Friday, Oct 30, 2009

Work in progress

The Times: Economists expect Bank of England to extend QE next week

The Bank announced yesterday that it had reached its current £175 billion limit in asset purchases under its scheme of QE, but the majority of City economists expect that it will seek permission from the Treasury to extend this limit next week.
Two thirds of the 62 economists surveyed by Reuters this week said that they expected QE to be extended by at least £25 billion, with many forecasting a £50 billion increase.

Posted by devo @ 11:08 AM (5317 views)
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95 Comments

1. shipbuilder said...

This will be an interesting decision. Needless to say that the majority of City economists expected us to come out of recession in the last quarter. Not that anyone cares, but I don't think QE will be extended

Friday, October 30, 2009 11:12AM Report Comment
 

2. flashman said...

QE is more of a red herring that most people realise. I can’t be bothered to explain this comment (see Mark Wadsworth’s more than adequate explanation of QE)

By the time the Olympics rolls around, the nationalised banks will have been privatised and the government will have made a profit on the sale of their shares. UK Government debt will have started to reduce and the world economy will be growing vigorously. Toxic assets will have become a pub quiz subject. The recently released UK GDP figures are widely thought to be inaccurate (most economists think they will be revised upwards) and there is great confidence that the figures for the next quarter will be positive. In fact, an exaggeratedly bad figure now, will make next quarters’ figures look better than they actually are. Make of that what you will. At its peak, this recession had cost America only 3.7% of its total GDP and they have recently returned some healthy growth figures. They are by far the largest economy in the world and this robust performance in the face of disaster has great significance

Misery guts bloggers and perma bear pundits alike may desperately want to disagree with the above synopsis but the rest of the world is working to a different script and we can either choose to get in step with reality or be left in a state of confused angst. There will be several wobbles along the way to sustainable recovery but the world is, nevertheless, inexorably heading towards recovery.

House prices are being held up by low interest rates and unemployment numbers that have, thus far, stubbornly refused to reach the levels of past recessions. Not everyone believes that this is the case. I often read on this site that QE is holding up house prices. This is illogical. The banks have severely restricted their mortgage lending, so how can QE be supporting house prices? At best, there is a rather weak, indirect link.

If unemployment gets nearer the 3 million mark then house prices will probably take a tumble. If unemployment peaks at circa 2.6 million then house prices will probably wobble up and down for a few years (there is considerable statistical proof that house prices react strongly to unemployment, once it exceeds the 2.75 to 2.8 million mark). Of course, there are always special circumstances that can skew an outcome but the link between unemployment and house prices is so strong that I have no reason to doubt that past correlations will hold. The only caveat is that low interest rates will temper the effects of unemployment and higher interest rates will compound the effects of unemployment. I have often stated my doubts about the now, outdated 3.1 to 3.3 million unemployed forecasts. It seems I might have been right. Most forecasters have recently lowered their estimates to somewhere between 2.7 million and 2.9 million (it is worth noting that unemployment usually lags GDP growth, so we can expect the dole queues to carry on growing for two or three quarters after growth has been re-established. These newly lowered unemployment forecasts are very slightly above the house price tipping point but they are not as high as in past recessions. The evidence therefore points to house prices taking a further small hit and then stabilising for a few years.

btw letthemfall, I am not smugdog. wtf?

Friday, October 30, 2009 11:59AM Report Comment
 

3. Duncanio said...

Oh it will be extended, simply because they cannot afford not too. We've pumped 6.53% of our annual GDP into the Economy and still the thing hasn't grown.

That means over the year the 'actual real growth' will be 6.53% less than whatever figure we have (and it's likely to be negative).

If I handed you 6.53% of your annual household income last year as a cash sum, you would expect your wealth to increase by about the same amount. The comparison is that the Economy has got 'so many bills to pay' that it has absorbed that 6.53% and requires even more! - we will end the year with our wealth diminished despite the huge injection.

The US have done the same and are claiming they are out of recession, in their case they have injected about 5.6% of their annual income and seen a 1 quarter rise of 0.7% (which they then annualised to be 3.6%)

It's all smoke and mirrors - no real growth - except in the money supply. Soon we will be wiping our bums with tenners as they will have little or no monetary value.

Friday, October 30, 2009 12:03PM Report Comment
 

4. tyrellcorporation said...

@ Flashman.

A good synopsis of the current situation but surely all the toxic assets are still in place, what has materially changed for the World to just carry on as 'normal'? Accounting rule changes and massive bailouts have masked the stench but the carcass is still there.

Also, IMO, public sector redundancies are lagging - but even more so. The private sector has been hacking and slashing for two years already and are pared to the bone. Collapsing tax revenue will mean public sector layoffs are a given and this will create an extra wave of unemployment and downward pressure on house prices.

Friday, October 30, 2009 12:12PM Report Comment
 

5. watching with amusement said...

@ Flashman - "At its peak, this recession had cost America only 3.7% of its total GDP"

Yet, USA: GDP fell 6.1% in Q1 2009 (I admit I haven't done too much research into this... just nipping out...)

