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I M F: U K Growth Will Not Be Enough To Deal With Debt

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http://www.telegraph.co.uk/finance/economics/8051000/Cut-or-spend-what-the-IMF-really-thinks.html

Cut or spend: what the IMF really thinks
The UK, according to the IMF chief economist Olivier Blanchard, is planning a consolidation of 1.7pc of GDP. In other words the accompanying contraction will be around 1.7pc.
To put that in context, the UK economy shrank 6.6pc peak-to-trough in the recession – the deepest contraction since the Great Depression. So, fiscal consolidation alone is effectively like voluntarily triggering about one quarter of that.
There’s more. According to the Global Financial Stability Report, another IMF publication this week, a “growth shock” of one percent less that the WEO’s baseline forecast between 2010 and 2015 would have devastating effects on the national debt.
Its analysis finds that instead of the debt to GDP ratio settling at 86.4pc of GDP in 2015, it would reach 99.2pc. In other words the UK would be loaded with £200bn of extra debt because it failed to grow its way out of its problems.
So, what to do? The IMF’s position is contradictory and the lesson seems to be we're damned if we do and damned if we don’t.

Buggered. Totally buggered. :o

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Our "growth" is slowing dramatically reducing all hope of growing our way out of debt:

U.K. Third-Quarter Growth Pace Halves to 0.5%, Institute Says
By Jennifer Ryan - Oct 8, 2010 12:00 AM GMT+0100 Tweet (2)LinkedIn Share
The U.K. central bank kept its bond-purchase plan at 200 billion pounds ($319 billion) and the key interest rate at a record low yesterday as policy makers debated the need to expand asset purchases to aid growth.

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Our debt in 2011 is going to be 50% higher than the US:

http://www.debtbombshell.com/

Right now, that debt is growing violently. The Government forecasts it will soar to an eye-watering £1.1 trillion by 2011. To put that in perspective, the UK went bust in 1976 running a budget deficit of 6% of GDP. In 2010 that deficit is going to top 11%.

Just what gives the IMF confidence in the Koalishon I do not know. I suppose they consider our positon is so hopeless that the rest of the world will bail us out on the "too big to fail" basis?

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Our debt in 2011 is going to be 50% higher than the US:

http://www.debtbombshell.com/

Right now, that debt is growing violently. The Government forecasts it will soar to an eye-watering £1.1 trillion by 2011. To put that in perspective, the UK went bust in 1976 running a budget deficit of 6% of GDP. In 2010 that deficit is going to top 11%.

Just what gives the IMF confidence in the Koalishon I do not know. I suppose they consider our positon is so hopeless that the rest of the world will bail us out on the "too big to fail" basis?

I have a nasty feeling that George is about to tell Merv to fire up the presses (if Merv thinks that best of course) to offset the effect of George turn off the magic government funding tap:(

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I have a nasty feeling that George is about to tell Merv to fire up the presses (if Merv thinks that best of course) to offset the effect of George turn off the magic government funding tap:(

FT headline shown on Newsnight says excatly that :o

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So, what to do? The IMF’s position is contradictory and the lesson seems to be we're damned if we do and damned if we don’t.

I yearn for the day when the leader of a country somewhere tells the IMF to stick their opinions where the sun don't shine.

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Our debt in 2011 is going to be 50% higher than the US:

http://www.debtbombshell.com/

Right now, that debt is growing violently. The Government forecasts it will soar to an eye-watering £1.1 trillion by 2011. To put that in perspective, the UK went bust in 1976 running a budget deficit of 6% of GDP. In 2010 that deficit is going to top 11%.

Just what gives the IMF confidence in the Koalishon I do not know. I suppose they consider our positon is so hopeless that the rest of the world will bail us out on the "too big to fail" basis?

Remind me again, exactly who do we owe all this money to? And in a worldwide crisis, who exactly has the funds to bail us out.

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What do the IMF know... can you point me to their predictions of a house price bubble or financial crisis?

Also, how often do they change their mind?

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I have a nasty feeling that George is about to tell Merv to fire up the presses (if Merv thinks that best of course) to offset the effect of George turn off the magic government funding tap:(

trouble is, the presses cure nothing.

imagine, it takes 1000 pounds borrowed to make a product.

inflation kicks in...the interest on the old debt rockets, but the capital value decreases.

Now...we want to make another product....how much now is needed to be borrowed to make it?

see...the old debt is wiped ( interest isnt), but now we need to borrow more in line with inflation to make it. and sell it.

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What seems odd to me is that, despite a deficit larger than the US (per capita basis) the overwhelming view is that the US are in worse shape than us with shrill headlines about a $1.3TR debt (compared with our equivalent of $1.36TR). UK must be the flavour of the month after the Euro got a bashing in the 2nd Q. We may be next for the bashing when the market wakes up to the fact that we are in worse shape than the US and certainly in worse shape than Ireland who at least have the ECB to bail them out when they default.

And another thing, the US growth has collapsed to 2.6% compared with our stellar performance of 0.6% which NIESR say will have halved in the 3rd Q.

So what, exaclty, is holding us up? Resilient house prices compared with the 50% crash in the US?

