Grim data undermines Brown's economy claims

[PerlOfWisdom]

I think it will be the poor who suffer. Look at farepak - the government is happy to let poor people with no voice suffer.

The poor always suffer because they do stupid things. That's why they're poor. Why should my money be used to bail out any private individuals who I don't know?

[AtW]

It wasn't bailed out for them, it was the serious money that would of been lost by the big boys in the City.

Yep.

[rootsnall]

...but bail out Northern Rock, used by all those Labour voters in the north east.

It wasn't bailed out for them, it was the serious money that would of been lost by the big boys in the City.

[wendigo100]

I think it will be the poor who suffer. Look at farepak - the government is happy to let poor people with no voice suffer.

...but bail out Northern Rock, used by all those Labour voters in the north east.

[BrilloPad]

You honestly believe the New Lie will let those with money (i.e. prudent and hard working types) keep their loot. I can see a "windfall" tax levied against savers and those with equity to bail out the banks and the government.

I think it will be the poor who suffer. Look at farepak - the government is happy to let poor people with no voice suffer.

[BrilloPad]

Those with money will make a killing in the long term. those on low incomes will be the ones to suffer

That will make a change then.

[DimPrawn]

With High interest rates, people (Lower income) can't afford to save.
Driving down Interest rates will increase saving in the short term, but Government bolstering of the banks can only be a short term measure.

People are stripping investment capital to counter high interest rates on loans & Mortgages. The property buy to let boom of two and three years ago has placed many property investors with large BTL mortgages is a precarious position as their fixed rate loan periods end in the next 12 months.
Lender write-offs in the event of a rise in interest rates will plunge the countries finance industry into chaos, as savers/investors pull money out of the system, that the lenders need to back further loans.
With Little money available, the banks/Lenders will have to lean harder on current lenders who are in default, to realize assets and try to claw money back into the system through repossessions.

House values/increases will drop or stagnate as more and more properties are thrown onto a market with fewer and fewer borrowers able to get mortgages to buy them.
Altogether, not a pretty picture is emerging.

Those with money will make a killing in the long term. those on low incomes will be the ones to suffer, along with those who lose their jobs/income in a recession.

You honestly believe the New Lie will let those with money (i.e. prudent and hard working types) keep their loot. I can see a "windfall" tax levied against savers and those with equity to bail out the banks and the government.

[pisces]

We'll be fine as long as we have taxpayers money to bail out the banks with.

[AtW]

Anatole Kaletsky is a sharp fellow, I like his articles.

[realityhack]

Just been reading the top 4 articles here - very good financial journalism - and unsustainable deficit, if you're interested in a clear & concise assessment of the state (and outlook) of our economy.

[Diver]

With High interest rates, people (Lower income) can't afford to save.
Driving down Interest rates will increase saving in the short term, but Government bolstering of the banks can only be a short term measure.

People are stripping investment capital to counter high interest rates on loans & Mortgages. The property buy to let boom of two and three years ago has placed many property investors with large BTL mortgages is a precarious position as their fixed rate loan periods end in the next 12 months.
Lender write-offs in the event of a rise in interest rates will plunge the countries finance industry into chaos, as savers/investors pull money out of the system, that the lenders need to back further loans.
With Little money available, the banks/Lenders will have to lean harder on current lenders who are in default, to realize assets and try to claw money back into the system through repossessions.

House values/increases will drop or stagnate as more and more properties are thrown onto a market with fewer and fewer borrowers able to get mortgages to buy them.
Altogether, not a pretty picture is emerging.

Those with money will make a killing in the long term. those on low incomes will be the ones to suffer, along with those who lose their jobs/income in a recession.

[AtW]

Grim data undermines Brown's economy claims
Official figures are showing a very different economic picture from that drawn by the Prime Minister and Chancellor
Gary Duncan, Economics Editor

Claims by Gordon Brown and Alistair Darling this week that the economy is fundamentally sound and well placed to ride out worsening world conditions were badly undermined yesterday by a spate of bleak official figures.

City economists lined up to sound warnings that the latest grim economic news suggested that Britain's economy is badly exposed to a global downturn and “dangerously unbalanced”.

In a double blow to an increasingly embattled Chancellor, the slew of worrying data showed the Government's finances in the red to a record extent last month, and the country as a whole living far beyond its means, with another record-breaking deficit on the balance of payments.

“The latest flurry of UK data painted a distinctly ugly picture of a dangerously unbalanced economy, supporting our view that the coming slowdown will be a prolonged and potentially painful period of adjustment,” said Jonathan Loynes of Capital Economics.
Related Links

The biggest shock in yesterday's figures came as balance of payments data showed that the current account - the broadest measure of the country's international financial position — was in deficit by a huge £20 billion in the third quarter (Q3), the highest figure since records began in 1955.

The vast total marked a ballooning of the deficit from £13.7 billion in the previous quarter, and saw it swell to a massive 5.7 per cent of national income. As a proportion of GDP, this left Britain's balance of payments as deep in the red as that of the United States. The percentage deficit matched records set in the 1980s boom.

Earlier quarters' current account deficits were also revised up, with the overall total for 2006 now put at 3.9 per cent of GDP, against previous estimates of a more modest 2.5 per cent.

The pound's overall value on its trade-weighted index tumbled to its lowest level for a year and a half, and shed more than two cents against the dollar, as economists said that the situation looked unsustainable and left Britain exposed to a difficult rebalancing of the economy. Analysts cautioned that a further slide in the pound, fuelling inflationary pressures, could hinder the Bank of England's ability to fend off a downturn with aggressive cuts in interest rates.

The severe deterioration in the balance of payments was driven by a combination of a record £22.6 billion trade deficit in Q3, with an abrupt shift in Britain's investment income from abroad. In the past, Britain has raked in far more on income from its direct investments in companies and projects abroad than it has paid out to foreigners investing in the UK, but the position has now worsened markedly.

The nation's surplus on direct investment income in Q3 fell to £4.9 billion, from £7.5 billion in Q2, while £23 billion was wiped off a revised surplus for the past 18 months. Economists pinned the blame on a boom in foreign direct investment and takeovers in the UK, meaning the country must pay out more overseas on income on the assets that have been bought up.

In a further headache for the Chancellor, yesterday's poor data on the public finances sparked renewed warnings that government borrowing could surge well above £40 billion for the present financial year, against a £38 billion Treasury forecast, and reach annual totals as high as £50 billion in future years.

November saw monthly public borrowing in the red by a record £11.2 billion, compared with £9.2 billion in the same month last year, as government spending rose faster than implied by Treasury plans, and despite strong tax revenues. For the eight months of the financial year so far, borrowing has reached £36.2 billion, up from £26 billion in the same period last year, and also a record.

Economists said Mr Darling could be forced to impose tougher curbs on spending if the credit crisis hits tax revenues from City institutions. “The Chancellor is likely to be playing Scrooge for some years in order to get this uncomfortably high budget deficit back under control,” said John Hawksworth, of PricewaterhouseCoopers.

Other GDP figures yesterday showed that while GDP growth remained strong in Q3, at an upgraded 3.3 per cent annual pace, this was driven by resilient consumer spending that seemed to come at the expense of households dipping into savings. The savings ratio, a key gauge of what people are putting aside from pay, fell from 4 per cent to 3.4 per cent in the quarter.

------

But the good news is that New Labour cancelled "boom and bust" cycles