Monday, January 21, 2008

UK economic outlook by Roger Bootle

Falling pound may keep recession at bay

"In my professional life there have been three phases of gross delusion about the performance of our economy. The first was the Barber boom of the early 1970s; the second was the Lawson boom of the late 1980s; and the third is the Brown boom that we have just lived through. The extent of the macroeconomic imbalances now is just as great as it was then. The balance of payments gap, as a share of GDP, is as large, and the boom in real house prices has been bigger. Government borrowing has not surged - yet - but the signs are ominous" (we saw the first £25bn in emergency bonds announced today) "The end of illusion means the end of what I called, in the book published under that very name, "money for nothing"

Posted by confused76 @ 02:50 PM (1259 views)
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7 thoughts on “UK economic outlook by Roger Bootle

  • japanese uncle says:

    Once the manufacturing is gone, it’s gone.

    Even under the cheaper pound regime, what can the UK export? For more than a decade, engineering education has been treated incredibly poorly in this country, bringing about a huge gap of resources in manufacturing. Too many people including younger population rushed towards easy profit by BTL and other quasi-pyramid scheme businesses, It takes a couple of decades to redeem this lost generation, unfortunately.

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  • Unwinding of the carry trade… problems…

    http://uk.reuters.com/article/businessNews/idUKL2169385120080121
    Pound falls vs yen
    LONDON (Reuters) – The pound slid to its lowest in nearly a year against the dollar on Monday, pressured by a spike in global risk appetite and further evidence that the UK housing market is heading for a sharp downturn.

    The pound — which has the highest interest rates in the Group of Seven industrialised nations — had benefited from the carry trade where investors borrow low-yielding currencies to fund purchases of higher yielding assets.
    However, fears that economic troubles are spreading beyond the United States sent high-yielding currencies lower.
    “People are coming to the view that it’s not just the U.S. that’s going to suffer,” said Neil Mellor, currency strategist at Bank of New York Mellon. “The dollar has been the default beneficiary as it’s no longer a no-brainer to sell the dollar as markets fall.”
    By 2:24 p.m., the pound was down 0.35 percent versus the dollar, to around $1.9470, having fallen to $1.9461, its lowest level since March. It fell by over 1 percent versus the yen, to as low as 205.72, its lowest since May 2006.
    A broadly weaker euro was down 0.4 percent at 74.43 pence.
    Annual house price inflation in England and Wales fell to its lowest since December 2005, backing the view that the housing market is heading for a sharp downturn, a survey by property Web site Rightmove showed.
    Sterling has fallen from its November peak of over $2.11 to below $1.95 as a raft of negative economic news has increased expectations that the Bank of England is set to cut interest rates by as much as 100 basis points this year.
    In further bleak news for the economy, British public sector borrowing rose more than expected last month leading to the largest deficit for a month of December since records began, data showed.

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  • the housing market is simply doomed:

    DATAWATCH Slowdown in UK housing market shows no sign of abating
    http://www.thomsonfxhub.com/fxhub/forex-news-detail.jsf?newsId=9897
    “At some point you would hope to see some indication that mortgage lending has started to flatten out, but there are no signs of that as yet,’ said Philip Shaw at Investec.”

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  • ”the housing market is simply doomed”

    good.

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  • David Smith's Sub Prime. . . says:

    The Dow was about 555 points down (5.5%) and the FTSE 323 (4.8%) in trading a little earlier….

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  • it_is_going_with_a_bang says:

    The ‘flattening out’ theory mentioned again. LOL.

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  • I’ve just posted a reply on the Torygraph website. His argument that a weak currency will keep recession at bay is insane!

    Weak pound = high petrol costs + high food costs + high gas bills + high electricity bills

    Weak pound frightens off investors and only acts a sop to property speculators. I wonder how many BTL properties Mr Bootle has got.

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