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Bank Of England May Need To Print More Money

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U.K. Economy Won’t Resume Growth Until 2010, CBI Says

The British economy won’t start growing again until 2010 and the Bank of England may need to expand its money-printing plan to underpin the recovery, the Confederation of British Industry said.

Gross domestic product will fall 0.3 percent in the second quarter and 0.1 percent in the third, and will stop shrinking in the final three months of the year, the biggest U.K. business lobby said in forecasts released today. The group previously predicted a contraction throughout the year.

Bank of England markets director Paul Fisher said last week that Britain should not be “complacent†on the prospects for a recovery, which may falter if banks remain unable to lend enough. Policy makers this month reiterated their plan to print 125 billion pounds ($206 billion) of the total 150 billion pounds authorized and spend it in U.K. debt markets.

“We still have some way to go before the U.K. economy is truly out of the woods,†Ian McCafferty, the CBI’s chief economic adviser, told reporters. “There may well be a justification for extending the 150 billion pounds a little further to make sure we do not slip back.â€

The CBI said yesterday that Prime Minister Gordon Brown and the opposition Conservatives need to talk about how they will repair the public finances once growth rebounds.

Bond Sale

Britain plans to sell as much as 5 billion pounds of bonds through banks tomorrow in the U.K.’s first so-called syndication since 2005, according to the Debt Management Office. The sale is part of a record 22 billion pounds the Treasury aims to raise this year to finance the budget deficit.

“The U.K. faces a fiscal deficit never before seen in peacetime, yet the war between political parties is not resulting in any proper answers as to how this will be addressed,†said John Cridland, deputy director general of the CBI. “Whichever political party wins the next election needs to secure a mandate for radical action.â€

More than half of U.K. voters see Brown staying in his post as harmful for Britain, a YouGov Plc poll in the Sunday Times newspaper showed yesterday.

The economy will grow again in the first quarter of 2010, expanding 0.1 percent, and then 0.3 percent in the second quarter, the CBI said.

More companies are freezing wages and cutting working hours instead of firing staff than in previous recessions, the organization said. This should limit job losses through 2009, with the CBI now expecting unemployment to peak in the second quarter at 3.03 million, a rate of 9.6 percent, up from 2.2 million in the first quarter of 2009. In April, it predicted a peak of 3.25 million, or 10.3 percent, in the same quarter.

CBI Pessimism

The CBI’s growth predictions are more pessimistic than those of other economists. Royal Bank of Scotland Group Plc economist Ross Walker said on June 12 that the economy will start growing as soon as the third quarter.

Reports this month indicate the recession is showing some signs of easing. Manufacturing output rose and services industries expanded for the first time in a year, while house prices stabilized in May.

The Royal Institution of Chartered Surveyors said today U.K. homebuyers are clinching smaller discounts on property prices as the housing market stabilizes.

“There are flickers of life visible all round the country,†Richard Lambert, the CBI’s director-general and a former Bank of England policy maker, told reporters. ‘We are past the worst but we can’t say with any great certainty that the recession is over.â€

Policy maker Andrew Sentance said last week that the recession may be “bottoming out.†Fisher said that there may still be “bumps in the road ahead†for the U.K. economy.

A global survey of company executives in June showed most of them see signs of economic recovery this year, Ernst & Young said today. Among 570 respondents, a quarter said the worst was past while 42 percent said some signs of life were evident or would be by the end of the year. About a fifth saw no recovery before the second half of next year.

"a little further" lol.

Understatement of the decade...

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Guest sillybear2

Of course, NuLabour cannot stop spending so BoE cannot stop printing, the moment they do the wheels will come off.

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There will be no growth, only inflation.

Not that the media will question it.

All the economic growth that they boasted about during the so-called boom was all inflation as well, just pumping up the money supply, they just did it using housing and debt, hence the mess now, in the process they also destroyed the productive/competitive capacity of the country.

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Who would have thought that once you start printing it gets hard to resist the temptation to print more....... Still, if it hastens the death of the fiat money scam it might even be a good thing long term.

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yep, as predicted by the BLOO LOO

printing has worked, but not quite enough.....we need more.

trouble is, there is NEVER enough as printing does not solve the underlying problem. DEBT.

print to much and DEBT Is the last thing you are going to be worrying about.

And 2 BNP MEPS?

How about a fascist government offering a cure to the masses whose savings have been destroyed, and starvation has fuelled for vengence.

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I still don't see how printing money can bring on a recovery for the economy. I can see how it may help some banks, but if printing money alone made every economy healthy, why does not every poor country in the world print enough money to become rich? It is complete nonsense. How does printing money suddenly make our economy productive and generate jobs and wealth? Nobody in favour of QE can explain this.

