 1% of the US adult population.

While I don't agree with the way the US treats many of their "soft" criminals I fail to see how this is going to lead to an economic collapse.

It is also unrealistic for the US to expect continue racking up huge multi-trillion government debt,

The US gov't debt is not huge from a historical perspective. See above.

massive debt among consumers,

This is a problem but is more likely to lead to the collapse of irresponsible consumer credit businesses than the economy as a whole. If you have anything to back up your claim though I would be interested to read it.

and huge trade deficits for one decade after another,

Trade deficits are a difficult thing to peg, even for people who spend their entire lives studying them. There is no one way to look at trade deficits and the short-term view is often very different from the long-term one.

That said, the US has been running trade deficits for 30 years or so. Generally speaking the greatest deficits have been during the greatest periods of economic expansion. That doesn't mean they are always good of course but they don't seem to be killing the economy either.

without some really bad long-term consequences.

What, specifically?

Otherwise we would all just live off off our credit card.

Yes, because we all know that credit cards and global trade are exactly the same thing!

I am not in the mood to read more childish insults and sexual abusive comments thrown against me by others in this forum, as was the case in the recent past.

Ah, a wee bit sensitive are we? If you can't hack it then gtfo.

PS. I am not a expert, nor do I claim to be. But there is nothing wrong in reading from experts and referring to their expert opinions.

Technically speaking you are correct. The problem is that many of the "experts" relied upon are just pulling things out of their asses to support their viewpoint or economic desire.

[Buraku]

We are not in the shit yet
in the shit means this housing/financial disaster continues
really in the shit means world wide manufacturing production sinks, food prices suddenly skyrockets and a war with Iran causes the Strait of Hormuz to go up in flames and Oil suddenly hits 200$ a barrel

Now I can't vouch for the exactness of that data -- it does come from the Whitehouse after all, not a place that is always known for the truth. That said, on page 130 you can find historical data showing the debt held by the US government as a percentage of GDP. Perhaps that isn't the absolute best way to calculate but it is a fairly common method. Here are a few highlights:

1940: 44.2%
1946: 108.6% (post WW2)
1950: 80.2%
1960: 45.7%
1970: 28.0%
1980: 26.1%
1990: 42.0%
2000: 35.1%
2005: 37.4%

There is no data after 2005 but there are some estimates. Even assuming the estimates are wildly low it is unlikely to hit 42%, 1990 levels.

Ah yes, but the war is costing so much money. Have a look at 1946 (post WW2) figures, 108.6%! It took until 1960 to really recover from that. I wasn't around then but I don't think I have read about a US economic implosion during the late 1940s and through the 1950s.

As far as I understand current numbers are cooked books, they are rigged figures from either the Democrat or Republican Presidency

Don't quote them because these numbers are absolute BS like their falsified CPI numbers
As I remember it the biggest economy ie the US has a total GDP of something like $13 Tril and the foreign debt is almost nine tril...that's over 65% of GDP


Now Japan looks worse because its debt is something like 180% of GDP but then again Japan's debt is different, they owe the IMF nothing, they don't have bills to pay in Iraq etc they owe Saudi and Swiss bankers nothing...all of Japan's debt is INTERNAL

but here's where the US gets shitty, not all the US internal debts are counted. The United States Medicare and United States Social Security is so fucked up they decided to stop counting these numbers. They now hold the figures in a separate red book
and if you include the invoice for social security and medicare the United States debt adds up some insane figure like over 500% of GDP

The US just has to hope the Saudis and Chinese continue playing the game of funding this over-spending

Like I've been saying Japan has some shitty problems they have many issues to deal with but they also have good things going form them: Unlike Chevrolet the Japanese build exportable cars and traditionally Japan holds on to its low unemployment numbers
I've hope the next US presidency can turn things around no matter who is elected but I'm also well aware the next US President is going to inherit a shit load of problems.

