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We are living through an economic boom – but how long can it last?

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Another MSM article againat relentless HPI... 

We are living through an economic boom – but how long can it last?

As for real wages, the huge problem in the UK is housing costs, and that is at least partly a result of the ultra-cheap money policies of the central banks. Relative to earnings UK house prices are the highest they have ever been: more than seven times average earnings. 

Prepare for a sharper rise in rates, certainly in the US but also in the UK, than people currently expect.

http://www.independent.co.uk/voices/uk-economy-global-economy-economic-boom-2008-brexit-a7637136.html

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37 minutes ago, frederico said:

When they stop fixing markets with cheap money, but when and why would they have to stop?

Trump needs to improve the lives of the people who voted for him to get re-elected and they are the ones who suffer from cheap money, QE and ZIRPs. 

He will put pressure on rising rates, but it's a question of whether he holds his nerve in the event of a recession. The "have-nots" are becoming a very potent political force and if we see another round of bank bailouts and endless QE, I think another politician will come along and attract their votes to get power.

Theresa May also understands this but I think they all underestimate the levels of anger out there.

Edited by thisisthisitmaybe

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They should have increased interest rates years ago. They didn't. What happened as a result? Nothing. People need to realise that interest rates are no longer used as a tool to control inflation or the wider economy.

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46 minutes ago, Lord D'arcy Pew said:

A lot of people are in for a shock, the ones that think <1% interest rates are normal.

They are in Japan and have been for over 20 years

So who will the UK follow? US, Japan or maybe option 3? Come on let's all sing together :rolleyes:

 

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55 minutes ago, Lord D'arcy Pew said:

A lot of people are in for a shock, the ones that think <1% interest rates are normal.

Like many here, I am old enough to know how the setting of interest rates can, and has been used to control inflation and the economy. Like that's the method previously used. Problem is, that game was over from 08/09. I'd wager <1% interest rates for at least the next couple of decades.

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8 minutes ago, Dreamcasting said:

Like many here, I am old enough to know how the setting of interest rates can, and has been used to control inflation and the economy. Like that's the method previously used. Problem is, that game was over from 08/09. I'd wager <1% interest rates for at least the next couple of decades.

'Turning Japanese' it is then, I always thought we were a nation of w@nkers ;)

 

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2 hours ago, thisisthisitmaybe said:

Trump needs to improve the lives of the people who voted for him to get re-elected and they are the ones who suffer from cheap money, QE and ZIRPs. 

He will put pressure on rising rates, but it's a question of whether he holds his nerve in the event of a recession. The "have-nots" are becoming a very potent political force and if we see another round of bank bailouts and endless QE, I think another politician will come along and attract their votes to get power.

Theresa May also understands this but I think they all underestimate the levels of anger out there.

I suspect QE and ZIRP stopped Donald's empire going down (again) during the Financial crisis, and perhaps is still required to keep it afloat. .

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Sovereign debt substitution doesn't work. The private sector is still hopelessly underwater. Hence an economic 'recovery' that continues to feel like a depression.

Without a debt jubliee the prospect of UK rate rises at any time in the forseeable future is nil. Nothing whatsoever to do with technology or the rise of the so-called gig economy. The latter being an ineffectal response to the crisis rather than a cause.

 

 

Edited by zugzwang

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How can it be an economic boom when every single month the UK can't afford to pay its bills without massive net borrowing? I can understand net borrowing when you're going through a huge infrastructure/jobs creation expansion plan like after WW2. The UK isn't though.  It's actually cutting costs where it can.  So let's summarise :-

  • the UK can't afford to pay its monthly bills to the tune of having to net borrow £5Bn to £10Bn a month depending on the shortfall
  • the UK is cutting costs where it can - this massive monthly cost to the run the UK isn't some amazing new infrastructure/jobs creation plan in action - it's not even trying to keep things as they are - councils are scaling back their services (e.g. rubbish collection, rubbish tip opening times) - infrastrcuture isn't expanding at the rate the population is - so the UK is going BACKWARDS while having to massively net borrow to do so
  • we've had 8 years of unprecedented (since 1694) ZIRP.  The lowest IRs were prior to March 2009 was 2% from 1694 to February 2009. 
  • Wages have been FALLING for 10 years+ when compared to actual inflation - I mean "reality inflation", not CPI or RPI - but the "reality inflation" that includes rent and utlity bills - everything. 

So all of the above shows the UK is enjoying an "economic boom"? Who are these idiots who call themselves journalists? Why is it an average layman like me can see the obvious, but someone qualified enough to be a journalist for a national paper can get is so very badly wrong?

