The Pound Must Fall Further If Britain Is To Have A Lasting Recovery

[The Masked Tulip]

I think Carney is his man to do that.

http://www.telegraph.co.uk/finance/comment/rogerbootle/10123660/The-pound-must-fall-further-if-Britain-is-to-have-a-lasting-recovery.html

[thecrashingisles]

I think Carney is his man to do that.

Even Krugman thinks Canada is heading for a massive bust - http://krugman.blogs.nytimes.com/2013/06/15/worthwhile-canadian-comparison/

[Executive Sadman]

Even Krugman thinks Canada is heading for a massive bust - http://krugman.blogs.nytimes.com/2013/06/15/worthwhile-canadian-comparison/

The conscience of a liberal

That is one hell of an ego!

[SuperChimp]

What a terrible article, truly appalling.

[gf3]

What a terrible article, truly appalling.

I am a bit of a fan of Roger Bootle.

It was his prediction of falling interest rates back in 2007 that convinced me to take out a life time tracker at 0.17% above base rate.

The Guy has saved me a lot of money.

He also said that interest rates would stay low for five years when others said interest rates would shoot back up.

Why do you think the article is appalling?

and forget about what I have written above I do have an open mind.

[RufflesTheGuineaPig]

Can it wait until after my next holiday?

[@contradevian]

What a terrible article, truly appalling.

Most significantly for the case against further sterling weakness, since that recent sterling drop,

Cable has substantially retraced most of this years earlier fall.

[@contradevian]

Why do you think the article is appalling?

and forget about what I have written above I do have an open mind.

Amongst other things its dreadfully written.

However he seems to be calling for an "unbalanced recovery" based on HPI and trashing the currency, which should lead to a "balanced one" cos its different now.

[SuperChimp]

Why do you think the article is appalling?

Ok, my reply might be quite long. It is a shame actually because very few finance articles in the MSM have discussed the fall in the value of Sterling since the end of the Breton Woods era and the effect this has had on house prices. Money has poured into property in the UK in my opinion to avoid the loss of its purchasing power. Any discussion of a recovery has to talk about WHY Sterling has lost its value, WHAT this has done to the economy and HOW can we reform the banking system/monetary system to correct this.

The main problem with the article is the quality of the writing, it is difficult to tell if he is in support of the suggestions he proposes at the start of the article or against them.

Firstly he makes statements with no reference to sources which always annoys me. I know it is just an opinion piece but I always want to see facts and figures. Take this:

After all, companies are sitting on extensive piles of cash.

How does he know this? Where are his figures to suggest this is the case? It is central to his argument as the opening premise is:

There has been a widespread consensus that the UK needs a more balanced economy. In the short-term that requires a recovery unbalanced towards net exports and corporate investment

Yet he provides no quotes from business sources or links to other articles.

Second we have this:

So what will lead the recovery? The answer is consumer spending...How can consumers increase spending when their real incomes are still falling? One way is if employment is increasing, which has been happening.

One does not lead to the other. A person can enter employment but be no better off financially than they were unemployed. We also have the demon of Working Tax Credits, a system of supporting poor pay that is unsustainable. Rising employment rates in the UK mask a rise in people working beyond retirement to support their income, an increase in part-time work and people registering as self-employed to avoid having to claim state benefits. He does not address any of this.

Thirdly:

Another way is through a decline in the savings ratio.. If consumers start to save a bit less they will be able to increase their spending by more than the increase in real income would justify. An increase in house prices would reinforce this trend. As prices rose, so housing equity would pick up and housing transactions might rise too.

What is that last sentence? Utter twaddle. How would an increase in house prices improve the economy? If he said "debt fuels economic growth and a rise in house prices increases debt" that is fine. But that is not what he is saying. He seems to be suggesting that if house prices rise more house sales will occur but provides no evidence of this.

