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For Many, It'll Be A Very Unhappy Financial New Year-Telegraph


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#1 Realistbear

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Posted 30 December 2010 - 07:03 PM

http://uk.finance.ya...401677.html?x=0

For many, it'll be a very unhappy financial new year

Jeremy Warner, 18:26, Thursday 30 December 2010

It will only need a small nudge to tip some households into destitution, writes Jeremy Warner.

In one respect, Brendan Barber, the TUC general secretary, had it about right in his new year message; for many people, 2011 is going to feel "horrible". Around 60,000 public sector workers will lose their jobs, and across the economy as a whole, living standards are likely to fall. Growth will be sluggish, if not negative in some areas. Inflation will remain high, so real wages will fall. Meanwhile, the Government will struggle to get on top of the deficit.

But that's where Mr Barber's grasp on reality ends. Both he and the Labour leader, Ed Miliband, seem to believe that with different policies, the coming adjustment can somehow be avoided. In so arguing, the Left has descended into fantasy.

It's easy enough to see why they might delude themselves. Despite the worst banking crisis in 100 years, and the deepest economic contraction since the Great Depression, to many people, it hasn't felt much like a recession. Unemployment has remained relatively low by the standards of past contractions, and thanks to rock-bottom interest rates, many households have enjoyed a significant boost to their disposable income.

The collapse in business demand has been countered by higher government spending and robust domestic consumption. House prices have undergone only a mild correction, and thanks to public support the City is once more skipping along as if in the midst of a full-scale boom. Why can't we just continue in the same vein? That's what they're doing in the US, where more fiscal stimulus is being piled on top of yet more quantitative easing. Is it not madness to follow the European periphery into self-imposed austerity?

This is a seductive message but it's also cloud cuckoo land. To think that Britain can be saved from the consequences of years of credit-fuelled excess by continuing to apply more of the same defies logical analysis.

Ministers, meanwhile, suffer from a different form of delusion: a conceited belief in their own powers of economic alchemy. Their message is that things are now unambiguously on the mend, that the mere act of announcing a credible deficit reduction plan has somehow put the worst behind us. Already the sunlit uplands seem to beckon. If only it were true.

I'd never urge ministers to fill the airwaves with pessimism. To stand any chance of getting out of this mess, we need decent private sector growth, and perpetually sounding the air-raid siren hardly helps. Yet there is a sense in which policymakers are not telling it as it is for in fact, the debt workout has barely begun.

To understand why, take a look at where we were meant to be by now, three and a half years into the crisis. By common agreement, the UK economy became dangerously unbalanced during the long years of boom. We weren't exporting enough, and importing far too much. The illusion of rising living standards was kept alive by soaraway credit expansion, rapid growth in public spending and constantly rising house prices. Like all illusions, it couldn't last.

Nobody welcomes a crisis, but it did at least provide an opportunity to get the economy on to a more sustainable footing. Rebalancing it away from debt-funded government and consumer spending and towards private investment, savings and net trade became the over-riding goal of macro-economic policy.

But how much progress has been made? Hardly any. In fact, the policy response to the downturn has only succeeded in making matters worse. Household debt remains at near-record levels indeed, in nominal terms, it hasn't fallen at all. It wouldn't require much say a P45, and/or a rise in mortgage rates to tip many households into outright destitution.

After a brief upward blip, the savings rate has returned to one of the lowest in the developed world. And despite all the brave talk of deficit reduction, central government spending and therefore borrowing reached an all-time record last month. Meanwhile, growth in imports is still outpacing the recovery in exports. Our trade and current account balances remain deep in deficit.

A big uplift in business investment does, admittedly, provide cause for encouragement, but in other respects, the hoped-for rebalancing is still in the starting gates. We live in a policy-induced stupor, shielded from the consequences of past follies by fiscal and monetary stimulus.

That's why it hasn't so far felt like a recession. Yet nothing can be put off for ever and for many, next year will be when the pain starts to bite. Austerity has been on a long fuse, but begins on January 4 with the rise in VAT. The inflationary consequences of devaluation will, through higher interest rates and falling real wages, further damage our already declining living standards.

I'm not trying to argue that supporting the economy via negative real interest rates and government spending was the wrong response to the banking crisis. But nobody should be under any illusions about how these levers work: they could only ever succeed in smoothing and slowing the pace of adjustment. They could never, as Messrs Barber and Miliband seem to believe, eradicate it. Next (Xetra: 779551 - news) year comes the moment of truth.


