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There Is No Soft Option When Confronting Our Economic Reality

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http://www.telegraph.co.uk/finance/comment/jeffrandall/7992902/There-is-no-soft-option-when-confronting-our-economic-reality.html

It was J K Galbraith, the American economist and diplomat, who concluded that there are two classes of forecasters: "Those who don't know – and those who don't know they don't know." He was right, but only partially. In today's febrile financial environment, a third class of forecaster has emerged. Those who thought they knew, but now know they didn't.

If this sounds disconcertingly like Donald Rumsfeld's wisdom about "unknown unknowns", then spare a thought for managers in businesses and public services who are paid to plan for what is likely, insure against the unexpected and budget accordingly. Only this week, one of Britain's most successful industrialists admitted to me: "I've no idea what's really going on."

I cannot remember a time when the views of City analysts, leading academics and professional investors were quite so polarised – with rows of empty chairs on the middle ground. For many boasting a surplus of grey matter, the future has become a stark place: either black or white. But who is correct?

Are we heading for deflation or runaway inflation? Will growth accelerate or evaporate into a double-dip recession? Can the stock market de-link from prevailing economic woes – as it has done before – or are share prices (and therefore much of our pension assets) about to enter a new ice age?

The message from financial markets is horribly ambivalent. There has been a rush into government bonds (fixed-interest paper), which has driven up prices and crushed yields. This points to expectations of lower inflation and the anchoring of central-bank rates at rock-bottom levels.

But gold, a traditional hedge against inflation, is also in favour, currently trading at near to its all‑time high of $1,264 an ounce. This, in part, reflects concerns that heavily borrowed countries, such as the US and Britain, will resort to inflating away their debts.

So far, the "deflationists", those who feared the credit crunch would result in a depression, have had the upper hand. To offset the prospect of falling prices and the ossification of economic activity, the Bank of England has, in effect, printed £200 billion of new money. The trouble is that for 43 of the past 52 months the Consumer Price Index has been above the target rate of 2 per cent. In July, it was 3.1 per cent. Part of the upward pressure on prices has been caused by sterling's weakness, which has led to higher import costs.

At some stage, the tripling of the UK's monetary base through quantitative easing must surely feed into the system and fan further these inflationary flames. When banks stop hoarding and begin re-lending, prices will blaze. Then it gets really nasty. Will the Bank and its political masters have the nerve to put out the fire with interest rates of 4 per cent, 5 per cent, perhaps even 6 per cent?

The Policy Exchange think tank predicts rates of 8 per cent within two years. If it's even half right, those on floating-rate mortgages should brace themselves for a kick in the collectibles. Disposable incomes will shrink, just as consumers are adjusting to the pain of higher VAT (it goes up to 20 per cent next year).

The problem is no one has a future predicting machine. Mathematics cannot solve this problem it's just far too complex however it won't stop charlatan mathematicians from trying to fool you into thinking that they can predict the future with equations you don't understand.

http://university.unitedstatesliberty.org/654/textbooks/adam-fergusson-when-money-dies-nightmare-of-the-weimar-collapse/

http://lynncoins.com/fiat-money-france5.htm

Of course history does suggest where this will end up.

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I've watched the debate for years now.

Will this happen... Won't this happen... Inflation... Deflation... Stagflation.... Certain collapse...

The problem is, month after month, nothing seems to change in the UK.

Cuts now put back till April 11, house prices staying the same, consumer spending up, unemployment levelling, BTL landlords getting richer.

If things were that serious, surely something would be happening now instead of this same old, same old.

I just wish something would happen!

Edited by Kyoto

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I've watched the debate for years now.

Will this happen... Won't this happen... Inflation... Deflation... Stagflation.... Certain collapse...

The problem is, month after month, nothing seems to change in the UK.

Cuts now put back till April 11, house prices staying the same, consumer spending up, unemployment levelling, BTL landlords getting richer.

If things were that serious, surely something would be happening now instead of this same old, same old.

I just wish something would happen!

I feel your pain.

