Saturday, Oct 24, 2009
Analysis by the well known magazine
Economist: Still Falling
"BRITAIN'S recession, already the deepest since the second world war, has now become the longest, lasting for six consecutive quarters. Contrary to widely held expectations that the economy had started to recover over the summer, it shrank by 0.4 per cent compared with the level of activity in the second quarter. As a result GDP has now fallen by 6% since its peak at the start of 2008. Britain's households are the most over-borrowed in the G7. Its banks have been among the worst affected in the financial crisis as a result of unsound financing practices (a heavy reliance on fickle wholesale funding rather than steadier retail deposits) and insufficient capital to support over-extended lending".
Posted by alan @ 08:01 PM (1970 views) Add Comment
21 Comments
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1. mark wadsworth said...
In a non-scientific sort of way, I remember when I was a little lad and the economy went t1ts up in the early 1970s, which was believed to be an oil price shock, but it was probably just the collapse of the first big house price/credit bubble (heralding the start of the Home-Owner-Ist phase in British economic history).
And the economic misery dragged on through the whole of the 1970s, most of the 1980s, with another relatively quick house price/credit bubble at the end of the 1980s, followed by another bust and things didn't really start to pick up again until 1994-1995. That's twenty years of pretty constant misery. And our benighted govt embarked on the same Home-Owner-Ist nonsense as ever and thereby stored up even bigger problems. I'd be pleasantly surprised if this were over in less than ten years, to be honest.
Sure, there'll be quarters where GDP growth or house price growth is positive, but that's little consolation to people who can't find work (which our tax/welfare system exacerbates, of course) or don't own a home.
2. crunchy said...
Home-Loser-Ist
This time will be like no other crash.
The UK rent boys will be back!
3. gone-to-colombia said...
Mark, I totally agree with you, this is going to be long, slow and miserable.
At the heart of Britain's malaise is the fact that we no longer produce anything.
In the middle of all the misery will be a crash in house prices.
Reality has not yet set in, when it does there will be a slow motion fall.
4. devo said...
'Reality has not yet set in'
I agree.
'when it does there will be a slow motion fall'
I disagree.
Denial phase - almost completed.
Anger phase - gathering momentum.
Capitulation phase - imminent.
5. happy mondays said...
Acceptance phase ? emmm..
6. devo said...
No acceptance.
7. happy mondays said...
That's what i thought..The fun begins !
8. tenyearstogetmymoneyback said...
Mark @1
The key difference in the 1970s was inflation. Back in 1967 my parents bought
a three bed semi for £5000 which my Mum thought was a huge amount.
When I started work in 1978 there were so many "productivity schemes"
that it was like getting a pay rise every month. In fact by 1983 when I finished
my apprenticeship I was on £7000 a year.
In contrast this year we are still waiting for the results of our August pay review
(not that anyone is shouting much). Middle management have warned us that
there probably won't be one, despite our pension contributions going up again
to cover the schemes shortfall.
Is it a case of where Japan leads we will follow ?
9. crunchy said...
3. gone-to-colombia said..."At the heart of Britain's malaise is the fact that we no longer produce anything."
A gold star for the person that can guess what is going to replace that and turn our economy around.
De-industrialisation over the years has not happened for no reason.
It has to be replaced with something.
10. japanese uncle said...
Six consecutive quarters. We haven't seen nothing yet. I cannot rule out even 16, nay 60 consecutive quarters.
11. crunchy said...
10. japanese uncle
It will be over when they decide the time is right.
Then most will know what this has all been leading to.
From what I know the outcome will be beyond what most people ever imagined.
This is not so much a crash, rather a complete take over bid.
We are not weak enough yet.
12. drewster said...
Mark W,
"which was believed to be an oil price shock"
It was unmistakably an oil price shock. Sometimes you are a little too keen to see things through your home-owner-ist vision ;)
"And the economic misery dragged on through the whole of the 1970s, most of the 1980s"
Unemployment is the main manifestation of "economic misery" for most people. The graph below shows that the last 10 years have been rather pleasant (NICE, as Mervyn might say) compared to the period from 1974 to 1994:
Of course we now know that those last ten years were largely fuelled by an unsustainable debt binge. The consequences for unemployment don't look promising. If jobs go, house prices go too.
13. crunchy said...
12. drewster said..."If jobs go, house prices go too."
Has not happened yet.
What if the banks decide rather than repossess and sell on, to claim the property back offering then to rent?
Devil's advocate.
14. Ndg said...
I love gold stars so my guess to crunchy's generous offer:
No more private sector and we all work for the government?
15. brickormortis said...
Crunchy: A depreciation of rental yields, which may in turn hit the BTLers? Maybe there won't be enough money around for rent? Maybe housing benefit will have to go up? Maybe some banks will have to sell repos?
It reminds me, though, of a situation I was in a few years ago, sharing a house with three others, one of which preferred weedy substances and pizza to working. She blagged her rent and council tax for the best part of a year. that's a lot of wasted money for someone who was perfectly able to work and had just left uni with debt and a degree!
This country wastes so much money it makes me sick.
16. crunchy said...
14. brickormortis said..."This country wastes so much money it makes me sick."
That seems to be the problem and why comment 13 still stands as a future possibility.
If this were to happen the FTB factor would be greatly reduced.
17. braindeed said...
munchy@13
That seems to be the problem and why comment 13 still stands as a future possibility.
Almost seems odds on - I think that the desire to maintain house prices, by the gov/bank combo is so strong, that the notion of 'market economics' is fried.
It's not fair or just, but what is?
18. chrisa said...
12. drewster said..."If jobs go, house prices go too."
Normally you would be right. However you haven't allowed for a totally corrupt Government and BoE/MPC who are prepared to conjure up seemingly unlimited amounts of freshly printed money for the purpose of buying their own debt and reinflating asset prices. It will however be 'interesting' to see how a nation that imports over 50% of its food will fare with a worthless pound.
19. drewster said...
crunchy, chrisa,
We haven't seen that much unemployment yet. Nearly all my friends are working; those who aren't are unskilled. However companies are burning through their cash piles - living off their savings or credit lines. In many cases they've laid off the peons while keeping the managers in place, praying for an upturn. This situation can't last: when the money's gone, it's gone. When the managerial caste starts seeing mass layoffs, house prices will really tumble.
20. letthemfall said...
Our companies do make things. It's just that they farm out the actual fabrication to the Far East.
21. crunchy said...
16. brainweed.
You may be worthy of my changing your name.
Please watch Fall of the Republic if you have not already.