Tuesday, May 24, 2011

Perceptions – Borrowing

Public finances disappoint at start of fiscal year

"Britain's public finances made a disappointing start to the fiscal year as weaker tax receipts and higher spending led to the worst borrowing tally for a month of April on record". The BBC will say "higher than expected".

Posted by alan @ 12:30 PM (2004 views)
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22 thoughts on “Perceptions – Borrowing

  • general congreve says:

    So, if I remember correctly, we’ve had the highest borrowing figures ever for ‘that month of the year since records began’, last August, last November, this February and now April. God damn those cuts are biting hard!

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  • ‘ambitious austerity agenda’

    If only they could be as ambitious about avoiding such agendas.

    Nice Lion & Unicorn symbol.

    ‘…I can o’ersway him; for he loves to hear
    That unicorns may be betray’d with trees,
    And bears with glasses, elephants with holes,
    Lions with toils and men with flatterers’

    ~ William Shakespeare

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  • These figures are “skewed by one-off factors”. This is the bank payroll tax which made last years’ figures look good and this year’s bad by comparison. Nevertheless it’s still the worst April on record and the government’s preferred measure of borrowing still notched up another record. So how is the ‘deficit-fighting agenda’ ‘still on track’?

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  • That elusive deficit.

    They will be charging us interest on it next.

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  • @2

    Clearly the Chinese aren’t impressed:-

    BEIJING, May 24 (Xinhua) — China’s first domestic rating agency, Dagong Global Credit Rating Co. Ltd., on Tuesday downgraded the local and foreign currency long-term sovereign credit rating of the United Kingdom by one level to A+ from previous AA- with “negative” outlook.

    The Chinese rating agency said the downgrade reflected the UK’s deteriorating debt repayment capability.

    Source: FT Alphaville which carries a little more detail than other reports.

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  • Thanks Dill,
    I always wondered what western countries’ ratings would look like if the agency was not “influenced” by the Fed. Link to WSJ comments:

    http://online.wsj.com/article/BT-CO-20110524-700297.html

    If the rating drops much more we will have to pay more to borrow money won’t we? I’ll have to look up Greece and Portugal now….

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  • bellwether says:

    Incredible how you end of days types always find each other, and a corner to lurk in.

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  • Thanks Bellwether,
    Today saw an interesting turn of events. I hope nobody sees this as “the end”.

    A few days ago we had a US preacher forecasting “The End”. This can’t possibly happen before the Champion’s League final.

    Don’t lets get carried away 🙂

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  • general congreve says:

    Now, now Bellwether, you are being deliberately misleading. There are no ‘end of days’ types here. Only ‘major upset to the the global financial system is on the horizon’ types. You know that, so try to play fair, even if you have precious little ammo left in the arsenal in the face of overwhelming evidence that is contrary to your views.

    I for one don’t think widespread falls in living standards across the West is the end of days, unless some politician does something stupid and starts another global war in response. All it means is that life for a lot of people will be pretty f4cking sh1t for a while.

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  • @8 bellwether

    There’s nothing end of days about this. It’s practical. The main source of debt sponsorship comes from the East, as you well know. Western ratings agencies are currently being vilified by the mainstream, no less, for their obvious historical negligence, and are fast losing credibility. Meanwhile Dagong has been quietly building a serious profile. Britain might well smart on it’s average debt maturity being 13 years, but it can’t hold that position indefinitely. Having the capacity to ‘print’ your way out of a hole is not a get out clause. It’s a sign of defeat and inexorable weakness, with all the documented ramifications. There will be a response if it’s maintained.

    We’re approaching the time when the West must exercise some responsibility and show a little more humility. Like it or not.

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  • I find myself agreeing with the General more and more lately!

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  • The only end of times ahead are the good ones.

    Pay no mind to the shills, who would rather everyone went on an overnight spending spree on collection day.

    No one knows the end time but God. However, we all know it’s coming.

    And the real nutters will be the cause of it.

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  • GC @10 – and those ‘major upset to the the global financial system is on the horizon’ types don’t have far to look or long to wait. It’s called Greece, or Lehman writ large. Lagarde, the French bankster-spokeswoman, favourite for the IMF job. said recently “that a rescheduling of Greek debt is NOT an option (and that) executing the planned austerity program, proper implementation of privatization, and commitments across the political spectrum in Greece are the key for a solution in Greece” Which Euro political leader looks like preventing Greece from anarchy and a default that drags down the other PIGS along with the financial markets with their daisy chains of derivatives and debt pyramids?

