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Us Economy Roars On

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Analysts said the reduction in inventories, which acted as a damper on second-quarter growth, boosts the likelihood that U.S. interest rates will keep rising since the Federal Reserve will be wary that stronger growth in the future might fuel bigger price gains.

"If anything, it will give the Fed more reason to continue raising rates," predicted Robert MacIntosh, chief economist for Eaton Vance Management in Boston.

http://today.reuters.com/news/NewsArticle....-ECONOMY-DC.XML

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Yes indeed,all eyes will be on the USA economic data next week.

My tip,keep a look out for the Chinese currency,it may have effects around the globe.

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I'm surprised there is not much mention of the US economy in our press. Forget the Olympics, Gordon Clown and all the VI bullsh1t you have been listening to, this is the stuff that matters.

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Alot was said a while ago about the imminent collapse of the US dollar.

This was another trigger to the global economy crash, house price crash etc.

Has it happened yet ???!!!!

Nahh, didn't think so. US economy strengthening, does that mean the US $ will also tend to strengthen, especially with higher IRs ?

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US economy strengthening

Don't confuse an increase in GDP with a strong economy: GDP is absolutely worthless as a measure of the health of an economy. If the government borrows a trillion dollars and spends it paying ten million people to dig holes and ten million others to fill the holes back in, the GDP goes up nearly 10%... but that's totally worthless and totally unsustainable.

Also, don't forget that the US government uses 'hedonic' GDP measurements. If a PC today still costs the same as a PC ten years ago but is ten times as fast, then its contribtion to GDP is artificially increased because it supposedly increases productivity... even though, in most cases, the same people are using it for the same basic tasks like word processing that they were back then.

The US economy is in the crap, it's only government and personal borrowing that's preventing a crash over there: just like the UK.

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The US economy is in the crap, it's only government and personal borrowing that's preventing a crash over there: just like the UK.

A year ago I would agree but now no way. The US is on a big up swing and other than a few coastal areas property is still very very cheap as a proportion of earnings compaired to the Uk. Dollar will also start to move up against the pound and euro.

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Alot was said a while ago about the imminent collapse of the US dollar.

This was another trigger to the global economy crash, house price crash etc.

Has it happened yet ???!!!!

Nahh, didn't think so. US economy strengthening, does that mean the US $ will also tend to strengthen, especially with higher IRs ?

Strengthening US dollar relative to the world as a whole is quite likely in the short term. However in the long term many economists agree that the dollar cannot keep its current value and must devalue at some point to pay for the huge american debts.

Strengthening US dollar relative to the pound is likely over the short to medium term because US rates are rising and US economy is outperforming UK (UK was outperforming US a couple of years back so pound was v. strong vs dollar).

This means the pound will have less power to buy dollar-denominated imports such as oil and some other things. To prevent inflation, the BoE will have to support the pound by increasing IRs.

And we all know where that leads, don't we?

frugalista

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However in the long term many economists agree that the dollar cannot keep its current value and must devalue at some point to pay for the huge american debts.

The US national deficit is actually going down not up for the last few months.

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The US is on a big up swing

Where, exactly? And, even if it was, how long would it last without $600,000,000,000 of government borrowing thrown into the economy every year, along with trillions of dollars of extra personal borrowing?

The entire US 'economic growth' is debt-driven, just like ours.

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The US national deficit is actually going down not up for the last few months.

Yes, you are quite right, instead of allowing their currency to devalue, they could also pay off their debts by becoming really productive and selling loads of widgets and other useful stuff all around the world. Do you think that's what's going to happen?

frugalista

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Where, exactly? And, even if it was, how long would it last without $600,000,000,000 of government borrowing thrown into the economy every year, along with trillions of dollars of extra personal borrowing?

The entire US 'economic growth' is debt-driven, just like ours.

Well I can tell you is that my company is mutilnational and we are finally seeing massive budgets being released for projects in the US. Remember that US companies have been making tons the last few years with no investments and a lot of wealth has been built up. So in the US we are hiring big time.

As for the UK the only work we are seeing is government sponsored hence in the UK we will probably be letting people go soon.

The national deficit just doesn't seem to impact the US people on a street level where sentiment is very good right now.

As for predictions US end the year at 4% UK end the year at 4.25%

As for housing the US is still way cheaper compaired to the UK in proportion to earnings and most people have fixed rate mortgages.

In the real world a mechanic in an average US city can afford a 4 bed house easy, try doing that in England..........................

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Charlie,

I agree.The only reservation I have is regarding that idiot of a chancellor, is he stupid enough to devalue sterling? It is one of the few reasons people are still here in this country.This is a genuine question as I have quickly learnt not to put anything past the fool.

This chart below shows UK and US rates, kindly provided by HPC members.

The average difference is around 2%. The UK and US rate lines seem joined at the hip apart from two or three instances which I suspect are times of crisis. Would anyone care to comment on those times when US rates are equal to UK rates or higher?