He then suggests that a fall in the value of the pound is needed:

Although they embraced sterling depreciation in 2007-8, the British policy establishment has never quite gone the full monty.

The value of Sterling has continued to fall since then and yet our exports have barley risen and the trade deficit is as wide as ever and he concedes in his next quote:

since that recent sterling drop, the performance of net trade has been disappointing and there is a danger that a further sharp fall could be counter-productive.

His article provides no important facts or figures nor any proper critique of UK government policy. Above all it suggest that we should invest more in manufacturing and trying to compete with countries like China, Taiwan and Brazil on a manufacturing level which is absurd.

Hope this helps.

[gf3]

Amongst other things its dreadfully written.

However he seems to be calling for an "unbalanced recovery" based on HPI and trashing the currency, which should lead to a "balanced one" cos its different now.

OK I don't think HPI is a good thing. In fact I think positive yields are a poison. It is like the grains of rice on a chess board doubling every square. It looks OK until you reach the 30th or 40th square then it all falls apart.

Everything the government does is to create new debt to try and create enough money to service the old debt.

For a balanced economy we need savers to spend to cover the debt.

[SuperChimp]

Everything the government does is to create new debt to try and create enough money to service the old debt.

For a balanced economy we need savers to spend to cover the debt.

In my opinion, there should be no debt. Or if there is debt, then no interest.

In the past the government (royal family) took on debt as money was physical, it was gold and silver. That is no longer the case. We have electronic money and the government should not have any debt. It should create as much money as it needs, and use this to provide public services. It then demands of its citizens that taxes are paid with the money it has created.

[zugzwang]

I am a bit of a fan of Roger Bootle.

It was his prediction of falling interest rates back in 2007 that convinced me to take out a life time tracker at 0.17% above base rate.

The Guy has saved me a lot of money.

He also said that interest rates would stay low for five years when others said interest rates would shoot back up.

Why do you think the article is appalling?

and forget about what I have written above I do have an open mind.

Good for you, he clearly got that one right. Generally speaking, however, he's been neither smart or lucky.

In his report, Mr Bootle says "Because of the emergence of low inflation, the change in the policy regime, and the dramatic change in the tax treatment of home ownership, the era of boom and bust in the housing market may now be over."

02 Aug, 2000

[gf3]

In my opinion, there should be no debt. Or if there is debt, then no interest.

In the past the government (royal family) took on debt as money was physical, it was gold and silver. That is no longer the case. We have electronic money and the government should not have any debt. It should create as much money as it needs, and use this to provide public services. It then demands of its citizens that taxes are paid with the money it has created.

Yes agree with that.

Into too short an answer to your previous post I think corporates do hold a lot of money. Some one has to hold the other side of the balance sheet of this massive debt.

And thank you for answering my post I will read it again tomorrow.

[thecrashingisles]

Good for you, he clearly got that one right. Generally speaking, however, he's been neither smart or lucky.

In his report, Mr Bootle says "Because of the emergence of low inflation, the change in the policy regime, and the dramatic change in the tax treatment of home ownership, the era of boom and bust in the housing market may now be over."

02 Aug, 2000

He may have said that in 2000 but he was calling the housing bubble around 2003/2004. His book Money For Nothing from 2003 was vehement in denouncing HPI.

[The Masked Tulip]

He may have said that in 2000 but he was calling the housing bubble around 2003/2004. His book Money For Nothing from 2003 was vehement in denouncing HPI.

Yes, I am one of the people who bought that book and a big part of why I did not buy

[gf3]

Yes, I am one of the people who bought that book and a big part of why I did not buy

I bought my house in 2001 I thought that houses were over valued by 10% but I was willing to take the loss because I needed a house.

[billybong]

The first sentence says it all.

Recovery is in the air.

What does he mean by "recovery", he doesn't say except to imply later in the article that recovery actually isn't "in the air" or anywhere else for that matter.

The article is twaddle.