[nottu]

[Mulboyne]

I've been thinking a lot about the UK recently and wonder about how it will deal with its own bubble which may in the end be worse than the US.

The main way we appear to be dealing with it is by telling ourselves that Australia will have it even worse than both. This from last week:

Telegraph: Australia faces worse crisis than America

[Charles]

The main way we appear to be dealing with it is by telling ourselves that Australia will have it even worse than both. This from last week:

Telegraph: Australia faces worse crisis than America

Well that's a no-brainer. Everything is worse in Australia.

[Buraku]

more economic madness

Japan's planned economic package to help ease the pain from higher oil and food prices could be worth US$18-27 billion....
..
LDP policy chief Kosuke Hori said in a speech in Tokyo on Monday that the package could total up to 2-3 trillion yen, although he did not specify whether he was referring to the government's spending or the total size of the package including other non-spending measures such as special loan facilities.

The comments came after Akihiro Ota, the leader of the New Komeito party, the junior partner in the ruling coalition, told Reuters last week the government should spend more than 1 trillion yen on the measures.

Hori also said the government could end up considering debt-financing bonds as a last resort, although such steps were not desirable.

Some ruling party officials have been suggesting that the government could use part of reserves held in special accounts -- so-called "hidden treasure" -- to fund the package so as to avoid issuing new debt-covering bonds.

The government has tapped into such funds before, transferring 1.8 trillion yen from a special account for foreign currency assets acquired through market intervention to help finance the general account budget for the current fiscal year to next March.

Still, many bond analysts think an extra debt issuance of 1 to 2 trillion yen would not have a big impact on the Japanese government bond market, as the government plans to sell about 105 trillion yen of JGBs to markets this fiscal year.

During the 1990s, Tokyo compiled a series of economic packages that centred on heavy public works spending as the economy languished in the aftermath of a stock and property bubble, which led public debt to snowball.

Many economists think such large-scale spending did little to boost the economy.

http://www.stuff.co.nz/stuff/4669552a6026.html

Japan's farm minister faced calls Tuesday to explain himself or resign in a scandal over expenses, dealing a potential new blow to beleaguered Prime Minister Yasuo Fukuda.

Seiichi Ota, a brash ruling party heavyweight appointed just this month, admitted his political support group booked office expenses of 23.45 million yen (214,000 dollars) despite working out of his secretary's house.

The incident has a hint of political deja vu for the farm ministry, which saw three ministers replaced in 2007 due to money scandals, including one who committed suicide.

http://afp.google.com/article/ALeqM5ieIXS2nppN65WksJ-W7gUPMPa7Xg

A political row over a temporary income tax cut emerged on Tuesday as a stumbling block to an economic package that Japan's coalition government is compiling to help people and firms cope with high energy and food prices.

The New Komeito party, the junior member of the ruling coalition, stepped up its call for a flat income tax cut that would benefit low income earners most, an idea that would be welcome among its own constituents but is not favoured by many in its partner the Liberal Democratic Party.

New Komeito policy chief Natsuo Yamaguchi said he told Economics Minister Kaoru Yosano the government needs to include a cut in income tax. "We will seek to reach an agreement on this with grave resolution," he told reporters.

His comments came as speculation simmered that New Komeito, a partner of the LDP for nearly a decade, was growing increasingly worried about fighting an election under unpopular Prime Minister Yasuo Fukuda.

http://www.forbes.com/reuters/feeds/reuters/2008/08/26/2008-08-26T082215Z_01_T4800_RTRIDST_0_JAPAN-ECONOMY-UPDATE-2.html

[Mulboyne]

"The Credit Crunch - Housing Bubbles, Globalisation and the Worldwide Economic Crisis"

Here's a piece he has written recently on the UK:

Guardian: The Bank of England's folly will send us into depression

Events of the past week mark a watershed. Most now realise that the UK is heading for a deep recession in 2009. But the risks are much greater. Unless the government forces the Bank of England to cut interest rates fast, it is not recession we should fear but depression. There were many shocking twists and turns in the financial markets last week. But the most sobering news was back in the real world. Unemployment on the narrow claimant measure rose 60,300 over July and August. Estimates for a rise in unemployment to two million next year are too low. Unemployment today reflects the big decline in domestic demand during the first half of this year. But consumer spending fell further over the summer. And the past week will bring more retrenchment. Unemployment looks likely to surpass the high point of the early Thatcher years. Four million out of work could be Gordon Brown's legacy by the time Labour goes to the polls in 2010.

