Thursday, Apr 23, 2009
A sovereign downgrade now looms
The Telegraph: The lesson from Budget 2009 is that our politicians are blind to Britain's financial risks
This is government profligacy on a quite simply unprecedented scale – a disgraceful, morally repugnant raid on our children and grandchildren. Yet it’s highly likely that even these blood-curdling borrowing forecasts will turn out to be under-estimates.
Posted by devo @ 12:02 AM (1764 views) Add Comment
24 Comments
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1. quiet guy said...
Do any blog readers discuss the coming financial woes with their friends or family? I don't because I know if I spoke of my fears for the future, my friends and family would fear for my mental health.
I think Liam Halligan is right to highlight the dangers this country faces but anybody who openly speaks of these things will be labelled as a lunatic fringe doomster. Across the pond, Ron Paul spoke openly of his ideas and he paid the electoral price. Perhaps Cameron gets it. Perhaps he doesn't. Either way, if Cameron tried to warn the electorate what's coming, they would run to NuLabour screaming "Save me!"
Perhaps we should hope that we have to go the IMF so that we are given the tough economic medicine?
2. devo said...
1. quiet guy said... Perhaps Cameron gets it. Perhaps he doesn't.
No one gets it, quiet guy, and I mean NO ONE! Just imagine that!
3. drewster said...
quiet guy,
The people I've talked to don't seem particularly concerned. Most reply with "That's interesting, but did you see last night's football...". The ones who are slightly more worried demand "Well what do you expect me to do about it??". To be fair they have a point. There's not much use in us worrying about things over which we have no control.
The worst-case scenario is what happened to Iceland:
- banks collapsed; many people lost their life savings and/or pensions
- stockmarket collapsed (down from 9000 to 200; many people lost their savings and pensions)
- Krona down 2/3rds against dollar
- unemployment up from 1.2% to 10% (and still rising fast)
- inflation basket of goods rising 15-18% per year
- interest rates at 15.5% (good luck trying to start up a business)
- house prices collapsing (ordinary homeowners trapped in negative equity)
From a selfish FTB point-of-view I wouldn't be so bothered about the last point. However I'd be most annoyed if I lost my job, lost my savings in a bank collapse or stockmarket crash, had to pay £3 a litre for petrol or orange juice, unable to afford the heating bill for the month, and unable to ever travel overseas again. Also knowing that things were going to get worse still, and no sign of any way out. That's what it's like to live in Iceland right now.
On the bright side it's now a cheap place to visit. Some friends came back recently with stunning photographs of the landscape.
4. last_days_of_disco said...
The Tories absolutely understand what is going on however, they are careful politicians. Having learned that the reward the British give to anyone who actually gives them too much truth is to spend ten years in the political wilderness while the government steals their ideas, corrupts them and destroys the country they love, they are obviously going to be careful in the way they present things.
A study was done by the Tories a couple of years ago where they took their policies to people and put the Tory name on it and they got roughly 30% support. When they put the Nulabour brand on it, the same policies got about 60% support. In a society where the majority is not very deep thinking and the media is given to supporting a political cause (like liberal lefty ideas) then you basically are stuffed if you appear to represent something the liberal media disapproves of.
Many Tories genuinely believe that the Labour party is treasonous but that means nothing if everyone keeps voting Labour because they are fooled by the non stop flow of media endorsements of the Labour party. All the Cameron represents is someone who gets it. He understands that you need to win the media war, you can't rely on people to do the right thing.
As I am writing this I can hear the words "with global warming, life as we know it would cease to exist". This is during children's prime time TV. So everyone is being bathed in philosophies from young that is going to make it very hard for anything to debated rationally. The Internet is the bright spot in this equation because it has helped to begin to break the liberal hegemony by allowing other voices to be heard. But hey presto, the moment it arrives so do hate speech laws specifically targeted to suppress conservative ideas.
The interesting thing is this plays both ways and Cameron is going to absolutely make sure that the Tories are electable.
5. alan said...
Yes Drewster, the Iceland scenario could happen here!
I expected to see some austerity measures in the budget. Alas, not!
I think Cameron knows only too well what comes next. The problem is that nobody likes to "take the medicine", "pull your socks up" or whatever headline the Sun uses! Warning of doom is a sure vote loser.
