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Realistbear

Trade Deficit Was 2nd Biggest Ever Since 17th Century

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http://business.guardian.co.uk/story/0,,1818240,00.html

Trade deficit soars to highest level since era of three-day week

· Shortfall in goods worst since spring of 1974

· Exports hit by continental slump and strong pound

Larry Elliott, economics editor

Wednesday July 12, 2006

The Guardian

A surge in imports to a record level saddled the UK with its second biggest trade deficit in goods since data was first collected at the end of the 17th century, the government said yesterday.
Figures from the Office for National Statistics showed that an increase of £1bn in the value of goods coming into the country coupled with a slight fall in exports resulted in a £6.8bn shortfall in May.
The UK's deficit in goods is running at 6.2% of GDP, closing in on the record level of 6.8% of GDP that was amassed in the spring of 1974, in the aftermath of the three-day week.

A huge amount of data spin is being undertaken by Gordon, the ONS and the BoE but the figures speak for themselves. The UK is on a spending binge and the decline in manufacturing is going to make matters worse as the months pass.

Meanwhile back on the ranch:

http://business.guardian.co.uk/story/0,,1818237,00.html

US slashes deficit estimate by $127bn as tax revenues rise

Ashley Seager
Wednesday July 12, 2006
The Guardian
The US government yesterday slashed its estimate of its 2006 budget deficit by $127bn (£69bn) due to much stronger than expected tax receipts from both businesses and individuals.
The Bush White House had originally forecast in February a budget shortfall of $423bn for the 2006 fiscal year but now sees it shrinking to $296bn. The deficit came in at $318bn in 2005 after hitting a record $413 bn in 2004.
The windfall of tax receipts, due largely to robust economic growth in the first half of the year, easily outweighed extra spending on the Iraq war and reconstruction after Hurricane Katrina.
Edited by Realistbear

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Add to this the remarkably strongly worded warning from the Bank of England about the risk of a meltdown in the City if the credit bubble bursts and, you start to get the picture that we're getting to the endplay. I still can't believe what the BofE is actually saying about a 25% HPC.

Oil prices are rising.

North Sea oil production is falling. So is gas production.

We do not have a strong culture of nurturing the export manufactures needed to close the gap and sustain this country's standard of living. That is the consequence of a social culture that holds industry in contempt whilst lauding the "sexy" careers in finance, consulting, advertising and so forth (ie, looking down your nose, not doing).

This country is heading for a real mother of all Crunches - and it is exactly what it deserves for its fairyland attitudes to making its way in the world. This country has never adopted a realistic attitude following the end of the Empire, instead posturing as and old fighter still "punching above its weight", with largely feudal attitudes the real hard work of inventing and developing industries that will pay the bills. What pains me is that those who are responsible will be the least affected. The folk at the top can always escape the brown when it flies. They have the land and their money is spread about so much - in PMs not least no doubt - that the worst storm will just wash over them.

As CGNao would say "Get ready to protect yourselves".

Speaking of whom, where is he?

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Why do these trade deficits matter?

For the UK it may mean loss of confidence in sterling. The currency markets have been riding the pound to breathtaking heights since 2003 on the basis that Gordon had created a Miracle Economy of high house prices withouit financial consequences, a healthy trade balance and high employment. We still have high house prices but the other underpins are falling.

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Add to this the remarkably strongly worded warning from the Bank of England about the risk of a meltdown in the City if the credit bubble bursts and, you start to get the picture that we're getting to the endplay. I still can't believe what the BofE is actually saying about a 25% HPC.

Oil prices are rising.

North Sea oil production is falling. So is gas production.

We do not have a strong culture of nurturing the export manufactures needed to close the gap and sustain this country's standard of living. That is the consequence of a social culture that holds industry in contempt whilst lauding the "sexy" careers in finance, consulting, advertising and so forth (ie, looking down your nose, not doing).

This country is heading for a real mother of all Crunches - and it is exactly what it deserves for its fairyland attitudes to making its way in the world. This country has never adopted a realistic attitude following the end of the Empire, instead posturing as and old fighter still "punching above its weight", with largely feudal attitudes the real hard work of inventing and developing industries that will pay the bills. What pains me is that those who are responsible will be the least affected. The folk at the top can always escape the brown when it flies. They have the land and their money is spread about so much - in PMs not least no doubt - that the worst storm will just wash over them.

top post.

