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Guardian: "the Hangover After Too Much Punch "

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http://money.guardian.co.uk/interestrates/...1838851,00.html

The hangover after too much punch

Interest rates are on the rise around the world and we will all be feeling the pain

Larry Elliott, economics editor

Monday August 7, 2006

The Guardian

The surprising thing about the Bank of England's decision to raise interest rates was that it was a surprise. There were plenty of straws in the wind in the past month to suggest the monetary policy committee would opt for a no-risk strategy, yet the City - with a few notable exceptions - failed to see it coming...../
What concerns central banks is that there is far too much easy money sloshing around in the system. Interest rates were cut and kept unusually low for a prolonged period earlier this decade amid fears of recession. It became a lot cheaper to borrow and this meant consumers could ramp up their spending and businesses were encouraged to invest.
It also meant more speculation in property and in financial markets, and a greater vulnerability for borrowers when interest rates started to rise. Last Friday's bankruptcy figures in the UK illustrate the point. The number of people going bust has reached record levels; the figure is on course to hit 100,000 this year for the first time. The big high-street banks made a song and dance last week, but it is the banks themselves that are to blame for nurturing the live-now, pay-later, have-it-all culture with their aggressive marketing and irresponsible lending.
We will see in the coming months just how many individuals in Britain are living on the edge, with only modest increases in rates enough to tip them over the edge. My guess is that the economy is far more sensitive to a quarter-point rise in borrowing costs than it was, especially if there is a threat of further moves from the Bank. The fact that insolvencies were 66% higher in the second quarter of 2006 than in the second quarter of 2005 is a sign of just how tough many people are finding it to meet their financial commitments; add in spiralling energy costs, rising unemployment and higher interest rates and you have the recipe for extreme difficulties for many households.

The more I read about the economy the more I think it would not be unreasonable to call the end to HPC and the beginning of what looks like its going to be a long painful ride to the bottom. Sentiment has turned extremely bearish over the last couple of weeks making any further attempts by the EAs to suggest that houses will be flying off the shleves at even greater levels of debt sound ridiculous.

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http://money.guardian.co.uk/interestrates/...1838851,00.html

The hangover after too much punch

Interest rates are on the rise around the world and we will all be feeling the pain

Larry Elliott, economics editor

Monday August 7, 2006

The Guardian

The surprising thing about the Bank of England's decision to raise interest rates was that it was a surprise. There were plenty of straws in the wind in the past month to suggest the monetary policy committee would opt for a no-risk strategy, yet the City - with a few notable exceptions - failed to see it coming...../
What concerns central banks is that there is far too much easy money sloshing around in the system. Interest rates were cut and kept unusually low for a prolonged period earlier this decade amid fears of recession. It became a lot cheaper to borrow and this meant consumers could ramp up their spending and businesses were encouraged to invest.
It also meant more speculation in property and in financial markets, and a greater vulnerability for borrowers when interest rates started to rise. Last Friday's bankruptcy figures in the UK illustrate the point. The number of people going bust has reached record levels; the figure is on course to hit 100,000 this year for the first time. The big high-street banks made a song and dance last week, but it is the banks themselves that are to blame for nurturing the live-now, pay-later, have-it-all culture with their aggressive marketing and irresponsible lending.
We will see in the coming months just how many individuals in Britain are living on the edge, with only modest increases in rates enough to tip them over the edge. My guess is that the economy is far more sensitive to a quarter-point rise in borrowing costs than it was, especially if there is a threat of further moves from the Bank. The fact that insolvencies were 66% higher in the second quarter of 2006 than in the second quarter of 2005 is a sign of just how tough many people are finding it to meet their financial commitments; add in spiralling energy costs, rising unemployment and higher interest rates and you have the recipe for extreme difficulties for many households.

The more I read about the economy the more I think it would not be unreasonable to call the end to HPC and the beginning of what looks like its going to be a long painful ride to the bottom. Sentiment has turned extremely bearish over the last couple of weeks making any further attempts by the EAs to suggest that houses will be flying off the shleves at even greater levels of debt sound ridiculous.

