Friday, Aug 20, 2010
Government preparing for the next round of bailouts
Telegraph: UK borrowing falls as country slides deeper into debt
UK Government borrowing fell sharply in July, although the country continued to sink further into debt.
Posted by khards @ 08:43 AM (2274 views) Add Comment
22 Comments
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1. theboltonfury said...
quite agree
2. khards said...
If we actually stop increasing and start repaying some of our deficit back the financial markets will look upon us favourably.
This will cause sterling to rise and take interest rates up with it ?!?
3. jack c said...
@khards - "This will cause sterling to rise and take interest rates up with it ?!?" - if Sterling were to appreciate and interest rates went up surely this would push Sterling higher again - or am I missing something here?
4. techieman said...
hey jack . had an op wed and have right arm in a sling. am still able to click but typing is a prob with left hand. apparently i need to be this way for 6 weeks. anyway. just wanted to say wont be posting much - if at all- over the next few weeks.
hope u had a chance to listen to glen neely and watch bob p on that thread. opex option expiry today so could be interesting.look up maxpain- which is most likely area of the underlying price.
while i am away Lara elliottwaveforex.com and christian perfectstockalert.com - u tube. and of course daneric blog, are good sites to follow. as for hps no real surprises that we look like we have turned the corner. sorry if this post doesnt make much sense - must be that the drugs DO work.
5. jack c said...
@techieman - hope all went well with your op and that you make a swift recovery. Had a look at the previous threads you posted and all made interesting reading/watching. Will keep a check on perfectstock etc.. as suggested. Heading out of the office for next few hours - look forward to seeing you back on board when you are fully fit - who knows the housing market might be down 10% by the time you return. Greenbay was back the otherday !
6. tyrellcorporation said...
Hey Techie. I'm alarmed to see you can't hold down the shift key! (capital flight?) Can't you stick a paintbrush in your gob and hold it down that way? ;)
7. Crunchy said...
3. jack c
Foreign property buyers? and into the mix, British HPCers. Mervyns nightmare!
It used to be called treason but they now call it globalisation.
Sorry for being a racist or an extremist and whatever else for my personal indulgents in (non collective) 'thought crime.'
8. 51ck-6-51x said...
khards,
Countries are currently competing to have the weakest currency, not the strongest - in the short-term at least ;p
Economist - Buttonwood - Race to the bottom
Article Text:
"""
Buttonwood
Race to the bottom
Countries compete to weaken their currencies
Mar 4th 2010
ONCE upon a time, nations took pride in their strong currencies, seeing them as symbols of economic and political power. Nowadays it seems as if the foreign-exchange markets are home to a bunch of Charles Atlas’s 97-pound weaklings, all of them eager to have sand kicked in their faces.
First the dollar took a battering in 2009 when the return of risk appetite, and the ability to borrow the currency at very low rates, sent money flowing out of America for use in speculative “carry trade” transactions. Then the euro got pummelled because of concerns about the euro zone’s exposure to sovereign-debt problems in southern Europe. Finally sterling hit the canvas this week because of concerns about the British government’s deficit and the policy gridlock that may result from a hung parliament after a general election expected in May.
Is there any sign that politicians and central bankers are upset by these depreciations? None at all. Mervyn King, governor of the Bank of England, seems to welcome sterling’s weakness as a boost to exporters. European politicians, such as Christine Lagarde, the French finance minister, have revealed their pleasure at the euro’s recent decline for similar reasons. The American authorities, while parroting their belief in a strong dollar, have done nothing to shore it up, neither raising interest rates nor cutting the fiscal deficit nor intervening in the markets.
Nor has there been much sign of rejoicing in those countries whose currencies have tended to strengthen. The Swiss have intervened to hold down the franc. And Japan’s latest finance minister, Naoto Kan, has called for a weaker yen (although he received a rebuke from the prime minister for doing so).
The one country that most economists agree should let its currency rise is China (in theory, faster-growing countries should enjoy real appreciation over the long term). But the People’s Republic also resists the temptation, intervening to stop the yuan from rising against the dollar.
Why are weak currencies so much in favour these days? The answer seems to be that the interests of exporters are paramount, given the desperate scramble for growth that has followed the credit crunch and the global recession.
Of course, because currencies cannot depreciate all at once, there seems to be a kind of “Buggins’ turn” to be the land of the rising exchange rate. The starring role tends to be brief, either because the government takes action to weaken the currency, or because economic news prompts the markets to drive it down.
At the same time weaker currencies have not been punished in the traditional way—by higher inflation. Consider sterling. Using the currency’s 2007 peaks as a guide, the pound has fallen more sharply against the dollar and euro (around 25-30%) than it did after the exit from the Exchange Rate Mechanism in 1992.
