Unexpected wonderful coalitionConservative and Liberal Democrats form the new UK governmentEvents unfolded quite unexpectedly and quickly on Tuesday afternoon and now the UK has a new government based on the coalition between the Conservative and Liberal Democrat Parties.
I was against the idea of Conservative-Lib Dem coalition quite strongly. However by looking at their coalition deal and cabinet members, I like it. I think it's far better than anything that Labour-Lib Dem could have produced.
Liberal Democrat supporters should not feel let down and betrayed by Nick Clegg and the Party. If I were given a choice between a small opposition in the House of Commons or in the Cabinet, I would rather choose the latter one.
In fact, what they have is even better than the choice given above. First, their job is not to oppose, but work and make decisions alongside Conservative ministers. Second, they have already got a promise from the Conservatives to implement some of their policies and delay some of Conservatives policies.
I strongly disagree with the view that Lib Dem has given away too much in order to get into the government. In fact, their policies, especially on the economy and banking reforms have been adopted. Some of the policies that they could not get into the agreements are quite frankly not that important or some are irreversible or almost irreversible, for example joining the euro.
Some important new policies to be implemented (or indeed not to be implemented):
- Income allowance will be increased gradually from April 2011, by £1000 annually towards £10'000 level (Lib Dem policy)
- The capital gain tax (CGT) will be increased, to be streamlined with income tax (Lib Dem policy)
- The increase of inheritance tax threshold to £1m from its current level of £325'000 is to be delayed (Tory policy)
There are many other policies to be implemented and delayed, which is not number-based. Those policies are difficult to measure and some of them are nothing more than reviews and possible reforms, so they are not actually that substantial.
All in all, these new taxation system is the most radical change in decades, and it certainly reflects far fairer system as it relieves the burden on poor and middle income-earners, yet punishes the wealthy harshly.
This is very different from what Tories stood for and their image, protecting the rich and slaving the poor. This removes one big shield for wealthy individuals, very low CGT compared to income tax. Also, there is a serious planned "clampdown" on bankers bonuses and their "reckless" activities.
My thoughts on some issues related to the coalition government:
In today's BBC's "Question Time", some rather ridiculous issues were raised:
Melanie Phillips, the Daily Mail columnist: "3 quarters of the nation didn't want Lib Dem to be in the government"
- I am sorry, but this country has not produced that many election results which resulted in a certain party to be "not supported by less than half of the voters". So should they have had re-election every time when no single party had more than 50% of voters' vote?
First, the current "first past the post" system ignores the overall vote share. Indeed it's mathematically possible to win the election without the majority of the voters' support, if the constituency boundaries were drawn in a particular way. Second, with the coalition of Conservatives and Lib Dems, they have a total of more than 60% of the votes and more than 56% of the House of Common seats.
"They have put their interest first, rather than national interest, unlike what they are saying"
- If Tories really had put their interest first, they could have formed a minority government by themselves without compromising any of their policies or calling a second election, in which they will likely to win. I am not saying everything they say is the truth, but I think some people are being far too cynical and critical.
"Lib Dems compromised too much", "Nick Clegg only wants to get into government, and doesn't really care"
- Yes, they have compromised, and they must have compromised. How else, do they expect to form a coalition. In fact, given the number of Lib Dem MPs, they have done quite well both on their coalition policies and cabinet seat numbers. Of course, Nick Clegg wants to get into government, that's what every politician wants to do, however, it's too early to judge and tell if he has compromised his Party and his policies for the sake of it. At least at the moment, it doesn't look so.
There were many conflicting issues raised by both the panel and the audience. Melanie claimed that this coalition government cannot survive and will break down, then she says she wouldn't predict anything, when asked about how Theresa May will do in the cabinet. So stop predicting anything at all!
Then there was a non-white guy talking about immigration policy being loose, yet complaining about ethnic representation. He cannot have it both ways, first he is clearly a descendant of an immigrant or an immigrant himself. Then he cannot ask others not to come into the UK, yet demanding ethnic representation in the cabinet or in the Parliament. That's nothing, but a very very selfish act.
I personally prefer a world with no boundaries. Why should anyone born by a chance to be in a specific country be confined in that country?
Also I am against the representation of ethnicity or women and ethnic equality, just for the sake of it. I am not against the women or a member of any ethnic group, but I am against appointing a woman or someone from an ethnic background just for the sake of it, why should they be appointed, if there is really someone better and more capable of doing the job, but a man from non-ethnic group?
Eventful weekFull of political, economical, financial, commercial and environmental eventsThe last week is one of the most eventful weeks I have ever seen. Only 2 weeks ago, on 28th April, there was pretty much nothing going on and BBC was reporting pretty much nothing, but about the Gordon Brown's incident with Gillian Duffy, which Brown called 'bigoted'.
However, from the middle of last week, things started changing, it was not only the general election in the UK. Markets around the world crashed last week, having one of the worst days ever on Thursday the 6th, which eventually resulted in the cancellation of trades made between 2pm and 3pm on 296 stocks out of listed 300 stocks on NASDAQ. Even more bizarrely, no-one quite seems to know exactly what happened and what resulted in leading US Stock Indexes to be dropped by almost 10% and then recovering quite magnificently, all within a very short period of time, withing just few minutes.