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It goes on ..

http://www.thisismoney.co.uk/money/mortgageshome/article-4326896/Midland-property-leads-house-price-rise-1-3-March.html

I concur with the previous sentiments about rates staying low, like in Japan in order to prop it up.

A slide in the pound makes foreign trips more expensive, sure, but as most consumer tat is imported from low-wage economies and further automation is coming, that may well offset its inflationary impact.

Even so, we know they will 'look through' blips in inflation, so what if anything would force a rate rise?

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30 minutes ago, hotairmail said:

Debt jubilee! No way. That is exactly what the rich and their shills want.

No, we need taxes to transfer wealth of people who aren't prepared to circulate it, to dig out over indebted zombies from  their assets. Stimulate a much needed asset reset to  share them out more equitably. A wealth and land tax is ideal for this. 

A debt jubilee needn't support the rich at all, other than stopping default in their customers. 

It wouldn't support the majority here, but it would support the majority in the country.  If they were to say 'here's a note that'll give everyone £20k off their debt, to compensate for the imminent rise in interest rates' that would have a massive impact on the country, but would have a net negative effect on the BTL empires (the interest rate rise bit).

But without another crisis (and it's unlikely even with) a debt jubilee just isn't going to happen... were taking the other solution of ultra low interest rates for the next few decades.  This is actually worse than the debt jubilee solution, as it helps most the ultra leveraged, and hurts most the ones without debt.

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25 minutes ago, dgul said:

A debt jubilee needn't support the rich at all, other than stopping default in their customers. 

It wouldn't support the majority here, but it would support the majority in the country.  If they were to say 'here's a note that'll give everyone £20k off their debt, to compensate for the imminent rise in interest rates' that would have a massive impact on the country, but would have a net negative effect on the BTL empires (the interest rate rise bit).

But without another crisis (and it's unlikely even with) a debt jubilee just isn't going to happen... were taking the other solution of ultra low interest rates for the next few decades.  This is actually worse than the debt jubilee solution, as it helps most the ultra leveraged, and hurts most the ones without debt.

There wont be a debt jubilee,but there will be a massive debt deflation (and with it asset prices) through default i expect.The way i see things as a simple layman is later this year the world will see a massive deflation break out.There will be huge debt defaults,both corporate and private and several banks might go under as asset prices (houses and equities) tank.The central banks will go QE crazy in panic and that will see inflation finally arrive in the early 20s pushing inflation and rates to maybe double figures and inflating away the debt that is left.It sounds crazy,but thats exactly what im expecting.Its the only way i see out of this.

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7 hours ago, canbuywontbuy said:

How can it be an economic boom when every single month the UK can't afford to pay its bills without massive net borrowing? I can understand net borrowing when you're going through a huge infrastructure/jobs creation expansion plan like after WW2. The UK isn't though.  It's actually cutting costs where it can.  So let's summarise :-

  • the UK can't afford to pay its monthly bills to the tune of having to net borrow £5Bn to £10Bn a month depending on the shortfall
  • the UK is cutting costs where it can - this massive monthly cost to the run the UK isn't some amazing new infrastructure/jobs creation plan in action - it's not even trying to keep things as they are - councils are scaling back their services (e.g. rubbish collection, rubbish tip opening times) - infrastrcuture isn't expanding at the rate the population is - so the UK is going BACKWARDS while having to massively net borrow to do so
  • we've had 8 years of unprecedented (since 1694) ZIRP.  The lowest IRs were prior to March 2009 was 2% from 1694 to February 2009. 
  • Wages have been FALLING for 10 years+ when compared to actual inflation - I mean "reality inflation", not CPI or RPI - but the "reality inflation" that includes rent and utlity bills - everything. 

So all of the above shows the UK is enjoying an "economic boom"? Who are these idiots who call themselves journalists? Why is it an average layman like me can see the obvious, but someone qualified enough to be a journalist for a national paper can get is so very badly wrong?

It isn't a boom. The World economy is on life support. 2008 was a heart attack, but the damage was fatal. We've been on life support ever since. Only when that fails (or gets unplugged) will we have the crash (that we didn't have in 2008).