I can't see how these figures add up!

Friday, October 30, 2009 12:35PM Report Comment
 

6. flashman said...

hello tyrellcorporation: Companies are setting up left right and centre to purchase these ‘toxic’ assets. The recently publicised Barclays deal was not actually the first major deal of this kind. Obviously these new outfits are convinced that they can make a healthy profit out of managing and trading these assets. Maybe they are right, maybe they are wrong but it won’t matter because they will be off the banking books

The unemployment forecasters are aware of the coming public sector layoffs and have therefore factored them in. Unemployment forecasting is very tricky so we will have to see how it pans out. Current unemployment numbers are certainly lower than previously forecast

Friday, October 30, 2009 12:40PM Report Comment
 

7. watching with amusement said...

Hmmm... that 6.1% may be the annual rate... not particularly clear in either the article or the statement. Not happy with people just firing off these figures without proper details...

Friday, October 30, 2009 12:41PM Report Comment
 

8. flashman said...

watching with amusement: They always annualise each quarter’s number.

Friday, October 30, 2009 12:45PM Report Comment
 

9. Duncanio said...

flashman

"Misery guts bloggers and perma bear pundits alike may desperately want to disagree with the above synopsis but the rest of the world is working to a different script and we can either choose to get in step with reality or be left in a state of confused angst. There will be several wobbles along the way to sustainable recovery but the world is, nevertheless, inexorably heading towards recovery."

yeah, the script of lies.

Can you explain the post I made above?

How can you inject so much into an Economy and still not see growth?
How is the Government going to make a profit from the stakes it holds when the share price is steadily falling and it has such a huge stake in them they will have to offer a large discount to market rate to sell them?

How can you explain Lloyds needs to raise 20 Billion to keep afloat when the company market cap is only 20 Billion?

"There will be several wobbles along the way to sustainable recovery but the world is, nevertheless, inexorably heading towards recovery"

Where - what examples can you give? Which countries have shown +ve growth who haven't injected large percentages of GDP into their Economies?
Can you even show a +ve growth indicator that has appeared two months in a row?

Are you from another planet? Your economics certainly seems to be - planet 'blind hope' I think you'll find.

Friday, October 30, 2009 12:45PM Report Comment
 

10. flashman said...

watching: There was a graph and article in yesterdays CNN Money that showed the quarterly numbers and quoted the total decline of 3.7%. It should make things clearer for you

Friday, October 30, 2009 12:48PM Report Comment
 

11. mountain goat said...

Flashman I don't appreciate name calling "Misery guts bloggers" etc and find this unusual coming from you.

You are entitled to your optimism as am I to my belief that any potential recovery you describe from policies which have resulted in increasing public and private debt are doomed to a bigger panic than last year. Call it pessimism if you must. At least I will not go to my grave worrying about debts unpaid, but at this rate neither will I own a home. I believe this is a more optimistic approach to life than leaving debts to my wife and child.

Friday, October 30, 2009 12:55PM Report Comment
 

12. quiet guy said...

Oh, lighten up Mountain Goat!

I'm one of those misery guts bloggers and a perma bear but I found Flashman's description quite funny.

Friday, October 30, 2009 01:08PM Report Comment
 

13. flashman said...

mountain goat: I didn't imagine for a minute that anyone would be offended by the deliberately quaint "misery guts". However as you are offended, then please accept my sincere apologies. I often think that the negativity expressed on this site is a little strong. Harmless in itself … but it appears that several posters have been led astray by it and have made decisions that have harmed their family finances (several posters have recently expressed regret). Please accept my post as a counterweight to what I consider to be a damaging and willful excess of negativity.

I think that house prices will fall a little further but a belief that the world is going to hell in a hand basket is almost certainly bad for the soul and wallet.

Friday, October 30, 2009 01:12PM Report Comment
 

14. quiet guy said...

Flashman,

You've stated that QE has a marginal, at best, effect on house prices and lending is still restricted. Could we take the discussion from the other end; what effect do you think QE does have if it doesn't support property prices?

Friday, October 30, 2009 01:13PM Report Comment
 

15. crunchy said...

If QE was a red herring why are they so obsessed with it?
Surely the banks are now solvent and thus able to restrict their lending (freeze the falls) and use the endless flow of money to speculate in the dubious over bloated investment markets.

Sorry nobody can pis8 down my back and tell me it's raining. No matter how hard they try.

Friday, October 30, 2009 01:14PM Report Comment
 

16. flashman said...

crunchy: a few of the banks are not yet reliably solvent (the new liquidity ratios are difficult to achieve). Amongst other things, QE is designed to make them reliably solvent, so it might continue for a little while longer. Banks will continue to hoard money until they have achieved the legally required liquidity ratios. QE will then be switched off and lending will slowly increase. The path will be bumpy for a while

Friday, October 30, 2009 01:21PM Report Comment
 

17. crunchy said...

