Friday, Dec 12, 2008
What the sterling crisis means for you
MoneyWeek: What the sterling crisis means for you
"Our so-called government may think it can solve Britain's economic problems via borrowing like crazy, and letting sterling collapse into the bargain.
But it's quite wrong. As the Germans are now telling Gordon Brown, his mistaken approach is actually storing up a lot more trouble for the future... "
Posted by damien @ 10:51 AM (1948 views) Add Comment
52 Comments
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1. down wave said...
Ring Fenced in an economic barbed wire of debt, Stalag 13, that is: Great Britain is doomed by Gordon
Brown’s and Sir Mervin King’s Keynesian economics of the 1930's. Brown and the Work and
Pension secretary’s James Purnell’s motto is ‘Arbeit Machen Sie Frei’. ( Work Makes You Free)
This time the jack boot is on the other foot. For the sake of the Beloved Queen and Country,
Please Gordon Brown, the man with a Ph.D in History (Theses submitted: The History of The
Dark Ages.), do the Honorable and fall on your Sword. NOW.
2. alan said...
Down wave,
IMHO, the attention given to reducing benefits (stamp on benefit layabouts - headline) is an attempt to win back the middle ground of British politics. There is a slim chance that Gordo may even make a rush to the polls early in the new year.
All GB needs now are a few headlines to say people are flocking to buy property again. I wonder which VIs could help him do that???
3. andrew said...
I have been reading HPC for about 2 years and I thought incorrectly that when a financial disaster occurs then the usual would happen, interest rates would go up to prop up Sterling, people would stop spending like mad (my neighbour earning half as much as me wouldn't be able to afford a car 3 times the price of mine), people would be encouraged to save, I suppose I expected everything to go back to normal.
It looks like it won't, borrowing on this scale, encouraging people to take on more personal debt, encouragement to go out and shop to save the economy?? GBrown is on an kamikaze mission, he has done nothing except simply borrow more, we all know that, this is the complete sum of his rescue package.
Yes house prices are going down, but i don't think those of us that just want to buy a home are any closer to doing so, not sure how this will pan out now, we all knew that there would be a HPC but does anybody have any predictions about what might happen next ?
4. theboltonfury said...
andrew, I agree. I am 100% further from buying now than before as I am faced with having to use my deposit to sustain life over the next God knows how long.
I can't even jet off to join family in Italy as planned - I've been devalued by a third with the strong Euro
Cheers Gordon - You absolute ******* ****
5. Alan Lubin said...
andrew. i share your pain
6. Cheekie Charlie said...
One thing a weak pound does, it make our wages alot cheaper therefore foreign company's should in theory keep or even move production to the UK.
7. This comment has been removed as it was found to be in breach of our Blog Policies.
8. titaniccaptain said...
as andre and bolton said
Also......you raise a good point bolton............are the rest of you finding hard not tuck into your savings right now?.....I am.........and yes I would like a fist fight with the entire labour front bench...........
9. titaniccaptain said...
Unless we have massive inflation I really dont know how any of you guys can say there will be less than 80% drop in house prices with the condition of this country at the moment........................If the doom and gloom scenario unfolds as many have said it will.............we need to look at ourselves and our jobs..............In a depression what value will our individual skills hold?............ what need is there in a world where people are cutting back to the bare essentials for the luxury services which our economy has become based upon............
10. doom&gloom said...
my savings are on a negative trajectory! Some of my acquantances with massive mortgages and insecure jobs are actually starting to panic now, but I've actually thought, "what the hell, might as well splash out a bit". Only on productive purchases like a new PC, you understand. But watching the value of your nest egg devaluing due to GBs kamikaze policies is quite disheartening, when you've avoided debt and been saving for years!
11. jack c said...
Guy's, have to say most people I know (private sector/self employed) are having to tighten up financially (myself included) - I suspect having been fortunate enough to take 2 trips to the Med during 2008 I will be staying in the UK for 2009 - the exchange rate will price a lot of people out. I also know quite a few people who moved permanently to Spain but because they have fixed pensions paid in Sterling they are now being forced to move back !
Fortunately I postioned the family finances defensively several years ago in order to meet this debacle (which I anticipated) but it still doesnt sit well with me because those that were prudent are now being forced into bailing out the irresponsible and I feel as a nation we are being raped.
