Monday, Oct 22, 2007
Change in outlook and perceptions
Tgraph: German team damn UK economic 'miracle' as a sham
This is a damning report, and we all know it is true. "Just as private households have been living beyond their means, so has the state. The expansion of the public sector artificially inflates GDP growth data: it cannot continue much longer." "The economy has in effect been been 'bailed out' by housing inflation and debt,"
Posted by confused76 @ 06:27 PM (1368 views) Add Comment
15 Comments
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1. japanese uncle said...
Again, why now of all times? This conclusion has been all too obvious for the past 10 years. They could have published this at any moment meanwhile. Why now? Full-scale media campaign organized by the mastermind seems to be the answer.
2. alan said...
"From 2001 to 2006, a total of £256bn in equity was extracted from UK property values in this way. Dependent as it is on rising house prices, housing equity withdrawl cannot continue to prop up our consumer spending at its current level," said the report.
"Bank of America is forecasting four rate cuts to 4.75pc by the end of next year as the chickens come home to roost in Britain, with sterling dropping from £2.03 to around to £1.84 against the dollar".
This report is absolutely spot on. The reason why it hasn't been published before? ..... MMmnn anyone out there have any conspriracy theory?
3. Winnie said...
JU "Organised by the mastermind"....do you mean Campbell on behalf of Blair..... I would almost like him if that were true...
4. New User 2007 said...
“Bank of America is forecasting four rate cuts to 4.75pc by the end of next year as the chickens come home to roost in Britain, with sterling dropping from £2.03 to around to £1.84 against the dollar.” And “with rates at 5.75pc it has ample room to ease monetary policy to cushion a hard-landing”.
The good news at the end of the story (that we can lower interest rates) is not necessarily the case. We have inflation targeting, and it looks like world inflation will be higher in coming quarters (the deflationary effects of China are already disappearing and commodity prices are high). If interest rates and the pound weakens against US dollar (the currency most commodities are priced in), even more imported inflation could come in.
Still looking for the revelation in the story (anyone see anything that has not been obvious for years)?
5. tyrellcorporation said...
I think it hasn't been published before because quite frankly the spectre of a full-blown downturn has been masked by the apparent health of the economy. Too many commentatrors have tried to pipe up about HPC in the past and have been made to look like fools. It seems finally people feel it's safe to look over the top of the trench and rather than seeing a vista of beautiful spring borders they see a barren landscape strewn with bodyparts!
6. denzil said...
This is all wrong. The reason the UK economy is struggling is because Golden Brown is no longer chancellor. Old Golden built the economy on solid foundations and did not milk the British punter and sell the stability of the country to achieve his goal of PM, albeit illegitimate PM.
Since the silver surfer Darling has been in charge the economy is in tatters.
I'm starting the bring back greasy patronising Golden campaign right here. Sick bags at the ready.
7. Duncan said...
Regarding the comment about why this wasn't published ten years ago, back then everyone
was talking about technology stocks. What I find interesting was there was about a year or more
between people suggesting that Tech stocks were overvalued and them crashing. There was an
excellent Panorama program in which said they were overvalued, but that people thought the risk
of loosing out by not buying them in the short term was greater than the risk of losses in the long term.
8. David Smith's Sub Prime. . . said...
"....the UK is now in worse fiscal shape than almost any other major Western country..."
Says it all really.....
9. stillthinking said...
"but with rates at 5.75pc it has ample room to ease monetary policy"
This is my one. I wonder why they haven't eased them already if there is so much ample room to provide a big economic stimulus.
10. C'mon Correction said...
"Ample room to cut rates" - i think not. Only a full-blown recession/HPC will cause any sort of serious cutting. It's not just about the factor of Sterling dropping and the UK importing inflation; the UK public has proven it will borrow, borrow, borrow if rates are low - this would result in an even more un-stable economy with an even bigger recession further down the line. It's payback time Britain for the last 10 years of the credit orgy.
The UK economy has no option but to suffer stagflation, or certainly very low growth and rates remaining the same. I don't understand why many people believe we can take on ever higher levels of debt with no future consequences??
11. Quiet Guy said...
I am not a highly educated economist or such like but I strongly agree with the German analysis; as a nation, we are up to our necks in debt.
Personally speaking, I have had friends mock me for not buying in to the big debt machine - the massive financial combine harvester that is out of control.
Happy ending for me? I doubt it. I've faith in our suited thieves in the city to pass the bill to the taxpayer. Not sure how but I've little doubt that they'll pull it off.
12. Van Hoogstraten said...
What would the Germans know about running an economy
They are so out of date with their export driven manufacturing based economy with borrowing largely for investment in the productive capacity of their economy - they need get with it.
13. Another Alan said...
Denzil, is that sarcastic? Your comments could not be more wrong.
14. Rainbow said...
I recall a Dave Smith column a year or so back, comparing UK economy to Germanys and coming to the conclusion that after all said and done, he would much prefer our problems than Germanys. Apparently he believed that the German economy was built on people digging roads and exports and nothing more. Whilst Britains economy is built on .................
15. uncle tom said...
At some point - and probably quite soon now - the British economy will have to adjust to a position where debt is no longer spiralling.
This means that people will be spending much less - so others earn less - but those others still have debts to service. So debt defaults will then spiral, pushing interest rates up.
The government meanwhile, will have to face a collapse in tax receipts and a rise in welfare claims as unemployment rises - and they already have a huge budget deficit..
Will the BOE drop rates?
- It's a slightly academic question, as the market has already dictated an increase in interest rates. Only those who have a tracker mortgage would benefit if they did.
- My own belief is that the BOE will be concerned about it's credibility. If the MPC dropped rates, and the mortgage lenders ignored the change, the MPC would look a bit silly.
- As I don't believe that the credit market is about to return to cheap and easy money, I think the BOE might make a small token drop if they came under pressure to do so, but will otherwise probably leave them largely unchanged.