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Is The Long Depression Over?

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The numbers jump around a bit - we've been in a slump, then out of it, then in a double dip, then not in a double dip after all, and now in a "boomlet" - so are out of the woods?

I keep thinking there's another piece of footwear to fall. Interest rates have to go up sometime. QE has to be either reversed, or the money allowed to feed into higher inflation. What about the fact that this boomlet is largely mortgage-credit based, and there is little business investment? Will further news from the eurozone change things? What about continuing austerity?

I can't quite believe that in a few months we've gone from looking at a triple drip to a boom - all on the back of Help to Buy. Are we through the worst, or is the best (HPC) yet to come?

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The numbers jump around a bit - we've been in a slump, then out of it, then in a double dip, then not in a double dip after all, and now in a "boomlet" - so are out of the woods?

I keep thinking there's another piece of footwear to fall. Interest rates have to go up sometime. QE has to be either reversed, or the money allowed to feed into higher inflation. What about the fact that this boomlet is largely mortgage-credit based, and there is little business investment? Will further news from the eurozone change things? What about continuing austerity?

I can't quite believe that in a few months we've gone from looking at a triple drip to a boom - all on the back of Help to Buy. Are we through the worst, or is the best (HPC) yet to come?

The QE money was supposed to flow into the real economy. What the PHD's at the BOE did not realise is that the system is rigged so that all the money flows to the 1%. Unless the system is modified they will not be able to get the money to flow to the bottom.

So, no the economy is not fixed. You are experiencing a small bounce caused by PPI refunds and people attempting to front run an non existent property boom that is supposed to manifest next year.

Ask your self, where is the money coming from for the next boom? Who is going to take on more credit? How could they make credit more affordable.

To me it looks like the stock market is in a classic setup, just waiting for Goldman et al to pull the plug and buy in again.

There is at least another decade (if we are lucky) for all the malinvestment to purge from the system. If the economy was really picking up they would announce an end to the money printing and interest rates would be raised a little, say 1%.

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Those jobs that have gone from the real economy are not coming back - the service and consumption sectors are spinning on printing money and more debt - this time primarily govt debt. The new round of job losses will come from the already dwindled manufacturing sector and increasingly fromthe financial sector as it catches up withthe level of automation and faces increased competition from emerging markets where they are going to try and diversify and broaden their jobs and income heist from the west. Far from anything being over the structural malinvestment and high costs that have plagued many businesses have been reinforced and made worse.

Automated manufacturing allowed skills to be virtualized - embedded in the machinery that did the job inviduals used to do. That virtualization made shifting those jobs to another location, anywhere in the world almost trivial compared to starting the skills base necesary to do so from scratch. Much the same process is happening on the web - the software itself is becoming virtualized - it doesn't sell as a packaged product on the local store shelf or with the computer but is hosted in the cheapest/most reliable location overseen by the cheapest/most reliable labour (for the price point that the service is intended). When this hits the service/fiannce sector much the same will happen, the virtualization of the concepts, procedures, operational activities, paperwork are virtualized new entrants can very quickly be up and running with the same infrastructure that took decades of experience before. The faster costs rise in locations like London the faster this transition will happen.

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Most definitely not. Not yet anyway. The main thing that has to happen is some re-balancing, some reduction in inequality.

This chart I saw just yesterday provides a very good example of the depression we are in. And just like the 1930's, sometimes people will desperately call an end to it...but that wouldn't happen by some measures until after the end of the second world war when soldiers returned home and spent their savings from government/war provided wages. I don't know what the catalyst will be for this one but we may even be dead before it happens, peacefully or violently.

We could gear up for the full levels of wartime production and technology investment without actually having a war..

You have to wonder what we'd achieve..

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Ask your self, where is the money coming from for the next boom? Who is going to take on more credit? How could they make credit more affordable.

+1

With wage rises very weak less than 1% PA at present with forecasts of weak increases to come were is the money for new debt to come from when we are already up to the neck in debt,

As you say there are people who are reacting to the hype that is being banded about at the moment and causing the effect of a unsustainable boom.