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Guest mattsta1964

Add to this the remarkably strongly worded warning from the Bank of England about the risk of a meltdown in the City if the credit bubble bursts and, you start to get the picture that we're getting to the endplay. I still can't believe what the BofE is actually saying about a 25% HPC.

Oil prices are rising.

North Sea oil production is falling. So is gas production.

We do not have a strong culture of nurturing the export manufactures needed to close the gap and sustain this country's standard of living. That is the consequence of a social culture that holds industry in contempt whilst lauding the "sexy" careers in finance, consulting, advertising and so forth (ie, looking down your nose, not doing).

This country is heading for a real mother of all Crunches - and it is exactly what it deserves for its fairyland attitudes to making its way in the world. This country has never adopted a realistic attitude following the end of the Empire, instead posturing as and old fighter still "punching above its weight", with largely feudal attitudes the real hard work of inventing and developing industries that will pay the bills. What pains me is that those who are responsible will be the least affected. The folk at the top can always escape the brown when it flies. They have the land and their money is spread about so much - in PMs not least no doubt - that the worst storm will just wash over them.

As CGNao would say "Get ready to protect yourselves".

Speaking of whom, where is he?

Yup. This country stopped earning a living for itself a very long time ago and soon we are going to pay for resting on our laurels for so long. The borrow your way to prosprerity mantra of the UK and the USA will soon be exposed for what it is. The smart money will be heading out to the Far East.

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Could someone please explain this: Telegraph Article

How can the economics Editor of the Telegraph be so wrong about the long term prospects? It was only written last week.

Edited by mopo

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How can the economics Editor of the Telegraph be so wrong about the long term prospects? It was only written last week.

The number of people who have any idea what is going on can probably be counted on one hand I suspect. If they really new they would have as much cash as Sorros or Buffet. Even then I suspect it has a lot to do with luck. The rest is just words and words are only wind. You only have to look at how stock markets behave to see that.

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Guest donall

The popularity of the Pound as a currency has nothing (or little) to do with Britain's economic successed.

In the past 5 years or so the poound has strengthed against the US$ and many other currencies. It is seen as a safe/stable currency (would you rather have UK£ or Iraqi whatevers?)

Britains current accound deficit is being supported to some extend by people storing their cash in UK£.

This is good for the Brittish as if you owe your debtors UK£ there is no incentive for them to weaken the pound (agianst their currency) as it will reduce what you owe them in thier currency.

Antoher way of thinking about it is that the pound is like Man. Utd - they might not be winning the league or Europe but they are seen as a safe bet and more stable when compared with the ever-underperforming Liverpeul (the EU) or the cash-rich but erratic Chelsea (Russia).

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donall

The Euro is doing just fine thank you very much and i'll be staying out of the GB£ for now.

you best run along and get yourself some USD$ while they are going so cheap, can not go wrong :):lol::)

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We do not have a strong culture of nurturing the export manufactures

That is the consequence of a social culture that holds industry in contempt whilst lauding the "sexy" careers in finance, consulting, advertising and so forth (ie, looking down your nose, not doing).

Nothing to do with snobbishness, the British have for a long time focused on THE EASIEST ROUTE TO PROFIT.

We leave the huge risk of making new products to the Germans et al.

Our 'bag' is getting maximum profit from minimium risk / effort, and its actualy something we lead the world in.

Why spend years and millions creating a new car (that may flop) when you can sell insurance to the world!!!!!

Britains current accound deficit is being supported to some extend by people storing their cash in UK£.

Something else that you have all missed:

NET INCOME FLOWS B)

Ours have been fantastic these last few years. Due to the income that flows from our investment abroad, be they cycle factories in changbingshao or villas in Morocco :rolleyes:

Net Income Flows have conterbalanced out spending on foreign widgets for some time now.

Edited by dogbox

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I believe that sometime in the last three months the goverment has been enlightened to the spectre that could await us all. Why did they allow thousands of medical staff to be made redundant leaving the Trusts to take the blame, better them than the goverment. John Reid this week has cancelled regional integration of the police saving £1 billion and also ID cards, saving £15 billion.