The only certainty (in my mind) is that the longer this can is kicked down the road, the more severe the impact.

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I have posted about this a few times in recent months - this is the most uncertain time economically in my memory and that goes back to the 1970s.

As Kyoto states, nothing is happening and you wish something would happen. Heck, even a global recovery will be at least something happening. But nothing appears to be happening.

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I have posted about this a few times in recent months - this is the most uncertain time economically in my memory and that goes back to the 1970s.

As Kyoto states, nothing is happening and you wish something would happen. Heck, even a global recovery will be at least something happening. But nothing appears to be happening.

AKA Japan perhaps?

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http://www.telegraph.co.uk/finance/comment/jeffrandall/7992902/There-is-no-soft-option-when-confronting-our-economic-reality.html

The problem is no one has a future predicting machine. Mathematics cannot solve this problem it's just far too complex however it won't stop charlatan mathematicians from trying to fool you into thinking that they can predict the future with equations you don't understand.

http://university.unitedstatesliberty.org/654/textbooks/adam-fergusson-when-money-dies-nightmare-of-the-weimar-collapse/

http://lynncoins.com/fiat-money-france5.htm

Of course history does suggest where this will end up.

There are at least a couple of firm facts: The UK has lived beyond its means for many years, and this is ending now. It will unwind, no doubt about it. The only question is how. Only the format of this unwinding is difficult to predict, because the format will depend on politics: If the government manages to cut deep and fast, then inflation and interest rates will remain low. If they fail, badly, then we will have high inflation and interest rates. Most probably it will be somewhere in between. But the deciding factor will be politics, hence public opinion, hence the media - particularly the BBC.

.

Edited by Tired of Waiting

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Guest UK Debt Slave

I have posted about this a few times in recent months - this is the most uncertain time economically in my memory and that goes back to the 1970s.

As Kyoto states, nothing is happening and you wish something would happen. Heck, even a global recovery will be at least something happening. But nothing appears to be happening.

The calm before the storm

And it will be a storm to remember!

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Guest UK Debt Slave

There are at least a couple of firm facts: The UK has lived beyond its means for many years, and this is ending now. It will unwind, no doubt about it. The question is how. And the prediction is difficult because the format of this unwinding will depend on politics: If the government manages to cut deep and fast, then inflations and interest rates will remain low. If they fail, badly, then we will have high inflation and interest rates. Most probably it will be somewhere in between. But the deciding factor will be politics, hence public opinion, hence the media - particularly the BBC.

For about 65 years

The next 10 years will be fekkn awful

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AKA Japan perhaps?

My thoughts exactly on reading that post. I am a "don't know", but accept that pretty much anything could happen. However, so far we have gone down Japan's route of borrowing a load of money to avoid reality. However, unlike them, Britain is more prepared to face reality and has started to cut spending. Japan cannot and will be screwed in 20 years time.

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I've watched the debate for years now.

Will this happen... Won't this happen... Inflation... Deflation... Stagflation.... Certain collapse...

The problem is, month after month, nothing seems to change in the UK.

Cuts now put back till April 11, house prices staying the same, consumer spending up, unemployment levelling, BTL landlords getting richer.

If things were that serious, surely something would be happening now instead of this same old, same old.

I just wish something would happen!

Yes totally agree nothings happening in the public sector schools still have management structures of plcs,landlords getting £600 plus paid into their bank accounts from the benefits office for housing scumbags, incapacity benefit well virtually everyones on it who doesn't work, i could go on and on but wjhats the point all hot air once again nothing will change for the next few years its all about votes .

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My thoughts exactly on reading that post. I am a "don't know", but accept that pretty much anything could happen. However, so far we have gone down Japan's route of borrowing a load of money to avoid reality. However, unlike them, Britain is more prepared to face reality and has started to cut spending. Japan cannot and will be screwed in 20 years time.

Or perhaps the British gov.knows that it will not have lenders as forgiving as Japan?

Can the UK gov.'s debt get close to 100% of GDP, and still be financed cheaply?

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  • 149 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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