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  • Drewster fear and scaremongering have a way of attracting converts into the bunker. I’ve been away for a few weeks busy with other things but I like to check in and find things haven’t changed. The same cliched mainstream views, day in day out about debt mountains and derivative collapses, and other erstwhile nonsense that I’m convinced the disciples barely understand. But hey understanding isn’t the point, the point is to keep scared, and paralysed or lazy and to devote a good deal of one’s day posting the same tired views and half baked quips.

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  • bellwether – views that are repeated, cliched, mainstream or not fully understood by their proponents aren’t necessarily nonsense. How would you explain the post-Lehman financial crisis other than in terms of debt/leverage and derivative collapses? And while debt in itself isn’t neccessarily a dangerous thing it’s mishandling (as with austerity measures without debt re-structuring for Greece etc.) is likely be.

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  • bellwether says:

    Icarus agreed such views aren’t necessarily nonsense but there is at least a high probabiltiy they will be wrong in pretty fundemental ways.

    I also tend to agree that the greatest immediate threat (and in referring to threat I don’t subscribe to the view that threats to stability are any greater now than at any other point in time during my life) will probably come from austerity reactions to the perceived sovereign debt problem.

    As for Lehman and the banking crisis as a whole, it surely comes down to bets (that should have been better regulated) that the consumer could keep leveraging and spending on the back of sprialling property prices, and while this articular myth is now lanced, the failure to better regulate banks etc has surely sown the seeds of the next crisis some years down the line.

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  • Bellwether,

    There’s no “end of days” argument here. Any fool can see that the Euro is heading for a crisis, with a forthcoming Greek default causing major damage to European banks. A default in Greece could set off a chain reaction of defaults in Portugal and Spain too. The ECB will be forced to print more money to bail out the banks. Investors lose confidence in the Euro and in banks; the Euro tumbles in value by 25% as investors flee to the dollar and gold. Fear returns to the markets and all asset prices fall; especially banks. Timeframe? Before the end of 2013.

    That’s not an “end of days” argument, it’s merely a rational extrapolation of the present situation.

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  • bellwether – while the consumer’s inability to keep borrowing played a big part in the crisis the effects of that inability were massively magnified by derivatives and the cascade of cross-defaults they caused, e.g. CDSs were free money to the AIGs of the world, who collected premiums for nothing – until it was time to pay out. Players who hedged by betting both ways (i.e. bought the CDS insurance) couldn’t collect on winning bets, so couldn’t pay out on losing bets, causing others to default on their bets and the dominos went down.

    If the US govt hadn’t bailed out Fannie and Freddie $trillions-worth of of bonds and MBSs they owned or guaranteed would have lost a big proportion of their value and about $1 trillion-worth of CDS payouts would have been triggered – enough to bankrupt the highly leveraged financial institutions that sold the insurance. Their creditors would see the hit coming and pull the rug of short-term credit on which those institutions depended, leaving them with huge portfolios of illiquid assets. They would be unable to meet their obligations, triggering another round of CDS ‘events’ and so on. This threat to the financial system leaves the banks calling the shots (bail us out or else) and politicians serving their needs – hence another round of weak regulation.

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  • Icarus the derivative problem could have been cleared up by countries retrospectively deeming such bets (which were largely amongst a small number of players) void – making them what they in essence ulrimately are netted off nil sum. If necessary these institutions could have been put down and restructured with no-one in the real world losing any sleep. We are probably agreed that the failure to do this and to better regulate will prove to be a major mistake. We also remain over financialised which is far from ideal.

    Drewster – the problem with the Euro is that it is not a fully formed monetary union. The problems this gives rise to have next to nothing do with eg the US/UK.

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  • Drewster agreed the Euro looks overvalued and the region would probably benefit from a 25% hair cut to its relative value.

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  • bellwether 20 – the problem with doing this restrospectively is that these things happen in real time so it’s a genie-bottle problem. Nobody will take the risk of financial centres becoming insolvent, markets shutting down for weeks or months, stockmarkets collapsing etc. So it’s bailouts.

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