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The Perils Of Excessive Economic Optimism

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http://blogs.ft.com/gavyndavies/2011/04/13/the-perils-of-excessive-economic-optimism/

I'll try it here (before it gets whipped off to some sub-forum before you can blink). One for the inflationistas I'd have thought..........

snippety

In the simulation, the resulting tightening in monetary policy leads to a very large drop in GDP growth rates from 2013-15. The scale of this setback depends on whether the period of excess GDP growth has by then caused an increase in inflation expectations and has therefore become entrenched in wage formation. If this occurs, China has to raise interest rates by 300 basis points relative to the baseline scenario, and this cuts real GDP growth by 5 per cent, 4 per cent and 3 per cent in successive years from 2013-15. In the US, the Fed has to raise rates by 200 basis points, and the hit to GDP growth is 3 per cent, 2 per cent and 1 per cent respectively. These are huge effects, which would have catastrophic consequences for financial asset prices.

So either we (they) get monetary tightening sooner or later. If it's later it'll be more painful (natch).

2013-15 really isn't so far off now either. Hope Osborne's got his thinking cap on............He'll be needing it.

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http://blogs.ft.com/gavyndavies/2011/04/13/the-perils-of-excessive-economic-optimism/

I'll try it here (before it gets whipped off to some sub-forum before you can blink). One for the inflationistas I'd have thought..........

snippety

So either we (they) get monetary tightening sooner or later. If it's later it'll be more painful (natch).

2013-15 really isn't so far off now either. Hope Osborne's got his thinking cap on............He'll be needing it.

Printy printy.

All the way. if there was any appetite for facing reality, it would have been done by now.

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Printy printy.

All the way. if there was any appetite for facing reality, it would have been done by now.

IMF appears to be suggesting an earlier tightening would be better than a dislocative late one.

Either way, 2013 onwards would also appear to be a rather nasty confluence of a number of financial outcomes (RB has posted on the German banks for instance).

I was rather hoping we (UK) would have offloaded the likes of Barclays, HSBC and RBS before all this happens, but there's no sign of any willingness to do that, from govt. at least. Osborne and Boris love the banks just as much as Gordon unfortunately.

Printy printy might (you'd say 100% would be) the 'solution' to whatever crash they/we get then. Unless rates have risen rather significantly between now and then we'd be looking at negative rates again I'd have thought, and more QE etc. But I suppose this also might trigger a nastier outcome between China and the West (and Australia!)

Anyway, there's perhaps a year or so to gets one's ducks in a row hopefully. This one might just be the 'biggie' before whatever world order comes after. Personally I'd want any 'capital' close to home, out of derivatives, in UK based banks safely within guarantee limits (or whatever else people think will protect them against serious global asset price falls and dislocative rate rises :rolleyes:) and so on and hope war is avoided and we stagger through to the other side.

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Hmmm ...

At the end he says "bigger danger in China than US because ..."

Seems implausible to me. Chinese government has been tightening, while the US pumps out ever more from its dire rear.

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IMF appears to be suggesting an earlier tightening would be better than a dislocative late one.

Either way, 2013 onwards would also appear to be a rather nasty confluence of a number of financial outcomes (RB has posted on the German banks for instance).

I was rather hoping we (UK) would have offloaded the likes of Barclays, HSBC and RBS before all this happens, but there's no sign of any willingness to do that, from govt. at least. Osborne and Boris love the banks just as much as Gordon unfortunately.

Printy printy might (you'd say 100% would be) the 'solution' to whatever crash they/we get then. Unless rates have risen rather significantly between now and then we'd be looking at negative rates again I'd have thought, and more QE etc. But I suppose this also might trigger a nastier outcome between China and the West (and Australia!)

Anyway, there's perhaps a year or so to gets one's ducks in a row hopefully. This one might just be the 'biggie' before whatever world order comes after. Personally I'd want any 'capital' close to home, out of derivatives, in UK based banks safely within guarantee limits (or whatever else people think will protect them against serious global asset price falls and dislocative rate rises :rolleyes:) and so on and hope war is avoided and we stagger through to the other side.

Not a bad plan.

Me?

I am volunteering at the sally army.

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Not a bad plan.

Me?

I am volunteering at the sally army.

Well, if you can't stand next to the printing press, you might as well stand next to the soup.

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Why do I feel that I am watching a car crash in slow motion.

