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Bbc News: Imf Details Risks To Uk Economic Growth

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BBC News: IMF details risks to UK economic growth

2 August 2011 Last updated at 11:03

The International Monetary Fund says there are still "significant" risks to inflation, growth and unemployment in the UK.

In its latest assessment of the UK, the IMF said growth would be 1.5% this year - less than the government expects.

It backed the current austerity measures as "appropriate" to the present economic conditions.

However, it warned the government may need to react to new economic problems such as falling house prices.

The Office of Budget Responsibility had forecast 1.7% growth for 2011.

In its most likely "central scenario", the international financial regulator and lender predicted inflation would fall from 5% in 2011 to 2% by the end of 2012, while growth would accelerate to 2.5%.

Contagion fear

But the IMF warned that there was "substantial" uncertainty about this scenario.

The impact of spending cuts, higher prices for commodities such as oil, economic "turmoil" in the eurozone and falling house prices could throw the economy off course.

The report warned that the ratio of house prices compared to average earnings was still 30% above its historical average - meaning prices could fall, so limiting consumer spending. :blink::blink: :angry:

It also estimated that the UK banking system had $178bn (£111bn) worth of loans to the three most troubled eurozone economies, Greece, the Irish Republic and Portugal - 25% of the total capital held by UK banks in the first quarter of 2011.

Continuing uncertainty about the ability of these countries to pay their debts therefore poses significant risks to the UK financial system.

If these risks materialised and growth stalled, then "significant loosening of macroeconomic policies" would be required, it said.

This could include tax cuts to boost spending.

The IMF also suggested the Bank of England might need to return to quantitative easing - the process of increasing the amount of credit available in the economy.

However, should growth be better than expected, the IMF suggested that the Bank of England may have to increase interest rates to control inflation. <_<

The report supported measures to limit the risk of collapse in the UK's banking and financial system, but said risks remained.

It also called for improvements in financial reporting, where it said the UK remained less advanced than other developed economies.

Well if there was ever any doubt that the UK economy is solely based on perpetually rising house prices...

No mention of the UK manufacturing sector contracting. No, that's not the problem; it's rising commodity prices (oil) and, er, falling commodity prices (housing).

Printy printy it is then. Unbelievable.

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http://www.housepricecrash.co.uk/forum/index.php?showtopic=167320

It seems with have QE on threads as well.

That's growth I'll have you know.

Edit: No mention of house prices in that Reuters link or your discussion thread. No duplication found.

Edited by GordonBrownSpentMyFuture

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"The report warned that the ratio of house prices compared to average earnings was still 30% above its historical average - meaning prices could fall, so limiting consumer spending."

I thought it was just worth reiterating this backward-ass logic that seeks to justify the support for high house prices in the UK.

Double-speak alive and well on the BBC. I really do despair.

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BBC News: IMF details risks to UK economic growth

2 August 2011 Last updated at 11:03

Well if there was ever any doubt that the UK economy is solely based on perpetually rising house prices...

No mention of the UK manufacturing sector contracting. No, that's not the problem; it's rising commodity prices (oil) and, er, falling commodity prices (housing).

Printy printy it is then. Unbelievable.

It's incredible isn't it?

That the whole economic system here depends on the cost of shelter rising to keep it going.

No inventing stuff, no taking tangible things, putting them together and making a product that other people see enough benefits in for them to buy from you, no....

Wealth and prosperity in the UK is acheived by borrowing ever increasing amounts of invented money against your home. FFS! The 'finest' minds in world economics, those who have probably reached the pinnacle of their careers in economics at the International Monetary Fund define falling house prices not as the inevitable result of a credit boom and much needed return to normality, but as a an economic problem.

I know this site has a main focus and it's pretty much like preaching to the converted, but ****** me, I despair. God forbid something so totally crucial in life like a house becomes affordable !

Nope, I call it upon those in charge to break the rules I must live by and create trillions of pounds out of thin air - I don't care if this devalues the very same pounds - I HAVE TO FÚCKING WELL WORK HOURS AND HOURS FOR ! I will take it for the team, bend me over and rape again, sans lube this time..

GRRRRRRRR

aaaaaand relax....

30% ??? and the fúcking rest

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"The report warned that the ratio of house prices compared to average earnings was still 30% above its historical average - meaning prices could fall, so limiting consumer spending."

I thought it was just worth reiterating this backward-ass logic that seeks to justify the support for high house prices in the UK.

Double-speak alive and well on the BBC. I really do despair.

Have just made an official complaint (below). Watch this space (but don't hold your breath):

This article states that: 'The report warned that the ratio of house prices compared with average earnings was still 30% above its historical average - meaning prices could fall, so limiting consumer spending.' I find this statement somewhat baffling since if house prices fall, people would be spending less of their income on servicing mortgage debt or rent and therefore have MORE not less disposable income.

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Have just made an official complaint (below). Watch this space (but don't hold your breath):

This article states that: 'The report warned that the ratio of house prices compared with average earnings was still 30% above its historical average - meaning prices could fall, so limiting consumer spending.' I find this statement somewhat baffling since if house prices fall, people would be spending less of their income on servicing mortgage debt or rent and therefore have MORE not less disposable income.

