Tuesday, Feb 23, 2010
Rising Pound, if only...
Bloomberg: U.K. Economy Faces ‘Grave Stage’ on Deflation Risk, Bootle Says
The bank “should keep a close look on the exchange rate and if the pound looks like rising quite significantly, which is a real danger, that it should do even more quantitative easing, and then do even more,” Bootle said.
Posted by mrflibble @ 10:55 AM (1431 views) Add Comment
34 Comments
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1. fallingbuzzard said...
The pound rising. Is that meant to be a joke?
2. The Baldman said...
Have these economists got a clue what is going on!
3. jack c said...
Roger's credibility has been down the pan for quite some time
4. hpsceptic said...
What's he smoking?
5. mrflibble said...
Snow joke my friend, after slicing yet another cent off the Dollar Merv came out today and said that he’d be ‘Immensely Surprised’ If the U.K. lost its top rating.
Wouldn't be the first time he's been surprised though would it?
6. ontheotherhand said...
Bootle has lost the plot. Danger of pound rising because....? Oh that will be because GDP is rising based on productivity gains, we have a current account surplus and a budget surplus, and we have very little debt other than money used to invest in growth stimulating infrastructure. Plus inflation is low and therefore real interest rates to foreign investors are attractive relative to other currencies.
7. mark wadsworth said...
"Deflation risk" - they're saying that as if it were a bad thing, aren't they - because this makes inflation look like A Good Thing, and it is certainly in line with the Home-Owner-Ist policy of inflating away mortgage debt while sitting on an asset that is largely inflation-proof. SO net savers, who've squirrelled away some cash and not bet it all on ever rising house prices lose out by equal and opposite measure.
So the next time a Home-Owner-Ist talks about 'responsibility' and 'encouraging saving', please punch him in the face for me.
8. hpsceptic said...
I'll punch him in the face for all of us.
9. hpsceptic said...
My favorite brand of coffee (Columbia) has just got cheaper. Guess it won't last.
10. need-a-crash said...
I don't understand I thought Roger Bootle was 'on our side' in so far as he thought house prices needed to fall and has been saying so for years, yet now he's calling for more QE & inflation which he must know will support house prices? Isn't he being contradictory?
11. Nobody777 said...
Triflation is the exit policy.
Devalue the pound to create imported inflation currently around 10% pa
Increase taxes via cap and trade and fuel tax and the fixed line phone tax crank up price inflation via tax.
Deflation in UK assets houses will be hit hard via high interest rates and taxes on jobs like the NI increase and the new employers pension tax pushing more companies offshore and push take home pay down and crank up government debt very deflationary.
Cost of living up and pensions and assets down it will work.
Print currency and move money offshore Tata is on the button.
12. mrflibble said...
From the sounds of the Treasury Select Committee meeting this morning the BoE is poised to extend QE should the economy turn out weaker than expected. There were a lot of people on here who said that once they start with this caper they will not be able to stop, at the beginning I doubted this, but I haven't for a while now.
I fear were we go from here. If someone had told me 3 years ago that I would STR and move the majority of my cash out of Sterling to protect myself then I would have laughed at them. Today the only thing I fear is the minority of my cash that is still left in Sterling. I'd an idea things were going to pop 3 years ago, but what I didn't know was just how far the powers that be would go to try prop up the whole lousy ponzi scheme.
13. jack c said...
@need-a-crash
I believe Capital Economics started to lose clients because of his contrarian views and rock n roll style hence he's become a bit more main stream. techieman posted something up on this a while back (I think he'd been to see him at a presentaion or something)
14. chrisa said...
You need to understand that Roger Bootle is a Globalist. He has already called for the creation of a One World Currency. If more QE and hyperinflation means that Sterling becomes effectively trash and the people can be persuaded to abandon it and then adopt a One World Currency then his position becomes more understandable.
15. braindeed said...
9. need-a-crash said...
I don't understand I thought Roger Bootle was 'on our side' in so far as he thought house prices needed to fall and has been saying so for years
I'm not advocating this,but it may be that what's wanted (in certain echelons) is a slow repeat of the '74- '75 scenario - where house prices remained stastic, whilst inflation roared at around 25%.
