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Economy Suffers Slowdown As Double Dip Looms

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Economists fear the dangers of a double-dip recession are "growing alarmingly" after the release of the latest "grim" survey of business confidence in the service sector, and evidence of collapsing order books in the construction industry.

As the Bank of England's Monetary Policy Committee prepares to meet for its next session next week, the news adds to the pressure on the Bank to resume its programme of "quantitative easing", the direct injection of money into the economy.

The Chartered Institute of Purchasing and Supply (CIPS) reported yesterday that business sentiment remained "historically low", with pessimism about jobs driving the reading sharply down. The CIPS services index fell for the second month running, from 53.1 in July to 51.3 last month. Although suggesting a marginal expansion in services activity in coming months – the reading being above the benchmark figure of 50 – the trend is clearly downwards.

Adding the most recent results for manufacturing and construction shows the CIPS composite index, representing the vast bulk of the economy, suggesting that a marked slowdown is coming. The weighted average of the three indices declined further in August from February's post-recession peak, dropping 1.8 points – the largest decline since November 2008. The increase in output signalled in August was the weakest since June last year.

With thousands of jobs due to be cut in the public sector in coming months, the private sector seems ill-prepared to take up the slack. Service sector companies reduced their staffs in response to the continuing slowdown of new business growth in August, and the rate at which jobs were lost was the strongest since last October.

Chris Williamson, chief economist at Markit, which conducts the CIPS survey, said: "Our model is signalling a GDP increase of 0.5 per cent for the third quarter, meaning the second quarter 1.2 per cent surge in GDP will represent a peak in the recovery cycle.

"Disappointingly, the rate of job losses in private sector service companies has picked up sharply again to the highest since last October as companies remain worried about the outlook.

"Confidence about the year ahead has failed to recover from June's record drop, with public sector spending cuts and the looming VAT hike in January creating uncertainty over the future direction of the economy."

The disappointing survey came on the day the Office for National Statistics published gloomy news for the construction sector. Orders for the building trade plunged by 14 per cent in the second quarter, with few parts of the sector escaping the pain. The slowdown in the property market is again feeding through to the builders, while actual cuts in local authority and central government spending on housing and infrastructure is beginning to make their presence felt. Private housing orders in the second quarter of 2010 fell by 24 per cent compared with the previous quarter, and infrastructure orders were down by 22 per cent.

The results suggest that the strong second-quarter growth of GDP published by the ONS – recently revised up by 0.1 per cent to 1.2 per cent for April to June – may have significantly overstated the robustness of the recovery.

Economists are becoming increasingly downbeat about the prospects of the economy. Alan Clark at BNP Paribas, said the CIPS survey was "grim reading" and "reinforces the likelihood that the economy will begin to contract in the not-too-distant future".

Looks like the debt junkie needs another fresh fix of QE to try and achieve the same non outcome again.

Wow Q2 may be the "peak" of the recovery.

I'm sure it's all contained.

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Looks like the debt junkie needs another fresh fix of QE to try and achieve the same non outcome again.

Wow Q2 may be the "peak" of the recovery.

I'm sure it's all contained.

sorry i know i have posted many times before but its my favourite


I have now presented this history in its chronological order—the order of events: let me, in conclusion, sum it up, briefly, in its logical order,--the order of cause and effect.

And, first, in the economic department. From the early reluctant and careful issues of paper we saw, as an immediate result, improvement and activity in business. Then arose the clamor for more paper money. At first, new issues were made with great difficulty; but, the dyke once broken, the current of irredeemable currency poured through; and, the breach thus enlarging, this currency was soon swollen beyond control. It was urged on by speculators for a rise in values; by demagogues who persuaded the mob that a nation, by its simple fiat, could stamp real value to any amount upon valueless objects. As a natural consequence a great debtor class grew rapidly, and this class gave its influence to depreciate more and more the currency in which its debts were to be paid.[85]

The government now began, and continued by spasms to grind out still more paper; commerce was at first stimulated by the difference in exchange; but this cause soon ceased to operate, and commerce, having been stimulated unhealthfully, wasted away.

Manufactures at first received a great impulse; but, ere long, this overproduction and overstimulus proved as fatal to them as to commerce. From time to time there was a revival of hope caused by an apparent revival of business; but this revival of business was at last seen to be caused more and more by the desire of far-seeing and cunning men of affairs to exchange paper money for objects of permanent value. As to the people at large, the classes living on fixed incomes and small salaries felt the pressure first, as soon as the purchasing power of their fixed incomes was reduced. Soon the great class living on wages felt it even more sadly.

