Reply to: Economy will be over worst by October

[Doggy Styles]

Hmm scary to find myself half agreeing with that idiot Darling but it's my feeling also that things will bottom out by Oct if no more major banks (worldwide) go tits up or end up needing a rescue because by then Banks should be feeling secure enough in each other to loosen up the interbank market

"half agreeing" though because i think the "recovery" will be a long and drawn affair, about 2 to 3 years (from end of this year) until things are as good as they were before the "crash"

And then we will have about another 5 years until the next crash

But the country is running at a whopping loss, with no end in sight.

If you were earning £30K a year, and having to borrow another £10K a year to maintain your lifestyle, there is no way you will ever see a recovery, however much more 'the banks' have available to borrow, until you make drastic changes to that lifestyle.

There's a lot of pain required to reverse that deficit. People have not yet grasped how bad the nation's finances are. If they did they wouldn't be grasping at straws.

[Not So Wise]

Hmm scary to find myself half agreeing with that idiot Darling but it's my feeling also that things will bottom out by Oct if no more major banks (worldwide) go tits up or end up needing a rescue because by then Banks should be feeling secure enough in each other to loosen up the interbank market

"half agreeing" though because i think the "recovery" will be a long and drawn affair, about 2 to 3 years (from end of this year) until things are as good as they were before the "crash"


And then we will have about another 5 years until the next crash

[Gonzo]

What success in the British economy?

I was happy with not being referred to as "the sick man of Europe" anymore.

[TimberWolf]

We need the economy to be run by scientists for a decade or so. It's all ultimately about energy I tell yer! Unfortunately our scientists are all tulip too.

[sasguru]

"What if the success of the British economy over the past twenty five years turns out not to be down to the pain the country went through in 1981 - 1983, but turns out in fact to have been paid for by oil (which we don't have so much of anymore)?"

What success in the British economy?

[Gonzo]

I thought the issues of the mid seventies were caused by oil price too high?

<dons tin helmet>
And the early eighties by Saint Maggie fixing issues caused by Labour government of seventies?

There was a "boom" in 1972/1973 that turned into a "bust". The oil price spike made things worse but was not the only factor.

Similarly the "boom" in the mid to late 1980s resulted in a "bust". The UK had become an oil exporter by that time.

I mentioned it in another thread a while ago, but I had this nightmare thought the other day - "What if the success of the British economy over the past twenty five years turns out not to be down to the pain the country went through in 1981 - 1983, but turns out in fact to have been paid for by oil (which we don't have so much of anymore)?"

[sasguru]

Trawling through some of my stuff yesterday I found a copy of "From Boom to Bust" written by David Smith in 1992, which analyses the policy decisions that ended up causing the last recession.

I immediately thought that it would be interesting to re-read that now to see if it offers any insight into the current mess that should really have been expected. I have only read chapter one so far but already it has mentioned, when comparing the boom of the late 1980s with the boom of 1972-1973

Plus ca change ...

The problem is human nature and psychology - booms and busts have happened since capitalism was invented and will continue to do so for the same reasons: irrational exuberance, irrational depression and the forgetfulness (or stupidity) of each new generation, which is ignorant of the past.
I don't know if a making a basic course in economic history and personal financial management compulsory in the educational curriculum would help?
On the other hand if the economy was more stable then how would we make money by taking advantage of idiots, like in the past boom?

[PaulCD]

Hold on a moment, run this by me again.

Are you suggesting that the government decided that they didn't want to have to fight the next general election with the background of a well-performing economy and everybody in employment?

Instead, they decided that it would be better if they could torpedo the economy so that the incomes of large numbers of people are reduced, often substantially, becuase if they get things turning again that would present them in a better light?

I am guessing that you are not a professional political commentator.

Yeah...this lot would stoop to any ol' tulipe to get back in!

[BrilloPad]

Trawling through some of my stuff yesterday I found a copy of "From Boom to Bust" written by David Smith in 1992, which analyses the policy decisions that ended up causing the last recession.