This effective took a quarter off the HP index, and most people could'nt see it.The 'feel rich' brigade would be non the wiser and affordability rises for the FTB.
16. icarus said...
ontheotherhand 5. Don't laugh, there really are positive signs. (1) Productivity gains and (2) a rise in consumer spending (small print in the appendix: (1) caused by falling wage bills and (2) caused by rising food and fuel prices.)
17. techieman said...
"techieman posted something up on this a while back (I think he'd been to see him at a presentaion or something)" Well i cant remember that Jack. Ive never seen him but i have had a go at him - well about his track record - on here. Basically because he went bullish at the top. I think they even take the p1ss on the front of this blog.
I must confess im a bit confused by what he said re the exchange rate - then again see: http://www.youtube.com/watch?v=YYp804QWf0o - 40secs in.
As for deflation, yes MW that be bad for the economy (and you know why, off-putting consumption leading to continued contraction) - 2.23 inflation rising 4-5%; 2011 sees deflation. [2:45 property prices are "a different kettle of fish" but then he doesnt revert to that. in the vid]:
18. techieman said...
...it was nadeem's article that i think i referred to:
"Capital Economics UK Housing Market Forecasts:
What is the value of typically the same housing bear market / crash forecast that is rolled out every few months? This article takes a look back at Capital Economics that has been grabbing the headlines of late of having forecast the UK housing market crash of 2008. However if you dig a little deeper the actual accuracy of Capital Economics housing market forecasts evaporates into thin air."
http://www.marketoracle.co.uk/Article7183.html
19. techieman said...
... and its updated: http://www.marketoracle.co.uk/Article16183.html
interesting chart on there. H&S???
See the article comments I like Nadeem and i Like JD (Financial planner).....but.....
20. vindicated said...
Mrflibble, I always read your posts with respect and as a mere 'wife and mum', I'd like to ask where you moved your sterling to? We have approx £165k sitting doing jack in the banks. Not masses I know but I am beginning to feel very nervous about it. We actually moved about £45k back from dollars into sterling when the dollar strengthened to around £1.40. Should we be holding dollars instead?
Hubby does some dabbling in stocks, very minor dabbling... About £20k invested. I'm seriously considering handing over the lot and letting him dabble some more!!!
21. nomad said...
vindicated@18. The Moneyweek team are recommending investing in Japan on the grounds that as far as our recession and solutions go, they have been there and done it - for the last 20 years in fact. Mind you at Moneyweek they have had a thing about Japan for quite some time.
What has happened to Japanese Uncle? Haven't noticed him posting for a while, his comments are missed along with Uncle Tom and Titanic Captain.
22. techieman said...
Vindicated the only advice i can give (not that you asked) is to seek some advice :-). Good luck!
23. vindicated said...
I too miss the insights of JU, TC and UT. I know that TC can be found on his own site, the economic voice but I for one would certaonly welcome the return of these chaps. Anyone?
24. tom101 said...
Pardon my ignorance, but what factors could cause the pound to rise?
25. down wave said...
19. nomad said... What has happened to Japanese Uncle? Haven't noticed him posting for a while, his comments are missed along with Uncle Tom and Titanic Captain.
They have desterted, why?
This maybe is the reason:-
xxxxxx@aol.com wrote:
>Dear Sirs,
>
>Please can you explain your reasons for deleting the Gordon Brown Bully
>blogs:
>
>_http://www.housepricecrash.co.uk/newsblog/2010/02/blog-bully-27858.php_
>(http://www.housepricecrash.co.uk/newsblog/2010/02/blog-bully-27858.php)
>
>and:
>
>_http://www.housepricecrash.co.uk/forum/index.php?showtopic=137281&st=15_
>(http://www.housepricecrash.co.uk/forum/index.php?showtopic=137281&st=15)
>
>and:
>
>_http://www.housepricecrash.co.uk/forum/index.php?showtopic=137281&st=15_
>(http://www.housepricecrash.co.uk/forum/index.php?showtopic=137281&st=15)
>
>and:
>
>_http://www.housepricecrash.co.uk/forum/index.php?app=forums&module=extras&s
>ection=stats&do=who&t=137281_
>(http://www.housepricecrash.co.uk/forum/index.php?app=forums&module=extras§ion=stats&do=who&t=137281)
>
>
>Thank you.
