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Dave Beans

"shockingly Bad"

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We're buggered...oh well...

The experts' views

http://www.independent.co.uk/news/business/news/mervyn-king-i-see-trouble-ahead-2194534.html

"Dire" David Buik, BGC Partners

"Shockingly bad" John Hawksworth, chief economist at PwC

"Astonishingly poor" John Philpott, chief economic adviser at the Chartered Institute of Personnel and Development

"Staggeringly weak" Stuart Green, chief UK economist, HSBC

"Stunningly bad" Howard Archer, chief economist, Global Insight

"Exceptionally bad" Douglas McWilliams, Centre for Economics and Business Research

"Bolt from the blue" Andrew Goodwin, senior economic adviser to the Ernst & Young ITEM Club

"A terrible reading" Alan Clarke, UK economist, BNP Paribas

A year of economic growth and faltering recovery ground to a halt as the economy shrank during the last three months of 2010, according to official data released yesterday.

The news was greeted as "shocking", "dire" and "terrible" by economists, particularly as it comes at a time when inflation is set to accelerate, threatening a return to the "stagflation" of the 1970s.

In a speech in Newcastle, the Governor of the Bank of England, Mervyn King, gave warning that inflation would rise to "uncomfortably high" levels this year – peaking at "between 4 per cent and 5 per cent" before "falling back" next year. Mr King also said that unless there was pay restraint, interest rates would quickly be raised.

The Office for National Statistics (ONS) said that most of the 0.5 per cent fall in output recorded between October and December was down to the extreme weather in the final weeks of the year – but that still implies an otherwise "flattish" economy unable to grow, and is way below expectations of continuing, albeit modest, growth.

The figures, described by the Chancellor George Osborne as "disappointing", raise fears of a "double-dip" recession which would be bad news for jobs, the public finances and the housing market. The news also sent sterling and the stock market tumbling yesterday.

Mr Osborne was, however, quick to reject any notion of a U-turn in economic policy. "These are obviously disappointing numbers, but the ONS has made it very clear that the fall in GDP was driven by the terrible weather in December," he said. "There is no question of changing a fiscal plan that has established international credibility on the back of one very cold month. That would plunge Britain back into a financial crisis. We will not be blown off course by bad weather," he added.

Ed Miliband, the Labour leader, said the growth figures were "worrying". "George Osborne is using the British Rail excuse: the wrong type of weather," said Mr Miliband. "Even without that, the economy would be flat. What worries me is that these figures relate to the period before the vast majority of the spending cuts and before the VAT rise. The Government thinks the answer is to reduce the deficit and everything will be fine. The problem is that it has made decisions that are not about growth but inhibit growth." However, he stopped short of predicting a double-dip recession.

Ed Balls, making his debut as shadow Chancellor, added: "Now we are seeing the first signs of what the Conservative-led Government's decisions are having on the economy. Cuts which go too far and too fast will damage our economy. And shrinking growth and rising unemployment is not only bad news for families, but will actually make it more difficult to get the deficit down."

The implication that inflation will not return to its 2 per cent target until well into 2012 will disturb the City. Such inflationary trends are much higher than the Bank has forecast and will lead to mounting pressure on the Bank's Monetary Policy Committee (MPC) to raise interest rates. Mr King said that the nation faced a "squeeze in living standards". In a speech that suggested no early rise in rates and mortgage bills, Mr King stressed how much of the current inflation has been caused by the increase in VAT and booming global commodity prices.

He would not, he said, be influenced by adverse headlines about inflation, but cautioned that inflationary pay rises would be met with swift action.

"Further rises in world commodity prices and energy prices cannot be ruled out, and attempts to resist their implications for real take-home pay by pushing up wages would require a response by the MPC," Mr King said.

Nonetheless, analysts said an early base-rate rise was unlikely. Chris Redfern, a senior dealer at Moneycorp, commented: "The markets certainly shivered as the UK took its first step back towards a double-dip recession. It is possible this dip will remain a one-off occurrence. However, the figure will impact on the likelihood of a rate hike, and it is unlikely that the Bank of England will raise interest rates now before the third quarter of the year."