I agree. Its become totally impossible to talk about HPC in isolation to the rest of our lives. Everything related to UK PLC (and indeed to whole WORLD PLC) seems to be looking worse by the day and the clouds of concern are building and building with little sign of any silver lining.

Worrying times indeed.

AFP

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I wonder if Blair has called all his media pals around to give Brown a nice stab in the back before he retires? There does seem to be a distinct lack of economic miracles in the newspaper stories lately.

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It wasn't a suprise to people on this site however it was a suprise to the Guardian including Larry Elliot so I don't understand the slant of his article. I have read many articles by him suggesting that all is well in UK PLC and IR shouldn't rise.

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It wasn't a suprise to people on this site however it was a suprise to the Guardian including Larry Elliot so I don't understand the slant of his article. I have read many articles by him suggesting that all is well in UK PLC and IR shouldn't rise.

More people are waking up and smelling the coffee--only it isn't coffee they are smelling. :o

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The doomsayers are at it again i see.

London is undergoing the largest flux of immigration since the 1960's , possibly since the turn of the last century, as hundreds

of thousands of people needing homes head for our shores to do work for which there is massive demand and reward, and sometimes work which British people don't want to do.

They come more optimitic about this country than they are about any other in Europe. People all over the world are voting with their feet. This is where its at. In London, Europe's largest and most sucessful city, economic growth continues very robust and demand for places to live and work across all areas continues unbridled. For those who haven't been down here recently, you should take a trip and just see how this city has changed in the last 5 years and we can imagine how it will change in the next .

By 2016 there will be another 700,000 people living in this city. Tell me that there's going to be a house price crash - not likely - supply and demand will see to that, even if outlying areas are less popular.

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The doomsayers are at it again i see.

London is undergoing the largest flux of immigration since the 1960's , possibly since the turn of the last century, as hundreds

of thousands of people needing homes head for our shores to do work for which there is massive demand and reward, and sometimes work which British people don't want to do.

They come more optimitic about this country than they are about any other in Europe. People all over the world are voting with their feet. This is where its at. In London, Europe's largest and most sucessful city, economic growth continues very robust and demand for places to live and work across all areas continues unbridled. For those who haven't been down here recently, you should take a trip and just see how this city has changed in the last 5 years and we can imagine how it will change in the next .

By 2016 there will be another 700,000 people living in this city. Tell me that there's going to be a house price crash - not likely - supply and demand will see to that, even if outlying areas are less popular.

Something's going to crash if there are another 700,000 people living here. This city couldn't fit another 7 people.

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The doomsayers are at it again i see.

The bulls are posting the same old nonsense, I see.

head for our shores to do work for which there is massive demand and reward, and sometimes work which British people don't want to do.

No, to do work which British people can't afford to do for Eastern European wages.

They come more optimitic about this country than they are about any other in Europe.

Most come to make money and go home rich by their standards, not to buy hugely overpriced houses.

By 2016 there will be another 700,000 people living in this city.

Or not.

Immigration is going to be one of the biggest political issues of the next ten years: any predictions about future rates are nonsense.

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Something's going to crash if there are another 700,000 people living here. This city couldn't fit another 7 people.

They are building within the Thames Gateway and there are a lot more dense developments and flats planned.

I'm sure they can be accommodated. Really, these doomsayers are very naive and sometimes i think they must live in very depressed towns or isolated villages. If they came here they'd see how vibrant and booming things are.

Its just denial of reliality to suggest otherwise.

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Is it possible for London to thrive and the rest of the country to have a crash? Is there any precedent for this in history? London's economy is based on a very different set of parameters to the rest of the economy, and with the Olympics it may be just possible that it averts a full scale crash. However, London was equally confident in the 80s, and it crashed and burned big time in the early 90s. If the financial sevices sector gets hit, then London is ******ed quite honestly (along with the rest of the country) as that's all that keeps it rich, when that happens all those immigrants will have to go home or risk getting linched by the gangs of jobless yobs who want someone to blame.

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with the Olympics it may be just possible that it averts a full scale crash.

Ah, the magical Olympics.

I forgot how the magical Olympics is going to save us. Didn't the last magical Olympics nearly bankrupt Athens, or am I confusing them with some other near-bankrupt Olympic city?

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Ah, the magical Olympics.