If the banks were not made solvent they would have had to liquidate their housing stock ( mass repo's ) and realised the loss on the way down.

Keep things simple and you will not be confused by the conjures.

Friday, October 30, 2009 01:30PM Report Comment
 

18. nickb said...

@flashman
I'd be interested to know how you square "sustainable growth" with either or both of: permanently decreasing oil production from 2020-2030 at latest (UKERC, IEA reports) and what needs to be done to mitigate climate change.
Nick

Friday, October 30, 2009 01:36PM Report Comment
 

19. flashman said...

quiet guy: There are two camps. Most economists think that QE is designed to increase bank liquidity in line with the new ratios (see my comments to crunchy). They believe that it will work. A smaller group believe that QE cannot work to increase bank liquidity when insolvency is the threat and capital is scarce. This more pessimistic group believe that there is already too much liquidity and that more liquidity is harmful in current conditions. I am not a fan of QE and I think that it was only necessary because of the premature introduction of the new liquidity rules. They should have delayed the increase in liquidity ratios until we were out of the woods (not ideal but in an emergency etc). Then we would not have needed QE. Some banks would have gone belly up, but so what? Weaker companies should always be allowed to go

Friday, October 30, 2009 01:38PM Report Comment
 

20. crunchy said...

Misery guts or greedy guts, which one is better?

F I G H T !

Friday, October 30, 2009 01:41PM Report Comment
 

21. mountain goat said...

Flashman thanks for the reply. I try to ignore rude posters (and hoped that didn't include you) although lately I have failed to let some things go unfortunately, which might explain my touchiness...

It would be sad if those here only read this site. Seems unlikely since the whole point is to post articles from elsewhere. Reading around on the net I think we are not unusually negative on here. Maybe your working environment is the one out of touch and excessively optimistic because the speculative investment sector is where money still flows freely?

Friday, October 30, 2009 01:45PM Report Comment
 

22. timmy t said...

Flasman - surely "Sustainable" growth is brought about by people spending money that is actually theirs rather than borrowed. I think the reason we are still in recession when others aren't is purely because of our levels of personal debt, and people's reluctance to spend. I can't see the unemployment situation getting better for a long while yet and for this reason I think both the recession and QE will continue until well into 2010.

Friday, October 30, 2009 01:51PM Report Comment
 

23. flashman said...

“I'd be interested to know how you square "sustainable growth" with either or both of: permanently decreasing oil production from 2020-2030 at latest (UKERC, IEA reports) and what needs to be done to mitigate climate change.
Nick”
nickb: I try to stay away from arguments about climate change. I don't have enough information. Does anyone? A shrinking world economy would cause a lot of human misery. It's a case of choosing your poison

Many of my energy based colleagues think that the permanently decreasing oil supply story has been exaggerated. In any case, growing natural gas supplies are taking up a great deal of the slack and the development of renewables is growing exponentially. There is even some optimism that the glass ceiling placed on world growth by limited fuel supply will soon eventually be moved a bit higher. Regarding renewables, there are always people who rubbish new technology but they are usually proved wrong. It might take a while but it nearly always gets there in the end

Friday, October 30, 2009 01:53PM Report Comment
 

24. Ian said...

Flashman. Your comments are intersting and carry weight. If I am right you said recently that the price of housing would fall by another 30% in the first half of 2010. Do you still subscribe to this or have you revised your opinion in light of changed circumstances? As far as I am aware banks are not lending more than around three times salary and this restricted supply of capital dictates that sooner or later the price of housing will have to fall as first time buyers simply cannot proceed as they did until the crunch in 2007. It seems evident that taxes will have to rise sharply to repay the national debt and this will further limit spending power. What future for the price of a house?

Friday, October 30, 2009 01:54PM Report Comment
 

25. crunchy said...

Flashman said..."Misery guts bloggers and perma bear pundits alike may desperately want to disagree with the above synopsis but the rest of the world is working to a different script and we can either choose to get in step with reality or be left in a state of confused angst. There will be several wobbles along the way to sustainable recovery but the world is, nevertheless, inexorably heading towards recovery."

A different script? Well I may not want to be part of that script. Revolutions happen when enough people say to hell with this............

I'm not going to take it anymore! http://www.youtube.com/watch?v=F8LPNRI_6T8 There is enough documentation to support this and

even if this is not totally accurate it's a script that stinks.

Friday, October 30, 2009 01:55PM Report Comment
 

26. flashman said...

mountain goat: I am not actually in the speculative investment sector but I take your point

Friday, October 30, 2009 01:56PM Report Comment
 

27. flashman said...

timmy t: sustainable growth can be brought about by a combination of spending money that is not owed and money that is owed. Borrowing is not always a bad thing. Industries live or die on making the right investments and these investments are often made with borrowed money. Foolish lending/borrowing/investment is always harmful. Sensible borrowing/lending/investment can lead to increases in real employment and growth.

The UK has lost so many industries to low levels of investment. It would not necessarily have been bad if they had borrowed some money and spent it wisely. Individuals are the same on a smaller scale

Friday, October 30, 2009 02:06PM Report Comment
 

28. nickb said...