12. titaniccaptain said...
@jack C
"those that were prudent are now being forced into bailing out the irresponsible and I feel as a nation we are being raped.".............oooooohhhhhhh............that is spot on.........................................One of the best quotes I have seen on HPC......simple and to the point yet with enough venom in it to send a a pit of cobras to the grave. At some point Gordon has got to do something for savers.................hasnt he?......oh dear we are screwed.........time to invest in crack, heroin and a healthy prostitution racket!!!!!!!! Or is this all a conspiricy????? DOH!!!!!!!!..........I hate it when I cant make up my mind
13. renting2 said...
jack c - "I feel as a nation we are being raped" - more like spit roasted!
14. str 2007 said...
Andrew
I sympathise with your position, I thought the same.
I have been saying for a while that GB is a dangerous person in a desperate position with nothing to loose. I thought it would get expensive but nothing like this.
Bolton Fury
This has also been my concern, I am now trapped here due to devaluation, I don't like feeling trapped, even if I wasn't going to live abroad in the end.
TC
I think I'm as angry as you. Maybe it will still turn in our favour and we'll look back and think about how worried we were, without cause.
Re: the falls
I know JU is Uber Bear 60-70% outside London, but my sceptical side still turns to the fact that even with 4-5 million unemployed 70-80% of people will still have their jobs and if they really do reduce interest rates to 0% and you can run an interest only mortgage for 2-3% then this reduces a £300k mortgage to £750 per month. I think alot of peolple will struggle through ok with rates like that. IE not so many forced sales.
I guess the new prices will come down to lenders LTV's and income multiples. If they have reduced LTV's to 75% (from 95%) then effectively yes house prices should fall by 60-70%, but really more quickly than they are IMO. Somehow people still seem to be finding funds.
What I'm saying is that one way or another be it FTB or BTL, someone needs to buy a flat/starter home for someone to buy/sell a 4 bed family detatched house.
If FTB's can raise a £50k deposit (and that IMO is alot) they have a max £200k budget (75% LTV). Same with a BTLer (except their equity deposit source has just dried up).
Should that FTB have a £25k deposit more realistic IMO and still a very good deposit their budget is now £100k (75% LTV).
This should in theory drag the whole market down quite quickly to a lower level - a self fulfilling prophecy if you like.
I guess we should be keeping an eye on LTV's available as a guide to where the market will go.
It would be quite a good graph to have on this site showing average LTV's overlaid with average house prices.
Sorry if I'm waffling (trying to work and take calls at the same time). Just my thought processes out loud really.
15. str 2007 said...
renting 2
LOL that quote would send a pit full of Cobras and Vipers to the grave
16. titaniccaptain said...
@Str2007
If 70%-80% still have jobs they will be panicing like crazy over loosing them....so will they want to get into a more debt in that enviroment?.........
17. davecrash said...
We have got to get rid of this government ASAP.
If any of you are ask by a pollster or the media about who you are going to vote for please just say nu labour as you believe Gordon Brown really is the man with the right plan, you totally trust him, his government and his economic policies. Gordon will read the polls in the newspaper and call a snap election, we can then tell him the truth at the ballot box.
18. theboltonfury said...
feel better that others are tucking in to savings but it's completely demoralising even if it's not panic stations yet. If I was compared to a BTLer I would definitely be in the extreme anger phase! I can see making my own hobbit style home as the only option to have my very own piece of England
19. titaniccaptain said...
Great idea Dave crash...lol
20. jack c said...
@titaniccaptain (Friday, December 12, 2008 12:44PM) thanks for your kind words - I have 2 children (18 & 21) and they (along with people of the same and subsequent generations) will be paying for this debacle for decades to come. There is venom in my comments because it really did not have to be this way - we as a nation did not need to follow the cheap easy credit path etc.. and all that went with it. The most repeated lie in the world at the moment must be "it all started with US sub prime"
I have no faith in the current crew to get us out of this mess but the alternatives are hardly inspirational either - frying pan/fire springs to mind.
I'm out for a few beers and a bite to eat with my mates tonight - good job it's not all priced in Euro's (LOL)
21. down wave said...