Edited by Realistbear

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Looks like massive devaluation of the pound is coming.

http://www.forexrate.co.uk/news/short-term-correction-with-sterling-likely/

SHORT TERM CORRECTION WITH STERLING LIKELY
6 October 2010 Forex markets remained unchanged overnight as markets digested volatile price action from the last 48 hours. The Euro saw fresh yearly highs after touching $1.3839 versus the USD in late trade yesterday and remains firm against a number of its counterparts. The US Dollar however remains very much bearish against the majors however technical indicators may signal a possible reversal in trend as speculators look to take profit from the key psychological levels currently being tested. Broader price action overnight seems corrective more than anything else and we have seen some reasonable risk reduction over the past 24 hours in short Dollar positions.
Sterling, meanwhile, looks set to remain firm versus the dollar, underpinned by negative USD sentiment, higher investor risk appetite and yesterday’s surprise rise in the services PMI which has helped to ease some concerns regarding a double dip scenario in the UK.
However, while it saw 2 month highs versus the USD, sterling continues to lag the euro as markets debate the prospect of further policy action from the Bank of England.
EURGBP is close to year’s highs while cable struggles to break 1.60. The question is how much additional QE is now priced in for the pound? Given the amount of airtime this topic has received the past few weeks and the clear underperformance of the pound and likewise UK 10yr close to historical lows, I think there is a chance the pound is oversold and we are due some sort of short term correction or at least a sustained move higher in the TWI towards 81 area and GBPUSD towards 1.6200.
Much of this will depend on the data starting to stabilise.
.../
Overall price movement remains largely in favor of the Euro at present, markets are clearly bias towards USD weakness and
general sentiment surrounding Sterling is very much negative with bearish price movement expected over the coming days
.The market currently presents an excellent price for any Euro sellers, Dollar buyers should take advantage of the current highs and Sterling sellers should look to cover positions or work Stop orders to protect against further bearish movement. Stop orders are useful when the market is in a downward trend and allows buyers to minimise risk and exposure to what has once again become a very volatile market.

Sentiment is bearish vs. the $ and bullish toward £ on the basis that things are going well here and a double dip is not on. Further, that our QE2 will either not be necessaray or will be moderate with this priced into sterling.

If our growth has unexpectedly halved (NIESR report) and our deficit is growing (1.1 TR projected for 2011) what, exactly, is bullish about sterling?

Edited by Realistbear

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snip

So what, exaclty, is holding us up? Resilient house prices compared with the 50% crash in the US?

most people ARENT selling their ££££

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Yes, we (in the UK) are indeed fooked, with the biggest total* debt to GDP in the world, tied in 1st place with Japan.

( * = government + households + companies)

But I think this journo misunderstood the main points, or is spinning it.

But hang on. What’s this? Chapter 3 of the WEO notes that fiscal consolidation equivalent to 1pc of GDP leads on average to a 0.5pc decline in GDP over three years and an increase of 0.3pc in the unemployment rate.

If every country is doing it together, the contraction is double that and it takes five years for the losses of the early years to be offset by the gains later on.

But no other major economy will have to cut as much as us, in relation to GDP. America will have to cut more in absolute terms, of course, due to their size. And the few other countries with large fiscal deficits (Iceland, Ireland, Greece, Spain and Portugal) are almost all very small economies- bar Spain, a "small-to-medium" size.

it takes five years for the losses of the early years to be offset by the gains later on.

If gov. spending remains high, this will lead to more inflation and higher interest rates, repressing consumers and the private sector = worsening long term.

If gov. spending is reduced, this will lead to less inflation and lower interest rates, helping consumers and the private sector = better long term.

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Yes, we (in the UK) are indeed fooked, with the biggest total* debt to GDP in the world, tied in 1st place with Japan.

Btw, the wife is in Japan now, says it's Jumping, buildings go up, people out spending....lots of sweet little 660cc Kei (light) cars, more than ever, and almost all in conservative silver or white. !00 yen shops now offer excellent products even better than 5 years ago. (pound shops are crap!) Good vibe,they have adjusted and made themselves a life...and all with constant falling prices.

Okay there are people living under blue sheets but the great majority are doing OK.

Anyway, this report is from a Japanese who's lived in the UK for 5 years, must have some value.

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Btw, the wife is in Japan now, says it's Jumping, buildings go up, people out spending....lots of sweet little 660cc Kei (light) cars, more than ever, and almost all in conservative silver or white. !00 yen shops now offer excellent products even better than 5 years ago. (pound shops are crap!) Good vibe,they have adjusted and made themselves a life...and all with constant falling prices.

Okay there are people living under blue sheets but the great majority are doing OK.

Anyway, this report is from a Japanese who's lived in the UK for 5 years, must have some value.

yeah, but, bankers cant make a living in deflation...well, they can, but they gotta do some work for it.

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yeah, but, bankers cant make a living in deflation...well, they can, but they gotta do some work for it.

....I asked my wife's cousin, a manager of a regional bank if we could borrow some money. (jokingly of course) She said "Yes if you can you pay it back?" Funny people the Japs.

Edited by council dweller

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  • 142 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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