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overbearish

Mervyn King - P45 In A Year?

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I apologise for the rant but IMO today was beyond belief...

Please can somebody explain what I am missing on the UK economy that Mervyn King can see? Having being so disastrously wrong with his (or his mates) forecasts for last nine months - not rocket science to work out that tax rises, mortgage rises, utility rises and £100bn+ pa net increase in debt (needed just to keep house prices where they are) combined with slowing house prices/pension worries is going to finally hit consumer spending - he is now claiming that all will be ok in 2007 ? A few questions:

1. HOW CAN YOU SAY THE HOUSING MARKET HAS STABILISED when it is going into the summer recess and quiet Autumn period with excess stock, transactions still at low levels and massive affordability/medium term return (for the BTL investor) issues?

2. Since when has any life in recent history being breathed into the UK economy without substantial interest cuts and house price boom (NB bounce from crash excluded)? Since when has Britain ever exported itself of a downturn?

3. Just how are you going to drive 3% growth in productivity when it is currently 1.0% and falling and the only drivers being government (hugely inefficent and increasingly sow) and retail (not for much longer)? Invesment picking up - just what sensible UK company is going to invest in the UK when it can can get better returns overseas (like its population who are buying property)?

4. Just what have you modelled in for the tax rises for 2007? How do you think people with stable/falling house prices, low earnings growth, growing debts, pension worries are going to react when tax rises hit? no doubt the savings ratio is going to stay at its historical low levels in such a scenario!

5. Just who is going to drive economy given the 20-40 year old is up to his neck in debt and 40-70 year old is 1) either so worried about his pension he is not spending 2) moving abroad with his cash from property sale (not reinvested in economy) where for £2-300,000 he can swap a 3 bedroom flat for a palace in the sun and live for half the price?

Seriously, I am not as bearish as some about the UK house prices - see 10-20% nominal falls in house prices - as yield on houses at c.5% is better than equities even after costs, however, this economy is built on government and retail, especially outside the South East. The South East will again be hit by the tax rises over next three years as Labour MPS represent the North. This will seriously hold it back. (I apologise for massive generalisation and any offence - I am half Scottish - but in a global economy, the principal place to drive above trend earnings growth medium and long term is the South East given Banking, Media, IT, Biotech, Global Heaquarters and its health is vital to help the rest of the country).

The UK is in for ten years of hardship like it or not Mervyn and putting your head in the sand and focusing on stable prices is undertandable (what other option does he have) but IMO it will humiliate you. You are (if still in a job) going to be taken kicking and screaming to reduce interest rates again and again over next two years and the inflation target will become a historical footnote on the back of Sterling depreciation...Roger Bootle for next BOE governor...

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I agree culpability - I have no doubt that he is a brilliant man but he always looks as slightly bewildered (looks to be as he should be running your local green grocer or butcher) by what is is going on - although to be fair the cards Gordon Brown has dealt him are impossible to play!

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I agree culpability - I have no doubt that he is a brilliant man but he always looks as slightly bewildered (looks to be as he should be running your local green grocer or butcher) by what is is going on - although to be fair the cards Gordon Brown has dealt him are impossible to play!

Yeah.

I actually like him but I think his arm will be twisted until it snaps off.

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He's more likely to get a Lordship for his services than a P45.

This is how the world works. Move in the right circles, say and do the right things with the people in power and all sorts of goodies come your way.

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Guest The dude
Yeah.

I actually like him but I think his arm will be twisted until it snaps off.

I dunno about 'liking him'...I mean he IS a Banker after all....who gives a shite about Bankers for godsake......I have to confess, when I look at Mervyn...I keep thinking I'm looking at Bliar...then it's Moron Brown.....Let's face it...they're all a bunch of knobheads....

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When has a central bank ever forecast a recession?

I can't see it happening - they would be blamed for the sudden loss of confidence that would ensue and people would point the finger and say "there's your trigger!"

So I don't think MK does believe what he says about next year but he won't admit the truth because that is not part of the game.

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what did ya expect ?

did you think that they (or anyone else) actually knows whats to happen next ?

they havent a clue. its just a policy stab same as anybody elses, but wowsers - they are so out of sync with the ground level realities i wonder how they ever got appointed.

all in all they looked sheepish and lacking in confidence.

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Guest Bart of Darkness
When has a central bank ever forecast a recession?

I can't see it happening - they would be blamed for the sudden loss of confidence that would ensue and people would point the finger and say "there's your trigger!"

So I don't think MK does believe what he says about next year but he won't admit the truth because that is not part of the game.

Good point. Avoiding the blame is a big part of the game. Best to keep quiet and wait for your reward for being a good boy.

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I think thak MK did very well.

Assuming that the point of all this was to inform the market that interest rates will not be going down in the near future - i.e. to avoid any shock later on.

I can't think of any better way of saying that due to inflationary pressures we cant lower interest rates any more.

It seems that the MPC see one of their criteria is to avoid as much uncertainty as possible.

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  • 302 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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