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We could gear up for the full levels of wartime production and technology investment without actually having a war..

You have to wonder what we'd achieve..

I don't want to produce any more, my girlfriend and I already work too much. I want to keep a larger share of the value that I produce so that we can afford to work less and have more of a life as a household.

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When you're borrowing 5~10% of GDP to achieve growth of 1~2%, then basically things are getting worse. I know the economics isn't quite that simplistic, but I suspect in our current situation, you can probably say that all that borrowing since (at least) 2007 has been totally wasted, and we are about 50% worse of than at the time of the last crash, and meanwhile various speculative bubbles in land, property other asset classes have been created to suck wealth out of the real economy.

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How can there be an actual recovery when interest rates are still at their 300 year emergency low... this is a talked up blip due to a temporary return to borrowing by fktards. France downgraded only yesterday, ecb reducing rates the day before. Not exactly healthy is it.

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'boomlet' - like it! that's my word of the day sorted. :)

Nothing makes any sense to me any more, I'm becoming very weary of hyperbole on one hand that never seems to come to anything, and complete indifference to what would've been siesmic events only a few years ago. Probably that's what they want I suppose.

For example Cyprus, meltdown a few months ago, unthinkable theft from savers whilst letting those in know off the hook, and now completely 'fixed'. Greece, one week it's chaos bankruptcy death spiral, next weeks it's all fixed again, nothing to see here massive growth confidently expected next year etc etc. all complete ****** cut n pasted by unquestioning moron propaganderists in our so called media - pathetic. This week ECB lower interest rates to an inconcievable 0.25% AND France downgraded by one of the biggest ratings agencies again (they didn't even bother to wait for after trading hours on Friday eve FFS!) and yet barely a ripple? no doom and gloom stories and surprisingly little gloating - makes me wonder why not, are we next in line for some of the same treatment?

I'm starting to get a bit more nervous for my STR fund again lately, Cyprus set a very worrying precedent, and illistrated how quickly and completely phwucked you could be if it goes tit's up - assets effectively frozen and confiscated with NOTHING you could do about it. Trouble is everything just seems so risky and overpriced, makes me more inclined to just say sod it and get a cheap mortgage and just join the homey borg ponzi and be done with it. - Probably that's what they want I suppose :( :angry:

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I can't quite believe that in a few months we've gone from looking at a triple drip to a boom - all on the back of Help to Buy. Are we through the worst, or is the best (HPC) yet to come?

I guess the theory is that it primes the economy.

When things have been screwed like they have - a lot of capex has not happened which could have happened.

Warehouses run low inventories, IT departments use servers for a year or two longer than they should, estate managers don't replace chairs unless they are unusable, people drive their cars in to the ground etc.

Once positive sentiment returns a lot of that latent investment can be unlocked - yes on credit in many cases - but this demand moves down the food chain. A rising tide lifts all boats.

However, it does appear quite common for the government to miscalculate and over do it. It's entirely possible historians will say 'if only they had raised interest rates 0.25% in Nov 2013 this could have all been avoided'.

It's hard to put where we are in to context. Two reference points I use are:

- Early 90s when I would walk through the city and see everything boarded up and everyone I knew was skint

- Late 90s when you had to join a 6 month waiting list to get a BMW and even then you needed to know someone in the dealership

Feels like we're closer to the former than the latter right now.

Edited by slacker

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I get a magazine called People Mangement as part of my membership of the CIPD, every couple of months you see some stupid comment about "the green shoots of recovery"

Sometimes I feel that the people who come out with this crap need the reality shook into them!

Edited by Hectors House

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The financial system which underpins the economy is fundamentally flawed asm far as the UK and probably Europe go.

It depends on people borrowing ever increasing quantities of credit, whilst not really rewarding or encouraging truly value added resource efficient activities.

The US may be able to get away with it because of its size, military know how and natural resources.

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I get a magazine called People Mangement as part of my membership of the CIPD, every couple of months you see some stupid comment about "the green shoots of recovery"

Sometimes I feel that the people who come out with this crap need the reality shook into them!