6. titaniccaptain said...........and yes I would like a fist fight with the entire labour front
bench...........& 5. japanese uncle said... Auschwitz Britain!
Forget that idea, Gordon Brown and his propitiative cabinet and ministers and chronic apathetic
back benchers will have your head shaved, stuff your hair into mattresses, confiscate your
spectacles, strip you of your cloths, gas you with potassium cyanide, reduce your fat with sodium
hydroxide (caustic soda) and turn what remains into bars of soap to be sold in Nationalized
Woolworth.
Gordon Brown is not a kamikaze, he does not have the steadfastness or fortitude for that, like
Blair, he will make other commit suicide, give their lives for his glory. For the sake of our
Beloved Queen and Country, Brown should be sectioned and forced onto Incapacity Benefit and
see what it is like to survive on £60.oo per week and receive draconian intimidating letters and
telephone calls from Wrt Hon. James Purnell’s beloved Department of Works and Pensions, printed out by
USA leaky software.
The very best that we can hope for is that the medication that has been prescribed to control
Brown’s fury (I am always right, and the world would be a better place if everyone did as I say),
will introduce iatrogenic disease and cause escemea or an embolism.
22. titaniccaptain said...
Down wave
I like you..........were you breastfed by your grandfather like I was by mine? and raised by frogs
23. shipbuilder said...
Gordon Brown and his cronies are stealing our and our children’s future, spending our future earnings in front of us and we are doing nothing about it and will do nothing about it.
No-one in this part of the world gives a sh*t about each other anymore, there is no chance of solidarity over any issue and the government know it. Individualism won. We are divided and conquered. Us vs them has a chance, you vs them has none.
The deal is done, the money is effectively spent, things cannot get better, they can only get worse. Meanwhile we will blame the dole scroungers and the immigrants, whatever other sacrificial lambs are presented, as we have been instructed to by the media.
We like to think of ourselves as ‘different’ but there is no better example than this site – little about how things could be better, loads about how to personally profit/invest on the way down, maximum return for minimum effort.
People will take this personally and that’s my point, it’s not about US, it’s about YOU now, so we are already beaten.
24. down wave said...
20. titaniccaptain said...
Down wave
I like you..........were you breastfed by your grandfather like I was by mine? and raised by frogs
No, my Grandfather had BO, my mother was Irish not French, she died at the end of the war from scepticemea so I lost her breasts, since that tragedy, I have a terrible oral problem and my smoking and drinking, the taxes from it, has paid NU Labour's wages ever since.
25. titaniccaptain said...
BRAVO Down wave!!!!!
26. titaniccaptain said...
@ship builder
"We like to think of ourselves as ‘different’ but there is no better example than this site – little about how things could be better, loads about how to personally profit/invest on the way down, maximum return for minimum effort."
I hate to say this but your right and I am as guilty as the next man there.
27. letthemfall said...
If this Govt is so bad - and I understand why people think so - consider how things would be (or would have been) under a Conservative govt. Does David Cameron really strike anyone as a man with a deep understanding of how to solve our economic problems? As well as the enormous debts built up (not unique to the UK) there is the wealth inequality to address - the false premise that certain jobs somehow merit great rewards at the expense of the rest of the nation. I don't believe for a moment that the Tories would have done better in this respect.
Regarding devaluation of savings, that depends on what you measure their value against. If it is against housing, then savings are increasing in value. Against foreign currencies sterling savings are falling. It depends on what you expect to do with your savings.
I think only time will tell whether current Govt policies are right or wrong. In the meantime I reserve judgement.
28. george monsoon said...
We need someone in power with common sense, no ego and the strength to tell the people the truth, no matter how hard it hurts.
29. theboltonfury said...
@24 take whatever I have and give it to a Rwandan refugee camp or just burn it if it means that society wasn't such a vile place anymore and my family can exist in some form of reciprocated harmony. I truly mean that. Just leave me my guitars and any old amp - is that ok? (would my signed copy of Appetite for Destruction staying be taking the piss?)
30. andrew said...
well letthemfall you are the kind of person multiplied by a few million that is the reason why we have GBrown in power.
Do I believe the Conservatives would have done things differently? Yes, a different set of people would be on the bonfire, would the country be in a different position, perhaps marginally, maybe much better, we don't know that.