@Flahshman,
Well if you defer to those with most information and time on their hands to analyse it, I think that would mean the climate scientists, who say we need drastic emissions reductions and a move to a decarbonised economy.
point taken about unemployment, but is it ethical to send tomorrows grandchildren to early graves for the sake of less unemployment now? Bottom line is we need greener ways of employing people - fast. Strategic investment in renewable energy infrastructure, home insulation and so on would provide a wealth of green jobs.
On fossil fuel scarcity, similarly, it's surely about the latest and best research says, not about what our friends in this or that industry say, and it says, permanent decline by 2030 at latest.

Friday, October 30, 2009 02:14PM Report Comment
 

29. tyrellcorporation said...

@Flash. 'Companies are setting up left right and centre to purchase these ‘toxic’ assets'

If banks are being cleansed by these benevolent companies then shouldn't we pile into banking shares? Why has Barclays plunged over the last 12 days? (20% drop).

Friday, October 30, 2009 02:20PM Report Comment
 

30. shipbuilder said...

Flashman, you've made some statements there about what might happen, but how do you actually see this happening? What will be the driver for growth? There are articles suggesting that recent US growth is almost entirely down to government stimulus programmes - is that a recipe for the growth being sustained?
An article posted a few days ago seemed to make a lot of sense to me - that GDP growth since the 80s in the US (and probably the UK) has exceeded growth in the 'real' economy and as such we are reliant on the 'paper' economy, hence efforts to prop up asset prices.
Do you think this is sustainable? What way do you see our economy moving to produce growth?

Friday, October 30, 2009 02:22PM Report Comment
 

31. flashman said...

crunchy@15

"If the banks were not made solvent they would have had to liquidate their housing stock ( mass repo's ) and realised the loss on the way down. Keep things simple and you will not be confused by the conjures"

The banks do not actually have any significant holdings of housing stock.

They have a queue of people waiting to buy anything they have and are delighted to sell it as soon as they get it because it helps with their liquidity ratios and bottom line. Repossessions are running at a low rate because interest rates are low and unemployment is not yet as severe as it was in past recessions

Friday, October 30, 2009 02:31PM Report Comment
 

32. timmy t said...

Flashman - I agree with your comments but the problem is that too many individuals have spent what they didn't have on things they didn't need. Equity was taken from their houses to fund lifestyles beyond what was sensible. QE is now backfilling some of that but will not even come close to plugging the gap entirely.

Your comments re sensible lending are bang on but there isn't enough cash to support lots of viable businesses, exacerbating the problem by making more good folk redundant.

Only when houses bottom out and people know what they really "have" can sustainable growth start. We are not there yet IMO. The US suffered the true HPC required to start again but saw much more sizeable falls than we have seen. But we have a government determined to see off the crash we need until after the election.

Friday, October 30, 2009 02:33PM Report Comment
 

33. mr g said...

Flashman@2 said "there is great confidence that the figures for the next quarter will be positive"

There was great confidence that quarter 3 would be positive.

I wouldn’t pay the so called “experts" in washers and certainly take their forecasts with a pinch of salt.

As I've said before, GDP, inflation, unemployment, industrial output, interest rates, etc, etc ad nauseam. You name it, they’ll get it wrong and get handsomely paid for doing so.

For the record, I'm neither a misery guts or perma bear but I strongly object to these clowns being consistently wrong in their forecasts, if my track record at work had been as cr*p as their's I'd have been visiting the job centre in no time.

Rant over!

Friday, October 30, 2009 02:36PM Report Comment
 

34. tyrellcorporation said...

Poor old Flash, his keyboard must be smoking. LOL!

Friday, October 30, 2009 02:42PM Report Comment
 

35. Ndg said...

Climate change is natural. Check out recent (bone fide) geology reports (by qualified experts - not hysterical monkeys). The evidence is clear and leads to obvious conclusions - carbon tax is/will be robbery. It is without doubt an overblown scam, backed by people who just can't be bothered to research the facts and who are, quite willingly, pulling the wool over their own eyes.

USA 3.5% GDP growth? Another farce. Roll on next March when reality may start to kick in. Then, perhaps, there will be some progress made.

Friday, October 30, 2009 02:45PM Report Comment
 

36. crunchy said...

28. flashman

It saves me writing endlessly but I hope you get the idea.

Please take some time out to watch Fall of the Rebublic even if it's just to understand why some people, not all, are sick and tired of this

script. Call me a misery guts if that's true, but misery does not grow in a just humanistic system where the government serves all,

if indeed it serves at all.

Friday, October 30, 2009 02:47PM Report Comment
 

37. Ndg said...

Forgot my point (sort of). QE will provide hyperinflation. Is that good?

Friday, October 30, 2009 02:48PM Report Comment
 

38. Ndg said...

UK = 61,382,500 flash-men and maybe 500 crunchys. That's the problem (and I don't mean too many crunchys!)

