Sunday, Mar 29, 2009
G20 - Stabalise the world or bust
Daily Telegraph: Only a united front at the London G20 can save the world from ruin
Another article from the Telegraphs economist Ambrose Evans Pritchard drawing analogies with how the world failed to act at the start of the Great Depression and what will happen if they fail to act now.
It would be interesting to get some reasoned, non political argument as to what impact this event will have on UK house prices if one of the following three scenarios happen:
a. An agreement is reached for coordinated action and reflation of all economies (deficit and surplus). Which we know could lead to worldwide inflation and house price losses will be less in actual terms than in real terms.
b. The usual promises are made with no substance (as before).
c.Blatant divisions emerge that cannot be healed: Thus becoming the turning point of real protectionism.
15 Comments
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1. tudorian said...
I don't think that agreement is possible between creditor and debtor nations...although both have much to lose if a workable and acceptable solution to the worsening global economy. Germany (ECG) are still drunk on the kudos of running a tight economy and want us to recive punishment proportional to our profligacy.
Protectionism is the most likely outcome. More destruction as S2R1 might say
2. tudorian said...
Should read ECB in above
3. uncle tom said...
Brown's antics remind me of this little classic:
To-morrow, and to-morrow, and to-morrow,
Creeps in this petty pace from day to day
To the last syllable of recorded time,
And all our yesterdays have lighted fools
The way to dusty death. Out, out, brief candle!
Life's but a walking shadow, a poor player
That struts and frets his hour upon the stage
And then is heard no more: it is a tale
Told by an idiot, full of sound and fury,
Signifying nothing.
(Macbeth)
4. britishblue said...
@uncle Tim
I see you can't resist making a political point rather than reasoned argument. As per usual it is tiresome to see that people don't bother to read a post - just stick a comment about Brown it it. I would genuinely like to see some thought as to what impact these outcomes could have on house prices. I for one was with Jonathan Davis on his original estimate of -35% on house prices. We have now had some extraordinary events and the UK does not have its own desitny in its hands. I would be interested in some intelligent and cogent analysis of how house prices could play out with different scenarios.
5. uncle tom said...
Britishblue,
There's nothing very political about my commentary. That Gordon Brown is a walking shadow, an idiot; strutting and fretting his hour upon the stage is a pretty apt description.
What is depressing is that Tories look set to behave in much the same manner, when they get elected next year..
6. it_is_going_with_a_bang said...
That lot couldn't come to an agreement when things were good. The chances of them all getting together and helping each other when they are all going to be primarily looking after themselves more so than ever before is very bleak.
The answer is therefore A B & C when it all plays out.
35% relies on the rental market holding up. What else dictates prices? Other than sentiment. Average house price of £130k/£135k is where I see a bottom - but that is as long as Rentals hold up. If events come together to make BTL unfavourable then who knows what will happen. Pensions are such a disgrace it is hardly suprising that the nation relies on property booms for a pension.
7. quiet guy said...
"Only the printing presses can rescue us"
Well Evans-Pritchard has made his posiiton clear w.r.t. savers at least. Can't say we weren't warned!
I don't like this government much but I do think that anything Brown can do to dissuade the other G20 countries from protectionism is surely worth doing. It's probaly wishful thinking but there should be real benefit to avoiding trade barriers.
8. Seen It All Before said...
The old equation
Money * Confidence = growth
It is plain to see that you have trillions and trillions being printed but without confidence there will be no growth.
What we are really witnessing is the fall ofthe west or at least a realignment.
The west will keep tring to prop up the old system - which will make the whole situation even worse - when it crashess China and India will pick up all west business and form the new world order.
We have over produced and overpaid ourselves over state too much pensions too much red tape - with layer up layer of governments -.
WE have abortioned and contracepted our way out of popualtion growth and have to rely om immigrants to look after the teamming old and our pensions
The west has been living on past glories - the new breed are waiting - and we are gonna have to work hard and probably die younger.
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10. alan said...
BB,
Protectionism won't help at this stage. I think it will buy a few "nationalist" votes, at most...but for what?
I think many countries will allow a modest reflation. How modest will depend on a variety of internal issues which all countries and trade blocs have. It will at least keep people in work, even if it causes other problems downstream.
11. letthemfall said...
Shakespeare quotes are becoming almost frequent here - good to see a bit of literary erudition - though I don't see how this really applies to any politician: this passage is about existence after all. If we assume that Gordon Brown really is an idiot, as all prime ministers seem to be viewed in due course, then the implication is that a new prime minister will solve all problems. Calling PMs idiots is a relief of sorts but I don't think he is, any more than we are. Ah.
12. mountain goat said...
Ambrose Evans-Pritchard writes "The heroic Bank of England has pioneered monetary stimulus a l'outrance, even if the ungrateful wretches of this island mock their own salvation."
Agreement on reflation to save us. I don't agree with this point of view. When the debt levels reach current levels there is no policy decisions that will miraculously save us. Boom and bust have been going on for 300 years. In the boom reckless lending is followed by bust. The longer you delay the bust the bigger the eventual bust. The bust should have happened in 2000 but no they had to meddle and now we have a bigger bust taking place because of more debt from this monstrous housing bubble. Reflation is not some miracle cure. What it means is more debt. But debt IS the problem now. Pritchard thinks we can pull off another get out of jail like we did in 2000. By not facing facts now he and his ilk will achieve an even more dangerous situation in a few years time. Misguided and reckless policy. But then what do I know ungrateful wretch that I am.
13. flintster1994 said...
Well said MG!
14. icarus said...
If Charles Ponzi were alive he'd have written a similar article - you solve debt with more debt.
15. uncle tom said...
MG,
Correct; there is no painless 'get out of jail free' card here.
My belief is, that in the longer term retrospective analysis of this calamity; economists will hail the start of QE as being 'the great mistake' - that we should have held firm, and sought to protect the value of the currency.
The genie is out of the bottle now, and the game of consequences will play itself out..
..there's no way back - hold tight!