Edited by Dave Beans

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Guest sillybear2

Are these people seriously surprised? We've lived through the biggest financial shit storm in human history, and the biggest subsequent robbery, our creditors have been made whole (their world was "saved") and this can only be paid for by lower growth, higher debt and the high inflation rate that goes with a steadily debased currency. QE and deficit spending (still going strong) was simply a way of bailing out the financial sector and pushing the pain down the line, but those losses are still in the system, the price has to be paid eventually, with interest on top, the only question is how they dilute the poison and the affects of that.

The bankers and sycophants seem to advocate handing over more public assets to private capital, I guess they're on a buying spree after all those QE injections, and rent seeking from the tax payer is virtually risk free.

The City economists are living in their little bubble still, it's still party time over there, I'm not surprised they're so blinkered.

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Very bad news. The rest of the world is really starting to grow again, after the pain in 2008 and 2009. You can see it in corporate earnings releases, the numbers are going up again.

Even the US which has taken a lot of pain is growing fairly nicely now. The main complaint there is the millions and millions who are now left out in the cold with unemployment.

If Britain had not de-industrialized we would be feeling the upswing led by the developing world. As France and Germany are rising as all these developing nations pile on orders for industrial equipment. Compare how Peugeot-Citroen and Renault are pursuing opportunities as car ownership expands in the developing world. To MG which is now a brand name owned by Shangai Automotive Industry Corporation.

Probably some city banker made a few hundred million in the sale of MG's assets.

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He would not, he said, be influenced by adverse headlines about inflation, but cautioned that inflationary pay rises would be met with swift action.

"Further rises in world commodity prices and energy prices cannot be ruled out, and attempts to resist their implications for real take-home pay by pushing up wages would require a response by the MPC," Mr King said.

Translation, working people must get poorer. If they don't, we will act to make sure they do.

I'm not saying that wage inflation doesn't need to be controlled but suggest that if the above translation was widely reported, the man on the street would be err 'out on the streets', especially if interest rates rise significantly.

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Guest sillybear2

He would not, he said, be influenced by adverse headlines about inflation, but cautioned that inflationary pay rises would be met with swift action.

"Further rises in world commodity prices and energy prices cannot be ruled out, and attempts to resist their implications for real take-home pay by pushing up wages would require a response by the MPC," Mr King said.

Translation, working people must get poorer. If they don't, we will act to make sure they do.

I'm not saying that wage inflation doesn't need to be controlled but suggest that if the above translation was widely reported, the man on the street would be err 'out on the streets', especially if interest rates rise significantly.

The BoE is run by bankers for bankers, in nearly all businesses labour is by far the single biggest cost, so they are simply doing their job by protecting capital holders. In reality they have never targeted consumer price inflation, it's a ruse as their measures excludes so many essentials, for example do you know many people who can voluntarily decide whether they pay council tax? Well, maybe John Prescott. The BoE conveniently ignored the biggest credit bubble in their history, so I think we know where they're at.

Remember that "inflation is always and everywhere a monetary phenomenon", so higher wage settlements aren't the initial cause of inflation, they are the product of excess credit in the system, in time every 'commodity' in the system balances to this new level, and the cost of labour is no different from the cost of oil in that respect. By trying to jawbone the second round effects out of existence the MPC are trying to have their cake and eat it, and it never works, not least because their state sponsored brethren in the financial services industry will soon be making off like bandits come bonus time (hey, it's a crooked system, they've "earnt" it), the rest of the country are being asked to stand back and watch whilst that lot jolly it up and puke all over our feet.

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The experts' views

http://www.independe...ad-2194534.html

"Dire" David Buik, BGC Partners

"Shockingly bad" John Hawksworth, chief economist at PwC

"Astonishingly poor" John Philpott, chief economic adviser at the Chartered Institute of Personnel and Development

"Staggeringly weak" Stuart Green, chief UK economist, HSBC

"Stunningly bad" Howard Archer, chief economist, Global Insight

"Exceptionally bad" Douglas McWilliams, Centre for Economics and Business Research

"Bolt from the blue" Andrew Goodwin, senior economic adviser to the Ernst & Young ITEM Club

"A terrible reading" Alan Clarke, UK economist, BNP Paribas

"Painfully poo."

"Superbly shit."

"Totally turd." Reck B, HPC forum user. (mental age 6)

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Guest sillybear2

I think Merv has forgot his remit, they are meant to target consumer price inflation, his excuse for ignoring the bubble on the way up was that they were hitting their narrow target, now they're making every excuse for ignoring it when things aren't going their way, they've been way off for some years now, as have their fanciful predictions.