Friday, October 30, 2009 02:51PM Report Comment
 

39. crunchy said...

BTW Flashman as smugdog. That would deserve an Oscar! lol

Friday, October 30, 2009 02:55PM Report Comment
 

40. flashman said...

mr g: I like a good rant. The press said that economists were confident about last quarter but I never came across one who actually was. They (economists) actually are quite confident about next quarter. Who knows what the press will report??

Friday, October 30, 2009 02:57PM Report Comment
 

41. flashman said...

tyrell “If banks are being cleansed by these benevolent companies then shouldn't we pile into banking shares?”

I’m not an expert in share valuing but I’d have to give you the standard answer, that the 'cleansed state' was to a large extent, priced in some time ago. A price often falls when a long anticipated benevolent event actually happens. I don’t know if this is the case, in this instance. I doubt the chairman of Barclays knows where his shares are heading.

Friday, October 30, 2009 03:06PM Report Comment
 

42. mark wadsworth said...

@ Flashman, I'm glad I'm not the only one who's realised that QE is smoke and mirrors. Of course it has "an effect" but it is very, very marginal.

@ Everybody else. I wouldn't call Flashman an optimist, he outlines a nightmare scenario where house prices don't tumble, thus making him a pessimist from my point of view.

Friday, October 30, 2009 03:07PM Report Comment
 

43. crunchy said...

36. mark wadsworth

Let's see what happens when/if they remove it then.( Listed In my favourites already! )

Flash you can put this one in yours-

America over the next two years will go from bad to worse, untill it will be hardly recognised from what it is today.

Yours, Misery guts.

Friday, October 30, 2009 03:16PM Report Comment
 

44. ontheotherhand said...

How do house prices go up? People either have to cut spending allocations elsewhere since there is a fixed pot of earnings each year, or they have to time shift their future expected earnings through a mortgage to spend today on a house. If the multiples banks will lend against a given salary and deposit go up, then there is more money to throw at houses.

Some say there is strong link to employment, but sometimes confuse correlation with causation. In fact multiple regression has been done on factors thought related to house prices - employment, GDP, interest rates, immigration, building etc. and resulted in very low R squared e.g. these things are only weakly related to house price movements. However, run a regression on house price movements against what they did last year and you get excellent R squared. That is to say when house prices go up, they tend to continue going up, and when they go down, they tend to continue going down. Sentiment of the masses takes over the fundamentals.

Friday, October 30, 2009 03:17PM Report Comment
 

45. flashman said...

shippy: I think the recovery will happen in fits and starts. There might even be the odd relapse. Some of the short-term growth will be caused by stimulus and might therefore be classed as unsustainable. On the other hand, a portion of the stimulus growth may well be sustainable (see my earlier comments regarding good borrowing and investment).

I think that the bulk of the sustainable growth will be derived from vigorous growth in the developing world. It’s not too much of an exaggeration to say that another billion people might soon be joining the high consuming middle classes. This strong growth will benefit our multinational companies and domestic companies that derive their business from overseas. As an example, we currently have more business than we know what to do with. Nearly all of it is coming from overseas customers. There are, or will be many other companies in a similar situation. When I earn money from a foreign customer, I spend most of it domestically. Therefore overseas growth will benefit my accountant and my barber etc.

I am not suggesting a triumphant return to growth. It will be a hard slog

Friday, October 30, 2009 03:24PM Report Comment
 

46. shipbuilder said...

MW, I missed your explanation of QE, but isn't it at least indirectly related to house prices in that it allows interest rates to stay low?

Friday, October 30, 2009 03:25PM Report Comment
 

47. p. doff said...

How refreshing. Some reasoned arguments followed by lively debate - it has been a pleasure reading this thread. Only slightly spoilt by the usual suspects responding to sensible comment with links to odd youtube clips.

Friday, October 30, 2009 03:25PM Report Comment
 

48. crunchy said...

38. ontheotherhand

That's the real smoke and mirrors, it comes from the same horror house as the stock market. IMHO.

Friday, October 30, 2009 03:26PM Report Comment
 

49. crunchy said...

41. p. doff

.......and people who have nothing to add to the thread. Buzz off!

Friday, October 30, 2009 03:28PM Report Comment
 

50. p. doff said...

Cap fitted then?

Friday, October 30, 2009 03:29PM Report Comment
 

51. shipbuilder said...

Flash, fair enough, I guess what you're saying is that the developing economies are switching to being less reliant on western consumption for their revenue and so are able to grow when we decline and in turn then provide business opportunities for the west? Doesn't that still mean a slow decline in our standard of living in that the developing middle classes are still fairly low paid in comparison to us, so we will be unable to replicate the levels of profit in selling to them as selling to the western middle classes i.e. there is still a rebalancing taking place between developing and developed countries?

Friday, October 30, 2009 03:36PM Report Comment
 

52. cynicalsoothsayer said...

ontheotherhand "when house prices go up, they tend to continue going up, and when they go down, they tend to continue going down"

In our line of work we call that an oscillator.

