David Smith Needs Help

[thecrashingisles]

http://business.timesonline.co.uk/tol/busi...icle4837626.ece

If this is the bust, why wasn’t it preceded by a bigger economic boom?

In the run-up to the last recession, in the early 1990s, the economy was characterised by runaway growth in consumer spending and soaring wages. At its peak, in 1988, spending was rising by more than 8% in real terms. Average earnings growth moved into double figures. That really was an extreme overheating boom of the kind seen in the early 1970s, just ahead of the first of the big postwar recessions.

This time, however, one striking but unappreciated feature of the economy has been the absence of a consumer boom. Over the past five years the average annual rise in consumer spending has been a very modest 2.4%. The last time consumer spending was even remotely strong was more than four years ago, when it rose by 3.6% between mid 2003 and mid 2004.

What is true of spending is also true of wages, which remain very well behaved in the face of provocation from high inflation. Earnings growth is a modest 3.5%. John Philpott, chief economist at the Chartered Institute of Personnel and Development, says that in contrast to past episodes when recession and rising unemployment were needed to cool an overheated labour market, this is not the case now.

Which really underlines the fact that we have just gone through a pure property bubble. In the lead up to the early 90s crash, prices were driven up on the back of an overheating economy; this time there was nothing supporting them at all except liar loans and collective insanity.

Prices will fall far further this time.

[Bloo Loo]

http://business.timesonline.co.uk/tol/busi...icle4837626.ece

Which really underlines the fact that we have just gone through a pure property bubble. In the lead up to the early 90s crash, prices were driven up on the back of an overheating economy; this time there was nothing supporting them at all except liar loans and collective insanity.

Prices will fall far further this time.

+1

something was wrong in about 2000. It was obvious by 2003 (ERIC)

there is nothing wrong with the market now, it is correcting. Those caught in the bubble are being culled.

No need for a banking bail out.

[dinker]

I certainly haven`t experienced any increase in my standard of living since Labour got in, the opposite in fact.

[RichB]

Well partly the measure of inflation is wrong - it does not take into account how frequently you replace things.

At a guess we replace most things (clothes, electronics, cars, whitegoods, kitchen gadgets) far more frequently than in the 90s. Designed obsolescence has seen to that - and the overwhelming amount of cheap tat.

Anyone found that things just don't last as well as they did? MP3 players outlasting your old walkman...?

[time 2 raise interest rates]

You would have thought David Smith would realise the reason we had double digit wage

inflation in the last recession was down to the fact the Conservatives didn't flood the

country with a few million cheap migrant workers in order to suppress wage inflation

for the masses. Better to have a recession having had a decent pay rise than a recession

when your pay has fallen.

[FrozenOut]

I've read this article, and I honestly don't understand why he doesn't see that all the money went in to houses - I just don't get it?

[davidhpc]

I certainly haven`t experienced any increase in my standard of living since Labour got in, the opposite in fact.

Me neither, I suspect for many people that think they have, it has been an illusion paid for by debt.

[Confounded]

I've read this article, and I honestly don't understand why he doesn't see that all the money went in to houses - I just don't get it?

I read the article too and was astonished by his incompetence. It is unbelievable I know every time I see his articles I would be better off avoiding them but I get drawn to them and always regret it.

I do not have the article with me but I recall his graph shows we have had an extended boom for over 10 year where retail sales grew year on year each year (i.e better than the previous year), just because there was no spike in growth in any one year does not detract from the fact that retail sales were growing year on year for a sustained period, if that was not a boom I do not know what is!

What an idiot, the very worst bubbles are those that are sustained for a long period as the housing and economic growth has been recently, a quick boom and bust is far less painful this is why this is going to be awful.

I hope he follows what he seems to preach and jeopardises his saving and his future like poor Jeremy Clarkson

http://www.timesonline.co.uk/tol/comment/c...icle4836545.ece

[interestrateripoff]

Well partly the measure of inflation is wrong - it does not take into account how frequently you replace things.