What this amounts to is a de facto incomes policy for the lower and average paid, as with the 70's any such policy is doomed to failure of course, but this has the added sting of having absolutely no constraint on the settlements at the top end, which is just a recipe for resentment and strife. Their only hope is that the unions will remain completely ineffectual. I worry for the BoE too, they don't have the democratic credibility for carrying out an outsourced fiscal or incomes policy.

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To me his speech last night was a bit of a Ratners moment, but what I don't understand is why people aren't turning the spotlight on Merv himself and asking about what belt-tightening he's going through.

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King should be fired immediately.

I think Cameron, Clegg, Osbourne and Cable will regret not firing King immediately in light of King's speech last night.

All King has done is rub the noses of the people in it last night.

He has basically admitted that his economic policies have failed and continue to fail.

He has basically admitted that all he has done is make life incredibly harder for hard-working people and small businesses whilst allowing the banksters to give themselves huge bonuses yet again.

I am not surprised by the angry reaction I am hearing online this morning, on the radio and in the work-place to what King said.

I think it will be a very naive politician who does not realise the growing anger in the UK over King's policies.

King has basically stuck 2 fingers up to the electorate IMPO - but what does he care I guess as he, unlike Cameron and Clegg, is not dependent upon being voted into office by the people.

Even worse, although King's policies have now clearly failed he seems intent on trying the same thing again. If at first you mess up then keep on making the same mistake appears to be his mantra?

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King should be fired immediately.

I think Cameron, Clegg, Osbourne and Cable will regret not firing King immediately in light of King's speech last night.

All King has done is rub the noses of the people in it last night.

He has basically admitted that his economic policies have failed and continue to fail.

He has basically admitted that all he has done is make life incredibly harder for hard-working people and small businesses whilst allowing the banksters to give themselves huge bonuses yet again.

I am not surprised by the angry reaction I am hearing online this morning, on the radio and in the work-place to what King said.

I think it will be a very naive politician who does not realise the growing anger in the UK over King's policies.

King has basically stuck 2 fingers up to the electorate IMPO - but what does he care I guess as he, unlike Cameron and Clegg, is not dependent upon being voted into office by the people.

Even worse, although King's policies have now clearly failed he seems intent on trying the same thing again. If at first you mess up then keep on making the same mistake appears to be his mantra?

Why have his policies failed?

They have not done what he promised, but they have done what he wanted.

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Guest sillybear2

Why have his policies failed?

They have not done what he promised, but they have done what he wanted.

Agreed, King has done everything asked of him, which is great provided you're the sort who is running one of the commercial cartel banks. Now we're starting to find out how everyone else fits into this puzzle.

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They have not done what he promised, but they have done what he wanted.

Yes, I agree.

I was talking about what is in the best interests of the country and the people and not in the best interests of his bankster chums.

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King has basically stuck 2 fingers up to the electorate IMPO - but what does he care I guess as he, unlike Cameron and Clegg, is not dependent upon being voted into office by the people.

Another way of looking at it is that King has just planted the blame on the politicians since they were the ones that gave the orders to bail out the banks.

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Guest sillybear2

Another way of looking at it is that King has just planted the blame on the politicians since they were the ones that gave the orders to bail out the banks.

The man in the street won't see it like that though, they think the era of bailouts has come and gone, once they connect the dots and realise the past two years were simply one giant bridging loan and the pain is finally arriving they won't be pleased. When it hits people in the pocket and the effects of debasement are made real it will produce a different reaction, especially so if the one's who did the special pleading are back to business as usual.

It's one thing to say "this will hurt", it's quite another when I finally wallop you in the face :)

Edited by sillybear2

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The man in the street won't see it like that though, they think the era of bailouts has come and gone, once they connect the dots and realise the past two years were simply one giant bridging loan and the pain is finally arriving they won't be pleased. When it hits people in the pocket and the effects of debasement are made real it will produce a different reaction, especially so if the one's who did the special pleading are back to business as usual.

I think the key decisions were political rather than BoE. I don't think much of the public will be calling for higher interest rates to strengthen the pound.

The BoE never really had any power, they just followed Libor and then did what they were told with the printed bailout.

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  • 309 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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