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What Happens When Ppi Cash Runs Out?

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There is more evidence today of the strength of Britain's recovery in the confirmation that the UK's car market last year returned to the kind of buoyant conditions not seen since before the 2007-8 crash.

There was a rise in motor sales of almost 11% to 2.26 million vehicles, according to the Society of Motor Manufacturers and Traders.

What has been happening? Consumers have been feeling more confident, credit is more readily available (around three quarters of private purchases are on credit) and PPI compensation payments have provided the few grand needed for the deposit.

Which brings me to one of my nagging worries about the UK's recovery (I have a few, as you know).

What happens when the PPI payments stop flowing?

In a very unorthodox way, PPI rectification has been a big money-creation exercise for the benefit of consumers.

Over 18 months or so, banks have paid out around £12bn to those mis-sold the credit insurance, out of a total that they currently expect to pay of £16bn.

It represents an economic boost equivalent to circa 1% of GDP - which is big. It is a bigger direct fiscal stimulus than anything either government has attempted since the crisis of 2008, involving more money for example than the temporary VAT cut of 2009.

Robert Peston about to take up hill working with such heretical thoughts.

This is a recovery, it's real it's not powered by funny money!

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It's like some sort of strange Christmas club. :P

The banksters give you £2,000 of your own money.

You go to a car dealer and organise a loan for the remaining £18,000 and buy a car.

The car dealer then deposits £20,000 into the bank!

Rinse and repeat.....

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So in effect masking the Nasty Parties negative actions against the country. So in effect once PPI money does stop flowing that's the 1% leveraged downwards, so 2% to 3% from GDP?

No doubt this will coincide with another crisis just after election time (if they are lucky).

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