Nails it. CNAM
CRIMBOCASTS for y/e 2013

1. The Euro will have another bad year and may hit parity with the US$ before the end of the year.
2. The Pound will not move much against the dollar (range 1.47-1.60) but is likely to regain a lot of ground verses the Euro which may not survive. US $ will be a safe bet, especially ST bonds and large caps.
3. Stocks should finish moderately higher than 2012 barring a war with Korea and Iran.
4. Gold will not be flying to the moon (again) and will bitterly disappoint (again) any who got in during the run up in 2011.
5. House prices: Flattish to up single digits overall..
6. Not much in the way of inflation again this year--those who forecast hyperinflation will be proven wrong (again--as in 2011 and 2012)
7. Could see a snap GE after the May elections which will be the worst result EVER for Dave. UKIP continue to make headway and will be number 3 before year end.

#2 bogbrush

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Posted 30 December 2010 - 07:14 PM

Indeed, and in the long run it will be good if the country wakes from the decades-long illusion that borrowing = wealth creation, but in the meantime there must be scapegoats; thankfully this government will last the 5 years and perhaps take matters beyond the point where even a new Labour government could turn it back.

Reality approaches.
"They who would give up an essential liberty for temporary security deserve neither liberty or security" - Benjamin Franklin

#3 scepticus

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Posted 30 December 2010 - 07:24 PM

Yet another scare story in the telegraph telling us all what we all already know, even the mumsnetters know all this, though they choose not to talk about it in public.

This article is the journalistic equivalent of a pot noodle, with all the seasonings and spices that torygraph readers love liberally applied, leaving a nice bitter taste but failing to provide an ounce of actual new information.

What a sh1t rag.

#4 R K

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Posted 30 December 2010 - 07:26 PM

Yep.

Import tariffs, higher top-end and bankster windfall taxes are becoming an urgent priority.

Come on Osborne - make your Bullingdon buddies cough up their windfall gains!


"The problem with capitalism is that eventually you end up with everyone else's money" RK
"We have now entered The Great Rebalancing 2007-20xx" - RK
"Gold will go to $1000, Silver to $18" - RK August 2011
QE £100bn and build 1m council homes - RK
Carney announces the launch of Empire 2.0 - Rise of the Banksters Oct '13


#5 bogbrush

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Posted 30 December 2010 - 07:46 PM

Yet another scare story in the telegraph telling us all what we all already know, even the mumsnetters know all this, though they choose not to talk about it in public.

This article is the journalistic equivalent of a pot noodle, with all the seasonings and spices that torygraph readers love liberally applied, leaving a nice bitter taste but failing to provide an ounce of actual new information.

What a sh1t rag.


Do you think "we" all know it? That's not the impression I get every time I see the public engaging on the subject. All I see are the likes of Question Time audiences baying for "free" education, more of this and that and basically business as usual on the never-never.
"They who would give up an essential liberty for temporary security deserve neither liberty or security" - Benjamin Franklin

#6 bogbrush

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Posted 30 December 2010 - 07:48 PM

Yep.

Import tariffs, higher top-end and bankster windfall taxes are becoming an urgent priority.

Come on Osborne - make your Bullingdon buddies cough up their windfall gains!


What impact on the structural deficit would you see any level of banker windfall tax or whatever else we want to call it having? I can't see how it closes it, even the bank stuff is only measured in at best a few tens of billions when the problem is now in the hundreds, every year.

Myself, I think arguing about how it's all shared out is secondary to the problem that we're consuming it but without generating it.
"They who would give up an essential liberty for temporary security deserve neither liberty or security" - Benjamin Franklin

#7 8 year itch

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Posted 30 December 2010 - 07:57 PM

Nails it. CNAM

RB contra-indicator™ tells me its not worth reading

There is no ladder.

JY


No need to sell up, the next phase of the economics cycle is going to be very positive for anyone that owns property.

All I'm sayings is, don't listen to the property bears people, they are wrong.


#8 Redcellar

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Posted 30 December 2010 - 08:13 PM

Yet another scare story in the telegraph telling us all what we all already know, even the mumsnetters know all this, though they choose not to talk about it in public.

This article is the journalistic equivalent of a pot noodle, with all the seasonings and spices that torygraph readers love liberally applied, leaving a nice bitter taste but failing to provide an ounce of actual new information.

What a sh1t rag.


I disagree. They don't get it.
I hear so many intelligent people saying what recession? Never happened. And then they carry on as normal saying there is no problem and there won't be.
Allegedly.

#9 drrayjo

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Posted 30 December 2010 - 09:55 PM

Yet another scare story in the telegraph telling us all what we all already know, even the mumsnetters know all this...
What a sh1t rag


What kind of ivory tower do you inhabit? In the real world, even the relatively well-informed see through a glass darkly and like a boiling frog dimly aware of its predicament understand little of true cause and effect.