At a guess we replace most things (clothes, electronics, cars, whitegoods, kitchen gadgets) far more frequently than in the 90s. Designed obsolescence has seen to that - and the overwhelming amount of cheap tat.

Anyone found that things just don't last as well as they did? MP3 players outlasting your old walkman...?

I thought this for a long long time.

When I first moved in with the wife I bought a Bush 28" WS TV, in 12 mths I had around 4 of them as they all had the same fault of a purple tint at the top of the screen, got my money back and got a samsung, it was £100 more, this lasted for a couple of years but had an extended warranty with it, the on/off switch broke and Samsung no longer made that on/off switch so I had a new TV. So it worked out that in 5 years I averaged a new TV every year.

My mum and dad had a colour TV that lasted them around 15 years before it got replaced, I think in about 30 years they had 4 TV's.

LCD's in laptops are poorly designed once the back light has gone it's cheaper to buy a new laptop than replace the screen. The backlight is fragile buts costs around £20, new screen your looking at upwards of £200.

Designed obsolescence is over unfortunately we all have products like that in our homes, which really worries me, nothing lasts like they used to.

[Sinking Feeling]

Over the past five years the average annual rise in consumer spending has been a very modest 2.4%.

He does actually raise a very good point; if the vast amounts borrowed from 2001-2007 only increased consumer spending by 2.4% it just goes to show how bad things would have been without this money, and more to the point how bad things are about to get!

[game over]

David $40 a barrel, Smith.

He couldn't spot the link between increased bank lending and rising house prices.

He also thought that debt exceeding UK GDP was no problem because the average Britain has a very expensive asset, their home, which would balance their personal finances. He forgot that house prices are a matter of opinion, but the debt is REAL.

David Smith is PROPER thick and extremely arrogant.

[megaflop2]

You would have thought David Smith would realise the reason we had double digit wage

inflation in the last recession was down to the fact the Conservatives didn't flood the

country with a few million cheap migrant workers in order to suppress wage inflation

for the masses. Better to have a recession having had a decent pay rise than a recession

when your pay has fallen.

The Berlin wall was up.

[crash2006]

i dont really follow any of those reporter views, crap view and not work the electrons on my screen.

Edited September 28, 2008 by crash2006

[ubuntu]

I never read any of the so called 'serious' newspapers but many supposedly educated & intelligent people spend their weekend reading the trash opinions of these columnists and then take their written word as gospel without any critical thinking of their own.

[Bloo Loo]

I never read any of the so called 'serious' newspapers but many supposedly educated & intelligent people spend their weekend reading the trash opinions of these columnists and then take their written word as gospel without any critical thinking of their own.

thats a worry.

[Ash4781]

He should look at what happened in Japan.

[Elizabeth]

I just think this is extremely funny and says everythign about the state of britain. I don't think it is limited to just politicians. I think there are a lot of government managers who break the wheel regularly just so that they can claim to have invented it - it is the most bizarre thing I have ever seen.

[Steppenpig]

My mum and dad had a colour TV that lasted them around 15 years before it got replaced, I think in about 30 years they had 4 TV's.

...

Designed obsolescence...

Agreed. My parents are only on their third or fourth since the beginning of the 70s.

And format changes.

And people buying computer toys that they don't really need or use.

How come I spend hundreds of pounds on computer equipment every year that I never used to have to, and somehow this increased expenditure has reduced inflation?

Edited September 28, 2008 by BigPig

[Take Me Back To London!]

I read the article too and was astonished by his incompetence. It is unbelievable I know every time I see his articles I would be better off avoiding them but I get drawn to them and always regret it.

http://www.timesonline.co.uk/tol/comment/c...icle4836545.ece

I was absolutely gob smacked by his article today. I like to read his articles from time to time because they are so bad they are good, but to read his every article is a waste of one's life. It's rather like the attraction of X Factor and Britain Has Talent, watching the displays of the dammed right awful, talentless and incompetent.