Euro crashed, hitting 14 months low and markets lost the gains since the year started. The panic continued on Friday, only to vanish on the next trading day-Monday and resulting in the best daily-gain in 14 months. The sudden vanish in the panic was due to EU finance ministers successful and quick decision on Sunday, which created an emergency fund of 750 billion euros to support the deficit ridden EU countries and more importantly to defend the euro and avoiding Lehman Brother-style collapse in the financial markets. 250 billion euros will be guaranteed by the IMF, 60 billion from EU fund and the rest coming from EU governments, largely from Germany and France.
On Monday, another big news hit the headline: Gordon Brown offers his resignation as a leader of Labour Party in public, hence in effect resigning as a Prime Minister. This could lead to a possible coalition between Labour and Liberal Democrats, although they still fall short of the overall majority within the House of Commons, totaling only 315 seats out of required 326 seats to be the overall majority. Hence, they will need support from smaller parties, but that will make the coalition unstable as they will need 2, 3 or even 4 smaller parties' support.
However, as the incumbent cabinet decided they would not choose its new leader until certain agreements have been made with the Lib Dem, it is uncertain who will become the next Prime Minister if the coalition between Labour and Lib Dem goes ahead. David Cameron probably used to hate Gordon Brown, now he must surely be hating him if the coalition goes ahead and David Cameron loses his chance to become the Prime Minister.
One of the top agendas, apart from the economy and budget, on Lib Dem is an electoral reform, which they say will be a condition for any coalition. It seems they will get it, as Conservative Party has offered they will hold a referendum on it and Labour already favours a reform. However, any electoral reform is going to hurt both Labour and Conservative badly, as they will probably never be able to govern by themselves only, especially if Lib Dem favoured proportional system replaces the current first-past-the-post system. The biggest winner will be, without a doubt, Lib Dem, as they will probably be always a part of the coalition in the future, giving them a power they never had.
If those events were not enough, there is a partial closure on the UK airspace due to Icelandic volcano ashes again and to top it off, BA cabin crew announced they will have 20 days strike within the next month. Now surely, people must be thinking to give up on air travel as chaos and uncertainty of their flights seem to be increasing.
Many more events have been happening within the last week, of which any of them may have hit the headlines during normal times, however it seems there is not much room for those events to be on the headline at the moment.
Obama urges China to adopt more market-oriented currency market and China rejects it (once again) So called G-2 keeps disagreeingThis week the-same-old-argument came up once again, US calling for the devaluation of yuan (or renminbi, RMB) and China accusing US that US wants to solve its problem using China. On the face of it, yes, it looks like so, as the US trade deficit with China has been increasing steadily, from $68.7bn in 1999 to $266.3bn in 2008 (that's more than the entire GDP of Portugal or UAE, which consists of Adu Dhabi, Dubai and 5 more emirates).
Today, China is not going to do what US wants them to do, or what EU or any other country and group of nations for that matter, wants them to do. China wants to be recognised as a super-power on its own, so why should it be listening to others and meeting their demands? China will devalue its currency at its own pace, as it sees fit. US calling for devaluation of yuan is only going to slow down the devaluation process, as China does not want to be seen as meeting US demand. So, it is best that topic of yuan and its devaluation to be left out of their conversation, if US wants to narrow its trade deficit.
However, the problem of US and other nations with big trade deficit maybe internal rather than external. For example, UK's trade deficit has risen in January 2010 to £3.8bn from £2.6bn in December last year despite a weaker pound, with trade deficit in physical goods increasing to £7.9bn, which is almost a billion higher than the the expected £7bn.
Pound Sterling in a free fallPound falls below $1.49 Today, just before midday Pound Sterling fell sharply from the valuation over $1.51 to less than $1.49. It fell against the other major currencies by a similar proportion. It reached its lowest point against USD since last May after continuous decline since mid-November 2009.
It was feared it may be a double-dip recession, however it seems unlikely, at least at the global level. However, it may just well be the case for Pound Sterling as it dives under $1.5. Since the end of 2003, Pound has been overvalued by a significant amount, reaching ridiculously high valuation at more than $2.1 in November 2007, then it became severely undervalued from end of January 2009 till April 2009. It has reached its relatively stable (and reasonable level in my opinion) of $1.6-$1.7 from June 2009. But from end of January this year, it has gone below $1.6 with the rest of the financial markets due to previously unseen problems starting with Greece's sovereign debt, weak economic results and still increasing unemployment in many industrialised nations. Markets started recovering from mid-February, yet Pound remains falling.
Some given explanations are UK's public debt, which has been ballooned in the last 18 months and set to increase further for next few years, and today's spectacular fall was attributed to the approaching general election, as hung-parliament is becoming more of a possibility in the UK, as Tory leader David Cameron's popularity with its party has fallen and the its lead over Labour is diminishing.
I don't think public debt problem can explain the whole story, as the problem is not confined to the UK. However today's fall maybe explained in terms of the upcoming general election, although it's questionable if it can explain the continuous fall.