It is disturbing that so few of today's politicians or central bankers have digested the crucial economic lessons of the 1930s. John Maynard Keynes spent years railing against classical economists who resisted the case for lower interest rates. It was only when governments delivered deep rate cuts and drove down long-term borrowing costs that recovery took root. It was never a strong upswing: the policy was implemented too late. But it was critical in turning the tide. We do not have to go so far back in history. Japan suffered a catastrophic implosion of property prices during the early 1990s. The Bank of Japan was slow in cutting interest rates. Eventually, they were slashed to 0.5% in 1995, but it was too late. Multiple banking failures in 1997 and 1998 drove the economy further into recession.

After 11 years of falling house prices, Japan adopted Keynesian-style monetary reflation. The Bank of Japan expanded its balance sheet fourfold, buying government debt to drive long-term interest rates below 1%. The recovery has been fitful. After 18 years, property prices are still falling. But if the policy had been implemented much earlier in the downturn, Japan could have averted much of the turmoil that engulfed the country. The Bank of England seems oblivious to the risks. Inflation did rise to 4.7% last month. But it will drop like a stone over the next two years. Commodity prices have fallen 30% since July. The current squeeze on wages will intensify as unemployment climbs. The threat has never been inflation but deflation.

Until the Bank of England relents, house prices will continue to tumble. And rising arrears will cause more international creditors to withdraw from Britain's banks. By the end of the last financial year, they had borrowed ￡3.9 trillion from abroad. That was more than two and a half times the UK's GDP. Of this, ￡3.6 trillion was short-term debt. HBOS was not brought down by short-sellers. It was the extreme and irresponsible leveraging of UK banks that precipitated the shareholder runs. Without a change in monetary policy, there will be more failures.

Similarly, the latest bailout of US banks is flawed because it will not deliver the lower borrowing costs needed to stabilise house prices. International creditors are now worried that a sharp rise in the US government's borrowing will cause it to default too. Long-term interest rates rose sharply towards the end of last week. There is little chance that mortgage rates in the US will fall with the current policy. In short, injecting vast sums into the banking system will prevent true monetary reflation. Instead, the bailouts will saddle taxpayers with huge costs. Repeated bailouts caused Japan's government debt to soar from 65% to 175% of GDP. Driving borrowing costs down to stem a rising tide of foreclosures swamping more banks is a cheaper and far more effective policy. Some will argue that this merely sows the seeds for the next boom and bust. That is wrong. Reflation is needed now to keep people in their homes and prevent soaring unemployment.

Should they succeed in stabilising the financial system, governments can implement the controls necessary to prevent a return to the easy credit that fuelled the bubble. The recent boom was not created by low interest rates. It was the deliberate neglect of banks that allowed the explosion of credit. But a balanced economy, less dependent on financial services and credit, will not materialise until the UK shakes the obsession with cost-cutting that has seen a loss of jobs to China and elsewhere. Japan at least had a strong manufacturing base to cushion its economy as property prices plunged. The UK will be pushed to plug the jobs deficit left by the financial sector's contraction.

That is for the next government to ponder. Today's Labour government has a duty to the country. It presided over the most grotesque credit bubble in history. It cannot stand by and allow the Bank of England to send the UK into a depression. It should demand immediate interest rate cuts. Only that will prevent a recurrence of last week's turmoil.