Let me go back to the beginning, when Labour came to power, I was just starting my career, I was on a salary of £14K was married and had just bought a house (all this is pre divorce). In the first few months Labour got rid of the Married Couples allowance and then got rid of mortgage tax relief, I was about £900 a year worse off, now you tell me if the Conservatives would have done it differently ?
31. titaniccaptain said...
@bolton
hhhhmmmmmmmm toughy
My Syd Barrett box set vs eutopian dream......................Arnold lane wins hands down
And I think I would turn on the Large Hadron Collider if threatened with having my Fender Jazz taken away...............
32. titaniccaptain said...
Speaking of which ive got to go and get ready for tonights gig.......:-(................
33. jamonit said...
TC@6 I'm living off my entire savings now - house money, pension, inheritance, the lot, no income whatsoever - and have just spent a year sinking 30% of it into a startup business set to go live in April '09. Great hey? Anyone want to buy some [seriously good] software?
34. braindeed said...
Ok so Broons an idiot.....but how could he ever have pissed on the great fire of 'rising wealth', that the British public has been roasting it's nuts on these last 50 years. Not at Tory squeak was uttered about the madness, until the sticky stuff hit the whirring thing - we get the clowns we deserve.
'Bullingdon Dave' is a posh chancer who will look after his chums - remember big bang privatisation et al, nothing will change there.
We are all to blame.....the British don't care about thier own 'status' so much as the ability to have at least some other group of poor sods to look down on. No one cared a jot about the generation who qualified higher education with debt, and an inability to compete with the scabs of BTL for even the dampest most rank pile of crepe to ever call itself a 'home'.
The biggest mistake that people make here, is to imagine there is a solution to our current state that will take care of their own percieved best interests, be it as: savers, FTB's, clever contrarian investers,etc - everyone will pay for this, no amount of money will insulate anyone from the brutalisation of civic dislocation when this truly unfolds.
It's going to have to get a lot worse before enough people are affected to make it 'their' problem, and to be willing to sacrifice a little of the comfort blanket to others. It's going to get bumpy - strap yourself in.
35. theboltonfury said...
TC have a good one. Tell the venue you are a rock covers band then launch in to a rendition of the complete 'Atom Heart Mother' album complete with sound effects. That should throw them
36. jamonit said...
Someone said to me yesterday that what we're seeing, finally, is the end of Thatcherism. 'Greed is good' et al.
37. letthemfall said...
andrew: "when Labour came to power, I was just starting my career"
Well yes, this is really my point. You only have direct experience of one govt. All govts in recent times have overseen disastrous economic conditions. The early 80s under the Toies was dreadful for many people and there were street riots then. Following this episode we had the Lawson boom (cf Brown boom). Policies will vary under different govts but in general the world economic situation has a larger impact on individual countries. You may or may not have been better off under a Conservative govt (though they would have removed MIRAS too), but in fact it is not down to me that we have the current govt. However, I have seen enough govts to understand that it is naive to expect a change of govt will make everything all right. By all means vent your spleen over the errors (real or imagined) of the current bunch; but prepare to feel the same after a few years of the next.
38. titaniccaptain said...
@Bolton
Actually ive already done something like that...........well you know I play bass in the Elvis band...........On the day we found out that Syd had passed away I started playing the intro for interstellar overdrive at the start of polk Salad Annie......it worked lol.....I dont know how Alan's psychedelic breakfast would go down at the millenium centre cardiff tonight (not plugging at all honest lol Ticket sales havent been the best) considering we are doing a christmas special the sausages may throw winter wonderland....but hey it could be interesting
39. This comment has been removed as it was found to be in breach of our Blog Policies.
40. letthemfall said...
jamonit:
Someone wrote this in a newspaper article a while ago. I think that may turn out to be true. An interesting point given some of the implicit enthusiasm for replacing Labour with the Conservatives. So much for socialism.
41. notaneconomicsguru said...
35 "You may or may not have been better off under a Conservative govt (though they would have removed MIRAS too), but in fact it is not down to me that we have the current govt."
