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Roman Roady

Talk About Changing Attitudes...since When Did The Mail Get This Bearish?

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http://www.dailymail.co.uk/news/article-2798689/shares-eurozone-fears-ebola-big-bet-chancellor-waspish-analysis-gordon-brown-s-ex-spin-doctor-doomed.html

....Mr Osborne’s confidence is merely symptomatic of a world that has forgotten the turmoil of the last financial crisis, and returned to treating every investment as a one-way bet.

We have gone back to assuming that houses and shares will always be worth more than we pay for them; that every new business idea is destined to succeed; and that every new loan we take out at these record low borrowing rates represents a shrewd deal.

Of particular concern to Britain – where the economy is so reliant on its service industries – we have also gone back to assuming there will always be a few million well-off people with disposable income to spend on clothes, coffee and haircuts.

...And while Friday’s strong gains may have provided welcome short-term relief for investors, the reasons for the rally were in themselves deeply worrying.

It was triggered by the Federal Reserve – America’s equivalent of the Bank of England – dropping strong hints that it would carry on supporting the economy through its so-called ‘quantitative easing’ programme, reversing recent market fears that their support would end.

To put it crudely, after a week of screaming at the prospect of potty training, the toddlers got their nappies back.

...But there is one unjustifiable and downright frightening reason, which Friday’s stock market rally so publicly exposed: if it wasn’t for that stimulus continuing to inflate the bubbles in shares and property, the economies of both countries would be at severe risk of collapse.

...If you know that the stock market is being kept afloat only by artificial means, you’d be foolish to invest all your savings in shares; and if you know the economy is in such a precarious state, you’d think twice right now about buying a new house.

When confidence evaporates and demand disappears, the slide into recession is inevitable: people stop spending; businesses go bust; employees get laid off; homeowners can’t pay their mortgages; and the circle gets ever more vicious.


But here’s the problem with the impending crash: next time, none of those measures will work. Minimal interest rates and quantitative easing are already in place; and a raft of tax cuts, spending increases and subsidies is not realistic when we’re still dealing with the deficit created by the last one.

Worse still, during the 2008 crisis, the recovery in Britain and other badly hit countries was helped by the fact that China, India and other emerging economies remained largely unaffected and continued to drive global demand.

We may have to accept that everything from the size of our economies to the value of our houses is now artificially high, and get used to a much less wealthy, less debt-fuelled world.

That is the best-case scenario, but it could be much worse.

When Gordon Brown faced the crunch day of the last financial crisis in 2008, I could see the terror in his eyes that the international rescue package he had put together would not work, that stock markets would continue to panic, and the whole banking system would collapse.

He talked of the chaos that would ensue if people could not get money from cashpoints or pay with their cards in shops.

He spoke of putting the Army on the streets. He feared all of that even when he had a credible rescue package to announce, including a £500 billion bank-bailout, and interest rates cut to 4.5 per cent with room to fall much further.

Given that Mr Osborne does not have those options to turn confidence around, he should be terrified of what could happen when the next crisis hits: the potential for anarchy in our streets; riots and revolutions overseas; and a slide towards war in Asia.

But George is a gambler. He’s hoping it will never happen, or at least, not in the 199 days left until the General Election.

Let’s hope he’s right. Because if the next crash comes soon, it won’t just be his dreams of being Prime Minister that will go up in smoke. It could be Downing Street itself.


Well I cant argue with that...HPC opinions finally going mainstream.

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By DAMIAN MCBRIDE:

https://twitter.com/DPMcBride

http://damianpmcbride.tumblr.com

Damian McBride is a former Whitehall civil servant and former special adviser to British Prime Minister Gordon Brown.[1] McBride began his civil service career at HM Customs and Excise. He worked with Customs and Excise and later became Head of Communications at the UK Treasury until 2008.

On 11 April 2009 he resigned his position after it emerged on a political blog that he and another prominent Labour Party supporter, blogger Derek Draper, had exchanged emails discussing the possibility of disseminating rumours McBride had fabricated about the private lives of some Conservative Party politicians and their spouses. The emails from McBride had been sent from his No. 10 Downing Street email account.[2][3]

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Papers always want to be on the "winning team" I'm sure they keep an eye on the popular (and unpopular) online comments for their articles. Similarly they are also prone to jumping on bandwagons and then claiming credit.

I don't know how much a DM hack is paid, but I suspect there are a fair few junior staff members at DM HQ moaning about how they can't afford a house.

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Papers always want to be on the "winning team" I'm sure they keep an eye on the popular (and unpopular) online comments for their articles. Similarly they are also prone to jumping on bandwagons and then claiming credit.

I don't know how much a DM hack is paid, but I suspect there are a fair few junior staff members at DM HQ moaning about how they can't afford a house.

Becky Barrow's articles often covered the bearish side of things but she left recently for the Sunday Times.

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