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Snugglybear

Are The Uk Growth Pessimists Right?

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http://www.guardian.co.uk/business/2013/may/05/uk-growth-pessimists-economy

Headline: Are the UK growth pessimists right?

Sub-headline: Past five years appear to be a dress rehearsal for future: smaller economy, falling living standards, austerity and fed up voters

Mostly plugging new book by Stephen King (chief economist at HSBC) 'When the Money Runs Out'.

The crux of his article (as I see it):

"..In Britain, we have a set of economic assumptions: that the economy will expand by 2% or so a year; that rising house prices will provide owner-occupiers with a nest egg; that the nation is wealthy enough to spend more on the steadily increasing cost of health, education, pensions and care for its elderly citizens.

There would need to be a radical scaling back of expectations in the event that the trend rate of growth is no longer 2 to 2.5% a year but 1%. Some of the promises we have made ourselves about the future would look extravagant, even reckless. There would be hard choices to be made between higher taxes and pared-back provision of public services. There would be a struggle to secure the fruits of what little growth there was, which those with the sharpest elbows would win. Many people would be in the position of seeing their living standards drop year after year, and would be mightily unhappy as a result."

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http://www.guardian.co.uk/business/2013/may/05/uk-growth-pessimists-economy

Headline: Are the UK growth pessimists right?

Sub-headline: Past five years appear to be a dress rehearsal for future: smaller economy, falling living standards, austerity and fed up voters

Mostly plugging new book by Stephen King (chief economist at HSBC) 'When the Money Runs Out'.

The crux of his article (as I see it):

"..In Britain, we have a set of economic assumptions: that the economy will expand by 2% or so a year; that rising house prices will provide owner-occupiers with a nest egg; that the nation is wealthy enough to spend more on the steadily increasing cost of health, education, pensions and care for its elderly citizens.

There would need to be a radical scaling back of expectations in the event that the trend rate of growth is no longer 2 to 2.5% a year but 1%. Some of the promises we have made ourselves about the future would look extravagant, even reckless. There would be hard choices to be made between higher taxes and pared-back provision of public services. There would be a struggle to secure the fruits of what little growth there was, which those with the sharpest elbows would win. Many people would be in the position of seeing their living standards drop year after year, and would be mightily unhappy as a result."

Astonishing. Has anyone told him living standards have already been dropping for years? There's no "would" about it- it's happening now. The only reason that reality has not impinged further is due to money printing. There is precious little candid talk about how the £120Bn hole in the public finances is going to be filled, and what the ramifications of that are for public services and/or taxation.

Edited by cheeznbreed

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Yes, 120bn is a lot of money,

I would also question the real value of the GDP calc, it is massively optimistic, but the real world is what counts.

That could also be said about inflation figures.

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They're not nearly pessimistic enough. Absent the trillions being produced by the world's central banks the UK economy would be contracting continuously. And now the inflationary consequences of this are beginning to wreak a terrible cost on emerging market economies. The sense of crisis in China, for instance.

http://www.telegraph.co.uk/finance/china-business/10039976/Policy-battle-rages-in-China-as-slowdown-feeds-sense-of-crisis.html

China's Caixin Magazine reports that there is a growing "sense of crisis" not felt since the depths of the global banking crash in 2008-2009.

The State-owned Assets Supervision and Administration Commission (SASAC) has assembled a team to "protect economic growth" and pressure state companies to boost jobs at all costs.

SASAC is the bastion of vested interests and controller of 115 state behemoths with assets above $6 trillion and lock on much of the economy.

The move comes amid further signs that growth is faltering across all fronts. HSBC's gauge of Chinese services fell three points to 51.1 in April, the lowest in almost two years.

The broader composite index also dropped sharply to a six-month low of 51.1 and is now barely above the contraction line, with new orders trailing badly. The economy grew 7.7pc in the first quarter, slower than expected.

The Shanghai index of stocks rolled over in early March and has given up the half the gains since the rally started late last year. It has dropped almost 60pc since its peak in 2008 and is now trading at levels comparable to 2003.

China's downturn is rippling through commodity markets, led by a major sell-off of base metals this year. Credit Suisse said the short-covering rally over the last few days is likely to prove a "dead cat bounce" as China's structural slow-down and a weakening global economy overwhelm all else. It expects copper to "bite the dust", falling to 2009 levels near $6,000 a tonne.

China's authorities have been trying to stop property speculation with loan curbs but it is proving hard to pop the housing boom without popping the economy itself.

...

Pressure is building for yet another burst of easy credit, even though the "economic efficiency" of debt is collapsing. The output gained from each extra yuan of credit has fallen from a ratio of 0.8 to 0.35 since 2008, a warning sign that the cycle has played out.

Fitch downgraded China's debt in April, warning that credit has already jumped from 125pc to 200pc of GDP in four years, much of it in shadow banking. While another burst of loans may boost growth in the short run, it risks storing up ever greater problems.

President Xi Jinping has yet to tip his hand in what amounts to a civil war over policy and China's economic destiny. Experts say he tilts back and forth between the reformist and dirigiste wings of the party. The Standing Committee appears evenly split.

The International Monetary Fund warned last week that China is in danger of becoming "old before it is rich" as the demographic crisis hits. The work-force has already begun to shrink, contracting by 3.5m last year.

The IMF said China and other emerging economies in Asia must embrace the rule of law, sound institutions, credit reform, and "limited government involvement in the economy", or risk falling into the middle income trap.

Edited by zugzwang

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  • 242 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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