On top of that they are fighting with the banks. Preventing overcharging 1st of all, then stopping the banks ejecting aukward customers that were making compensation claims. It smacks of a goverment that has now realised that banks can suck up market liquidity and destroy the economy, something I and many others saw years ago. Have they indeed pre-empted catastrophe in there desire to seize empty homes, do they foresee a situation where many could be ejected on to the streets while 100's of 1000's of homes fall into the ownership of the banks, also something I have warned off.

All the indicators are now negative, apart from high employment (see appendage). Trade deficit accellerating out of control, lending still increasing but economy in reverse, repo's up, benefit claimants up, oil and gas shortage.

Water owned by foreign and careless hands being taken for granted. (BEWARE)

Appendage: Employment is up but so is the claiment count. Foreign cheap labour has depressed labour costs at the low end of the market forcing those that have commitments such as rented property (council) to stay on benefits, who after all goes to work for a pay cut?.

I read all the media stuff about migration in the press and wonder who they get there info from. On the street level of the council estates of this country, migrants are hated by all, not by me, but by them. Why?, they are suffering because of them, they can no longer get £10 an hour in construction or £8.50 driving a lorry or a reasonable wage doing any unskilled work because the migrants can do it for less. So the migrants do it and the working class stay on benefits.

deano!.

Edited by deano

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  Replying to Trade Deficit Was 2nd Biggest Ever Since 17th Century

so to sum up, in 1611 device, chattox, redferne, nutter, hewitt, bulcock and robey and were exporting more gross tonnage of their pendle witches mountain brew (5%) than we export to the world alcopop markets in 2006 ??

what gives.?

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Why do these trade deficits matter?

This can means economic fallout.

Presently, UK trade deficit is euqal to 6% of GDP. To reduce those deficit for 1% (of GDP) the pound should decline circa 20%

http://www.econ.princeton.edu/seminars/MAC...-06/Krugman.pdf

(beginning of page 11)

Krugman is claiming, that US dollar will rather fall quickly. We should apply the same for the pound.

What it can means?

- violent decline in consumption - UK citizens, the same like US citizens, mostly are buing foreign good. Sharp decline of the pound will cripple purchasing power of UK citizens, and in this way will cripple consumption - foreign goods prices will skyrocket due to pound decline.

- decline of the pound means as well huge inflation pressure - so we will have or hyperinflation, or skyrocketing interest rates.

- such decline could means as well one positive thing - possible surge in industry output. But here is one big trouble - already many factories was shut down and switching capital from property/capital investment to industry will take considerable time.

Obviously, all above will have devastating influence on employment level (cuts in retail sector) and housing market (and again employment level).

Raising uneployment will only make problems deeper.

For me, huge trade deficit + huge debt (corporation and private and goverment) + huge housing bubble = coming not even recession - but depression.

Present conditions are worse than those from 1929...

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The perception of the UK having a healthy, deficit free, assett balanced, debt crisis free economy where borrowing and MEW can continue forever without consequences (Miracle Economy) is why Gordon need not increase IR:

http://www.telegraph.co.uk/money/main.jhtm.../14/ixcity.html

Filed: 05/07/2006)

The pound stages a remarkable comeback to power ahead of the dollar, yen and euro, writes Edmund Conway

Sterling has quietly become one of the most popular currencies in the world, despite being regarded for many decades as something of a joke on the international economic scene.
Against all odds, investors from around the world have been buying pounds and, since 1999, the growth in sterling as a major reserve currency has outpaced all others, including the dollar, the euro and the yen.
The currency is gaining credibility on all sides. In May, when Russia announced the creation of an oil stabilisation fund to protect the country from changes in energy prices, officials said it would be invested 45pc in dollars, 45pc in euros and 10pc in pounds.
The fact that, for central banks around the world, the pound is seen as a key alternative to the big two currencies is a testament to the recent economic strength of the UK. Some figures unobtrusively released by the International Monetary Fund last week underline this.
...../

Should the picture change and the UK were to become a deficit nation, run low on NS oil, be plagued by industrial action, or lose political stability, find itself facing rising unemployment then things may chnage.

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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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