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We knew it was coming....U.K. Economy Plunges Into Recession


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EVERY country will technically be in recession this year.

But that doesn’t really mean anything in and of itself - obviously GDP falls when people are hiding from the virus instead of working and consuming.

The real key is what happens from Q3 and how quickly it comes back.

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4 minutes ago, scottbeard said:

EVERY country will technically be in recession this year.

But that doesn’t really mean anything in and of itself - obviously GDP falls when people are hiding from the virus instead of working and consuming.

The real key is what happens from Q3 and how quickly it comes back.

It will never come back, the economy will be 60% smaller than it was before coronvirus

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12 minutes ago, shlomo said:

It will never come back, the economy will be 60% smaller than it was before coronvirus

Disagree

That would only be true if Coronavirus actually killed 60% of the population.

Given activity even now in the middle of lockdown is probably running at way over 40% capacity how can you foresee a long term position of that?

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1 hour ago, scottbeard said:

EVERY country will technically be in recession this year.

But that doesn’t really mean anything in and of itself - obviously GDP falls when people are hiding from the virus instead of working and consuming.

The real key is what happens from Q3 and how quickly it comes back.

I think we will see a very significant reduction in activity In Q3 and beyond due to two things:

1. Continued social distancing rules and COVID fear significantly reducing activity in retail, leisure, travel and hospitality.

2. The impact of loss of revenue for many businesses and individuals feeding into all sectors. Less people with money to spend means less to go around for everyone...estate agents, banks, car sales, electronics, private healthcare, the list goes on. 

If we see a 20-30% contraction in Q2 due to lockdown, I would expect Q3 to be at least 15% down on last year, but obviously up on Q2, but not V shaped. Even if all lockdown measures are removed by Q4, I would expect GDP to be down 10% YoY from Q4 2019 due to the huge impact and fallout of Q2 and Q3. We will only see GDP increase YoY in Q2 2021, which won’t be much of a challenge.

After that GDP growth will be constrained by the cost of paying back the huge debts the government has taken on which will translate into a massive reduction in discretionary government spending on nice to have projects like HS2 as well as an increase in taxes, which will stifle growth.

It is going to be pretty rubbish for everyone.

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Just a much needed correction and removed most of the frof. 

Ultimately everyone is priced in fiat, and as soon as it looks like any kind of deflation they will further open the money printing taps. 

that being the case any losses in fiat will be short lived, and soon we will be breaking all time highs again. 

BUT plenty of stuff is going to have real term falls including houses and wages. 

we won’t get any life changing depressions until we get a blow off top and faith is finally lost in the markets, maybe around 2029

once the global pandemic is cleared through the system, the second and third wave done by 2021, a million dead. then we will soon be off to the races again. 

it might actually free up the housing market more, plenty to oldies dead, lots inheriting etc. 

 

Edited by jiltedjen
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What about when we have to start paying back the national debts that have been incurred during this time? Likely to be through taxation. That could potentially impact spending power? Additionally, there is a report about households  putting more emphasis on saving now given the shock that's occurred.

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On 13/05/2020 at 15:33, scottbeard said:

That would only be true if Coronavirus actually killed 60% of the population.

Or if 60% of the gdp producing activities went away. Good thing most of our GDP is in manufacturing and value-producing industries, right?

 

...Right?

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I reckon there will be an initial boom as pent up demand and reduced supply, plus plentiful money printing combine to produce something akin to a crack up boom.

Then (could be a few months) - CRUNCH.

In the US, Trump will be doing his best to ensure things hold up until early November so expect them to do 'whatever it takes'.

 

 

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13 hours ago, Sour Mash said:

I reckon there will be an initial boom as pent up demand and reduced supply, plus plentiful money printing combine to produce something akin to a crack up boom.

Then (could be a few months) - CRUNCH.

In the US, Trump will be doing his best to ensure things hold up until early November so expect them to do 'whatever it takes'.

 

 

For those who have grown up over the last 40 years, mother nature has just dispensed a practical field lesson in economics.

That lesson is that you need reserves in place for a rainy day...we all know this is required deep down.

So I think we will now see a large proportion of the population of the west establish SAVINGS again...and i don't mean for a deposit on a house.