I immediately thought that it would be interesting to re-read that now to see if it offers any insight into the current mess that should really have been expected. I have only read chapter one so far but already it has mentioned, when comparing the boom of the late 1980s with the boom of 1972-1973

I thought the issues of the mid seventies were caused by oil price too high?

<dons tin helmet>
And the early eighties by Saint Maggie fixing issues caused by Labour government of seventies?

[Gonzo]

Yawn. exactly the same pattern as the last recession -assorted politicians claiming an upturn is imminent. Even if the GDP figures show a positive number, un/employment is a lagging indicator and employment doesn't return to normal levels for at least 2 years.
That was the case in the last recession and I don't see this one being any better.

Trawling through some of my stuff yesterday I found a copy of "From Boom to Bust" written by David Smith in 1992, which analyses the policy decisions that ended up causing the last recession.

I immediately thought that it would be interesting to re-read that now to see if it offers any insight into the current mess that should really have been expected. I have only read chapter one so far but already it has mentioned, when comparing the boom of the late 1980s with the boom of 1972-1973

In both cases, as we shall see, measures to liberalize the financial system helped to produce a powerful expansion of credit. And, having been instrumental in unleashing potent monetary forces, policy-makers attempted to persuade themselves that the effects would be benign, that they were one-off adjustments to a new financial regime.

[HairyArsedBloke]

Our index measures the affordability of average UK house prices in terms of income per household and the current average mortgage rate. The house price per disposable-income/household ratio is amortised at the going rate of mortgage interest over a 25-year term and assuming the whole amount is mortgaged. The analysis of house price affordability based only on the house price to earnings ratio relies on the notion that the size of the desired proportion of income allocated to buying a house is stable. But the actual required proportion of income varies with the rate of interest. The rate of interest has the largest effect on affordability and to exclude it in the analysis is a mistake. In addition, using earnings as a measure of income ignores the effect of an important structural shift over the past two decades - the rise in the number of two-earner households.

linky

Total bolloux

[DimPrawn]

I read that this morning : I am quite perplexed by it. The only thing I can think of is that interest rates are so low at the moment. Of course they will rise again.

I reckon the index is based on cost of borrowing, and with interest rates low, in theory it looks good value to get into debt. However, as you say, rates will rocket and top deals require a 40% deposit, which few people have.

So all in all. Total bollux.

[BrilloPad]

Housing slump over by December.

http://www.telegraph.co.uk/finance/f...conomists.html

In a forecast that will reassure homeowners, Lombard Street Research (LSR) has declared that house prices are now affordable, and forecast that the worst of the property crisis is over. Its affordability index, produced in conjunction with The Daily Telegraph, shows that for the first time in five years house prices throughout the UK are better value than their long-term average.


You've never had it so good!

I read that this morning : I am quite perplexed by it. The only thing I can think of is that interest rates are so low at the moment. Of course they will rise again.

[DimPrawn]

Housing slump over by December.

http://www.telegraph.co.uk/finance/f...conomists.html

In a forecast that will reassure homeowners, Lombard Street Research (LSR) has declared that house prices are now affordable, and forecast that the worst of the property crisis is over. Its affordability index, produced in conjunction with The Daily Telegraph, shows that for the first time in five years house prices throughout the UK are better value than their long-term average.


You've never had it so good!

[Gonzo]

Not because it has been uttered by Darling, but purely on my own instincts, I think that come the end of the summer the economy will be turning the corner.

I suspect that this current down-turn has been largely engineered by the goverment in the belief that they can be seen to 'pull things around' just in time for the next election. Let's face it, they have been exposed with the email smear campaign scandal that they are prepared to stoop to any level to ensure that they get re-elected.

Hold on a moment, run this by me again.

Are you suggesting that the government decided that they didn't want to have to fight the next general election with the background of a well-performing economy and everybody in employment?

Instead, they decided that it would be better if they could torpedo the economy so that the incomes of large numbers of people are reduced, often substantially, becuase if they get things turning again that would present them in a better light?

I am guessing that you are not a professional political commentator.