Edited June 16, 2013 by billybong

[R K]

Good for you, he clearly got that one right. Generally speaking, however, he's been neither smart or lucky.

In his report, Mr Bootle says "Because of the emergence of low inflation, the change in the policy regime, and the dramatic change in the tax treatment of home ownership, the era of boom and bust in the housing market may now be over."

02 Aug, 2000

A very reasonable statement in 2000.

China entered the WTO in September 2001 as you know, kick starting the 'global savings glut' and the derivatives bubble didn't really start for another couple of years, leading to the housing bubble (in real terms, not nominal) in the US (and elsewhere) from 2003-7.

So he was spot on. He was correct about inflation targetting, but clearly overoptimistic concerning what turned out to be a thoroughly useless FSA.

[Bloo Loo]

A very reasonable statement in 2000.

China entered the WTO in September 2001 as you know, kick starting the 'global savings glut' and the derivatives bubble didn't really start for another couple of years, leading to the housing bubble (in real terms, not nominal) in the US (and elsewhere) from 2003-7.

So he was spot on. He was correct about inflation targetting, but clearly overoptimistic concerning what turned out to be a thoroughly useless FSA.

The "wall of money" in 2002 was from the MBS/CDO scams that finally began to collapse in 2007.

the savings gluts were recirculating funds from off balance sheet "vehicles" ( the word even implies the movement of cash in to cash out)

Of course, in 2002, no-one outside the game even knew what was going on....so they said...

[Venger]

Amongst other things its dreadfully written.

However he seems to be calling for an "unbalanced recovery" based on HPI and trashing the currency, which should lead to a "balanced one" cos its different now.

His writing wins prizes. I wonder if it's now invested in housing or dollars.

The free-market think tank said it would award its Brexit Prize to whoever came up with the best blueprint for the UK after the EU, covering the country's withdrawal and post-exit repositioning. The winning entry will be awarded 100,000 euros (£86,525).

Entrants, who can be individuals or corporate bodies, are invited to submit a 2,000-word outline proposal by 16 September. The authors of about 20 of those entries will be given four months to produce a more detailed version.

Another judge is economist Roger Bootle, founder of Capital Economics, who won last year's £250,000 Wolfson Economics prize awarded for the best plan for dealing with member states leaving the eurozone.

http://www.bbc.co.uk...siness-23322122

Edited July 16, 2013 by Venger

[campervanman]

Nothing new here.UK economic policy for the past 5 years has been based upon trashing the currency, maintaining HPI and impoverishing the UK population by stealth via inflation. It's easier than rebalancing the economy and eventually people accept it as normal.

[easy2012]

Nothing new here.UK economic policy for the past 5 years has been based upon trashing the currency, maintaining HPI and impoverishing the UK population by stealth via inflation. It's easier than rebalancing the economy and eventually people accept it as normal.

The question is why.. Is this what the 51% of the electorate wants ?

[campervanman]

The question is why.. Is this what the 51% of the electorate wants ?

Why? Because they can and because enough people can be conned into believing that it is good for them. Under the UK democratic system what 51% want is irrelevant, it's what enough people want that counts and that is usually around 40%.

[Bloo Loo]

savers sitting on cash piles is bad for the economy?

How can capital form if firms and people cant build it up?.

And for most savers, these funds are in banks...where the funds can be used to invest wisely in production........NOT

Malinvestments in housing is a major issue in the UK decline.

[The Knimbies who say No]

savers sitting on cash piles is bad for the economy?

How can capital form if firms and people cant build it up?.

And for most savers, these funds are in banks...where the funds can be used to invest wisely in production........NOT

Malinvestments in housing is a major issue in the UK decline.

Yes, I heard this line about how good a declining pound is at pricing the UK back into world markets, but a £24Bn housing benefit bill, a good fraction of which is paid to people in work, suggests that we are pricing ourselves below our bottom line, as defined by the scandalously high cost of housing in the UK.