Reply:
>Hi,
>I'm not sure about the forum as this is a moderators' decision but the blog article seems
>to have been reported by other users as having nothing to do with house prices/economy.
>Regards,
>Dana<<<<<<<<<<<<<<<<
Is this true or has this site been infiltrated by a labour mole/s or has labour been bullying the moderators?
As you will witness, this posting will be deleted and I will be struck off for asking questions.
It is all being engineered for a hung parliament so the that the resulting mayhem will bring no blame to any of the politicians.
Ask yourself: Who would want to inherit the poisoned wells and scorch earth of Labour?
Pop down to Ladbrooks and place your bets.
By, By. to you all, free speech and democracy.
26. down wave said...
PS: do not forget to save this now as it will not be available after the moderators have had their dinner.
27. jack c said...
@tom101, Tuesday, February 23, 2010 04:58PM - a rise in UK interest rates (other things being equal)
28. tom101 said...
Thanks jack c, What about the Euro being in turmoil and countries having to adopt their own currencies again. Perhaps as a temporary measure. Would existing currencies take the slack including £GBP and rise in value?
29. alan_540 said...
@13 Braindeed... static house prices & high inflation - if wages keep up with inflation then won't house prices also increase? How can high inflation and static houseprices be made to happen?
30. jack c said...
@ tom101 - in the scenario you describe Sterling would potentially be a safe haven and consequently rise. Below is a link to one of Roger Bootle's more credible recent articles. Hope this is of interest.
www.telegraph.co.uk/finance/comment/rogerbootle/7237867/The-current-Greek-crisis-is-merely-act-one-of-a-much-wider-tragedy.html
31. tom101 said...
Many thanks again Jack c. Very interesting article, scary scenarios. The trouble is if you have a taste of the good stuff (being able to afford it or not) you are not going to like going back to past standards of living. Socially this could be quite a macabre spectacle!
32. braindeed said...
27. alan_540 said...
@13 Braindeed... static house prices & high inflation - if wages keep up with inflation then won't house prices also increase? How can high inflation and static houseprices be made to happen?
If I remember right, it was also accompanied with higher interest rates amd unemployment (possible again).....it was a de facto HPC, but disguised by inflation. I've been surprised by certain elements of this slump - interest rates at 300 year lows, QE...in truth who knows what the feck is going on or going to happen. Uncharted waters.Many at the time felt 25% was a dammed lie .....so no change there.
33. drewster said...
tom101,
The following factors could cause the pound to rise:
(1) More PIGS problems in the Eurozone
(2) More unemployment and social unrest in other countries
(3) More economic turmoil in the USA
(4) A firm commitment to end Quantative Easing
(5) A conservative election victory swiftly folllowed by a realistic action plan for re-invigorating the economy
On point 4, I wouldn't personally believe the BoE if they promised to stop QE. The markets might believe them though, so that would cause a sterling bounce.
On point 3, people aren't really talking about America's crisis in commercial property. Mish talks about it a lot (most recently here: Mish's: Commercial Real Estate Apocalypse in 2011-2012). If he's right, a lot more banks will end up going to the wall and/or the Fed will have to print a lot more dollars to rescue them.
If banks are left to fail with no support, that's actually deflationary and bullish for the dollar.
If the government / central bank step in to intervene, then the picture is less clear. Increasingly however the US public is losing its appetite for bank bailouts and so-called stimulous packages. Thus I'm still bullish on the dollar, in the short term.
On point 2, Remember that for all Britain's woes, we don't have Spanish levels of unemployment or Greek levels of corruption. Also our unions are very tame compared to the rest of the EU which means we can carry on working while French farmers park their tractors on the Champs-Elysée. If social unrest gets worse on the continent, the UK might start to look more appealing. Supposedly foreigners are even buying up London property while the pound is weak.
34. tom101 said...
Very interesting comments Drewster. Thanks for taking the time to explain.