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The Torygraph Goes All Chinese

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From the Torygraph

http://www.telegraph.co.uk/finance/financialcrisis/8679671/Whatever-George-Osborne-believes-Britain-will-spend-years-in-the-doldrums.html

"..it may be necessary to move quickly towards applying some of the policy tools used in command economies such as China..."

"Namby pambying around with market incentives simply isn’t working."

Golly gosh!

Whatever George Osborne believes, Britain will spend years in the doldrums

Plunging bond yields do not signify a recovering economy, but quite the opposite.

The Government’s cost of borrowing, as measured by the yield on 10-year gilts, hit a new post-war low this week, even as the rates of interest charged to Italy and Spain rose to their highest levels since the launch of the euro.

George Osborne, the Chancellor, was not around to witness this apparently triumphant moment in Britain’s supposed return to fiscal respectability. He’s holidaying in the US. But his team here were quick to claim the credit: it’s because of the resolute way in which the Government has gripped the deficit, a spokesman crowed. Investors were expressing confidence in the country as a “safe haven” for their money.

This is right, up to a point. Pre-emptive action on the deficit has removed the default risk we have seen ruinously applied to bond yields in the eurozone periphery. Yet there is also an altogether less comforting conclusion to draw from these almost unbelievably low interest rates.

It is that, for the third time since the financial crisis began – nearly four years ago to the day – investors are beginning to price in a depression, or at the very least a Japanese-style hiatus in growth lasting years into the future, if not decades. The reverse image of improving bond yields is a plunging stock market. Bond yields are falling not as a mark of confidence in the economy, but because markets believe that the economy is likely to remain so weak that it will be years before the Bank of England is able to raise interest rates again.

This, regrettably, is not just a British phenomenon. To a greater or lesser extent, these same fears of a “double-dip” afflict all advanced economies. Temporary resolution of the American debt crisis has failed to stop the rot. Normally, things settle in August as bankers and policy-makers retire to their sun loungers. This time around, financial markets are refusing to observe the conventions of the long summer break.

It is ever more apparent that a global economic slowdown, the scale of which was almost wholly unanticipated by the experts, is well in train. A strong, cyclical recovery was meant to be in place by now, but outside the developing economies of Asia and Latin America, it’s not happening. “Animal spirits” are not reviving as they are supposed to. More radical solutions, such as those routinely applied in the command economy of China, may be called for.

With the immediate risk of US default removed, there was some expectation that activity would pick up a bit, as pent-up demand held back by the uncertainty of the debt talks was unleashed on the economy.

Yet no sooner is one fire extinguished than another breaks out. The debt crisis has come hurtling back to the eurozone, where only a week ago policy-makers were loudly proclaiming the problem largely solved.

Predictably, Europe has blamed the wrecking ball of London and New York hedge funds, but even if it was possible to pin the latest bout of selling pressure on this relatively small group of financiers (which it isn’t), they only reflect underlying realities.

Repeated rounds of externally imposed austerity in Italy and Spain have further undermined prospects for growth, which in turn has worsened the outlook for correcting the crisis in the public finances. Slowing global growth makes it tougher still to overcome the eurozone’s debt woes. The wonder is that Italian bond yields are still as low as they are. Italy’s public debt dynamics are looking ever more perilous.

The eurozone has entered an upside down, Through the Looking-Glass type of world in which Italy and Spain are being forced to borrow at 6 per cent to lend to the existing bailout recipients of Greece, Ireland and Portugal at 3.5 per cent. It’s mad.

To rescue countries such as Italy and Spain, the size of the European bailout fund would have to be raised to 3-4 trillion euros, which would be a degree of shared fiscal responsibility quite unacceptable to the national parliaments of the single currency’s more solvent members. There’s no help coming from that quarter.

All this makes for a challenging backdrop to the Government’s attempts to deal with its own fiscal difficulties. Sometimes, it’s hard to figure out which is worse for us – mass default in Europe or the present European policy prescription of ever deeper austerity. Both look equally bad.

It would be nice to think, as the Government plainly does, that gilt yields at historic lows are a sign that, however bad things are, they are better here than most other places. If only this were true. In fact, abnormally low bond yields are one of the key indicators of a prolonged period of impaired demand. When households won’t spend and businesses won’t invest, the consequent accumulation of surplus savings tends to flow into the only place it can – government debt. An economy without demand will quite quickly become deflationary. Yields fall accordingly.

