Wednesday, Jun 10, 2009
Like QE never happened.......
Telegraph: UK recession may have ended in March
''Britain may have come out of recession more than two months ago, a leading economic think tank suggested. ''
Posted by hpwatcher @ 08:13 PM (2339 views) Add Comment
31 Comments
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1. paul said...
But didn't the government only actually admit that we were in recession in Q4 2008 in February?
Did the recession really only last one month? Are all of the bank debts gone now? Is normality restored to the credit markets? Are houses affordable again?
2. nubbers said...
Paul, as I understand it (and my understanding is quite limited) the figures that determine whether we are growing or in recession cannot be accurately determined at the time, but have to wait about 6-9 months before they are known enough to say when a recession has started or ended. John Mauldin did a good newsletter on the subject some time in early 2008, I think.
3. hpwatcher said...
So many people now have vested interests in seeing the return of a debt fuelled economy, including the property speculator Westminster MP's. QE, creative accounting, statistics and plain lies will all be used to hide the true picture. But it will only work for a time.
Banks and governments simply aren't respecting the currrency. Everyone seems to think they are entitled to absolutely everything they want........
4. a saver said...
So let's get interest rates up then!
5. hpwatcher said...
Paul, as I understand it (and my understanding is quite limited) the figures that determine whether we are growing or in recession cannot be accurately determined at the time, but have to wait about 6-9 months before they are known enough to say when a recession has started or ended. John Mauldin did a good newsletter on the subject some time in early 2008, I think.
The thing I find especially annoying is that so many people refused to believe the country was in recession - and were very slow to acknowledge it - now those same people are being very, very quick to claim that ''it's all over''.
6. nubbers said...
hpwatcher, I guess those would be the bulls then.
7. mander said...
Just had a discussion with my bank manager where I have described him that my industry is down 40% and we still have to cut prices. But no he said everything is fine people start to move into property market and there is no way property prices will ever go down and also that FSA is never going to adopt a 3.5 loan to income ratio...
40% down is no recession. Is it?
8. General Zod said...
0.1% is negligible and falls well within the margin of error. To claim we are out of a recession on the basis on paltry percentages is just wishful thinking at its best.
9. bellwether said...
When so many people call recovery it is only reasonable to wonder if maybe they are right. Edmund Conway of the Telegraph who has been quite bearish was saying something not disimilar today
I still can't help feel that it defies logic however. If the financial system crashed due to a weight of years of grossly mispriced debt how can it be fixed if nothing has fundementally altered. Growth was predicated on debt (ie people were doing things for other people based on promises to pay back in the future) when it became apparent that there wasn't enough income to pay the debts the systems crashed but somehow by creating more debt the problem has been solved and out of landscape of broken business and increased unemplyment we can return to debt consumer based growth as if there was never a problem, in fact growth infers we can return like never before. But if this is true why did the system of heaping the debt up even have to crash in the first place.
Am I just being pessimistic.
10. nubbers said...
It it possible that this recovery is in part engineered for the sake of the election next June, at the expense of whatever government comes after that? Would the current lot have the ability to do that?
11. novice pete said...
''Britain may have come out of recession more than two months ago, a leading economic think tank suggested. ''
Ahh! The power of suggestion, look into my eyes, look into my eyes, there is no recession!
12. bellwether said...
I suppose another point is that things look better because the bad debt has been hidden. Banks are refusing to call up loans in some cases and liquidate the assets that are called up in others because if you put any volume of assets into the market you will get a lot less than the book value the banks have marked agaisnt the asset causing an ever greater hole in their capital adequacy. There is in reality not enough assets to come close to repay the debt and not enough income to service the debt. Zero/low interest rates would had worked better if it was not the second time in a few years we have tried it.
The capital adequacy is an illusion and a hope that things will be better in the future.
13. hpwatcher said...
It it possible that this recovery is in part engineered for the sake of the election next June, at the expense of whatever government comes after that? Would the current lot have the ability to do that?
Give the man a cuddly toy!
It's a debt fulled boom - completely artificial - with the sole intention of putting GB back into number 10. I mean, am I the only one who thinks it's all a bit too quick?
14. bellwether said...
I'm quoting someone else here but a pretty good analysis
Central Banks and governments try to reflate the bubble or backstop the debt in order to keep assets from falling to levels where they ought to be.
