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tuggybear

Uk Housing Bust To Hit British Pound

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Quote:

The UK Economy and Pound Are In Trouble

I recently read this poignant comment by Jim Grant, long-term editor and market sage for Grant's Interest Rate Observer :

"The full catalog of the consumer's troubles would fill out a Sunday-morning sermon in a Puritanical meeting house. Improvidence compounded by idolatry — yea, the worship not of graven images but of houses — is the sum and substance of the situation."

Clearly, the pricking of the housing bubble was the catalyst for the downward spiral in the U.S. economy. It has paved the way for lower interest rates and varying degrees of desperate measures from our Money Gods — the Federal Reserve.

But if you think the U.S. has economic issues, get a load of the extreme exposure to housing the UK's economy is grappling with ...

UK consumers have about $278 billion in residential mortgage backed securities (RMBS). This is the toxic derivative-related stuff; RMBS are the dirtiest four letters in "The City" right now. UK exposure to RMBS is the largest exposure in Europe by far.

Britain's total RMBS exposure is dwarfed by the $4.39 trillion racked up in the U.S. But as a percentage of total GDP, the UK RMBS exposure is a whopping 7%, whereas the U.S. RMBS exposure to GDP is a miniscule 0.2%.

Residential mortgage debt outstanding per capita in the UK is 136%; it is 103% in the U.S.

Residential mortgage debt to GDP in the UK is 51%, compared to 44.5% in the U.S.

Debt to disposable income for the UK consumer is 164%, compared to about 138% for the U.S. consumer.

You may not be too impressed with these numbers. But keep in mind, since 1996 UK housing prices have tripled, whereas U.S. housing prices only doubled. And if you believe as I do in reversion to the mean, i.e. that prices sooner or later come back to a natural historical path; you can see why the UK is much more exposed to a downturn in housing than the U.S.

Whole Article : http://www.marketoracle.co.uk/Article5339.html

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That's a depressing article (despite its forecast of much greater than 12% house price drops in 2009!).

I'm sure he's right and the pound is going to get absolutely hammered even worse than it already has been, and against the dollar as well as stronger currencies.

There goes our collective spending and earning power.

And I thought I was getting a pay rise next year!

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Guest Skint Academic

One thing that does occur to me though, if we get inflation then the pound will get hammered, but if we get deflation because our money supply decreases, debts get paid off or defaulted, then this should mean that the pound strengthens surely? Or is it a case of whether people not actually wanting to buy pound sterling? And how would this affect our exports?

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Quote:

The UK Economy and Pound Are In Trouble

(snip)

Britain's total RMBS exposure is dwarfed by the $4.39 trillion racked up in the U.S. But as a percentage of total GDP, the UK RMBS exposure is a whopping 7%, whereas the U.S. RMBS exposure to GDP is a miniscule 0.2%.

Doesn't 'exposure' normally refer to the person holding the debt (i.e. the exposure is to the risk of default)?

On the face of it, this exposure would have to be in a country with savings -- not the UK, then ;)

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Our future prosperity.

No arguing with the numbers in that article, black and white.

The definition of pithy.

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Guest Skint Academic
We export death. We are the biggest arms exporter. How could this country get any more despicable?

Mr Academic was watching UKTV History channel today about the Victoria cross. One of the VC winners mentioned later executed rebellious Indians by tieing them to the front of cannons and then firing them. The overall tone of the program was that these people were insurgents and trouble-makers when really they were just fighting for the freedom of their invaded country.

This country has a long history of being dispicable.

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One thing that does occur to me though, if we get inflation then the pound will get hammered, but if we get deflation because our money supply decreases, debts get paid off or defaulted, then this should mean that the pound strengthens surely? Or is it a case of whether people not actually wanting to buy pound sterling? And how would this affect our exports?

This is a good point. It's hard to predict which will predominate.

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Britain's total RMBS exposure is dwarfed by the $4.39 trillion racked up in the U.S. But as a percentage of total GDP, the UK RMBS exposure is a whopping 7%, whereas the U.S. RMBS exposure to GDP is a miniscule 0.2%.