Good on you for trying. I can just imagine the scene in the BBC News editorial office as they try to comprehend your simple and straightforward assertion.

http://www.youtube.com/watch?v=HY-03vYYAjA

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Have just made an official complaint (below). Watch this space (but don't hold your breath):

This article states that: 'The report warned that the ratio of house prices compared with average earnings was still 30% above its historical average - meaning prices could fall, so limiting consumer spending.' I find this statement somewhat baffling since if house prices fall, people would be spending less of their income on servicing mortgage debt or rent and therefore have MORE not less disposable income.

im sorry, but using earned money from yesterday is so 1990, today, you need yesterdays earnings to pay your debts, and spend your MEW with tommorrows earnings.

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It's incredible isn't it?

That the whole economic system here depends on the cost of shelter rising to keep it going.

No inventing stuff, no taking tangible things, putting them together and making a product that other people see enough benefits in for them to buy from you, no....

Wealth and prosperity in the UK is acheived by borrowing ever increasing amounts of invented money against your home. FFS! The 'finest' minds in world economics, those who have probably reached the pinnacle of their careers in economics at the International Monetary Fund define falling house prices not as the inevitable result of a credit boom and much needed return to normality, but as a an economic problem.

I think I might start selling tulips.

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"The report warned that the ratio of house prices compared to average earnings was still 30% above its historical average - meaning prices could fall, so limiting consumer spending."

I thought it was just worth reiterating this backward-ass logic that seeks to justify the support for high house prices in the UK.

Double-speak alive and well on the BBC. I really do despair.

+1. You and I are on the same page (liked your stance before on telling your kids (or future kids) about the greed of us lot and how we've shafted everybody for a quick buck - and how not to think twice when walking over some greedy @sshole and only to look out for yourself).

Yep, completely backward logic. Massive VI fighting to keep a basic need out of the reach of the many, bankrupting us. Absolute greed. Double speak. Just unbelievable reading, really. I fully expect lots more QE. Anything to keep house price debt down, scr@w everybody else.

I don't want to live here much longer, subsidising pensions and homes I'll never be able to get, benefits I'll never be able to get - it's a JOKE and these stories strengthen my resolve to get out. As said in another thread, it's Euro travel next year and I'll be scoping out places in Austria & Germany where I can work. I urge you to do the same:

http://en.wikipedia.org/wiki/World%27s_most_livable_cities

Falling prices are the SOLUTION damn it! This is absolute MUTINY and it will never change. Get out while you can.

Edited by guitarman001

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Have just made an official complaint (below). Watch this space (but don't hold your breath):

This article states that: 'The report warned that the ratio of house prices compared with average earnings was still 30% above its historical average - meaning prices could fall, so limiting consumer spending.' I find this statement somewhat baffling since if house prices fall, people would be spending less of their income on servicing mortgage debt or rent and therefore have MORE not less disposable income.

Was the bit about consumer spending IN the IMF report or dreamt up by the BBC? If dreamt up then I too shall complain. Link?

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Was the bit about consumer spending IN the IMF report or dreamt up by the BBC? If dreamt up then I too shall complain. Link?

Seems to be only a Beeb take on the data.

From another source:

http://www.myfinance...-the-uk-economy

The IMF warned that UK house pressures were in danger of falling further because the ratio between average earnings and the cost of property was still skewed and that house prices are still 30 per cent above their historical average.

(I think they mean 'prices' not 'pressure' though)

BBC Complaints:

https://www.bbc.co.uk/complaints/forms

You need to check that you are complaining re a BBC News Online article

EDIT TO ADD:

Perhaps it's not so clear cut. This link seems to be halfway between:

http://www.financene...nomic-position/

According to the report, the ratio of house prices to average income is 30% above the historical average. If prices fall, consumer spending will be limited, as disposable income and overall household "wealth" will also fall.

Edited by rantnrave

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Was the bit about consumer spending IN the IMF report or dreamt up by the BBC? If dreamt up then I too shall complain. Link?

Yep. It's a pretty punishing 76 pages of modern economic double-speak but here are some quotes:

This slowdown partly reflects intensifying fiscal consolidation—most notably with a

2½ percentage-point VAT hike on January 1, 2011—and weak consumer

confidence in the wake of spiking import prices and a soft housing market.

Private consumption

7. Private consumption has remained weak as households have faced a marked

tightening in real disposable income. Nominal wage growth has remained sluggish over the

past year given low productivity growth and continued slack in the labor market. Higher

commodity prices and indirect taxes have further reduced households’ real incomes. These

factors, along with a weak housing market, pushed consumer confidence in early 2011 down

to levels last seen during the depths of the crisis, though it has rebounded somewhat in recent

months (Figure 1).