I take my hat off to David Smith, he has really excelled in his high standards of crassness.

[Take Me Back To London!]

I've read this article, and I honestly don't understand why he doesn't see that all the money went in to houses - I just don't get it?

I would of thought that given his economical slant on things he is heavily invested into the housing bubble. He is in denial that there is/was a housing bubble, he needs to go into rehab.

[Jonesy]

He does actually raise a very good point; if the vast amounts borrowed from 2001-2007 only increased consumer spending by 2.4% it just goes to show how bad things would have been without this money, and more to the point how bad things are about to get!

Very true - I find it amazing when you look at the graphs from Credit Action, how much mortgage and personal debt has had to increase to keep the economy ticking along at a moderate pace.

I was surprised how confident the article was about the recession being mild, I'd worry that given the contraction of credit the saving ratio will snap back quite sharply as lending contracts and people pay down debt, plus coupled with a rise in precautionary saving it could be vicious - for the high street anyway.

[OnlyMe]

DS & Co must be living in a little bubble.

Outside their world:

Concentration of capital in housing and little else - investment has been dire.

1,000,000 manufacturing jobs gone.

Whole manufacturing industries wiped out.

Pensions destroyed/eroded by Gordon's first tax/investment breaks reduced or stolen.

Defined benefits pensions almost gone except for the top tier.

Massive trade deficit - huge leakage of potential profits from any stimulus out of the country.

The workforce is now increasingly part-time/short working/short-contract or just full time temp.

Extreme pressure on wages at the low end from allowing 3/4x too many to enter the market - result more money out of the country as it was sent home.

The sectors that have grown have produced poor jobs - call centre and retail/warehouse.

Tax breaks to send jobs abroad / employ equivalent of H1B's - more money out of the country.

Haulage banjoed - becuase of Clown's tax cheaper to drive lorries form abroad full of fuel and work here (well it was for a time at least).

Extreme debt - credit/loans/mortgage - one off positive hit, then all it does is erode net purchasing power.

A lot of money has gone abroad - holiday homes, investment in flats in outer Mongolia.

Even more money as gone abroad as approaching 500,000 ditch blighty with their housing profits or skilled people with no housing decide to bail out yearly. They are either fed up with tax, government, or having PC rammed down their throat or their own country changed beyond recognition in front of their eyes - what the heck might as well go somewhere warm and cheaper and feel as in place.

Banks have bee ripping small companies to shreds with interest rates far higher than mortgage rates.

Commercial landlords have been ripping their clients to shreds with rents far higher than their businesses can sustain.

Business has been crippled by high costs and huge amounts of red tape.

The public get watched, fined and crapped on every time they go out the door - why bother! Cut out the middleman and get your stuff delivered from CHina

for the same price (or less).

Etc etc etc etc etc.

Pretty much the only positive trend (in terms of pseudo growth) is the growth in the population and money supply (nearly all funded form the future).

PRODUCTIVITY has gone nowhere. Hence no real growth at all.

Edited September 28, 2008 by OnlyMe

[eightiesgirly]

I love reading his stuff, it's such a relief when I stop.

[OnlyMe]

I love reading his stuff, it's such a relief when I stop.

Don't get relived quite yet - not even started on the negative effects of shifting more of the economy and employment from the private sector to the public by creating non-jobs and busy-bodies - which is a huge drain of resources and a drag on growth.

[Elizabeth]

I would of thought that given his economical slant on things he is heavily invested into the housing bubble. He is in denial that there is/was a housing bubble, he needs to go into rehab.

I was in denial at the beginning of 2002 that there was an IT Bubble, well actually, not denial, I just hadn't thought about it. That was just what IT technicians got paid. Market forces simply weren't that obvious until the whole thing crumbled. But I was not a government minister!