Reply to: Recession: Job losses will accelerate, predicts CBI

[Lucifer Box]

Didnt I read somewhere that its secured against 3 trillion in assets, doesnt sound so bad then does it.

Yes, an article in The Economist to that effect a few weeks ago. As they said, £1 trillion is of no significance in its own right but it's a big scary sounding number that doom merchants like to throw around.

[DodgyAgent]

I believe 1.5% is the latest city predictions for the UK's growth or treadwater as you rightly called it Dodgy.

Some in the city have hinted at predicted negative growth in the UK.
I never thought I'd accuse you of making under statements Dodgy. Most unlike you.

I would guess the point is and was understood by all & sundry. As long as you acknowledge the associated caveats such as sustainability and affordability.

That seems one mother of a sweeping statement.

Is that based on some logic like "the higher the house prices, the less people can afford to buy property and so have more disposable cash" ?

Someone at last who is able to engage in a discussion about economics.
I agree with all your points Bob. I am trying to say that a stimulation of house prices leads to a stimulation of consumer spending. Yes a secondary effect will be that people will find house buying more expensive leading to inflation. Economics is not about there being a pie of finite size, growth in an economy increases that pie's size so the inflationary effects of a growing economy take time establish themselves.

In Germany's case the government should make borrowing easier, reduce interest rates (which they cannot do being stuck with the Euro), reduce taxes, embark on some capital expenditure and remove all the job protection laws. This will have the effect of stimulating consumer spending which will stimulate the development of new businesses and expansion of existing ones.
Germany enjoys a trade surplus and people there have far more in savings tha we do in the UK. Businesses in Germany are sitting on cash because there is no confidence in the economy.

Anyway I suggest you read David Smith who writes for the Times and the economist http://www.economicsuk.com/blog/000243.html

[TwoWolves]

It sure is going to be a hard winter, better stay in this contract and keep my head down.

[The Lone Gunman]

" £1 trillion debt "

Didnt I read somewhere that its secured against 3 trillion in assets, doesnt sound so bad then does it.

[datestamp]

UK consumer debt hits £1 trillion

How about this for a sweeping statement:

"There's nothing wrong with £1 trillion debt. It's a bit like nuclear waste. You just need a big enough hole to hide it in or else we're all done for."

[BobTheCrate]

I believe 1.5% is the latest city predictions for the UK's growth or treadwater as you rightly called it Dodgy.

Some in the city have hinted at predicted negative growth in the UK.

The UK needs to batten down the hatches because borrowing is getting a bit out of control

I never thought I'd accuse you of making under statements Dodgy. Most unlike you.

My point is that borrowing is a good thing for consumers and businesses alike

I would guess the point is and was understood by all & sundry. As long as you acknowledge the associated caveats such as sustainability and affordability.

Increasing house prices gives people greater spending power ...

That seems one mother of a sweeping statement.

Is that based on some logic like "the higher the house prices, the less people can afford to buy property and so have more disposable cash" ?

[DodgyAgent]

There shouldn't be much of an argument here.

Germany and France are in the economic doldrums largely owing to unsustainable socialist policies and their Euro manacles

With the exception of the monetry union the UK is in the economic doldrums owing to much of the same. Slightly less intrusive employment regulation but not a lot less.

Unsustainable seems to be the word
I do not agree Britain's economy is doing noticably better than Germany's or France'. The notion we are doing better is purely down to Gov't deceit. Unemployment is much higher than is disclosed. Business bankrupcies are at there highest for over a decade. Skilled employment is in a dreadful mess in the UK. The current public sector employment is also totally unsustainable.

Unsustainable consumer borrowing in the UK is what's been keeping the economy afloat. But crucially this can hardly be attributed to borrowing for investment DA. Apart from what we normally associate with consumer spending (in the high street) an alarming volume of people had been using their credit cards as the only means to pay such things as :-

tax bills
energy bills
mortgage repayments
rents
council tax bills
other credit bills

It is the unsustainable credit fuelled consumer spending that has been disguising Britain's true economic condition. And that is what's about to be realised.

If I'm right, we're likely to experience the kind of misery that visited us in the early 90s. I don't care interest rates are low. Just means they can't be lowered significantly inorder to boost a failing or failed economy.

The UK needs to batten down the hatches because borrowing is getting a bit out of control, though some economics commentators say it isnt. My point is that borrowing is a good thing for consumers and businesses alike. Increasing house prices gives people greater spending power which stimulates spending. Alongside this people become encouraged to borrow money (call it investment if you like but capital that is spent by businesses to expand comes usually from borrowing). The govt can help to kick start an economy by itself investing taxpayers money in new infrastructure projects.