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Guest sillybear2
I still don't see how printing money can bring on a recovery for the economy. I can see how it may help some banks, but if printing money alone made every economy healthy, why does not every poor country in the world print enough money to become rich? It is complete nonsense. How does printing money suddenly make our economy productive and generate jobs and wealth? Nobody in favour of QE can explain this.

It might create a temporary bubble that Labour pin their slim hopes of winning the next general election upon, after which it just implodes and you end up in Zimbabwe territory, not that Labour care, short-termism rules the day.

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I still don't see how printing money can bring on a recovery for the economy. I can see how it may help some banks, but if printing money alone made every economy healthy, why does not every poor country in the world print enough money to become rich? It is complete nonsense. How does printing money suddenly make our economy productive and generate jobs and wealth? Nobody in favour of QE can explain this.

because no one who thinks logically believes in it

even keynes got some things right

link

But Keynes, earlier in his career, expressed different economic views, in a slight book called The Economic Consequences of the Peace. He had attended the Paris Peace Conference in 1919 as technical adviser to Prime Minister Lloyd George, but resigned his post in protest of what he regarded as outrageous demands being made upon a prostrate Germany for reparations. His book (it is available on the internet) deals with the economic condition of Europe prior to the war, the Conference itself, with interesting portraits of the attendees, the Treaty which resulted, and reparations. Keynes saw no ready solution, which "leads me to a necessary digression on the currency situation of Europe." What a digression!

It begins: "Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some. – As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.

"Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." Amazing words, predicting with great accuracy what would happen in Germany just a few years hence, as prices were raised weekly, then daily, then hourly, and "money" was printed so rapidly that it was blank on one side. Has the "existing basis of society" been overturned in America by inflation? If so, how many have made the diagnosis?

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Guest sillybear2
most tried it didnt they

clipping coins

changing metal content

Until Henry's reign, English currency was made of valuable metals - gold and silver - whose face value was approximately the same as their bullion value. To pay for his wars, Henry decided to mix the silver in his coins with base metal (copper).

Soon the "silver" coinage was so debased that it contained more copper than silver. Henry's subjects derisively called him "Old Coppernose" as the copper in the coins tended to show through first on the high surfaces - e.g. the nose of the portrait.

The debasement of the coinage helped cause rampant inflation, as people demanded proportionally more of the impure coins. The price of imports increased, for foreigners would not accept debased currency.

The economic disruption caused by debasement and inflation continued into the 1560s; it was only in 1562 that the debased coins were fully withdrawn from circulation.

Our 'copper' 1p and 2p coins were withdrawn sometime ago of course because the metal became worth more than the face value. Which just shows you how far along the debasement road we've gone.

And then John Law himself of course didn't have to trouble himself with metals when presented with the boundless opportunities of the pure alchemy offered by the printing press, as you no doubt know from your avatar 'lowrentyieldmakessense' ;)

http://en.wikipedia.org/wiki/John_Law_(eco...issippi_Company

Basically the Scottish criminal, and compulsive gambler, destroyed the currency and it all ended in a massive crash, predictable as ever.

Edited by sillybear2

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Is Mervyn still singing from the same hymn sheet as Gordon these days? I was under the impression he wasn't.

If so, further QE may be less likely than spending cuts.

(edited: for the hell of it)

Edited by CokeSnortingTory

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Is Mervyn still singing from the same hymn sheet as Gordon these days? I was under the impression he wasn't.

If so, further QE may be less likely than spending cuts.

(edited: for the hell of it)

The first thing you have to realise is that these people are liars and full of shit.

Remember moral hazard - next came slushing billions into the back pockets of the most reckless gambling bankers this country has ever seen.

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What bugs me is that credit rating agencies should not be rating a govt that prints money with an AAA .. there should be no excuse whatsoever for printing money .. if a fiscal stimulus is needed it should be done from reserves and not from thin air.. I think it is self preservation from the Ratings agencies.. they could never rate the UK & US other than AAA .. they may make noises .. but thats about it .. these coutries could be insolvent but the ratings agencies will be the last to let people know of the fact..

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Is Mervyn still singing from the same hymn sheet as Gordon these days? I was under the impression he wasn't.

If so, further QE may be less likely than spending cuts.

(edited: for the hell of it)

So spending cuts then, less cash to spend on education, health, and everything else (Infrastruture). Why? oh yeah, we had to give a load of cash to a bunch of gamblers that lost.

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So spending cuts then, less cash to spend on education, health, and everything else (Infrastruture). Why? oh yeah, we had to give a load of cash to a bunch of gamblers that lost.

Well, we couldn't go on parasiting off the labour of Chinese factory workers forever.....

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