Chin up, better than being IN a car crash in slow motion... (ie being indebted with a great big mortgage and dodgy job prospects) ;)

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Hmmm ...

At the end he says "bigger danger in China than US because ..."

Seems implausible to me. Chinese government has been tightening, while the US pumps out ever more from its dire rear.

64 million empty new build flats in China costing 300K on average. Deposit required is 50%. What is the average Chinese wage?

China is going to blow up. Question is, how much are the likes of HSBC, Barclays and Co involved in lending out there.

As RK says, it would be better for us if they were long gone from the UK.

I think the UK economy has seen this week the result of our fiscal tightening - sales down - and it has only just begun here.

Obama had every opportunity to do something different when he got in - he had the mandate for 'change'. He has fecked up. He gave Bernanke full control and Bernanke gave the US QE to the banks resulting in the DOW, Commodities, etc, soaring to bubble levels.

I can clearly recall Obama, within weeks of being inagurated, making a great speech about getting the US back to work by spending, Rosevelt style, massive amounts of money on US infrastructure - rail, roads, power companies, etc, etc. The plan was to create vast numbers of jobs whilst upgrading the US physically.

Virtually nothing has happened. As I say, Obama allowed Bernanke full control and his instinct, as a banker, appears to have been to cream it off for the banks and his banking chums.

Now, over 2 years later the money has been squandered, few jobs created and there are enormous bubbles all around. If the US stops buying the asset bubbles will crash, if they carry on printing then economic collapse happens just a bit later on.

I think Obama is going to go down as probably the most disasterous President in US history - even Nixon will rate higher.

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Well, if you can't stand next to the printing press, you might as well stand next to the soup.

:lol: That's very good.

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. btw, question for the economystics:-

If the output gap is currently being seriously over estimated by the FED, UK and misreported by China, then what are all our unemployed going to do for the rest of their lives?

What is 'the plan'?

What is the coalition's econonmystic vision?

Honestly, I seem to have missed it.

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. btw, question for the economystics:-

If the output gap is currently being seriously over estimated by the FED, UK and misreported by China, then what are all our unemployed going to do for the rest of their lives?

What is 'the plan'?

What is the coalition's econonmystic vision?

Honestly, I seem to have missed it.

"The market will provide."

"And then we'll steal it. Hurrah!"

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. btw, question for the economystics:-

If the output gap is currently being seriously over estimated by the FED, UK and misreported by China, then what are all our unemployed going to do for the rest of their lives?

What is 'the plan'?

What is the coalition's econonmystic vision?

Honestly, I seem to have missed it.

I think they have already been written off - and many more millions are in danger of being written off.

In a HPC sense, I think the idea of being mobile is increasingly important.

When I worked out in Silicon Vally in the dot.con boom I was amazed just how many of the people I worked with had moved to Silicon Valley from elsewhere. Most came not because of the boom, lavish salaries and lifestyle but out of economic necessity - if they oculd have found work in the other States that they had been born they would have, but they could not.

I met many people who had simply put everything they owned into a car and drove West to Silicon Valley to seek work.

There is nowhere else to go now. Well, there is India and China.

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Well, if you can't stand next to the printing press, you might as well stand next to the soup.

Exactly.

The more the printing presses are used, the higher the demand for soup kitchens in the future.

A collapse delayed is a collapse magnified.

PS : I avoided the "free lunch" temptation.

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...What is 'the plan'?

What is the coalition's econonmystic vision?

Honestly, I seem to have missed it.

Ah, eh, some kind of recovery where the economy is rebalanced for greater manufacturing and exports and after a few more years we'll eventually get that 5% pay rise we thought we were getting in 2008. Oh and then we can start flogging each other those crappy over priced houses again... No no please poke me to wake up, this is a bad dream and the recovery will never be coming, so just get used to this slow grind downward in to lower living standards, which is about the best scenario on offer from here.

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. btw, question for the economystics:-

If the output gap is currently being seriously over estimated by the FED, UK and misreported by China, then what are all our unemployed going to do for the rest of their lives?

What is 'the plan'?

What is the coalition's econonmystic vision?

Honestly, I seem to have missed it.

When you are completely fooked, it is very hard to develop a plan as the path is already set no matter what you do.

Perhaps they are slowly coming to the realisation that we are completely fooked?

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When you are completely fooked, it is very hard to develop a plan as the path is already set no matter what you do.