QE has the sideeffect of luring some investors back into stocks and other assets at inflated and yet increasing prices, which in return forces yields up on Treasuries. When the ongoing suckers rally collapse, and it can happen any time, watch out for the Q2 corporate earnings, investors will pile back into Treasuries.
This will force another wave of QE, that will start another suckers rally ...
In the meantime, the real economy will keep contracting because QE doesn't reach out to those that ultimately execute demand - the consumers.
Deflation will continue, with or without inflation, because consumers around the world are forced into backstopping their personal debt, just like FED and governments are forced into backstopping corporate and financial debt.
There will be no new sustainable growth until debt levels and leverage have been substantially reduced, ie back to levels 8-10 years ago. And this is the profound trap that has Bernanke and other centralbankers firmly by the balls (sorry): they have no alternative to QE, as Mr. Evans-Pritchard has stated on numerous occassions, but on the other hand the QE stops and even for short periods of time inverses the necessary deleveraging and debt destruction.
And just how is FED going to withdraw QE? By selling toxic assets back into the market? Bankers may be crooks but they are not stupid. Have you ever seen a farmer shovelling horse dung back into the stables?
15. stillthinking said...
There are some interesting comments by Paul Tucker here,
http://www.bbc.co.uk/blogs/thereporters/stephanieflanders/2009/06/another_bubble.html
Basically he points out that a real recovery is dependent on rebalancing of trade, and the elimination of excess savings (or debt as we like to call it in the UK). So should we start saving, solving our half of the imbalance, but the creditor nations continue to save, all the desperate savers with all that lovely dosh will push interest rates down, leading to another asset bubble. Whether they will blow another bubble (sorry, recovery) I have no idea.
So our recovery isn't up to us, as we don't owe us the money. I am sure there is more debt that could be taken on in the UK, all the FTBs, government, but this recovery is fake if based on really squeezing our own lemons(!) as far as borrowing is concerned.
Although you often read that the recovery comes, but unemployment keeps rising for another year, I think thats rubbish. A recovery in the case of the UK is falling unemployment, pure and simple. Some high faluting recovery while we are all down the DSS is no recovery at all !!!
At the moment unemployment is rising, we are half way through 2009, unemployment will be rising in 2010, when we get hit with state sector cuts. Even if the cuts only total 5%, which isn't in any way sufficient, that is an additional 500,000 unemployed on top of an already high level of unemployment. As they are former state workers you could describe that as structural unemployment.
This country is in complete financial and political disarray, and we are staring disaster in the face now. Engineered recovery....no... the last ten years were engineered, the engineering has run out.
16. timmy t said...
If they think this is anywhere near over then they really are a bunch of think tankers.
17. Time_and_tide said...
Clearly the result of QE. What's amazing is that no commentator I've heard has picked up on this.
Well, perhaps not so amazing; it's the same lot that thought the boom would last forever.
18. stillthinking said...
I thought of a good analogy (perhaps no just I use chicken this time) the other day which I may as well put down here
Somebody works on a chicken farm, and they produce a chicken a day, their father bought a farm by agreeing to pay 2 chickens a week for twenty years, and they want to do the same. But for some mad speculative reason they think they can get away with out-bidding others to the tune of 7 chickens a week.
The solution as proposed is to revalue the chicken, but the ruling government fail to comprehend that although you can revalue lemons against apples by investing in lemon groves or apple destruction, you can't revalue chickens against chickens. That is the unpleasant intractable nature of the UKs problems. Our whole economy is based on an over-valued pound (to my mind) and until wages fall to the extent that our trade imbalances reverse in our favour, nothing good is going to happen for the UK. At the moment we are becoming more and more unemployed, this is a pleasant prelude to step two, which is when we start working out of desperation for lower and lower sums of money. Or as JU suggested once, the Japanification of the UK, when we have no choice but to work 11 hour days for very little. The rest is just dreaming, we cannot import more than we export for ever.
Government debt crisis, politicial crisis, house value collapse, rising unemployment, sterling crisis/stagflation, public services cut, taxes to increase, public sector strikes/basic services stopping, more expensive food, rapid rise in population.
If this is a recovery I don't want it.
19. nubbers said...
So in other words, we're stuffed.
20. bellwether said...
It's like each currency in the world is a claim on a bit of the worlds resources and as other parts of the world get stronger their currencies will grow to outbid us and we will have to work harder. In the end roles reverse and we work for them.
