Sunday, April 19, 2009

We’re almost out of the wood! Green shoots will grow into great big oaks! Phew!

Economy 'no longer in free fall'

The economy is no longer in free fall and a recovery next spring is likely, a renowned economic think tank has said. Stabilising markets and the easing of credit conditions may well mean that the worst of the recession is over, The Ernst & Young Item Club said.

Posted by flintster1994 @ 03:26 PM (1616 views)
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10 thoughts on “We’re almost out of the wood! Green shoots will grow into great big oaks! Phew!

  • Hmm same think tank that failed to predict the ridiculous rise in house prices would lead to the crunch. I am starting to think econmic “think” tanks should be sued for the misuse of the word think.

    All hail the glorious leaders recovereh!

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  • flintster1994 says:

    You’ve got to love BBC reporting,

    Headline. “The economy is no longer in free fall”

    Further down in the article. “We face another 12 to 18 months of serious grief,” he said.

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  • The problem with these so called ‘think tanks’ is that they can never make a proper assessment of factors that have not been seen before, and use economic models that do not take into account all the data that may be significant.

    This country is now dependant on borrowing on an unprecented scale, from investors who are not UK domiciled. While the government is having to borrow far more than UK based savers can stump up, we also have an immense quantity of existing commercial debt owed to the same class of investor, that has to be periodically re-negotiated and rolled over.

    Uncertain that they would be able to sell the required quantity of Gilts, while interest rates are being depressed, the govt has started printing money (so called quantitative easing) to plug the gap at the soveriegn level. However, embarking on this course will only serve to make the overseas investors even less inclined to lend to the UK, as we are effectively devaluing the currency.

    The right decision would have been not to indulge QE, and accept that interest rates had to rise in order to secure overseas funds.

    What the govt has done is take the first steps towards what is essentially the Zimbabwe solution – being forced to print more and more money as overseas investors take flight, leading to runaway inflation.

    It is not too late to rescue the situation, but that requires an immediate commitment not to print any more money, to sell government debt at whatever rate the markets are prepared to pay, and to raise interest rates to a level that matches that rate.

    However there is no serious prospect of that happening before the election.

    Unfortunately, the likely timing of the next general election could hardly be worse. There is not enough time for the govt to do the right thing, and see the results of their efforts; but sufficient time to set in play a Sterling meltdown that the next government will find very difficult to arrest.

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  • stillthinking says:

    UT, I think so too. They will have to gamble on a recovery being visible before the election. I am kind of happy that their mind is of necessity concentrated on the task at hand.
    We will find out all on the budget announcement which way they are going to play it.

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  • “However, Peter Spencer, chief economic adviser to the Item Club, warned that the UK was not out of the woods yet. “We face another 12 to 18 months of serious grief. Around 900,000 jobs will be lost this year and half a million next,” he said”.

    The comment above is hardly in keeping with the title. Losses of this order surely reflect “free fall”. The BBC is just trying to print encouraging headlines. Surely, they are as bent as Gordon’s smear campaigners!

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  • Is this the same Item Club that failed to predict the crisis, nor weigh its gravity?

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  • Think tanks are lobbying organisations paid for by self-interested parties.

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  • general congreve says:

    No longer in freefall? Is it f…..

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  • When you fall off a cliff and hit the bottom you are no longer in freefall, but this doesn’t mean you’re going to be able to get up and walk back to the top of the cliff!!

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  • Dissavoweddan says:

    The BBC should realise that what goes around, comes around. And at some point in the future, because of their past, a day of reckoning will come, where a number of different elements combine, resulting in the end of the license fee.

    They do make some excellent programmes, but on the whole, I would sacrifice that for honest non vested reporting.

    Its a few years away yet. But Your day is coming BBC

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