For me, Vince Cable summed up the shambles. I admire Vince. Most people ignore him - perhaps a celeb makeover would help?
LDofD, yes, the country is not deep thinking. They want a follow up to the Jade Goodey story. I'm sure the media industry has one lined up.
6. goweresque said...
I agree - the Tories know the score, but politically cannot say so. The electoral maths is against them at the best of times. If they scare the floating voters with (correct) predictions of what is required as a result of Labour f*cking the economy, then they will struggle to get a decent majority. That would be a terrible scenario - a hung parliament with no strong govt at precisely the point one is needed.
The best they can do is keep quiet, profit from the dislike of Labour and Gordon. Then once in they can do the classic 'We've looked at the books, it's worse than we thought. Here's an emergency Budget of tax rises and massive spending cuts' Get the worst of the pain out of the way as early in their first term as possible, to give themselves as good a good chance of winning a second one.
7. timmy t said...
goweresque - I agree - I think the tories would have to try pretty hard to lose the next election. They just need to sit tight and it will be theirs for the taking. I think most politicians know just how deep this sh*t is, but also agree with quiet guy and others here, the public at large are far more concerned with who's marrying what footballer or who is going to get voted off the apprentice.
Also agree that Vince Cable would be the best person to sort this mess out, but we are in the unfortunate situation where the only way that would happen is if he went on Celebrity Big Brother. It's sad and sounds stupid but it's probably true.
8. Soldforgold said...
if we follow Iceland so will many other countries,where is it safe to put your savings now?
9. happy mondays said...
@ Quite guy,
psychologist call it the denial stage, most people just want to bury there heads in the sand, a part of it is fear, scared of the unknown, and if you do try to talk / discuss these issues / problems you might well be labelled the local moonraker! Ignorance is bliss!
As for the other political parties, they all regurgitate the same shite,as they themselves are frightened of making changes, losing votes, financial backing / donations etc from corporate business..
So until someone or some new ideology comes along we shall keep repeating the past.. But hopefully if this mess is as big as it seems, it could be the catalyst for change we need... Out of destruction comes creation!
10. alan said...
By the time Cameron sat down, the house was severely depleted on the Labour side. They clearly didn't want to hear Cameron's response.
The budget was marked by a sense of unreality. As Hamish McRae says in the Independent "unreality about the economic forecasts, about the borrowing plans, about tax and spending, and about the political backcloth to it all".
He goes on to say "There were two core economic beliefs of New Labour in 1997. One core belief was that a vigorous, enterprising economy would generate sufficient tax revenues for the Government both to rebuild public services and make sizeable transfers to the disadvantaged. The other was that by prudent monetary and fiscal management, the Government could avoid both the financial catastrophe of the 1970s Labour governments and the wild swings from boom to bust that had occurred under the Tories". Where are these beliefs in evidence here?
The Sun has a relevant commentary on its frontpage - a beach with deckchairs. At Least it's Sunny, they say. Good news sells papers!
11. britishblue said...
The double dip in the housing market seems ever more likely now, given the level of debt that is going to have to be absorbed over the next 20 years.
I think what we have seen to date is a correction that takes us back to 2004 prices - not a crash!
But if you look at the sheer size of the debt and the ways it can be reduced: taxation, austerity, inflation, etc all of these options have consequences for house prices - none of them positive. Higher inflation means higher interest rates (above the 5.5% average), austerity and taxation means less money in peoples pockets. This could mean that we have a lessening of the 'housing crash' in the next twelve months prior to the election, followed by a new crash when the Tories get in power and seek to balance the books.
12. icarus said...
drewster @3 - you forgot to mention that Iceland's rich still take their Russian oligarch buddies to the Blue Lagoon spa.
13. another alan said...
Petrol and Orange Juice are NOT £3 a litre in Iceland.
(Just a point of accuracy!)
Also many Icelandic guys and girls are still living it up extravagantly, if the Friday and Saturday evening I was there very recently are anything to go by.
A fantastic place...
Sorry back to the main discussion...
14. sold 2 rent 1 said...
devo,
"No one gets it, quiet guy, and I mean NO ONE! Just imagine that!"
You are quite right when talking about beyond the consciousness singularity.
As for a depression, there are a few forceasters on marketoracle.co.uk predicting this. As for the collapse of western capitalism, just a handful, including Martin Armstrong.