An overvalued pound ,built on an illusion, has given us access to more resources than we are due, so we are literally living on the credit of others everwhere, we are like an aristcratic family hanging onto the mansion we can't afford and there must be a quite literally a day of reckoning.
21. devo said...
So in other words, we're all going to be working for a poultry amount - we're plucked.
22. Banjo said...
Have y'all noticed oil is $71.40 at this moment. Thats up $14 in a month. Check out the ftse graph & the oil price graph - they are like mirror images. As has been said before, all previous recessions/depressions have been aided in their recovery by cheap energy prices. Not this time folks.
23. This comment has been removed as it was found to be in breach of our Blog Policies.
24. crash n burn said...
The only thing to do is to STOP WHINGING AND LEAVE. I will be hopefully leaving the country in 4 months and there is a good chance I may never return. I will hang on for a while whilst the pound recovers some value and then I'll flog them all off. I will never ever come back to be a tax slave and get nothing in return when I finally need the help. My prudence is being punished and I am still being taxed into oblivion. Come on let's start the brain drain and show this government up for the f* up mess they have caused this country. And do not get me wrong, the Conservatives should not be winning by default. For whatever happens, they do not seem to have learnt the lessons of this recession and will continue to make the same mistakes all over again. Furthermore, those NI contributions you guys are making - oh yeah?? You think you will actually get anything back when you retire??? Think again. Those damn f*ing consumers roggered me up the passage, so I'm busy bailing them out through my taxes whilst I have to run down my cash reserves... Good by Brown and your fellow consuming scum... I hope the temperature is intollerable in hell!
25. crunchy said...
http://www.youtube.com/watch?v=5j9_aqJ_4n0&feature=PlayList&p=1D154580035D23DC&playnext=1&playnext_from=PL&index=38
2. little professor said...Yes!!!
Hopefully , all the other conspiraloon sites will get baned too, as well as the nutters who keep spamming the blog with them. There are plenty of conspiracy sites on the internets, Take your sh!t there and leave this blog for those who want to discuss house prices.
Thursday, November 13, 2008 10:24PM
SPEAKER>>>>Flight 101 @ terminal cancer, is leaving for conspiraland plc.
You have 20 minutes to board unless you think house prices will save you. OVER! >>>>>>>>
26. contrails are not a conspiracy (formerly npnh) said...
I think you have officially lost the plot Crunchy.
27. 51ck-6-51x said...
This according to the NIESR - which is an independent think-tank. That is independent from political parties... but who is it the will of?..
( from their site: )
CURRENT CORPORATE MEMBERS:
Abbey National plc
Bank of England
Barclays Bank plc
Ernst & Young LLP
Marks and Spencer plc
The National Grid Company plc
Nomura Research Institute Europe Ltd
Rio Tinto plc
Unilever plc
Watson Wyatt LLP
28. devo said...
Hey 51ck, what can you tell me about the DTCC?
29. watchman said...
51ck-6-51x:
Well done for finding that.. that puts a bit of perspective on it!!
30. contrails are not a conspiracy (formerly npnh) said...
Interestingly the Annual Report 2008 is missing from the list but this document makes interesting reading:
http://www.niesr.ac.uk/pdf/corporate%20membership%20scheme%20web.pdf
NIESR Corporate Membership Scheme
The National Institute of Economic and Social Research is Britain’s longest
established independent economic research institute with over sixty years
experience of applying academic excellence to the needs of business and
policy makers. The Institute is independent of all party political interests. It
receives no core funding from government and is not affiliated to any single
university.
The NIESR Corporate Membership Scheme was set up to enable
organisations to further develop their working relationships with NIESR.
Our research interests are constantly changing in response to new needs but
embrace the issues that shape economic performance.
Becoming a NIESR Corporate Member gives an organisation the
opportunity to offer their input on NIESR’S research agenda. Also, the
donations from Corporate Members can be used as a channel of support for
new areas of inquiry which may not easily be funded by other means. These
areas may be directly linked to a Corporate Member’s area of interest.
NIESR’S Corporate Member donations are vital to help fund the research
time spent on our well respected and high profile forecasts of the UK
economy, published in our international quarterly journal: “The National
Institute Economic Review”.
31. Bob Ama said...
Thank gawd I moved to Switzerland.
ftw