Willy Hutton is an idiot

Nor does the story end there. The current account deficit for the third quarter of 2014 – the latest reported – reached 6% of GDP, the highest since records began in 1955. Analysing the figures, the Office of National Statistics observes that one of the principal causes is the deterioration in Britain’s international investment position since 1980. For centuries Britain, courtesy of empire and overseas expansion, enjoyed a phenomenal net surplus of assets; we owned more of the world than foreigners owned us – so that consistently Britain netted a surplus of investment income.

No more. In the third quarter of 2014 the growing net deficit of assets as we sell off the country overseas meant that Britain had a record deficit in its investment income balance of 2.8% of GDP. If these trends continue for another 10 or 15 years the interaction with our growing trading deficit – we import a great deal more than we export – will eventually make the scale of our international debts and income flows abroad insupportable.

Dear God Almighty.

The selling of capital stakes is *because* we run a trade deficit. A trade deficit must, as an accounting identity, be matched by a surplus on the capital account.

You fool.

20 thoughts on “Willy Hutton is an idiot”

  1. In the third quarter of 2014 the growing net deficit of assets as we sell off the country overseas…

    Anyone remember the days when the left thought Britain’s overseas empire was bad?

  2. @Tim Newman

    Anyone remember the days when the left thought Britain’s overseas empire was bad?

    Indeed, rather like their argument as to why we have to be in the EU – as otherwise, foreign investors like Nissan wouldn’t build factories and create jobs here.

    Yet Hutton says foreign ownership is a problem.

    I do wish they would make up their minds.

  3. It’s like the whole EU thing – it’s great, and those evil neoliberal [email protected] want to leave it, how very dare they, one minute, the whole EU edifice is a neoliberal plot the next.

  4. @ Andrew K
    It is news to *him*.
    He had a fantastically high opinion of his own intelligence when I knew him (he was an equity salesman at Phillips & Drew). He left to take an MBA course at INSEAD, then the most prestigious management school in Europe. Strangely there is no mention of his being awarded an MBA in any profile of him that I have seen.

  5. The Meissen Bison

    john77: he’s in the INSEAD Alumni Association address book as having been awarded an MBA in1978.

  6. @ TMB
    Thanks: I don’t understand why the Grauniad etc don’t list it as one of his accomplishments – rather more prestigious than a second in Social Sciences from Bristol.

  7. Bloke in Costa Rica

    I thought the whole “balance of payments sums to zero” thing was GCSE-level stuff, as basic to an economist as F = m a to a physicist. How has Hutton managed to lever himself into a position where he is regarded as anything other than a crank?

  8. The Meissen Bison

    john77: I imagine that acquiring a qualification that in the popular perception puts you in the vanguard of heartless capitalist swine, is not something to which he or his friends would want to draw attention.

    His subsequent career suggests that the experience ostensibly did nothing much for him educationally though I dare say the fellows at Hertford got a reassuring but utterly misleading peep at his certificate.

    dearieme: that’s very good. Do you mind if I use that in future?

  9. @ TMB
    What, as far as I can see from the MBAs I have encountered (and in one regrettable case worked under), is that the MBA does give is a training in marketing, especially marketing oneself. So I beg to differ with your second paragraph.

  10. TMB: that was rather graceless of me. Apols.

    Second Try: you are most welcome to spread my wisdom in the world.

  11. From WH talking about himself:
    “I was 18 months younger than the oldest boys in the fast-track class and generally bottom or near bottom in the class order. My O-levels were Bs, Cs and Ds but I really flourished in the sixth-form. Doing the subjects I loved – geography, history and economics – I often came first. I played rugby in the first team and ran the tennis team.

    I got my A-levels and went to Bristol University and got a 2:1 in economics and sociology. The sociology department wanted to give me a first but I hadn’t done well enough in Part I economics because I spent my first two years doing zero work. (It was the late Sixties, after all.)

    I didn’t get interested in journalism until I did an MBA at Insead in Fontainebleau near Paris. As the only English speaker, I was always asked to write the reports of my group projects and the other students, who were Japanese, Belgian, French, Czech and German, said, “You write good English.” I said, “Well, I’m English.”

    Jonathan Story was the professor who introduced me to political economy and insisted I read the classical economists: Ricardo, Adam Smith and Alfred Marshall. So much of economics degrees consists of reading papers by academics on the classic economists, rather than the original texts… Small wonder we’re in a financial crisis.”

    If I recall correctly, O levels were graded 1-6 (pass) and 7-9 and U (fail).

  12. Off topic, but Keith Sutton seems to have disappeared from the ASI blog. I managed to get my critique on railway tunnels past moderation, which may have had something to do with it. I didn’t intend to drive him off completely – just to make him think a bit about what he wrote and engage with the people who disagreed.

  13. “One thing tells us this is a better way of regarding our deficit than the “amazing fecklessness” Will describes. It’s that foreigners are happy to lend to us. Since early 2010 sterling’s trade-weighted index has risen 15% and ten year gilt yields have fallen faster than US yields. Neither would have happened if the UK were in a desperate fire-sale of assets to fund profligacy.”

  14. They interviewed the head of Ford EMEA on Today one day last week and the subject of Brexit came up. The Ford wallah seemed to me to be determined not to take a position either way but rather talk about how important the UK was to Ford’s global business. The interviewer continuted to push him to say whether our leaving the EU would make them UK footprint, so he eventually said it wouldn’t. the interviewer seemd quite disappointed at that…

  15. Sebastian Weetabix

    Apropos MBAs, the collective wisdom in our admittedly aged and cynical engineering office was it stood for ‘Married But Available’. The procession of half-educated job-hopping bullshitters that paraded through management positions was a wonder to behold. None of them had an original thought in their bony heads.

  16. @ james charles
    Your reference makes the utterly absurd claim that “A current account deficit, by definition, means domestic investment exceeds domestic savings” when it means no such thing. A *capital account* surplus might (using carefully chosen definitions of savings and investment) but a current account deficit is not the same as a capital account surplus.
    Also, the figures for current account and capital account are distorted the amount of nominal interest on bonds that, in an era of non-zero inflation, is repayment of capital (since the capital on nominal redemption is worth a lot less than at issue).

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