Finally, is the healthy return to trend for UK house prices to be judged as a similar crisis?

Uk_IR__US_IR__UK_HPI_Graph.JPG

post-119-1122668065_thumb.jpg

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"In the real world a mechanic in an average US city can afford a 4 bed house easy, try doing that in England.........................."

Absolutely correct. I dont share your optimism for the future of the US economy but the above (and lower taxes) is the reason that the US still has a far brighter future than the UK IMO

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Guest Charlie The Tramp
Charlie,

I agree.The only reservation I  have is regarding that idiot of a chancellor, is he stupid enough to devalue sterling? It is one of the few reasons people are still here in this country.This is a genuine question as I have quickly learnt not to put anything past the fool.

Mervyn King, Governor 0 0 7 7

Rachel Lomax, Deputy Governor 0 0 7 7

Andrew Large, Deputy Governor 3 0 4 7

First increases, second cuts, third hold, and last meetings attended.

Since last January when the call to cut interest rates were demanded by the VIs, Retailers, and Industry, the top three have consistantly except Large who on three occassions voted for an increase have steadfastly voted for a hold.

I find this very interesting and believe while they take this stand there will not be a majority vote against them. Prior to the last meeting there were many who said rates would be cut, but they all got a shock. We all know what their remit is but I believe they look at other matters which are not generally in the minutes, but recorded on the transcripts of the full meeting.

Remember Blair won the election going to the country a year before he had to.

Brown will now let matters run their course as he has no worries for the next four years with his employment unless there is a revolution, highly unlikely. :)

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So if we raise IRs, we'll have a guaranteed recession as those big debts will need servicing and people will have no cash to spend, rapidly rising unemployment etc.

OR

Reduce IRs, stimulate the economy once again, have rampant inflation for a few years - blame it all on the price of oil etc etc,

ooh look,now all those debts don't look near as bad as they did before ........ ahh that feels better, now lets raise IR rates again and get things back under control for a while. And while we are at it, lets join the Euro, so we don't get that silly inflation thing ever again.

So, which option would you go for when you are caught between a rock and a hard place.

I hate to say it but option 2 will be the option and my hard earned savings will get wiped out, whereas if only I'd taken on all that debt I would be much better off, relatively speaking.

Fxcked, which ever way I look !

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Again Charlie,

I agree. I think politically it would be much better for Labour if they were to allow some sort of orderly adjustment now (if that is still possible). If they try to re-inflate the bubble it'll blow up in their faces towards the time for a general election. I can not understand why Brown wants to prolong the agony, perhaps making it even worse, surely he does not expect everyone to forget that he was one of the prime architects of the house price boom and bust if he were to find himself at number 10?

Does this man think that he can simply wipe out economic fundamentals by redefining cycles as it suits him personally?

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Guest Charlie The Tramp
I hate to say it but option 2 will be the option and my hard earned savings will get wiped out, whereas if only I'd taken on all that debt I would be much better off, relatively speaking.

Fxcked, which ever way I look !

In all the recessions and downturns I have lived through the 45 years of my working life have always been accompanied by high or higher IRs and increased unemployment.

During the 90`s recession it was the time of the saver, why it will be different this time is beyond my understanding. :(

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Again Charlie,

I agree. I think politically it would be much better for Labour if they were to allow some sort of orderly adjustment now (if that is still possible). If they try to re-inflate the bubble it'll blow up in their faces towards the time for a general election. I can not understand why Brown wants to prolong the agony, perhaps making it even worse, surely he does not expect everyone to forget that he was one of the prime architects of the house price boom and bust if he were to find himself at number 10?

Does this man think that he can simply wipe out economic fundamentals by redefining cycles as it suits him personally?

Yes, he does.

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Well if he believes it that is his short-coming, not ours. If Newton's pure maths had been poor he wouldn't have been able to cancel gravity to suit his faulty formulars no more than Brown can make 2 plus 2 equal 5.

This economics thing is not rocket science, it's simple maths and a lot of politics, but sometimes,like now, the politicians have to give way to the maths and numbers do not lie.

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Guest Charlie The Tramp
the politicians have to give way to the maths and numbers do not lie.

Mid 2007

IRs 7.5%

Basic rate IT 27%

LUL 5k

Higher rate IT 45%

Vat 20%

Late 2008

Back to current rates.

<_<

Edited by Charlie The Tramp

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Mid 2007

IRs 7.5%

Basic rate IT    27%

LUL  5k

Higher rate IT  45%

Vat                20%

Late 2008

Back to current rates.

<_<

That sound about right to me by 2007 in the UK.

I still don't know why they just don't tax profits on a prime residence that is owned less than 2 years like in the US. It would stop the boom and bust property market overnight and only VIs would suffer plus raise some extra tax.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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