A touch over 2 months until the fifth anniversary of Baroness Vadera's use of the phrase:

http://news.bbc.co.uk/1/hi/business/7828549.stm

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Warehouses run low inventories, IT departments use servers for a year or two longer than they should, estate managers don't replace chairs unless they are unusable, people drive their cars in to the ground etc.

Efficiency? Not just throwing things out for the sake of it?

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Efficiency? Not just throwing things out for the sake of it?

That is what I thought.....seems a sensible way to run a household/business.....waste not want not.....having said that, there are many who do very nicely indeed from the product of others waste, they would find things tough going with less wasteful spending.....but who funds the wasteful? all of us indirectly. ;)

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No, it's not over and won't be over for several years. Which is why interest rates will stay at rock bottom levels for a long time yet.

Pay down debt while rates low......then when rates rise the hit won't be so hard. ;)

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Very good. Hope you don't mind but I borrowed that.

Certainly not, plug away. The more people see crap spouted by politicos the better. Vadera is a pretty unique individual in terms of her general reported odiousness, she moved to Brown's inner circle after a finance career (UBS iirc), and was rewarded with a seat in the Lords and Govt. job for being a (reportedly) extremely volatile bidder of McRuin's will.

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The numbers jump around a bit - we've been in a slump, then out of it, then in a double dip, then not in a double dip after all, and now in a "boomlet" - so are out of the woods?

I keep thinking there's another piece of footwear to fall. Interest rates have to go up sometime. QE has to be either reversed, or the money allowed to feed into higher inflation. What about the fact that this boomlet is largely mortgage-credit based, and there is little business investment? Will further news from the eurozone change things? What about continuing austerity?

I can't quite believe that in a few months we've gone from looking at a triple drip to a boom - all on the back of Help to Buy. Are we through the worst, or is the best (HPC) yet to come?

It certainly hasn't gone away. It is being masked by a massive amount of borrowing - done on the basis that somehow future growth will be able to overcome it and begin pay it down, before it reaches a sum that can't be serviced. That at present relies on very low rates for govt bond issues or QE. In the last 30 years the govt has issued bonds for amouts over 10% on occasions! We can only afford the 2% bonds currently. If we had to roll over all the national debt at 4 or more % in future years it's hard to see how we could manage it and ever pay any back. The current policy is to resort to pumping up the housing market - it always ends in tears and in fact has functioned less well every cycle since our manufacturing base reduced in size from around 30% to the current 12%.

LOOK AT THE BALANCE OF PAYMENTS - NOW AT THE WORST IMBALANCE FOR 25YRS WHEN CHANCELLOR LAWSON ALLOWED THE SAME KIND OF HOUSING BOOM AND BUST TO GET OUT OF CONTROL. 1988 - HOUSE PRICE FRENZY - THEY CANNOT GO DOWN - CRAWLEY IN WEST SUSSEX ON EOF THE HIGHEST RISERS - THEN ONE OF THE HARDEST FALLERS BY 29% FROM PEAK.

Rebalance the economy they said? A betrayal of an opportunity is in progress.....The EU is showing signs of deflation and that was only halted before with massive borrowing following the 2008 bust. How long can the cracks be papered over? Wish I knew...

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I quite like this interview for a number of reasons, not least because it attempts to answer the OP question and it contains an interesting UK HPC forecast around 20 minutes in.

sweet dreams?

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Still too much bad debt floating around - the Pacific Ocean island of plastic crud.

Plus price of oil needs to come down. There was an interesting theory from Scepticus that oil in the ground is a safe haven for investors in a negative interest rate monetary world, but the high price is just as likely a function of the increasing difficulty in extracting the stuff, ie. the safe haven is always over the horizon, inaccessible.

If the latter, I guess we is screwed. There should be a Zombie film about this.

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I quite like this interview for a number of reasons, not least because it attempts to answer the OP question and it contains an interesting UK HPC forecast around 20 minutes in.

sweet dreams?

Property back to 70's levels according to Nicole Foss. It's difficult to imagine.

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