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7 hours ago, canbuywontbuy said:

How can it be an economic boom when every single month the UK can't afford to pay its bills without massive net borrowing? I can understand net borrowing when you're going through a huge infrastructure/jobs creation expansion plan like after WW2. The UK isn't though.  It's actually cutting costs where it can.  So let's summarise :-

  • the UK can't afford to pay its monthly bills to the tune of having to net borrow £5Bn to £10Bn a month depending on the shortfall
  • the UK is cutting costs where it can - this massive monthly cost to the run the UK isn't some amazing new infrastructure/jobs creation plan in action - it's not even trying to keep things as they are - councils are scaling back their services (e.g. rubbish collection, rubbish tip opening times) - infrastrcuture isn't expanding at the rate the population is - so the UK is going BACKWARDS while having to massively net borrow to do so
  • we've had 8 years of unprecedented (since 1694) ZIRP.  The lowest IRs were prior to March 2009 was 2% from 1694 to February 2009. 
  • Wages have been FALLING for 10 years+ when compared to actual inflation - I mean "reality inflation", not CPI or RPI - but the "reality inflation" that includes rent and utlity bills - everything. 

So all of the above shows the UK is enjoying an "economic boom"? Who are these idiots who call themselves journalists? Why is it an average layman like me can see the obvious, but someone qualified enough to be a journalist for a national paper can get is so very badly wrong?

+1

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7 hours ago, canbuywontbuy said:

How can it be an economic boom when every single month the UK can't afford to pay its bills without massive net borrowing? I can understand net borrowing when you're going through a huge infrastructure/jobs creation expansion plan like after WW2. The UK isn't though.  It's actually cutting costs where it can.  So let's summarise :-

  • the UK can't afford to pay its monthly bills to the tune of having to net borrow £5Bn to £10Bn a month depending on the shortfall
  • the UK is cutting costs where it can - this massive monthly cost to the run the UK isn't some amazing new infrastructure/jobs creation plan in action - it's not even trying to keep things as they are - councils are scaling back their services (e.g. rubbish collection, rubbish tip opening times) - infrastrcuture isn't expanding at the rate the population is - so the UK is going BACKWARDS while having to massively net borrow to do so
  • we've had 8 years of unprecedented (since 1694) ZIRP.  The lowest IRs were prior to March 2009 was 2% from 1694 to February 2009. 
  • Wages have been FALLING for 10 years+ when compared to actual inflation - I mean "reality inflation", not CPI or RPI - but the "reality inflation" that includes rent and utlity bills - everything. 

So all of the above shows the UK is enjoying an "economic boom"? Who are these idiots who call themselves journalists? Why is it an average layman like me can see the obvious, but someone qualified enough to be a journalist for a national paper can get is so very badly wrong?

Nice analysis there.  I can't see that the scaling back in some of your points are going to make much of a difference.  For example, rubbish tips (or local libraries, or whatever public service you choose) reducing opening hours will only save the cost of wages as the plant, building etc will still be there to maintain. Given the low level of British wages, a drop in the ocean.

totally agree with your analysis of the lies that is cpi and rpi, a trip to the supermarket tells you that inflation is a lot higher than they would have us believe 

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2 hours ago, durhamborn said:

There wont be a debt jubilee,but there will be a massive debt deflation (and with it asset prices) through default i expect.The way i see things as a simple layman is later this year the world will see a massive deflation break out.There will be huge debt defaults,both corporate and private and several banks might go under as asset prices (houses and equities) tank.The central banks will go QE crazy in panic and that will see inflation finally arrive in the early 20s pushing inflation and rates to maybe double figures and inflating away the debt that is left.It sounds crazy,but thats exactly what im expecting.Its the only way i see out of this.

I'd agree with that -- except in the detail.. I'd suggest they'd QE like crazy at the first hint of debt deflation -- so we'll see asset prices down by 20% or so, then the inflation.  That would be a crash in 'their' eyes, even if it only takes asset prices back to the peak of 2008...

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3 hours ago, hotairmail said:

Debt jubilee! No way. That is exactly what the rich and their shills want.

No, we need taxes to transfer wealth of people who aren't prepared to circulate it, to dig out over indebted zombies from  their assets. Stimulate a much needed asset reset to  share them out more equitably. A wealth and land tax is ideal for this. 

LVT makes a lot of sense. In principle I'm a supporter, it's just in the present circumstances (a stagflationary depression not a boom) I think tax rises of any kind would prove to be an additional brake on economic momentum, the opposite of what's required.

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On 19/03/2017 at 3:40 AM, frederico said:

When they stop fixing markets with cheap money, but when and why would they have to stop?

When even fake CPI inflation goes high enough that people start to feel it.

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43 minutes ago, zugzwang said:

LVT makes a lot of sense. In principle I'm a supporter, it's just in the present circumstances (a stagflationary depression not a boom) I think tax rises of any kind would prove to be an additional brake on economic momentum, the opposite of what's required.

You replace income tax and VAT with LVT. Tax burden for anyone that works is reduced - increases for rentiers.

It would be a panacea for the UK economy, but alas the politicians do the rentiers' bidding.

Edited by Eddie_George

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