Prices of the necessities of life increased: merchants were obliged to increase them, not only to cover depreciation of their merchandise, but also to cover their risk of loss from fluctuation; and, while the prices of products thus rose, wages, which had at first gone up, under the general stimulus, lagged behind. Under the universal doubt and discouragement, commerce and manufactures were checked or destroyed. As a consequence the demand for labor was diminished; laboring men were thrown out of employment, and, under the operation of the simplest law of supply and demand, the price of labor—the daily wages of the laboring class—went down until, at a time when prices of food, clothing and various articles of consumption were enormous, wages were nearly as low as at the time preceding the first issue of irredeemable currency.

The mercantile classes at first thought themselves exempt from the general misfortune. They were delighted at the apparent advance in the value of the goods upon their shelves. But they soon found that, as they increased prices to cover the inflation of currency and the risk from fluctuation and uncertainty, purchases became less in amount and payments less sure; a feeling of insecurity spread throughout the country; enterprise was deadened and stagnation followed.

New issues of paper were then clamored for as more drams are demanded by a drunkard. New issues only increased the evil; capitalists were all the more reluctant to embark their money on such a sea of doubt. Workmen of all sorts were more and more thrown out of employment. Issue after issue of currency came; but no relief resulted save a momentary stimulus, which aggravated the disease. The most ingenious evasions of natural laws in finance which the most subtle theorists could contrive were tried—all in vain; the most brilliant substitutes for those laws were tried; “self-regulating” schemes, “interconverting” schemes—all equally vain.[86] All thoughtful men had lost confidence. All men were waiting; stagnation became worse and worse. At last came the collapse and then a return, by a fearful shock, to a state of things which presented something like certainty of remuneration to capital and labor. Then, and not till then, came the beginning of a new era of prosperity.

Just as dependent on the law of cause and effect was the moral development. Out of the inflation of prices grew a speculating class; and, in the complete uncertainty as to the future, all business became a game of chance, and all business men, gamblers. In city centers came a quick growth of stock-jobbers and speculators; and these set a debasing fashion in business which spread to the remotest parts of the country. Instead of satisfaction with legitimate profits, came a passion for inordinate gains. Then, too, as values became more and more uncertain, there was no longer any motive for care or economy, but every motive for immediate expenditure and present enjoyment. So came upon the nation the obliteration of thrift. In this mania for yielding to present enjoyment rather than providing for future comfort were the seeds of new growths of wretchedness: luxury, senseless and extravagant, set in: this, too, spread as a fashion. To feed it, there came cheatery in the nation at large and corruption among officials and persons holding trusts. While men set such fashions in private and official business, women set fashions of extravagance in dress and living that added to the incentives to corruption. Faith in moral considerations, or even in good impulses, yielded to general distrust. National honor was thought a fiction cherished only by hypocrites. Patriotism was eaten out by cynicism.

Thus was the history of France logically developed in obedience to natural laws; such has, to a greater or less degree, always been the result of irredeemable paper, created according to the whim or interest of legislative assemblies rather than based upon standards of value permanent in their nature and agreed upon throughout the entire world. Such, we may fairly expect, will always be the result of them until the fiat of the Almighty shall evolve laws in the universe radically different from those which at present obtain.[87]

And, finally, as to the general development of the theory and practice which all this history records: my subject has been Fiat Money in France; How it came; What it brought; and How it ended.

It came by seeking a remedy for a comparatively small evil in an evil infinitely more dangerous. To cure a disease temporary in its character, a corrosive poison was administered, which ate out the vitals of French prosperity.

It progressed according to a law in social physics which we may call the “_law of accelerating issue and depreciation._” It was comparatively easy to refrain from the first issue; it was exceedingly difficult to refrain from the second; to refrain from the third and those following was practically impossible.

It brought, as we have seen, commerce and manufactures, the mercantile interest, the agricultural interest, to ruin. It brought on these the same destruction which would come to a Hollander opening the dykes of the sea to irrigate his garden in a dry summer

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sorry i know i have posted many times before but its my favourite


The best ever, such an accurate blueprint.

New issues of paper were then clamored for as more drams are demanded by a drunkard.

Whenever I hear Krugman I am reminded of this.

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After reading When Money Dies, you can see how often history repeats and yet the same remedy is still tried.

who benefits from the chaos

when you dig deeper the same names keep appearing

yes i know there are many idiots involved as well but we are being played

some of the wierdo's think they are better than the Goyim - human farming indeed

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You wish. It's following the Japanese deflation model to a T.

Mind you, they say over-use of steroids shrinks the brain to the size of a peanut so you're excused.

Can we just clear something up here

Housing is not included in inflation calculations

And it is highly likely that house prices will crash at the same time as food and commodity prices are rising

In fact global food and commodity price inflation will possibly be the trigger for interest rate rises which would trigger further falls in the property market

So are we talking about asset price deflation ie housing and the stock market or food and fuel etc inflation?

This country is not Japan - we have had stagnation coupled with inflation in the past

And it is likely to happen again IMO.


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  • 418 Brexit, House prices and Summer 2020

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