This is under consumption so i expect to see the prevailing narrative to discourage it (references to hoarding, low IRs etc); but the experiences of many will be hard wired for the next decade.

It will be a "Generational" thing.

Oh another thing....it ain't over yet.

The fat lady ain't singing; not the end, not the beginning of the end...blah blah blah...

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On 13/05/2020 at 16:40, HovelinHove said:

After that GDP growth will be constrained by the cost of paying back the huge debts the government has taken on which will translate into a massive reduction in discretionary government spending on nice to have projects like HS2 as well as an increase in taxes, which will stifle growth.

The cost of UK govt debt is practically nothing; all of it will be rolled over by the Treasury or held until term at zero cost by the Bank of England. The real constraint on the economy is the towering mountain of debt in the UK private sector - surely now set to exceed 200% of GDP - which has left businesses and households burdened with interest repayments and unable to borrow either to invest or consume.

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20 hours ago, Locke said:

Or if 60% of the gdp producing activities went away. Good thing most of our GDP is in manufacturing and value-producing industries, right?

 

...Right?

That's the free market for you. When efficiency is the only consideration output migrates to the lowest cost producer.

Global Britain = China First.

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12 minutes ago, zugzwang said:

The cost of UK govt debt is practically nothing; all of it will be rolled over by the Treasury or held until term at zero cost by the Bank of England. The real constraint on the economy is the towering mountain of debt in the UK private sector - surely now set to exceed 200% of GDP - which has left businesses and households burdened with interest repayments and unable to borrow either to invest or consume.

Not true. We were paying £50 billion a year in interest on the national debt before coronavirus hit so its likely to be substantially higher. in the coming months.

There is no free lunch. All the government can do is either raise taxes, print money or borrow it and pay interest. All options will be felt for years to come.

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On 13/05/2020 at 15:13, scottbeard said:

EVERY country will technically be in recession this year.

But that doesn’t really mean anything in and of itself - obviously GDP falls when people are hiding from the virus instead of working and consuming.

The real key is what happens from Q3 and how quickly it comes back.

Do the job you were born to do....work and consume.;)

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5 hours ago, zugzwang said:

That's the free market for you. When efficiency is the only consideration output migrates to the lowest cost producer.

Global Britain = China First.

I have a suggestion for a film which might help you. It's called The Matrix. You would identify yourself as the regular people walking around who morph into Agents to defend the system.

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2 minutes ago, Simhadri said:

Friend bought a house in Dartford for £305k 4 years ago. Got his valuation as £358k yesterday. Not sure if the crash is happening in England.

They might not find any buyers, it is impossible to asses what the selling price will be, do you now the post code?

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29 minutes ago, Simhadri said:

Friend bought a house in Dartford for £305k 4 years ago. Got his valuation as £358k yesterday. Not sure if the crash is happening in England.

Cost them that much to move......only price that matters is the buying price and the selling price minus costs......everything else is hearsay.......in your dreams or nightmares.;)

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6 hours ago, zugzwang said:

The cost of UK govt debt is practically nothing; all of it will be rolled over by the Treasury or held until term at zero cost by the Bank of England. The real constraint on the economy is the towering mountain of debt in the UK private sector - surely now set to exceed 200% of GDP - which has left businesses and households burdened with interest repayments and unable to borrow either to invest or consume.

Which raises questions about the corresponding mountain (lake?) of 'money' that came into existence in tandem with the bank debt.

How much is in offshore accounts?

On the balance sheets of which banks?

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6 hours ago, Warlord said:

Not true. We were paying £50 billion a year in interest on the national debt before coronavirus hit so its likely to be substantially higher. in the coming months.

There is no free lunch. All the government can do is either raise taxes, print money or borrow it and pay interest. All options will be felt for years to come.

Yes, true. The cost of UK govt debt is at an all-time low. Last week's 8x oversubscribed 10 year had a coupon of 0.35%!

£50bn/yr isn't a trivial sum. But even after a decade of Tory profligacy and malinvestment, and the omnishambles of Brexit,  UK debt interest repayment is still less than 4% of GDP!  Lower than it was in the 1950s, 60s, 70s, and 80s.

 

UK_National_Debt_interest.png

 

 

 

 

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  • 415 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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