Edited by drrayjo, 31 December 2010 - 12:01 AM.

"‘Historically, societies that seek high levels of instant gratification and are willing to borrow against future incomes to achieve it have more often than not suffered inflation and stagnation. The economies of such societies tend to run larger government deficits financed with fiat money from a printing press.

Eventually, the ensuing inflation leads to a recession or worse, often because central banks are forced to clamp down...I regret that the US may not be wholly immune to it."

Alan Greenspan in "The Age of Turbulence: Adventures in a New World", 2007.

"It is difficult to get a man to understand something, when his salary depends upon his not understanding it"

Upton Sinclair

#10 sammysnake

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Posted 30 December 2010 - 10:01 PM

Yet another scare story in the telegraph telling us all what we all already know, even the mumsnetters know all this, though they choose not to talk about it in public.

This article is the journalistic equivalent of a pot noodle, with all the seasonings and spices that torygraph readers love liberally applied, leaving a nice bitter taste but failing to provide an ounce of actual new information.

What a sh1t rag.



totally agree, this is fast becoming another pointless rag
Stop f u c kin Voting

#11 South Lorne

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Posted 30 December 2010 - 10:09 PM

The inflationary consequences of devaluation will, through higher interest rates and falling real wages, further damage our already declining living standards[/b].



....higher interest rates are normally used to stifle inflation...why is this rant different.....?.... :rolleyes:
The market goes up. The market goes down. It is all about timing. (unless it's rigged)

#12 _w_

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Posted 30 December 2010 - 10:29 PM

Good piece albeit a rather optimistic one. The government is literally busting our finances to keep the illusion going while hoping for an inflation that would make it all go away. Unfortunately numbers don't lie and markets are noticing that the austerity programme was just a myth. On top of everything else, I would expect payback to be particularly painful on this point (will Merv trash the currency or will he let rates rise???).

Still, nice to see the MSM coming up with a rather lucid view of things, thanks for the post.

Edited by _w_, 30 December 2010 - 10:30 PM.




"When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it."
–Frederic Bastiat



#13 oracle

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Posted 30 December 2010 - 10:40 PM

here comes the catchphrase.....c'mon....say what you see!!! :lol: :lol: :lol:

Posted Image

PS I'm getting exceptionally fecked off with trying to post a decent image that is not supposedly copyright from google to vent my spleen.
might have to take my custom elsewhere.

Edited by oracle, 30 December 2010 - 10:44 PM.

you take the blue pill...you fall asleep...you wake up in your bed tomorrow and believe what you want to believe

you take the red pill...you stay in wonderland...and I show you how deep the Rabbit-hole goes.

#14 Charlie The Tramp Returns

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Posted 30 December 2010 - 10:47 PM

2011 will be a complete disaster for millions of the population making Dave and Nick more hated than Margaret Thatcher, blaming Brown will no longer be accepted as an excuse as the majority of the population have very short memories of the past and are only interested in the present and future. Remember "The Times They Are A Changing" and so they will. ;)

Dave and Nick may find themselves put out to grass with Osborne and Alexander joining them and the UK once again in crisis. ;)
I have been studying the European Economic Community which became the European Community and finally becoming the European Union since the 1st January 1973. As each year passed the stench of corruption, financial recklessness, and Dictatorship has got totally out of control.

In an interview,( on holiday in the exclusive Swiss ski resort of Davos ) the Liberal Democrat leader was asked whether he was in charge while the Prime Minister was away from Britain travelling in the Middle East. Sipping from a mug marked “Deputy Prime Minister,” he said: “Yeah, I suppose I am. I forgot about that.( Proves what a total berk he is )

Cameron must learn the basic rule in politics and life ( Put brain in gear before putting mouth in motion ) and Miliband with no direct British Lineage should dig a hole and disappear down it.

Is Nicholarse Elcleggski ( 25% British ) insane? Who, in their right mind would willingly appease the French and Germans?

In our Country today THE TRUTH MUST NEVER BE SPOKEN, I will leave you all with your very bleak future as I will be gone.

The Lib/Dems who over the years have supported the demise of the moral and accepted standards we were all brought up to respect. The party who would lead us the way of the Ancient Greek and Roman Empires. We can Add David Cameron and Ed Miliband as Leaders of their parties who are heading for the buffers

#15 Pauly_Boy

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Posted 30 December 2010 - 10:49 PM

Iced turkey fag??

Tbh, yes it's crap reporting, but let's face it; it's all good for us HPCers. The more the public get scared, the greater the chances of a hpc!
"And fairness extends across the generations, for what is fair about forcing the next generation to pay for the debts of our generation?" George Osborne , 17-Aug-2010




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