8. House prices are likely to weigh on consumption going forward. During the boom,

rising house prices helped boost consumption and cut the household saving rate to only

2 percent (Figure 3). Although these trends sharply reversed during the crisis, housing

valuation ratios are still about 30 percent above their historical averages. Some softness in

house prices thus seems likely going forward. But unlike the US or Spain, new home

construction in the UK remained relatively muted during the boom due to the UK’s tight

planning restrictions (Figure 4). As a result, supply constraints are likely to prevent house

prices from fully falling back to their historical averages. In addition, if real interest rates

remain below their historical average—as expected by markets even in the medium term

(Section IV.B)—then housing valuation metrics are also unlikely to revert fully to their

historical averages. On balance, staff’s central scenario assumes a reduction in the house

price-to-income ratio of 12 percent over the medium term (though house prices still rise

slightly in nominal terms). Indeed, house prices have already started retreating again in

recent quarters. An econometric analysis of the UK’s saving rate suggests that upward

pressure on the saving rate from subdued house prices should be offset by the fiscal

consolidation, which should depress private saving, resulting in a broadly flat household

saving rate over the medium term (Box 1 and companion Selected Issues paper).

Another key risk is that house prices may differ from central scenario

assumptions, with large effects on residential investment and consumption (via wealth

effects). These risks exist in both directions and reflect uncertainty regarding both the path of

real interest rates and the degree to which price rises over the last decade reflect structural

versus cyclical factors.

In particular, growth remains vulnerable to a steep drop in house prices

(as discussed earlier), which in turn are highly sensitive to short-term interest rates—

variable-rate mortgages account for 70 percent of the market. With household debt levels still

elevated by historical standards (see companion Selected Issues paper), rapid interest rate

hikes could also cut directly into households’ disposable income (and therefore

consumption), though this effect would be partially mitigated by households’ higher interest

income.

However, the pace of recovery will be moderate, as headwinds from fiscal

consolidation, a soft housing market, and the ongoing process of household and bank balance

sheet repair continue to weigh on growth.

In the central scenario, the pace at which monetary stimulus is withdrawn should be measured, given the extended period of

fiscal contraction and the high sensitivity of house prices (and hence consumption and

residential investment) to short-term interest rates.

Q

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BINGO!

Dear Mr Rave,

Thank you for your interest in our website. I think the reference was to

the phenomenon known as "equity withdrawal" -- that is, people borrowing

against the value of their house in order to spend on consumer goods. A

lot of people did this during the housing boom and it undoubtedly had an

effect on growth -- but if people's houses fall in value, their scope

for doing so in future is limited. Since none of this was explained in

the story, however, the line is somewhat ambiguous. I will amend it.

Regards

Robert Plummer

BBC News website

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The article now says:

The impact of spending cuts, higher prices for commodities such as oil, economic "turmoil" in the eurozone and falling house prices could throw the economy off course.

The report warned that the ratio of house prices compared with average earnings was still 30% above its historical average, meaning prices could fall.

Edited by rantnrave

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Wow. Top marks to beeb for ammending it. After everyone has read ut of course, but i suppose it is a step in the rught direction. In fairness the imf report pretty much does say that lower house prices results in less disposable income.

Which means 1 of 2 things....

1. I have no understanding whatsoever of economics or maths

Or

2. This world is corrupt beyond repair and we are all totallly f***ed

Or

7. Three of the above

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BINGO!

A result. Well done! Am I right in thinking this is the second time you've corrected a bit of BBC bias? Another relating to incorrect %s between asking prices and selling prices? I think a campaign of "Correcting the BBC" might be necessary. We can't stop their TV/Radio reporting bias but we clearly can in "print".

Higher prices means things cost more, people cannot get as much for their money and so buy less. Lower prices without exception (gas, electricity, food, petrol, HOUSING) all lead to lower costs, greater disposable income and a potential improvement in consumer spending. What our economy needs is lower house prices. Lower house prices means smaller mortgages, smaller monthly mortgage repayments (and rents) and more money to spend on OTHER THINGS. Things that people are employed to make, things that are sold and things that are used to make or service other things that people make, sell and use. That is how an economy works - or at least how it should and indeed used to.

The only ones to benefit from higher house prices are the ones extending the debt to purchase them and we all know who they are.

It really is that simple and it didn't require 76 pages of economic double-speak bullsh!t to do it.

Are we really the only ones who can see this???

Edited by GordonBrownSpentMyFuture

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A result. Well done! Am I right in thinking this is the second time you've corrected a bit of BBC bias? Another relating to incorrect %s between asking prices and selling prices?

Not quite. I pointed out that one day they barely mentioned a fall on the comprehensive Land Reg (which showed prices down 10% YoY in Manchester) but the next day gave the much less detailed and unchanged Nationwide a Breaking News spot and high profile on their business page. They never wrote back to me about that one (although I requested it). In the days after, they did start making a lot more reference to that Land Reg report and rightly so IMO.

Someone else pointed out that at 20% ish, their estimates of the difference between asking prices and sold prices they mentioned in another article was in fact 40% plus. They amended that pronto becuase it was a glaring mathematical error from data they were already showing.

Looking at the article here, it was amended at 16.30 - which was less than 15 mins after I sent my complaint!

It is worth taking these guys on. Their VI might yet turn out to be nothing but sheer ignorance.

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  • 334 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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