As far as I recall it was Major's government that set in place the abolition of MIRAS. First by restricting it to the basic rate tax - just about the time I started earning enough to qualify for the higher discount. Then there was a phasing out of it altogether over a number of years which started in 94 or 95 or 96 (I forget exactly when) and ran over into the fisrt year or two of New Labour. There were a number of other tax rasing measures they did such as 8% VAT on fuels, abolition of married couples allowance (just at the time I got married) and what most people also tend to forget is they did their own raid on pensions with a reduction of pension dividend credit in 1993 which to my knowledge was never restored during their government.
42. letthemfall said...
notaneconomicsguru: "Major's government that set in place the abolition of MIRAS"
Yes, that's right, although I don't remember the exact dates. And of course there was Lawson's famous abolition of double tax relief in 1989, which precipitated the last housing crash. Labour or Conservative, we'll pay your taxes and we won't like it. But at least if the wealthy pay a fairer share it's not so bad. Unfortunately they have not lately - private equity, etc.
43. techieman said...
Yep - you are all right and wrong at the same time. It would have made no difference who was in power, we basically would have gone along with the states both in terms of the problem and the "solution". Thats just what happens when you imply the promise of continual prosperity for ever and ever the bubble gets bigger and bigger then it bursts, welcome to the pleasuredome. 2 men enter 1 man leave.
44. jack c said...
techieman - welcome to the pleasuredome is that the Frankie goes to Hollywood version?
45. andrew said...
letthemfall,
I did have experience of living under the Tories, I was unemployed for a year in 1994-95, the fact is both parties are a bunch of schiesters we know that.
Labour have proved over and over again that they leave the economy in tatters and the simple fact is Taxes are higher under Labour, and no we do not get any additional services for the extra tax.
I think that the Conservatives are the best out of a bad bunch, GBrown is not even an elected leader and he is absolutely wrecking the UK, I don't see how anybody can defend him in any way, what other GBrown disasters do you want demonstrated before you eventually pass judgement.
46. techieman said...
jack - yep! ok so re the FTSE i now move my stop to guaranteed good all markets 4220 (we are currently @ 4300) and dow only now down 71 @ 8500. I didnt go long the extra 15% - your fault - shall i send an invoice??!! (i am only teasing).
47. jack c said...
techieman - my Dow prediction doesnt look so good now but lets see what happens @ the closing bell - if you are trading at a loss because of me forget the invoice and go for Jack's Friday banker - New Star shares - they shoild help balance the books (LOL)
48. braindeed said...
Andrew..... 'the fact is both parties are a bunch of schiesters' ..........they have to be populist - or they don't get elected.
We deserve them all.
49. techieman said...
New Star? I dont know much but arent these guys desparate for some cash? No not losing just lost the opportunity of going longer - with +15% so that would be erm 4300 less 4220 @ £7.5 a point or £600 (enough to buy up what stock remains at my local Woolies!).
Actually if it gets back to the low 42s would rather be out - i think it marches on a bit over the next week or so, Today was the "pain" but as you say it depends on those damn yankees!
Braindeed - i completely agree with you.
50. This comment has been removed as it was found to be in breach of our Blog Policies.
51. letthemfall said...
andrew:
Simple facts are not always as simple as all that. Taxes reached a record under the last Tory govt; I remember Michael Heseltine admitting as much (though no doubt there is an argument on how one defines a record). Most govts do some good, along with bad. What constitutes good and bad can be a matter of opinion (I thought the minimum wage was a good policy, for example). You obviously are a Tory supporter. I support neither of the main parties. I respect your right to your political views. But to dismiss one party as hopeless and the other as the best choice is the argument of undergraduates. I have no time for them.
52. Urban Bear said...
We don't need a government of this form and scale, it seems utter folly to not identify and slash away, most, if not all, of the wasteful governmental structure and spending, so free up vast amounts of money. Any able person who has neglected to work for years, and claims state benefits, does not deserve them, so should face rationing, it may not be nice, however we cannot afford to pay loads for these parasites any longer, especially economic immigrants and cynical seekers of asylum. We need to protect what is left of the productive core of this country, while we still can, and try to encourage productive new jobs, not state waste.
We must not join the Euro, the changeover costs would be ruinous, and lead us closer to total tyranny under the fraudulent EU.
I'm heavy in Offshore Gold Bullion, because I currently don't trust the state to meaningfully defend Sterling, this country, or it's people.