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Tulett Prebon Report

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The final part of Dr Tim Morgan's report on the UK economy has been released.

Quite a read, he seems to be on the money.

Here's the press release;

STRATEGY INSIGHTS ISSUE SEVEN

AVOIDING ECONOMIC ARMAGEDDON

DRASTIC MEASURES FOR DESPERATE TIMES

Tuesday July 26, 2011: The Government needs to push through radical supply side measures in order to stimulate growth and avoid a looming debt disaster for the UK economy, says a new report from Dr Tim Morgan, Global Head of Research at Tullett Prebon.

The report, Thinking the unthinkable: the final report of Project Armageddon, says the UK is caught in a high-debt, low-growth trap. Britain‟s flat-lining, debt-addicted post-bubble economy cannot generate sufficient growth to sustain levels of debt which are far higher than is generally realised. As a result, the Government‟s plan to reduce public borrowing hinges on assumptions about growth that are much too optimistic.

“The British economy, as currently aligned, is incapable of delivering growth at anywhere near the levels required by the deficit reduction agenda,” says the report. The underlying problem is that, during the bubble which preceded the crash, the UK became dependent upon private borrowing and public spending. A swathe of industries, encompassing real estate, construction, finance, health, education and retailing, and responsible for 70% of economic output, have been rendered ex-growth by the slump in private borrowing and the ending of unaffordable expansion in public spending.

Dr Morgan argues that the ruling Coalition is right to argue that the fiscal deficit must be eliminated and the Labour opposition is correct that fiscal tightening will undermine growth. Whilst the fears of both sides are accurate, neither set of prescriptions will work.

“The widespread assumption that the right blend of macroeconomic policies alone can overcome Britain‟s economic and fiscal problems is fundamentally mistaken,” Dr Morgan says. “With all the macroeconomic options exhausted, the only way to restart growth is to implement supply-side reforms designed to free small and medium enterprises from the onerous burden of regulation that blights their expansion.”

“Businesses in the UK are crippled by government interference and by the excessive demands of the state machine,” Dr Morgan argues.

However, Dr Morgan warns that, while such reforms are imperative if a full-blown economic crisis is to be avoided, there will be strong opposition from vested interests and public opinion may be against the scale of reform required.

“An early objective for government should be to put an end to the state of national denial over the true condition of the economy and to undercut the delusory sense of individual and collective „entitlement‟ that was fostered in the Labour years,” Dr Morgan says.

The conclusions are based on Tullett Prebon‟s Project Armageddon analysis of the scale and nature of Britain‟s economic plight, and whether the Government or Opposition has the right strategy to fix it.

The analysis shows that although the UK public debt is reported at 60 per cent of Gross Domestic Product (GDP), that rises to 75 per cent of GDP if measured on the Maastricht criteria used by Eurozone problem economies including Greece, Ireland and Portugal. Adding in unfunded public sector pensions and public-private finance commitments would lift the deficit to a staggering £2.46 trillion, or 167 per cent of GDP. Trend growth, the report argues, may struggle to reach even half of the 2.9% rate on which current plans are predicated.

Full Report

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The final part of Dr Tim Morgan's report on the UK economy has been released.

Quite a read, he seems to be on the money.

Here's the press release;

STRATEGY INSIGHTS ISSUE SEVEN

AVOIDING ECONOMIC ARMAGEDDON

DRASTIC MEASURES FOR DESPERATE TIMES

<snip>

Full Report

Thanks. Very interesting reading. Eg:

There are many possible theatres for denouement, but let’s start with property. As it has been so often in the past, the state of the property market is likely to be something of a bellwether for the broader economy.

Though annual average house prices have declined by 17% since their 2007 peak, the ratio of prices to earnings remains at 4.5x, far higher than historic averages in the 3.2x-3.5x range (fig. 34). Property market participants are reporting extremely subdued levels of activity, and this combines with still-very-extended price multiples to suggest that further sharp falls may be imminent.

There are at least three further reasons to suppose that property prices may be heading for a very big fall. First, net mortgage lending has virtually dried up, declining from £113bn in 2006-07 to just £3bn in 2010-11 (fig. 35). Second, even the official forecasts concede that interest rates are likely to rise, which will further undercut affordability. Third, it is clear that real incomes are declining, which is another adverse indicator for property markets.

