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GeordieAndy

Global Insolvency

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Just read this via the great Zerohedge which everyone must read but I have pasted the reports views on the UK outlook below:

United Kingdom

News on the fiscal side and for the real economy was mostly positive for the UK in 2010, and it appears to be on track to return to fiscal stability. The UK entered the financial crisis with a relatively low gross general government debt-to-GDP ratio of 44% in 2007, but very high recent deficits — the peak was 11.1% of GDP in 09/10 for the general government deficit and a trend of strongly increasing government expenditure, raised concerns about the sustainability of the public finances in the UK.

The coalition government has outlined and started to implement an ambitious programme, with a focus on reducing public spending and limited tax increases that is supposed to reduce the general government deficit from around 11% in 2009/10 to about 2% in 2014/15. So far, progress has mostly been reassuring.

The fiscal deficit is falling slightly, and the deficit in 10/11 is likely to turn out much lower than the consensus expected a year ago. We expect the general government deficit to fall to about 6% of GDP in 2011/12 and to about only 1% in 2014/15, leading the general government debt-to-GDP ratio to level off at around 80% of GDP.

After growing by 1.7-1.8% in 2010, we expect real GDP growth to reach 2-2.5% YoY in 2011 and 2012. Nominal GDP growth is in line with the historical average, running at 5.5–6% over the forecast period. Some downside risks remain. The bulk of the fiscal tightening has yet to take full effect, and the fiscal tightening should be expected to dampen growth in the coming years. With inflation (on the CPI measure) running at more than 3 percent per annum, and with survey-based inflation expectations edging up in line with recent actual inflation, monetary policy is unlikely to be able to play an active supporting role, should the real economy falter. However, the low pound and the strong financial position of the corporate sector will support the continuing recovery. in our view, and thereby also support the cautiously positive fiscal outlook. Continued sovereign debt turmoil in the euro area would adversely affect the UK through Euro weakness and by dampening growth in the euro area — the UK’s major export market. The exposure of some large UK banks to sovereigns and banks in the periphery of the EA is also a source of concern. However, the crisis also contains some mild positives for the UK, as its relative stability attracts capital inflows, keeps yields on sovereign debt low, and raises the attractiveness of foreign direct investment.

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Just read this via the great Zerohedge which everyone must read but I have pasted the reports views on the UK outlook below:

It certainly appears benign for the UK. Maybe he is right. I just cant square it up with what I have seen so far though. The bulk of the cuts appear to be on areas where they cannot achieve the cuts. The huge cut to the justice budget isnt going to happen, they simply cannot let all the prisoners out and axe the judiciary and cut police numbers.

Then there are huge cuts to council budgets. This is a bit tricky again. There are fat cats at the top who can be pruned a bit, and I am sure that there is lots of other waste. But finding it and acting on it is a bit tricky, and may not allow you to obtain the results you want. Councils also have legal obligations to provide some services, like education. I am not sure what their legal obligation is to support older people, but with a growing elderly population costs are going to rise there as well.

And let us not forget that when you axe public sector jobs, you get a feeding frenzy of bloated payouts and puffed up pensions, which end up saving us nothing. Worse, instead of having someone nominally working on behalf of the public, they are claiming their public service pension after having retired early, costing more and delivering less.

Speaking of pensions, that off balance sheet bomb combination of PFI and Public sector pensions is going to start going off about now, as we have to repay with interest all the great stuff that Brown built for us, and the boomers retire. The demand for government cash is going to rise, not fall.

Lets hope Buiter is right, and that the government deficit will be brought back under control. Lots of people put charts up to show something, and for some reason we end up believing it is true because it is on a chart. The best example of this is the Hockey Stick chart that suckered us into that global warming nonsense. I fear that we have a chart here that may so similar damage, by leading us into complacency. I wonder what the effect on our deficit will be if we get some negative UK growth when as a result of the pending Eurozone collapses?

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  • 312 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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