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15 March 2014

My Favourite Economist

Tag(s): People, Politics & Economics
My favourite economist is Liam Halligan who since 2003 has written his regular “Economics Agenda” column in the Sunday Telegraph which alone is worth the price of the paper. He writes on macro-economic themes with clarity and a consistently contrarian approach.  He not only flings his darts into the ribs of politicians but more significantly points out the foibles of the central bankers. He’s also written for The Economist, The Economist Intelligence Unit, The Wall Street Journal, Euromoney, The Financial Times, Sunday Business, GQ Magazine, The Spectator, The New Statesman, and Prospect. He was economic correspondent at Channel 4 News and researched, wrote and presented several documentaries for the Channel Four Dispatches series. His broadcasting credits also include Sky News, Jeff Randall Live, Frost over the World, CNN’s Global Exchange, CNBC Squawk Box, and a stint presenting Wake up to Money on BBC Radio Five Live. He has won numerous awards both for his journalism and for his broadcasting.

In his recent articles he has covered:
Russian cash still key to stability in Ukraine. February 23rd, 20124
Scottish independence is an Economic Nonsense. February 16th, 2014
Judges of Karlsruhe in fresh eurozone threat. February 9th, 2014
Britain’s shaky growth is papering over the cracks. February 2nd, 2014.

I was recently invited to a private dinner for a small group of business people to hear Liam speak. He covered a wide range of economic issues both about Britain and the world. He believes the recent rise in UK nominal GDP is rooted largely in the Government’s Help-to-Buy housing market stimulus, with consumers running down savings and taking on more debt to fund spending. Both trends are supported by the low cost of borrowing. We are therefore not creating wealth in a sustainable way, the economy is not rebalancing. Indeed despite a real terms depreciation of sterling by 20% since 2009 exports continue to lag imports and in the third quarter of 2013 the trade deficit reached 5.1% of GDP, the highest in more than two decades.

Liam is highly sceptical of the policy of Quantitative Easing, a sophisticated term for printing money. Net borrowing exceeds net GDP and then the Bank of England buys up that debt. He is also dismissive of the rhetoric of austerity. Government spending continues to rise in actual terms. In fact the net increase in nominal GDP is much less than the additional money circulated by the Bank of England, £375 billion to date. He is not suggesting that the manic policies of Ed Balls are the answer, but has severe doubts where the current management of the public finances are headed.

Liam also told us something of his background. He was born and raised in North London to an Irish immigrant family. He was the only one of his 21 first cousins to go to University, in his case to Warwick where he won a first-class BSc (Hons) in Economics, and then to St Antony’s College, Oxford where he gained an M.Phil in Economics, financed by an ESRC competition award. While at Oxford he was a member of the Oxford University Boat Club and rowed in the Isis Boat Race crew against Cambridge. Yes, Mr Halligan is a big unit.

After his first degree Liam took research internships at the International Food Policy Research Institute in Washington DC and the International Monetary Fund in the Fiscal Affairs Department. He also spent a full academic year as Head of Research at The Social Market Foundation, a Westminster-based think-tank working with David Owen, Professor Lord Robert Skidelsky and Daniel Finkelstein.

After his post-graduate degree he went to Moscow, founded Russian Economic Trends, an independent source of data and analysis, and the Russian European Centre for Economic Policy, which advised the Russian Government. He also had time to study the nature and consequences of gangsterism in the Russian economy. He put all this experience to good use when between 2007 and 2013 he was Chief Economist at Prosperity Capital Management, the world’s largest Russia/CIS-focused asset manager, controlling investments worth over $4bn for a range of international clients including insurance companies, pension and sovereign wealth funds.  When people started to dither over the right reaction to the Russian build-up of forces in Ukraine he told the Radio 4 Today programme that economic sanctions against Russia would be mad.

In a private dinner I think Liam went further than he normally goes in his articles. He insisted that he was an optimist but I could not detect much of that. He said he did not want to spread doom and gloom but found himself something of a lone voice in appealing to reason about the state of the nation’s finances. He said he found like thinking only in Moneyweek so it can be no coincidence that I read that avidly every week and place great store by its warnings.

He invited us to ask him about Scotland so I did. I knew from one of his columns that he thought it was economic suicide for Scotland to go independent. He had analysed and compared the ratio of bank balance sheets to the domestic economy in various countries including Iceland and Ireland where bank failures had proved close to fatal to the local economy. In both cases the proportion of bank balance sheets to domestic GDP was about a factor of five. But in the case of Scotland where both RBS and Lloyds are headquartered this rose to a staggering factor of twelve, clearly impossible to manage. In such a case the Bank of England would have to step in even if Scotland was nominally independent or otherwise the contagion would bring down the British economy.

But Liam surprised me by giving first an impassioned plea that Scottish voters would say no to independence. His reasons were entirely emotional and much more about the unity of the United Kingdom, the most successful and durable example of unification in world history. When pressed he gave the above economic arguments but it was the emotional arguments that for him were most important.

 A week or so before I had heard Jacob Rees Mogg speak. He is one of the few new Members of Parliament who fill the chamber rather than empty it when he gets up to speak. He had given a most entertaining talk, conventional on the economy, education and welfare, predictably controversial over Europe, but when asked about Scotland he also gave a strongly emotional response. He could no more wish that Scotland won its independence than Cornwall did or even Middlesex. We were a family and should stay together.

I may blog about this vexed subject nearer the date of the referendum, which, ironically for this family, is set for the date when Chile celebrates its independence from Spain. In the meantime let’s hope that Liam Halligan is for once wrong about his fears, but I somewhat doubt it.

Copyright David C Pearson 2014 All rights reserved



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