Holy milk chocolate flavoured tennis shoes! Not sure what to say to that, other than the previous sentance.

We export death. We are the biggest arms exporter. How could this country get any more despicable?

At this risk of sounding, well, rational...

<rant>

No, we don't export death, we export weapons, as do most of the developed and developing worlds. We could get a lot more despicable if, like China - the country whose cheap manufactured outputs allow you to type out that message on a basically dirt cheap piece of hardware whilst wearing dirt cheap clothes, and probably sat in a house loaded up with dirt cheap Chinese manufactured "handy products" - we exported them to absolutely all and sundry without giving the remotest flying **** what they're likely to be used for.

I strongly recommend taking a look at some of the news footage we see coming out of some of the truely tragic (yes, I do believe war is tragic, before you think I'm some sort of bloodthirsty loon) overseas trouble-spots we've got at the moment, and I think you'll find that your standard African (or other third world) trouble-spot is fueled by a mix of AK47s, RPG7s, Soviet designed tanks and APCs, and aging Soviet designed aircraft, either in the form of Cold War relics, or Chinese or North Korean copies supplied since that time. I mean, c'mon, in terms of cold, clinical hardware, Dafur isn't exactly awash with Harriers, Merlins, Challengers, SA80s, and the like, is it?

UKTI said that the figures were boosted by orders for Eurofighter Typhoon jets from Saudi Arabia, the world’s biggest arms buyer, which has imported $31 billion (£16 million) in weapons over the past five years. There were also orders from Oman and Trinidad and Tobago for offshore patrol vessels.

I mean, look at this lot. Fighter jets to the Saudis. How many times have the Saudis used their armed forces in the last, oh, erm, lifetime? Once. The first Iraq war. Fair enough, if you think it was just cool for Saddam to occupy Kuwait, then clearly the Saudis are Evil Warmongers, but if not, then where's the problem in that? Oman and Trinidad and Tobago... offshore patrol vessels... hmm, now are we talking about the supply of perfectly legitimate, peaceable nations with a means of maritime border patrol here, or some kind of dastardly means of shelling political discenters who've made the mistake of popping down to the beach for a Rum \ not-rum-because-that's-not-really-on-in-Oman Punch? Something tells me it's the former. If you feel the need to take it to extremes, I suggest you go find a Septic in his 90s who worked in an armaments factory between 1939 and 1945 and tell him he's evil for supplying us (it's a weapons export, after all, and that's what you've got a problem with) with a substantial proportion of the means, both material and financial, of defeating Hitler. After all, crap as they were, Shermans killed Germans. And if you fancy getting mildly more up to date, I suggest taking a pop at those well-known combat chassis' with side-wall flesh, the Belgians, for selling us the design for the gun our troops used when taking the Falklands back. Bloody Belgians... evil they are... I bet the Falkland Islanders were gutted they didn't get a chance to become Argentinian.

Sorry, but whilst there's nothing jolly about defence, it would take a tinfoil hat leap of absolutely Biblical proportions to describe Britain as some sort of Grade A International Pariah when it comes to weapons exports. We ain't perfect, but we're a hell of a lot cleaner than an awful lot of arms exporters, and whilst it might be nice to think nations who produced arms would never sell them abroad, that clearly isn't going to happen under any circumstances, and neither should it.

Then again, if you're the sort of chap who takes the view that we can all just get rid of weaponry and be nice to each other, and it'll all be okay, then anything that goes "bang" is going to be a problem for you... especially when the other bloke turns out to have had his fingers crossed and shoots you with something. Far fetched though it may seem that there are actually really nasty people out there, history would lead us to strongly to suspect that not all humanity are a nice bunch.

If you fancy a moral dilemma, how would you feel if George Bush was run over and killed by an Irishman in a British-made tank? Personally, I'd be delighted, as that's one less warmonger to deal with, but hey... it would have been British-exported death...