The reason that it’s different for the peripheral economies of the eurozone, which are already in a deflationary environment, is because public debt in these countries is on an unsustainable trajectory, making eventual default all but inevitable. There’s a high risk that debt holders won’t get their money back.

The Coalition’s deficit reduction strategy has all but eliminated that risk for Britain. But things could still go wrong. Such was the degree of overspending during the boom that it may permanently have damaged our economy’s ability to recover and grow. The longer that low growth persists, the more difficult it becomes to eradicate the structural deficit and the bigger the public debt mountain becomes. It’s not what the Treasury wants to hear, but the feeble growth rate of 0.2 per cent reported for the second quarter may be about the best Britain can look forward to for the next several years. We are in that “deleveraging” phase of correction that follows all serious banking crises. The Government cannot rely on a “normal”, cyclical recovery.

Is there anything Mr Osborne can do to lift us out of this funk? Labour’s calls for further deficit spending can be quickly dismissed as delusional. The risks are much greater than any benefits. Any suggestion that Britain was about to go slow on fiscal consolidation would cause the pound to plummet, forcing both short- and long-term interest rates to rise. The effect on household spending would be calamitous, far outweighing the marginal boost that consumption would receive from Labour’s suggested cut in VAT. Low bond yields do not provide the green light for more fiscal stimulus.

What almost everyone does agree on, however, is that, to thrive anew, the UK economy must structurally rebalance, away from undue reliance on consumption and towards exports and investment.

To date, public policy has, by keeping monetary conditions ultra-accommodative, focused almost entirely on preventing further damage to consumption. If the Government is serious about rebalancing, it must be bolder in its measures to boost investment. Tax incentives can be helpful, but they are not enough.

With normal market economics apparently incapable of providing answers, it may be necessary to move quickly towards applying some of the policy tools used in command economies such as China – cheap loans, land and energy for publicly determined business and infrastructure investment. Namby pambying around with market incentives simply isn’t working.

If there is to be another bout of quantitative easing, as now seems likely, some way of ensuring that it is applied to cheap business lending rather than disappearing into the pockets of bankers must be found. Extreme circumstances call for extreme solutions

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But....but...the free market!

Oh I forgot we left that behind when the bankers became neo-socialists (again).

PS. Printy?

Printy's an idea with hidden merits - if we can print to an extent that the face value of coins becomes less than their metal content, the BoE can start producing infinite numbers of 10p coins at 10p and selling them to scrap merchants at 20p to melt down, thus making a profit for the government without actually causing any further monetary expansion.

Problem solved!

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With normal market economics apparently incapable of providing answers

When was the last time normal market economics was applied to anything?

(The housing market for example?)

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When was the last time normal market economics was applied to anything?

(The housing market for example?)

Indeed, the real problem is that there is too much money backed by debt. This has inflated prices, making it hard to start a business, and additionally with so much debt interest around people are hardly spending.

The trick is to wipe out the bond holders who essentially don't deserve the "money" they have any way. Money is meant to be as means of exchange for the real economy, not something for bankers to wave around in la la land financial transactions.

It time to shut down the entire banking sector, arrest all senior and ex senior bank employees and seize all their assets.

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So:

government backed business

government appropriated/supplied land

government subsidised energy

government funded infrastructure

Or in other words - socialism..? That 'bankrupt ideology' (copyright all right-wing newspapers 1989 to 2008)?

The article refers to a topsy-turvy situation. It certainly is when you have a piece like this in the Telegraph!

Amazing how, now the credit tap's turned off, no-one's really got a clue what to do.

Debt is wealth!

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With normal market economics apparently incapable of providing answers, it may be necessary to move quickly towards applying some of the policy tools used in command economies such as China – cheap loans, land and energy for publicly determined business and infrastructure investment. Namby pambying around with market incentives simply isn’t working.

That just sounds like more of the same old stuff along the lines that's already been tried and applied in the UK for quite a few years now.

Edited by billybong

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From the Torygraph

http://www.telegraph.co.uk/finance/financialcrisis/8679671/Whatever-George-Osborne-believes-Britain-will-spend-years-in-the-doldrums.html

"..it may be necessary to move quickly towards applying some of the policy tools used in command economies such as China..."

"Namby pambying around with market incentives simply isn’t working."

Golly gosh!

Because too many people are stealing?

