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Realistbear

Higher I R No Longer Necessary To Bring A H P C

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Interesting article from the economics editor over at the Observer:

http://business.guardian.co.uk/story/0,,1806079,00.html

Delayed, but there is a day of reckoning

Knock-on effects of slower US growth will be felt in every corner of the globe

Larry Elliott, economics editor

Monday June 26, 2006

....../

It is not going to be easy on either front. In Washington,
the Fed now has the task of clearing up the mistakes made in Alan Greenspan's last years.
The fact that inflation is picking up even as the economy is slowing down, is testimony to an over-lax monetary policy two or three years ago.
Interest rates were left too low for too long, and when Greenspan did start to tighten the screw it was too little, too late. The US needed to work off the excesses of its debt binge in the 1990s but never had the chance to do so because the Fed pumped the economy full of cheap money. In previous eras, the speculation, and over-investment seen at the end of the 1990s, would have led to a recession as the excess capacity was worked off. Greenspan ensured that even the bursting of one of the biggest stock market bubbles in history did not have much of an impact on growth by fuelling a colossal boom in housing.
What is becoming clear is that the day of reckoning has been delayed, rather than avoided altogether.
A period of slower growth in the US is now inevitable.
Interest rates at their current level are more than sufficient to kill off the housing bubble; indeed, the signs are that the property market is cooling rapidly
. The Fed, though, is unlikely to stop raising rates yet, given that inflation is still rising.
...../
It is, then, conceivable that we could be in for a period in which a synchronised upswing in the global economy turns into a synchronised downturn, as weaker demand from the US ripples out to the export-driven economies of Asia and the Eurozone. Protectionism will then exacerbate the recession.

IMO, the same scenario exists in the UK: real inflation and a slowing economy with what Mervyn described as a "bumpy road ahead." Our HPI bubble is far worse than the US's overall market which has seen rises of around 20% over the past 5 years whereas we have had 120% or so. Our IR have similarly remained too accomodative as the resultant HPI bears out. With the US economy cooling it will impact markets globally. I think Larry has got it right when he says IR really do not need to go up much more as the housing market is already an economic dead man walking.

Edited by Realistbear

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Interesting article from the economics editor over at the Observer:

http://business.guardian.co.uk/story/0,,1806079,00.html

Delayed, but there is a day of reckoning

Knock-on effects of slower US growth will be felt in every corner of the globe

Larry Elliott, economics editor

Monday June 26, 2006

....../

It is not going to be easy on either front. In Washington,
the Fed now has the task of clearing up the mistakes made in Alan Greenspan's last years.
The fact that inflation is picking up even as the economy is slowing down, is testimony to an over-lax monetary policy two or three years ago.
Interest rates were left too low for too long, and when Greenspan did start to tighten the screw it was too little, too late. The US needed to work off the excesses of its debt binge in the 1990s but never had the chance to do so because the Fed pumped the economy full of cheap money. In previous eras, the speculation, and over-investment seen at the end of the 1990s, would have led to a recession as the excess capacity was worked off. Greenspan ensured that even the bursting of one of the biggest stock market bubbles in history did not have much of an impact on growth by fuelling a colossal boom in housing.
What is becoming clear is that the day of reckoning has been delayed, rather than avoided altogether.
A period of slower growth in the US is now inevitable.
Interest rates at their current level are more than sufficient to kill off the housing bubble; indeed, the signs are that the property market is cooling rapidly
. The Fed, though, is unlikely to stop raising rates yet, given that inflation is still rising.
...../
It is, then, conceivable that we could be in for a period in which a synchronised upswing in the global economy turns into a synchronised downturn, as weaker demand from the US ripples out to the export-driven economies of Asia and the Eurozone. Protectionism will then exacerbate the recession.

IMO, the same scenario exists in the UK: real inflation and a slowing economy with what Mervyn described as a "bumpy road ahead." Our HPI bubble is far worse than the US's overall market which has seen rises of around 20% over the past 5 years whereas we have had 120% or so. Our IR have similarly remained too accomodative as the resultant HPI bears out. With the US economy cooling it will impact markets globally. I think Larry has got it right when he says IR really do not need to go up much more as the housing market is already an economic dead man walking.

Sounds familiar.

Some of us were spouting this off 6 months ago. I wouldn't call Greenspans last few years a mistake though, far from it. I think his decisions were central to quashing the war on terror.

The timing of 9/11 was designing to accelerate the dotcom crash into a full blown US depression whilst simultaneously drawing them into a gobal conflict over energy security, and scaring shoppers from malls. AG's easy money postponed the pending economic wipe out for the duration of the conflict. The ability of the US to do this is exactly the reason the Fed was created.

The coming years will see most people in the west having to earn the money they have already spent, meaning a reduction in spending, this leads to a contraction of equity (lots more job seekers and fewer customers).

People make decisions on their own perceptions, nobody on the street can hold down a conversation on this subject because they simply do not observe macro-economics.

The US has once again fared the storm, it still surprises me how so few people see what they are doing and how they do it. They don't even try and keep it secret, I think most people just don't understand.

Apologise if I sound aloof, just baffled by ignorance.

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With the US economy cooling it will impact markets globally. I think Larry has got it right when he says IR really do not need to go up much more as the housing market is already an economic dead man walking.

Posters have been saying the US economy is cooling for a long time now, yet then we hear it was more resillient than thought.

Also this myth about America needs to be reigned - in. There are other economies such as China, Brazil and Russia expanding, so any US demand slack is merely mopped - up elsewhere.

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Posters have been saying the US economy is cooling for a long time now, yet then we hear it was more resillient than thought.

Also this myth about America needs to be reigned - in. There are other economies such as China, Brazil and Russia expanding, so any US demand slack is merely mopped - up elsewhere.

Not so sure about this. The reliance on global US trade cannot be overestimated. If California were a country it would be the world's 7th largest economy.

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im not sure how much you think that china brazil and russia are going to buy from the uk, but i suspect you will be disappointed.

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Posters have been saying the US economy is cooling for a long time now, yet then we hear it was more resillient than thought.

Also this myth about America needs to be reigned - in. There are other economies such as China, Brazil and Russia expanding, so any US demand slack is merely mopped - up elsewhere.

I wouldn't say it's cooling down. I would say it's running at a large imbalance with Asia.

Also, why would anyone need to reign in a cooling economy?

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Posters have been saying the US economy is cooling for a long time now, yet then we hear it was more resillient than thought.

Also this myth about America needs to be reigned - in. There are other economies such as China, Brazil and Russia expanding, so any US demand slack is merely mopped - up elsewhere.

Trouble is the Chinese, Indians, Japanese and Russians like to export and don't buy much tat from the West--other than a few exotic cars and handbags.

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  • 301 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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