I forgot how the magical Olympics is going to save us. Didn't the last magical Olympics nearly bankrupt Athens, or am I confusing them with some other near-bankrupt Olympic city?

No - that's quite wrong. The funding for the Games is already planned and the mechanism to pay the bills is operating (i.e special levy of £20 per council tax payer per year for 6 years - it shows up on your statement) and all the projects are at a further stage of planning than any other games. Its ahead of target and budget and thankfully free of Wembley-type **** ups now the London Continental Railways saga has been resolved.

Its wrong to rely on masssive public works projects of the sort the games will bring to London prior to 2012 just to prop up the economy & employ people, but it will be a safety cushion and pave the way for massive investment in infrastructure leading to greater economic growth afterwards.

In addition the whole mood is very positive generally and not cynical.

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No, to do work which British people can't afford to do for Eastern European wages.

I am not sure what you mean by a "Eastern European wage" but my understanding is that everyone gets at least the minimum wage. It is also easy to qualify for additional tax credits. Are you seriously saying there is anyone in the country who cannot "afford to work"?

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Are you seriously saying there is anyone in the country who cannot "afford to work"?

Do you honestly think that everyone in the country could afford to work for minimum wage? We have to pay British living costs for the rest of our lives, people over here for a couple of years to make money and go home don't... that makes a vast difference in the ability to survive. How do you pay off a 200k mortgage on 5 pounds an hour?

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The funding for the Games i... shows up on your statement.

But I thought the Olympics are all about the love of the games, the taking part, and all that; and not about doing it for money. So how come if all the stars do it for free it costs so much?

It used to be, years ago, that you'd always get a world record or five at the games. These have become harder and harder to achieve. At the same time the cost has gone up enormously. Why? Why is it more expensive to show the events now than 20, 30, 40 years ago? The swimming pools are the same size, the athletics track is no shorter.

Once upon a time the Olympics was cool. Now it's just a big business nonsense. For example, we could have bid to host them in Manchester -- where the Commonwealth Games were held a few years ago. That was widely seen as a triumph. But given the Olymipcs has global reach it had to be London. All that money would have meant an opportunity to develop the regions rather than pump yet more money into London.

I suppose one good thing is it did go to London -- I hate going to the South East, so at least the North West remains less like London. Great!

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Guest Bart of Darkness

The doomsayers are at it again i see.

London is undergoing the largest flux of immigration since the 1960's , possibly since the turn of the last century, as hundreds

of thousands of people needing homes head for our shores to do work for which there is massive demand and reward, and sometimes work which British people don't want to do.

They come more optimitic about this country than they are about any other in Europe. People all over the world are voting with their feet. This is where its at. In London, Europe's largest and most sucessful city, economic growth continues very robust and demand for places to live and work across all areas continues unbridled. For those who haven't been down here recently, you should take a trip and just see how this city has changed in the last 5 years and we can imagine how it will change in the next .

By 2016 there will be another 700,000 people living in this city. Tell me that there's going to be a house price crash - not likely - supply and demand will see to that, even if outlying areas are less popular.

I don't suppose you'd be willing to declare if you have a vested interest in property cuckoo? Either as an owner or perhaps you work in the property industry in some capacity?

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They are building within the Thames Gateway and there are a lot more dense developments and flats planned.

I'm sure they can be accommodated. Really, these doomsayers are very naive and sometimes i think they must live in very depressed towns or isolated villages. If they came here they'd see how vibrant and booming things are.

Its just denial of reliality to suggest otherwise.

Oh there's so much ignorance in this post it's quite sad....

So all these people, coming across from Eastern Europe arrive in the UK and get their minimum wage job - and they then buy a £200K flat in the Thames Gateway?

It's just denial of reality to think that this will be the case... :lol:

Open your eyes and switch on your brain, oh feeble minded bull! :rolleyes:

Edited by Badlad1967

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Guest grumpy-old-man

No - that's quite wrong. The funding for the Games is already planned and the mechanism to pay the bills is operating (i.e special levy of £20 per council tax payer per year for 6 years - it shows up on your statement) and all the projects are at a further stage of planning than any other games. Its ahead of target and budget and thankfully free of Wembley-type **** ups now the London Continental Railways saga has been resolved.