Friday, October 30, 2009 03:36PM Report Comment
 

53. nickb said...

"Sustainable growth" is an oxymoron, as should be numerically obvious from the exponential function.
e.g. 2.5% p.a. consumption growth means consumption doubles every 28 years. So in 84 years we'll be consuming 8X what we consume now and in 112 years 16X and in 140 years 32X etc. But we are already at ecological limits and about to go over an energy cliff. Forget it, the party is over.

Friday, October 30, 2009 03:39PM Report Comment
 

54. alan said...

@ Crunchy,

A good Youtube recommendation. There are reasons to suspect the hand of a global elite upon the US, and therefore the UK.

Corruption and looting are rife - Is the goal enslavement?

The problem is that when one country refuses to "toe the line" it gets ostracised and cut loose. Is that why we really went into Iraq?

Friday, October 30, 2009 03:47PM Report Comment
 

55. This comment has been removed as it was found to be in breach of our Blog Policies.

 

56. crunchy said...

44. p. doff

It's the cap and trade you need to worry about. Watch it, Fall of the Republic. http://www.youtube.com/watch?v=F8LPNRI_6T8

Thanks for another opportunity to spread the word bud.

Friday, October 30, 2009 03:50PM Report Comment
 

57. flashman said...

ship@45: Some people will indeed have a lower standard of life. Others may well be able to improve their standard of life, if they are in a position to supply or work with the growing economies. This is getting a bit long winded but yet more people will be able to maintain their standard of life by supplying the people who are supplying the growing economies. It’s all about velocity of trade.

Nothing remains static, so we need to be on our toes. Our government needs to think and invest strategically.

Friday, October 30, 2009 03:57PM Report Comment
 

58. crunchy said...

48. alan,

IRAN is the one to worry about. That's the big one which will spread worldwide. It's coming sooner than most think.

Globalisation, the route to peace or to the end? Let's get back on topic there are more important things to comment on.

Friday, October 30, 2009 04:00PM Report Comment
 

59. crunchy said...

50. flashman said...Our government needs to think and invest strategically.

I would be rolling on the floor laughing if that did not worry me so much. ( track record? ) I give up.

Friday, October 30, 2009 04:04PM Report Comment
 

60. techieman said...

I have nothing useful to add to the underlying views on this thread - one way or the other. All i can say is that the Flash must feel like Bruce Lee in Enter the Dragon. Being attacked from all angles - how your numchucks are still intact Flash!!!

Of course the Dow is taking a bit of a tumble and FTSE and the dollar is strengthening (so far)....... hmmmm is that 'nuff said?

Friday, October 30, 2009 04:06PM Report Comment
 

61. mark wadsworth said...

@ Ship 40, QE is just one branch of Treasury (BoE) taking gilts (which were originally issued by another branch of the Treasury, the Debt Management Office) from the banks (or whomever owns them) and crediting the banks with electronic balance at BoE.

In the short term, yes of course it helps keep yields on gilts down a bit, because the BoE is overpaying slightly, but apart from that does not change the banks' capital or liquidity one bit. Gilts are stupendously liquid, you can sell them at any time of day or night, they are more or less like cash. But gilts yields (=interest rates) have little to do with interest rates charged to borrowers.

Even the BoE base rate 0.5% has little to do with interest rates charged to ordinary borrowers, their willingness to borrow or banks' willingness to lend. The lucky ones are the ones with tracker mortgages, that's all. That will all come to an end fairly soon.

@ Shipbuilder 45, why does other countries becoming richer make us poorer? If they become richer, that means they are producing more stuff of higher value, so taking the world as a whole, we are all a bit richer. Economics and global trade are not a zero sum game. I think it would be great if China and India and so on could shake off their crappy and corrupt rulers and become like Western countries.

Friday, October 30, 2009 04:06PM Report Comment
 

62. techieman said...

sorry "HOPE your numchucks..." - how to tell a joke .... badly.... Techieman 30th October 2009!

Friday, October 30, 2009 04:07PM Report Comment
 

63. p. doff said...

@ 2 ''an exaggeratedly bad figure now, will make next quarters’ figures look better than they actually are''

I have noticed that the prediction that growth for next quarter will be positive is stated with complete confidence. Your comment might explain the reason why.

Friday, October 30, 2009 04:10PM Report Comment
 

64. flashman said...

hi techie: My numchucks are just about intact. Funny enough, I don't actually feel attacked. It's been a good debate.

Friday, October 30, 2009 04:15PM Report Comment
 

65. flashman said...

p.doff

I’m glad someone noticed my inference. No one took those GDP figures seriously. It might be genuine but you never know with this lot

Friday, October 30, 2009 04:21PM Report Comment
 

66. crunchy said...

55. techieman

Still funny. The US Dollar like the numchucks is just wave action untill it hits. The gbp/yen this week looks interesting. A pivotal point

perhaps!

Friday, October 30, 2009 04:24PM Report Comment
 

67. shipbuilder said...