Now because some of you are so thick I fully understand the fact that boom can lead to bust, so by handing interest rate control over to bankers then interest rates will move according to how the economy is doing, rather than as a political tool to distort the economy to suit the agenda of politicians.

[DodgyAgent]

DA,


, they have sustainable growth


Milan.

They dont have any growth milan (sorry 1.5% which is treading water)

[BobTheCrate]

There shouldn't be much of an argument here.

Germany and France are in the economic doldrums largely owing to unsustainable socialist policies and their Euro manacles

With the exception of the monetry union the UK is in the economic doldrums owing to much of the same. Slightly less intrusive employment regulation but not a lot less.

Unsustainable seems to be the word
I do not agree Britain's economy is doing noticably better than Germany's or France'. The notion we are doing better is purely down to Gov't deceit. Unemployment is much higher than is disclosed. Business bankrupcies are at there highest for over a decade. Skilled employment is in a dreadful mess in the UK. The current public sector employment is also totally unsustainable.

Unsustainable consumer borrowing in the UK is what's been keeping the economy afloat. But crucially this can hardly be attributed to borrowing for investment DA. Apart from what we normally associate with consumer spending (in the high street) an alarming volume of people had been using their credit cards as the only means to pay such things as :-

tax bills
energy bills
mortgage repayments
rents
council tax bills
other credit bills

It is the unsustainable credit fuelled consumer spending that has been disguising Britain's true economic condition. And that is what's about to be realised.

If I'm right, we're likely to experience the kind of misery that visited us in the early 90s. I don't care interest rates are low. Just means they can't be lowered significantly inorder to boost a failing or failed economy.

[milanbenes]

DA,

"You are talking about excessive borrowing",

and what do you call this...

UK consumer debt hits £1 trillion
http://news.bbc.co.uk/1/hi/business/3935671.stm


the point you are missing with Germany et al is that they don't have booms and busts, they have sustainable growth

now, go home do some more reading and come back tomorrow and
tell us what you've learn't on the subject

Milan.

[DodgyAgent]

Having previously studied the subject, I think your economics is aptly 'dodgy' DA. It's investment in capital rather than borrowing in itself which stimulates long term economic growth. The millions of fools up and down the country who have remortgaged their houses to the hilt in order to finance expensive cars, holidays and gadgets, all of which are produced abroad are doing very little for the economic well-being of the nation.

The idea that interest rates are the best way to control the economy is actually highly contentious. This approach, also known as 'monetarism', was practiced by many governemnts accross the world, including the conservatives under Thatcher and Major, with spectacularly bad results.

You are talking about excessive borrowing, and yes you are quite right that boom and bust is an unhealthy economic environment, but it is better than bust only. What do you think that investment capital is made up of?.. yes savings of people with a surplus of cash. The point I am making is that investment capital is invested as a loan, or a gamble on a business venture. The investment capital is "invested" in a person or a business who has convinced investors that they will make a return on that investment. In other words one persons savings is another persons borrowings.

The problem that Germany and France have is that no one wants to borrow to either expand or set up buisnesses. What Germany needs is a boom, and the only way they are going to stimulate that is to encourage economic activity by getting people to spend instead of save.

[The Lone Gunman]

Hey I'm no fan of NL and actually prefer the Conservative approach of lower taxes and less intervention in the economy. However, their policy of using interest rates as a means controlling the economy was simply disastrous at times. Do you remember the problems the UK economy faced with inflation in the 80s and when our forced depature from the ERM?

I remember those years well.

I would be inclined to suggest that what Thatcher did was bound to involve a lot of pain economically, but the outcome was a much more stable and managable economy.
Not all the woes of the era were specifically down to the Tories, but what they did was isolate the UK economy from many of the factors which damaged it in the past and were beyond our control.

Not saying they were perfect, but made the hard decisions and brought us through the hard times.

Gordo is now busy taking all those hard won assets and breaking them or giving them away.

[Lucifer Box]

Sounds supiciously like my trap 2 activities after some of yesterdays threads......

Ah, the good old Chinese helicopter pilot impersonation?

[The Lone Gunman]

trying to pull a brick with a piece of elastic. Nothing happens for ages and then all of a sudden it shoots forward and hits you in the face."

Sounds supiciously like my trap 2 activities after some of yesterdays threads......

[ALM]

I think you will find that when the Tories were thrown out of office the one decent legacy they left that the pundits agreed on was the strength of the economy.

Hey I'm no fan of NL and actually prefer the Conservative approach of lower taxes and less intervention in the economy. However, their policy of using interest rates as a means controlling the economy was simply disastrous at times. Do you remember the problems the UK economy faced with inflation in the 80s and our forced depature from the ERM?