Its wrong to rely on masssive public works projects of the sort the games will bring to London prior to 2012 just to prop up the economy & employ people, but it will be a safety cushion and pave the way for massive investment in infrastructure leading to greater economic growth afterwards.

In addition the whole mood is very positive generally and not cynical.

the UK hosting the Olympics will be hilarious :lol::lol:

Should we take bets on how much it goes over budget & still won't open in time ?

Look at the new Wembley Stadium :lol::lol: it nearly collapsed a while back & half the roof fell off :blink:

the 200 yard sprint will have 5 lanes coned off, going down into 1 lane for the last 100 yards (just like the motorways)

blokes will be wheel-barrowing sand from the long jump to finish off the building work :lol:

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Guest Bart of Darkness

the UK hosting the Olympics will be hilarious :lol::lol:

Should we take bets on how much it goes over budget & still won't open in time ?

Look at the new Wembley Stadium :lol::lol: it nearly collapsed a while back & half the roof fell off :blink:

the 200 yard sprint will have 5 lanes coned off, going down into 1 lane for the last 100 yards (just like the motorways)

blokes will be wheel-barrowing sand from the long jump to finish off the building work :lol:

It has all the potential of another Millennium Dome fiasco, but with the added "benefit" of worldwide embarrassment for the UK.

Should be interesting to see if they can avoid the usual pitfalls for once.

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I am not sure what you mean by a "Eastern European wage" but my understanding is that everyone gets at least the minimum wage. It is also easy to qualify for additional tax credits. Are you seriously saying there is anyone in the country who cannot "afford to work"?

Average wage in Poland is £4000 per annum.

Do you really think all business is in the UK is done 'through the books'! :lol::lol:

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i think cuckoo has finally gone "cuckoo".

40 hours per week X minimum wage .. tap .. tap .. tap ..

is a multiple of ???

i've got it - i've got it - cuckoo has a VI in selling calculators

with lots and lots and lots of digits. ;))

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Average wage in Poland is £4000 per annum.

Do you really think all business is in the UK is done 'through the books'! :lol::lol:

No, but I do think there is plenty of minimum wage jobs that do not require much in the way of skills.

I replied to a poster who thought that there were British people willing (desperate even?) to work but could not afford to do so at "East European" wages. I pointed out they could easily get a job paying the minimum wage, which is much higher. I am sure there is no suggestion that anyone, no matter how retarded and unskilled, who is willing and able to do a full time job in the UK would have to settle for 4k pa?

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Do you honestly think that everyone in the country could afford to work for minimum wage?

Yes, at least in that they would be better off than on benefits. Maybe not much, but I am pretty certain than no-one would make a loss by working. What is the least wage you think people should be prepared to work for, and why would you expect the taxpayer to hand out money to those who cannot earn that much?

We have to pay British living costs for the rest of our lives, people over here for a couple of years to make money and go home don't... that makes a vast difference in the ability to survive.

Survive? You really are making it sound rather dramatic.

Yes, the migrants can live in the UK for less because they are willing to live in cheaper accommodation. However, that does not mean the natives cannot afford to work. My understanding is that once you get a council house, it is yours to use no matter how rich you subsequently become. I don't know how hard that is to achieve that at present, but there clearly is a large number of people for whom the cost of accommodation is not a concern as theirs is heavily subsidised by the taxpayer. The rest would still be better off if they worked. I don't doubt there are people who live in poverty. What else is new?

How do you pay off a 200k mortgage on 5 pounds an hour?

You don't, because you don't take it out in the first place. Do you really blame East-European migrants for the state of the housing market? Remember, they only came in 2004. Was everything just peachy before then?

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Average wage in Poland is £4000 per annum.

Do you really think all business is in the UK is done 'through the books'! :lol::lol:

This influx of immigrants won't make the slightest bit of difference to London or the rest of the UK. They're getting paid peanuts really (though they tend to work hard) so are they really either going to buy or rent that 250k flat in say Bromley? :lol: Not a pretty chance.

They live about 6-10 in house crammed in like sardines paying about £60 p/w each. To say they're going to have the slightest impact is laughable I'm afraid.

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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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