MW, I wasn't implying that it was a zero sum game, just that in the immediate future if an increasing amount of business is selling to the emerging middle classes, profit margins are unlikely to be as great as selling to western middle classes and so we are likely to face a decline in incomes as a result. A rebalancing of incomes across the globe. The increase in incomes of developing countries will also inevitably mean an increase in the prices of our imported goods and a rebalancing of exchange rates. However this should not mean that our overall wealth suffers as long as other things, such as house prices, fall to compensate.

Friday, October 30, 2009 04:29PM Report Comment
 

68. This comment has been removed as it was found to be in breach of our Blog Policies.

 

69. mark wadsworth said...

@ Ship, OK, let's forget about the world economy and focus on e.g. the UK in isolation.

Let's imagine we're bumbling along as we are, but then Cornwall discovers huge tin reserves (to export), ski-ing in Scotland becomes more fashionable (so people from all over the world go there), the two sides in Northern Ireland drop hostilities and some bloke in the Midlands patents something fantastic and sets up a huge factory that exports something fantastic all over the world.

Do you think that areas I have not mention in the list (Wales, London, Newcastle, wherever) would become richer or poorer as a result? Surely all parts of the UK would benefit to some degree?

Why is it any different for e.g. the UK and China? Or, ask yourself, what would happen to our standard of living if China erupted into a revolution and everything ground to a halt? Surely we'd be worse off? So the converse, China sorts itself out, must make us better off.

Friday, October 30, 2009 04:38PM Report Comment
 

70. house said...

Hi, everybody what a discussion. I have nothing to add but to saying thank you to everybody for their contributions.
If MW and Flash are correct, then can you both please re-assure me once again that inflation is not going to be a problem. I think everybody should ask this question as a priority. Property prices are no longer an important issue as they will not go up the way they in the past.

Friday, October 30, 2009 04:55PM Report Comment
 

71. flashman said...

hello house: I will defer to mw on this one.

I am philosophically suspicious of hyperinflation or deflation predictions. Almost everything we know is priced into the current rate of inflation. We cannot possibly guess what the governments of the world will do in a few years time. They may discover more oil or develop a new energy technology. Conversely Saudi's capacity may be crippled by an atomic attack. We might irrigate the deserts with newly developed desalination technology or the rice crops might be wiped out by disease.

My advise would be to enjoy life and don’t worry about the unknowable. Maybe mw can offer something more solid?

Friday, October 30, 2009 05:10PM Report Comment
 

72. crunchy said...

Thanks flash for your massive input, you are always welcome in my view, even if it's just to cheer me up for a while. : )

Friday, October 30, 2009 05:11PM Report Comment
 

73. nickb said...

@ Mark at 61
Not if the Scottish tin miners were then thrown on the dole and so on. In the one country case you can say the country would benefit, but you can't even say this in the UK - China case. "the world economy" may benefit (or not, which takes you into the comparative advantage debate) but that is an abstraction from the people who comprise it and of no relevance to the UK policy makers etc.

Friday, October 30, 2009 05:12PM Report Comment
 

74. cyril said...

@61 MW - yeah it's great that China makes flat screen TVs. We can sit about all day watching crappy TV programmes about houses.

Friday, October 30, 2009 05:18PM Report Comment
 

75. house said...

Flashman, thank you as always glass half full.

Friday, October 30, 2009 05:25PM Report Comment
 

76. crunchy said...

66. cyril Have you ever wondered why we can buy and run huge TV's but we are only allowed to use weak almost powerless light bulbs.

Think about it folks!

Friday, October 30, 2009 05:35PM Report Comment
 

77. techieman said...

Crunch @ 59 - i will wait for you to "rub it in" - from our discussion on Saturday. You know my view i know yours - i think 1.50 Euro/USD to 1.47 doesnt qualify as a major fall but Maybe? thats the start of a new "wave" rather than a retracement of an old, anyway i am sure to get my numchucks blasted by a few folks on here for raising it in the first place.

Friday, October 30, 2009 05:38PM Report Comment
 

78. crunchy said...

LOL . Look at the gbp/jpy. That's a good day for me.

Have a good weekend tech

Friday, October 30, 2009 06:19PM Report Comment
 

79. smugdog said...

Now, I was expecting not to contribute again till early spring, but for the record, I am not the Great Flash (a much smarter cookie than I could ever be) and definitely not Sarah (god forbid!).

But I thought I might contribute in order to get you chaps through these dark days and nights. I thought a few lines written by a great poet of our time may help, it probably sums up a combination of both our feelings.

Do enjoy.


Heaven Knows I'm Miserable Now :

I was happy in the haze of a drunken hour
But heaven knows I'm miserable now

In my life
Why do I give valuable time
To people who don't care if I live or die

I was looking for a job, and then I found a job
And heaven knows I'm miserable now

In my life
Why do I smile
At people who I'd much rather kick in the eye ?

I was happy in the haze of a drunken hour
But heaven knows I'm miserable now

"You've been in the house too long" she said
And I (naturally) fled

In my life
Why do I give valuable time
To people who don't care if I live or die ?