(Disclaimer, yet again : I am not some sort of gung-ho warmonger, but I cannot for the life of me see the logic in saying that all weapons exports, regardless of destination and potential purpose, are bad. Life just isn't that simple. At the very top of my list of "really bad sh!t" I'd like to avoid is "war", but that isn't entirely my, or any other single human being's, choice.)

</rant>

*cough* Sorry for that. Mods, feel free to delete this post and tell me off for attacking the poster, not the post. Bad form. Had to do it though. Sorry again.

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Quote:

The UK Economy and Pound Are In Trouble

I recently read this poignant comment by Jim Grant, long-term editor and market sage for Grant's Interest Rate Observer :

"The full catalog of the consumer's troubles would fill out a Sunday-morning sermon in a Puritanical meeting house. Improvidence compounded by idolatry — yea, the worship not of graven images but of houses — is the sum and substance of the situation."

Clearly, the pricking of the housing bubble was the catalyst for the downward spiral in the U.S. economy. It has paved the way for lower interest rates and varying degrees of desperate measures from our Money Gods — the Federal Reserve.

But if you think the U.S. has economic issues, get a load of the extreme exposure to housing the UK's economy is grappling with ...

UK consumers have about $278 billion in residential mortgage backed securities (RMBS). This is the toxic derivative-related stuff; RMBS are the dirtiest four letters in "The City" right now. UK exposure to RMBS is the largest exposure in Europe by far.

Britain's total RMBS exposure is dwarfed by the $4.39 trillion racked up in the U.S. But as a percentage of total GDP, the UK RMBS exposure is a whopping 7%, whereas the U.S. RMBS exposure to GDP is a miniscule 0.2%.

Residential mortgage debt outstanding per capita in the UK is 136%; it is 103% in the U.S.

Residential mortgage debt to GDP in the UK is 51%, compared to 44.5% in the U.S.

Debt to disposable income for the UK consumer is 164%, compared to about 138% for the U.S. consumer.

You may not be too impressed with these numbers. But keep in mind, since 1996 UK housing prices have tripled, whereas U.S. housing prices only doubled. And if you believe as I do in reversion to the mean, i.e. that prices sooner or later come back to a natural historical path; you can see why the UK is much more exposed to a downturn in housing than the U.S.

Whole Article : http://www.marketoracle.co.uk/Article5339.html

Now lets have a look at some of these numbers:

US exposure is $4.39 trillion

UK exposure is $278 billion that's a factor of 15.79

For the US this is 0.2% of GDP

For the UK this is 7% of GDP, that's a factor of 35

So this implies that the US GDP is 15.79 * 35 = 552.7 times UK GDP

I don't think so.....

Makes you think about the rest of the article though!

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No, we don't export death, we export weapons, as do most of the developed and developing worlds. We could get a lot more despicable if, like China - the country whose cheap manufactured outputs allow you to type out that message on a basically dirt cheap piece of hardware whilst wearing dirt cheap clothes, and probably sat in a house loaded up with dirt cheap Chinese manufactured "handy products" - we exported them to absolutely all and sundry without giving the remotest flying **** what they're likely to be used for.

I wish your last sentence were right. Britain always obtains 'assurances' before exporting arms. And then accepts those assurances without a moments hesitation or questioning. British hypocrisy at its finest. Don't believe me...check out John Pilger's writings and documentary Death of a Nation about the decades of genocide under Suharto in East Timor. For years the Tories, then Blair (he even lied about it on Question Time) assurred us all those shiny hawk jets we flogged the Indonesians were for defence purposes, despite all the evidence they were being used to bomb the east timorese.

Sorry, but whilst there's nothing jolly about defence, it would take a tinfoil hat leap of absolutely Biblical proportions to describe Britain as some sort of Grade A International Pariah when it comes to weapons exports. We ain't perfect, but we're a hell of a lot cleaner than an awful lot of arms exporters, and whilst it might be nice to think nations who produced arms would never sell them abroad, that clearly isn't going to happen under any circumstances, and neither should it.

Nope we ain't....we're just very good at giving that impression.

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  • 401 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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