Government through too high taxes and a HMRC that is providing worse and worse services

Bankers who get preferential borrowing rates of 0.5% ish

Gold plated civil servant pensions

Too high privately imposed taxes through private rental collections

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So:

government backed business

government appropriated/supplied land

government subsidised energy

government funded infrastructure

Or in other words - socialism..? That 'bankrupt ideology' (copyright all right-wing newspapers 1989 to 2008)?

The article refers to a topsy-turvy situation. It certainly is when you have a piece like this in the Telegraph!

Amazing how, now the credit tap's turned off, no-one's really got a clue what to do.

Debt is wealth!

Shut down the criminal banks (pretty much all of them).

Pump money into mutually (state) backed lenders to lend for infrastructure development.

Borrow at sub 3% to create millions of social houses, for instance.

Thatcher/Raygun combo has spectacularly failed. All we are left with is the criminal oligopolies and government capture.

Obviously, there needs to be some form of redistibution from these rich corporates and oligarchs too, and I'd put up at least some controls to mitigate global capital flows which is where the problem arises in the first place.

This is pretty simple, straightforward stuff - once you get the corporates out of govt. (Blair/Dave/Osborne etc)

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thats rich coming from a newspaper that thrives on maddy and di stories. didnt know how many millions were in a billion and constantly lies to the public.

china has the ability to take what ever it wants. what are we ?

a paper tiger. corrupted and with more human rights violations than the chinese to critisise them.

i hate this country.

its not just the banks, media and politcians.

the public are equally as corrupted.

no one said anything when house prices were rising 300%

now their bleating cos they have to repay that, one way or another.

big society Fµckoff !!

eton society. population of brain dead morons.

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TBH command style economies and governments have certain advantages. I.e. you can put through the unpopular but necessary stuff without caring about the voters.

Right now we need massive massive cuts to the public sector payroll. But the government can't as its looking out for the votes.

We need a crash in the economy but the government won't do this either due to looking out for votes.

Hell make me total overlord of the UK and I guarantee to turn the country around in 4 years... a lot of people will die though and house prices will be very very low.

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TBH command style economies and governments have certain advantages. I.e. you can put through the unpopular but necessary stuff without caring about the voters.

Right now we need massive massive cuts to the public sector payroll. But the government can't as its looking out for the votes.

We need a crash in the economy but the government won't do this either due to looking out for votes.

Hell make me total overlord of the UK and I guarantee to turn the country around in 4 years... a lot of people will die though and house prices will be very very low.

they can fool the dumb uk public but they cant fool international money markets.

its time to face the music. one way or another.

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TBH command style economies and governments have certain advantages. I.e. you can put through the unpopular but necessary stuff without caring about the voters.

Right now we need massive massive cuts to the public sector payroll. But the government can't as its looking out for the votes.

We need a crash in the economy but the government won't do this either due to looking out for votes.

Hell make me total overlord of the UK and I guarantee to turn the country around in 4 years... a lot of people will die though and house prices will be very very low.

I think allowing "a lot of people" to die, is perhaps a shade extreme, even for those desperately seeking very low house prices..

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There could be a run on the banks if the share prices keep falling and confidence in them evaporates as you say.

where have you been for the last 4 years. there was a run on the banks, only the government printed IOUs for the generation below.

and it looks like they are going to repay that 8.4 trillion pounds with 'media studies'

good luck with that !!!

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I mean another.... have you seen Lloyds latest share price trajectory? A renewal of the financial crisis that never really went away.

I'd hate to be a major shareholder in that company, looks like a terrible investment..

*DOH*

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Indeed-someone who can make the trains run on time, that sort of thing. :ph34r:

Has to happen one way or another, in fact it will happen one way or another.

I.e. we have an orderly transition to a fascist government (what is happening now) which does lots of unpopular things. Which has a critical weakness in that post next election everything it does will be reversed.

Or we have a total collaspe whereby we go Zimbabwe, and end up with fifedoms and warlord states for a bit.

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Has to happen one way or another, in fact it will happen one way or another.

I.e. we have an orderly transition to a fascist government (what is happening now) which does lots of unpopular things. Which has a critical weakness in that post next election everything it does will be reversed.

Or we have a total collaspe whereby we go Zimbabwe, and end up with fifedoms and warlord states for a bit.

Like, where people play shrill, squeaky flutes all the time? That would be hell.

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  • 343 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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