In the 1970s that kind of depreciation was accompanied by double-digit inflation. But the year-on-year increase in the British retail-price index was just 3.5% in January and even that number was pushed up by higher rates of value-added tax, a home-grown factor. Nor is Britain paying any great price for losing its European and American creditors more than a quarter of their money in three years. Short-term rates are just 0.5% and ten-year government bonds yield a lowish 4%.
To some, the lesson of all this is clear. If all the issuers of paper money want to see their currencies depreciate, then the only answer is to own an asset that central banks cannot debase—namely, gold. Part of bullion’s rise to more than $1,100 an ounce this year must be attributed to the conviction that governments will inflate away their debts.
But it is hard to see how sustained rises in inflation will be generated in the next couple of years, given the amount of spare capacity in the global economy. It is also far from certain that governments could get away with a deliberate strategy of higher inflation, given the generally short maturity of their debts (less than five years, in America’s case). The markets would see them coming and increase bond yields accordingly.
Indeed the current sovereign-debt jitters may be a sign that creditors are starting to assert themselves again, and demanding higher yields from less prudent governments. Where countries depend on foreigners to fund their deficits, they may find that the “easy” option of depreciation carries a much higher cost than in recent years. In time, having a strong currency may once again come to be seen as an advantage, not a handicap.
"""
9. 51ck-6-51x said...
techie,
Hope you heal up nice and quick.
10. hpwatcher said...
what happened techie? Someone hit you with their handbag? ;-)
If we actually stop increasing and start repaying some of our deficit back the financial markets will look upon us favourably.
I'd like that very much. Can't see it happening for a very very long time though. I mean the debt is so big, too big....inflation must be looking more and more attractive. QE has to be the way forward for them.....
11. 51ck-6-51x said...
khards,
... and The Economist's latest word? The U.S is winning this battle, but how long will it last?
Economist - Currencies - Race to the bottom
I think anyone can read this one at the mo.
12. Crunchy said...
tech, watch out for the sling lows. It can always be worse, you could be suffering from trigggerr fiinnnnggggerrr....
GWS.
13. mark wadsworth said...
Techie, I wish a speedy recovery, or is this all part of your long term plan to injure your arm every summer to wriggle out of buying-a-house-and-doing-it-up duties? Didn't you hurt your arm last year (or was a different sell-to-renter?)
14. techieman said...
thanks chaps - i knew i had a shoulder prob but main issue last year was back, so needed to get that sorted first without surgery - then surgery on the shoulder. proximal bicep tear at the shoulder apparently. Pleased as had symptom but doc wasnt sure if there was a tendon detachment or not, until he went in.
probably caused by overuse - weights / boxing or maybe a mountain bike fall. so mark maybe long property next year.... or the year after....or the year after that... or.
anyway was trying to explain why i will be absent a while - even hpws comments can only raise a wry smile at the moment.
15. Simon said...
khards @2 "If we actually stop increasing and start repaying some of our deficit back the financial markets will look upon us favourably.
This will cause sterling to rise and take interest rates up with it ?!?"
The deficit needs to be reduced to zero before the first penny can be paid off our debt by which time our national debt is likely to be about £1 trillion pounds more than it is today .
They are going to print their way out of this and to hell with the pound .
16. jack c said...
"hpwatcher said...what happened techie? Someone hit you with their handbag? ;-)" - always reminds me of the Dick Emery sketches when HPW goes on about handbags - ooh! You are awful !
try 2.10 in on the following www.youtube.com/watch?v=qVpS4kJ8ZOg&feature=related
17. quiet guy said...
@51ck-6-51x
Everybody seems to be relying upon exports to get their economy fixed but Germany seems to suggest that it's the other way around too me. Even if we didn't have to compete against cheaper labour abroad, we cannot seriously hope to expand our industrial base quickly. Perhaps tourism and Uncle Tom's suggestion of a mass building program is the best way forward for now.
@Techieman
Hope your arm recovers soon.
18. hpwatcher said...
ooh! You are awful !
What was the next bit? Something like ''But I like you''?
http://www.youtube.com/watch?v=G_CG0frQAKc&feature=related
19. mander said...
Countries are trying to export their problems by devaluing their currency. If all countries are doing it will be a zero sum game. The process itslelf will be like a karaoke in many languages and it will destroy confidence in paper money. Result: Hyperinflation. And after probably a new world currency.
20. hpwatcher said...
And after probably a new world currency.
Yes, and it needs to be backed by something - hey wait there. I have an idea!
21. jack c said...
hpwatcher said "Yes, and it needs to be backed by something - hey wait there. I have an idea!" - not those gold plated handbags again (LOL) - have a good weekend everyone.
22. clockslinger said...
New free market politics in Telegraph a bit complicated.Public borrowing bad. Welfare bad. Money directed to poor bad. Private borrowing good. Business good. Private borrowing to inefficient business sustained by low interest rate and quantitive easing good. Inefficient enterprise and overleveraged household surviving at taxpayer expense good. Public funded welfare for big business and feckless speculator good. Trickle down theory feel a lot like somebody pi55ing all over me.