Lyrics by Stephen Morrissey

I hope we speak again once the frost clears and spring flows into the air.

Friday, October 30, 2009 06:29PM Report Comment
 

80. smugdog said...

Oh, still love you Crunchy.

Friday, October 30, 2009 06:31PM Report Comment
 

81. happy mondays said...

Smugdog for you.. The Great Adam & the ants (lol)

you may not like
the things we do
only idiots
ignore the truth

it's easy to
lay down and hide
where's the warrior
without his pride?

we're gonna move real good - yeah right
we're gonna dress so fine - OK
it's
dog eat dog eat dog eat dog
eat dog eat dog eat dog eat dog
leapfrog the dog
and brush me daddy-O

it's easy to
lay down and hide
where's the warrior
without his pride?
you may not like
the things we say
what's the difference
anyway?

we're gonna move real good - yeah right
we're gonna dress so fine - OK
it's
dog eat dog eat dog eat dog
eat dog eat dog eat dog eat dog
leapfrog the dog
and brush me daddy-O

it makes me proud
so proud of you
I see innocence
shining through
(repeat til end)

Friday, October 30, 2009 07:03PM Report Comment
 

82. crunchy said...

smugdog, I share the feeling. As we are in a howling mood, heres one for us. As cryptic as ever.

PUPPY LOVE by Donny Mormon.

And they called it puppy love
Oh i guess they'll never know
how a young heart really feels
and just why i love her so
and they called it puppy love
just because we're in our teens
tell them all
please tell them it isn't fair
to take away my only dream
i cry each night
my tears for you
my tears are all in vain
i hope and i pray
that maybe someday
you'll be back (you'll be back) in my arms(in my arms)
once again
someone help me
help me
help me please
is the answer up above?
how can i
oh how can i tell them
this is not a puppy love
someone help me
help me
help me please
is the answer up above?
how can i
oh how can i tell them
this is not a puppy love
(this is not a puppy love)
(this is not a puppy love)
not a puppy love
(this is not a puppy love.

Lifes a bitch!

Friday, October 30, 2009 07:38PM Report Comment
 

83. braindeed said...

anyone got any good youtube tunes?

Friday, October 30, 2009 07:55PM Report Comment
 

84. happy mondays said...

Yes braindeed, Vivaldi four seasons winter

http://www.youtube.com/watch?v=nGdFHJXciAQ

Put your feet up, with a nice glass of red...Enjoy

Friday, October 30, 2009 08:33PM Report Comment
 

85. This comment has been removed as it was found to be in breach of our Blog Policies.

 

86. mark wadsworth said...

@ House 70, Flash 71.

Every two bit journalist pours out stories about hyperinflation or hyperdeflation to make interesting copy. Having read it all dozens of times over and applied logic and experience to the matter, it strikes me that the most likely path is neither nor, it all cancels out and prices and wages will stay pretty flat.

For example, the total amount of "money" (itself a one-sided equation - all money always nets of to nil so that's why they have these highly artificial concepts like M1, M2, M3, M4) is clearly going down (=deflation) while sterling has dropped quite a bit (=imported inflation) and so on.

Nothing to worry about really. Neither is QE. Let's worry about the colossal tax burden or the lights going out or the ever expanding surveillance state or the EU or something like that.

Friday, October 30, 2009 09:29PM Report Comment
 

87. goweresque said...

Someone dig this thread out in a years time, and see who was right, the perma bears, or the shiny happy people. My vote goes for the perma bears, on the grounds that printing money creates nothing. For true wealth to be created actual people have to make actual stuff. If shuffling round bits of paper with lots of zeros on them created wealth, why is Zimbabwe an economic basket case?

Friday, October 30, 2009 10:28PM Report Comment
 

88. fallingbuzzard said...

I bet that we'll still be trying to work our whether or not the house prices are still going to rise or fall in 2 years time. In the mean time, they will have fallen 10%. Slow but painful

Friday, October 30, 2009 10:44PM Report Comment
 

89. fallingbuzzard said...

Actually on reflection I won't be trying to work it out at all

Friday, October 30, 2009 10:47PM Report Comment
 

90. devo said...

fallingbuzzard/flashman

You two, and your mates, need to start singing from the same hymn sheet if you're going to keep this edifice supported.

Friday, October 30, 2009 11:03PM Report Comment
 

91. markj69 str05 said...

@87.
Printing money is purely an attempt to stabilize the free-fall. It is having an impact, combined with all other influencing factors. It will not on it's own create wealth, but it has stopped the economy crashing, financial institutions collapsing, and postponed the HPC. Only when the gvm't can't influence, or choose not to influence any more will the true correction happen.

Friday, October 30, 2009 11:27PM Report Comment
 

92. devo said...

91. markj69 str05 said... Only when the gvm't can't influence, or choose not to influence any more will the true correction happen.

And once the true correction starts... look out below !!!

Friday, October 30, 2009 11:34PM Report Comment
 

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