Given this combination of factors – minimal market activity, negligible net mortgage issuance, declining real incomes and the probability of rate rises – it seems highly implausible that the property price/earnings ratio can remain about 40% above its historic

trend. One of the characteristics of the unfolding downturn in the British economy, therefore, is likely to be a sharp fall in property prices.

If the mitigation measures described later are put into place, the restoration of normality in the property markets may take place over a relatively protracted period. But if the psychology of denial continues, property markets could be heading for a sharp fall, taking the price/income multiple down to its 3.2x-3.5% baseline over a period of less than twelve months. Downwards momentum could cause the fall in multiples to overshoot, involving a slump of at least 30% in average prices that would take the multiple down to about 3.0x.

Edit: Forgot to say, liar loans also get a mention: "Loanto-value (LTV) mortgage ratios climbed to – and even, in reckless cases, beyond – 100% of the purchase price, and banks’ acceptance of self-certified “liar-loans” made top-end earnings multiples essentially unknowable."

Edited by sarahleyburn

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The same Tulett Prebon who threatened to move to Switzerland if they had to pay higher taxes? Arguing for radical deregulation and lower taxes? :lol:

Hit them with even higher taxes until all these skimmers scammers and scummers have buggered off.

Tw*ts.

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I heard David Cameron on the Radio today, saying that the British people can pay off our Debts and Deficits, and low Interest Rates are an excellent thing.

An unrepentant David Cameron prepared consumers and the markets for publication on Tuesday of gruesome growth figures by admitting Britain's "path back to growth will be a difficult one", but insisting no shortcut lay in either a fiscal or monetary stimulus.

He added: "There is no country really that can afford another fiscal stimulus. They have all run out of money."

Over half of UK Homeowner's own outright. As savers, they would welcome a sharp rise in Interest Rates. [And a drop in house prices so their adult kids could buy property]

[My parents dont vote Labour because their house increased by 300% in a decade. They listen to me and my brothers who hate Labour because their house increased by 300%]

2-3 Million voters, by 2015, will be priced out of housing, and are having their money stolen, by the government, to pay to keep the banks assets or other peoples houses, massively overinflated.

Just who do the Tories think they are helping by keeping Interest Rates low?

[bankers, BTL'ers, and under 10% of UK owner occupiers, who would be facing negative equity after a 50% crash?]

F"rk this country, and its stinking government.

Edited by Milton

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I've been waiting for a while for this report to be published, and it is every bit as interesting as I thought it would be. I've only got as far as the Executive Summary, and already I can tell that the author(s) are on the money.

This is one paragraph that tells it as it is, and deserves a wider audience:

Labour’s period in office was characterised not just by economic and fiscal mismanagement but also by the promotion of a culture of moral absolutism centred around spurious and selective concepts of ‘fairness’. This culture, and the accompanying sense of individual and collective

entitlement, is the biggest obstacle in the way of effective economic reform.

I think that is possibly the most succinct summary of one of the biggest ways in which Labour have f*cked this country that I've ever read.

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I've been waiting for a while for this report to be published, and it is every bit as interesting as I thought it would be. I've only got as far as the Executive Summary, and already I can tell that the author(s) are on the money.

This is one paragraph that tells it as it is, and deserves a wider audience:

I think that is possibly the most succinct summary of one of the biggest ways in which Labour have f*cked this country that I've ever read.

Yes, its eloquence struck me too. Unfortunately Tulett Prebon were also similarly enamoured and decided to repeat it throughout the text :)

On the whole it's an exceptionally written report and I've got a lot of respect for whoever wrote it. I might even send it to my dad!

Sadly they also share the HPC consensus conclusion: No Way Out for Britain.

Edited by 50sQuiff

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Not this time. Largely because of

the tripartite system, this informal

restraint no longer functioned, and

banks began to extend loans on terms

that would have given managers of an

earlier generation apoplectic fits. Loanto-

value (LTV) mortgage ratios climbed

to – and even, in reckless cases, beyond

– 100% of the purchase price

So because the regulators were in disarray the banks ran wild and lent money to anything with a pulse- this being entirely the fault of said regulators.

I said the same thing to the judge only last week when he asked me why I robbed that bank- the police didn't stop me so it's really down to them :lol:

What's funny is that this report is full of complaints about people failing to accept responsibility for their actions, while at the same time is littered with attempts to totally evade the banks role in creating the crisis.

The author seems to overlook the fact that risk assessment is what banking is about- the regulators are there to enforce the regulations- not to ensure the bankers perform their most basic tasks in the evaluation of lending risk.

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  • 333 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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