But the public are sleepwalking into chaos as you might expect.
15. crunchy said...
10. britishblue
Yep, Hurricane Brown is yet to hit. I would not like to be the one to clean up after the full impact of 10 years of Brownism.
In three years from now Brown will be saying all was fine when I was in power, It's Camerons fault that things got worse.
See how it works throught the decades. Pass the parcel dear boy!
The parcel has no layers left and we are holding the contents, A ticking timebomb. TICK.. tick.. TICK.. tick..................................
Boom after bust.
16. crunchy said...
10. britishblue
Yep, Hurricane Brown is yet to hit. I would not like to be the one to clean up after the full impact of 10 years of Brownism.
In three years from now Brown will be saying all was fine when I was in power, It's Camerons fault that things got worse.
See how it works throught the decades. Pass the parcel dear boy!
The parcel has no layers left and we are holding the contents, A ticking timebomb. TICK.. tick.. TICK.. tick..................................
Boom after bust.
17. icarus said...
crunchy - don't post that a third time or the bomb will go off.
18. stillthinking said...
Labour have a client electorate so I don't personally feel that the next election is a natural win for the Conservatives. They cannot announce measures which will certainly lose them the election so good luck on the sneaking in route.
We have a situation in the UK, where the politicians are routinely blamed for the ignorant decisions of the electorate. If individual voters feel that they will lose out in a scenario to improve the collective position, then there will never be any improvements. The danger, is a gradual insidious move towards a socialist state, and considering at election time, the unemployed/receiving benefits will vote Labour, the state sector will vote Labour, the unionised private sector will vote Labour and also a fair chunk will vote Labour to get a cheap car, whether that is a significant portion or not. So New Labour have got a very good chance of returning.
The problem is that the UK is now on a very long road of gradual impoverishment, and there don't seem to be any good options to rescue ourselves. Further, as has been pointed out on this site many times, the real state of the UK is -masked- by the global collapse and over-production, our real situation is worse.
People are going to leave and try to make their money elsewhere.
19. icarus said...
stillthinking - but where is 'elsewhere' if the collapse is global?
20. crunchy said...
16. icarus
Tick tick Tick.................................Grab your tin ten gallon hat and baked beans cowboy before you get scalped.
Speaking of scalping, having fun shorting gbp/jpy just before it makes it's limp daily uptrend.
21. happy mondays said...
@ icarus
Build yourself a sky ark....
22. drewster said...
@another alan,
Petrol and Orange Juice are NOT £3 a litre in Iceland.
You're quite right. I forgot that UK petrol prices are already tripled because of fuel tax. The untaxed price of petrol in Iceland has probably tripled though. Same applies to the wholesale price of orange juice, although the bar/restaurant/supermarket mark-up will have remained the same so the final increase to the consumer is more in line with the 15-18% inflation rate.
23. The Number Cruncher said...
The myth that economic enlightenment exists in any political party is one that I cannot subscribe two. Politicians - Cameron or Brown will take short term economic decisions for their own benefit. The pressure of the media and our social culture force them to make these decisions if they want to cling to power.
If you want to apportion blame look at our media who howl with any protest if their reader's short term interests are threatened.
We need to learn the lessons of delayed gratification and basic economic sense. I have not herd the tories, New Labour or the Telegraph mentions these very much now or in recent history.
My moral objective is the redistribution of wealth and an efficient economy and the barrier to this are those that want jam today whether they be monopolist capitalists, social democrats, screaming individualist libertarians or ignorant socialists.
The Telegraph is blind to economic probity as much as Cameron or Brown. This budget still puts the vast majority of the cost of the recession on the poor through a massive cut in public services such as health and education and they are the ones that will suffer and not the wealthy.
Tax property, tax wealth, tax speculation - do not tax effort and hard work that is the lesson we need to heed and welcome taxation as the moral commitment to a good society that it is.
24. britishblue said...
Still thinking @17. the argument of people leaving and working elsewhere may apply to non UK citizens.
However, the vast majority of UK born citizens don't speak foreign languages well enough to make it abroad. At a professional level they would need to compete with someone who spoke the native language of the country and two or three other languages At a manual level they couldn't compete with Labour from Eastern Europe.
Foreigners who came to work in the UK are a different matter. But, haven't they been part of the bubble in the city and house prices?