Perhaps they are slowly coming to the realisation that we are completely fooked?

And praying fervently that "we" doesn't include them, I would imagine.

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And praying fervently that "we" doesn't include them, I would imagine.

Quite. I vaguely recall Saint Vince recommending our youth pootle off to India to compete with them for work at some point. From the comfort of his Westminster taxpayer funded job, with ministerial salary and pension accruals.

I admit I didn't realise that was the coalition's policy on dealing with our existing high levels of unemployment and if this IMF report is even partly correct virtually non-existent output gap.

I suspect previous posters have hit the nail squarely on the head - the plan is there really isn't one, but bag as much of the spoils as possible along the way. It sort of feeds into this 'meme' about 'happiness vs GDP growth' and 'volunteering' and so on.

Surely there must be something more inspiring that this though eh? After all, we choose to trade with Asia and the BRICS - it's not axiomatic. We choose (to some extent) our terms of trade. We have a sovereign right to implement whatever policies we wish do we not? Or have we now gone so far down this road we're too scared to consider any alternative future? 'Cause that's how it's beginning to look........

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And praying fervently that "we" doesn't include them, I would imagine.

Those who will have net worth left over after disposing of all of their leveraged assets at a price of zero and repaying all of their debts are going to be fine.

Those who don't are going to be destroyed by the time that this is finally over.

Based on their behaviour, I would expect that many if not most MPs fall into the latter category.

It is not the meek who shall inherit the earth : it is the prudent even though they have had to endure at least 20 years of looking and possibly feeling a little silly.

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I suspect previous posters have hit the nail squarely on the head - the plan is there really isn't one, but bag as much of the spoils as possible along the way. It sort of feeds into this 'meme' about 'happiness vs GDP growth' and 'volunteering' and so on.

Or have we now gone so far down this road we're too scared to consider any alternative future? 'Cause that's how it's beginning to look........

Yes, our politicians of all politicial parties appear to believe that there is no allternative. Making our own stuff and buying our own made stuff appears to be beyond their comprehension.

The UK suffers now from a very weak political 'class' and a very poor media to pull them up on stuff.

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Quite. I vaguely recall Saint Vince recommending our youth pootle off to India to compete with them for work at some point. From the comfort of his Westminster taxpayer funded job, with ministerial salary and pension accruals.

I admit I didn't realise that was the coalition's policy on dealing with our existing high levels of unemployment and if this IMF report is even partly correct virtually non-existent output gap.

I suspect previous posters have hit the nail squarely on the head - the plan is there really isn't one, but bag as much of the spoils as possible along the way. It sort of feeds into this 'meme' about 'happiness vs GDP growth' and 'volunteering' and so on.

Surely there must be something more inspiring that this though eh? After all, we choose to trade with Asia and the BRICS - it's not axiomatic. We choose (to some extent) our terms of trade. We have a sovereign right to implement whatever policies we wish do we not? Or have we now gone so far down this road we're too scared to consider any alternative future? 'Cause that's how it's beginning to look........

The die is already cast.

The notion that we somehow deserve a certain standard of living because of the good fortune that we enjoyed based on the country in which the sperm met the egg has been dispelled.

I struggle with the concept that the benefits of being the "lucky sperm" only applies to parents and not geography.

Edited for completeness

Edited by LuckyOne

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Those who will have net worth left over after disposing of all of their leveraged assets at a price of zero and repaying all of their debts are going to be fine.

Those who don't are going to be destroyed by the time that this is finally over.

Based on their behaviour, I would expect that many if not most MPs fall into the latter category.

It is not the meek who shall inherit the earth : it is the prudent even though they have had to endure at least 20 years of looking and possibly feeling a little silly.

im sensing a bit of negativity on here today, how are the site hosts ever meant to overtake Facebook for hits when potential new members want to slit their wrists after reading 3 threads. Cheer up, youve got a big wedding in a week or so and and a national holiday, think of the less fortunate around the world who will be working

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im sensing a bit of negativity on here today, how are the site hosts ever meant to overtake Facebook for hits when potential new members want to slit their wrists after reading 3 threads. Cheer up, youve got a big wedding in a week or so and and a national holiday, think of the less fortunate around the world who will be working

I shall be working. On principle.

Pah, bread and circuses! (Only with less bread). Well, it doesn't wash with this member of the plebs.

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  • 276 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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