The Last 5 Major Uk Recessions

Realy

Unlike the HPC people to disrupt the thread!!! sorry for the OT rant but for some reason some on decided to come in and start to change the discusion as it was obvious by the debate everything is pointing to rate falls.

setmefree2

!!!!!!? wrote: »

My personal measure is the amount of money in the economy relative to useful product.

Price increases are just symptoms of inflation.

Credit is being withdrawn due to the financial criss, that's a major downward pressure and represents the market restoring equilibrium.

However, the government's stated objective is to restore credit availability to the stupid peak levels of 2007 and so far they have shown a real determination to at least try to bombard the banking system with lots of money to that end.

Whether they succeed or fail, its bad news given their tactics of chucking public cash at the banks to restore those lending levels.

ie. Succeed in restoring 2007 level credit availability - rampant inflation. Maybe even hyperinflation if things aren't brought to heel, if they even can be brought to heel by that stage.

Fail - recession lasts for even longer (due to all the public money wasted on liquidity measures and sucked out of our future earnings) and we probably see stagflation due to the currency collapsing.


What they need to do is set sensible rates and control the descent into recession so that it happens quickly enough to let the economy recover ASAP, but not so quickly that the thing slides out of control into a deep depression. Debt/credit has to be destroyed, we will have to swallow the bitter pill. Dodging it won't work.

They need to stop looking to a lax, cheap credit economy as being the way forward and develop strategies for sustainable growth and development instead.

I disagree that the banks are going to start lending money any time soon. Firstly, I don't think it is the government's intention to restore lending to 2007 levels, I think this is just the way it is sometimes reported in the (tory?) press. Secondly, the markets for MBS - mortgage backed securities - are still not operating, so there is no chance that we can go back to the lending levels of 2007. Thirdly, banks won't lend until they feel it is safe to do so - not matter what anyone says. So IMHO there is no chance that the real economy is going to be flooded with money any time soon.

So what can be done in the meantime to pump some liquidity into the system? Again, I disagree that we "let the markets sort it out". Economics is an ART not a physical science, it's not a natural phenomenon like a gravitational pull. It's just money. The obvious answer is to lower interest rates & for the government to spend whatever it can, IMHO to get "some" liquidity into the real economy- whilst keeping an eye on sterling I agree.

I think another point on which we disagree is how we got here. The UK & US governments never set out to create a credit boom- housing bubble . It was a result of firstly, coping with the deflationary effects of the flood of Chinese imports coming in to Western Economies which had a massive deflationary impact from 2000 onwards. Secondly, trying to cope with the fall out from the dotcom crash. You sometimes make it sound as if Western Govrnments deliberately went out to create this situation, when in actual fact they were, as they are now, caught between a rock and a hard place. Of course, in retrospect there are many things that they should have done differently and I'm sure we would agree on many of them....;)

vigesimal

Realy wrote: »

Ok now you look foolish.

I answered your question that I would preffer low rates and no job than high rates and no job!

Are you just pretending to be this foolish?

Do you really not understand what she is saying? You can only pay off your mortgage if you have a job and jobs will be going.

Is there a teacher on the list who can help Realy understand what he or she is reading?

StevieJ

MissMoneypenny wrote: »

My point is that people who are thinking how easy it will be pay off their mortgage debt, might not have a job to service that debt. Or they may have to take a massive pay cut in order to survive, which will mean that they are going to struggle to pay their debt, even with lower interest rates.

I'm not in favour of high rates, but those who think that lower rates will be a magic wand that will fix everything, are going to get a shock. Jobs will go. This recession is going to be a bad one.

You say that cuts in interest rates are not a magic wand (that magic word again) but do you aknowledge them as a step in the right direction? Do acknowledge that interest rates are being reduced (partly) to attempt to mitigate the worst excesses of a recession? thus hopefully saving some jobs that may be lost?

StevieJ

vigesimal wrote: »

Do you really not understand what she is saying? You can only pay off your mortgage if you have a job and jobs will be going.

Is there a teacher on the list who can help Realy understand what he or she is reading?

OK, watch the blackboard:

LOWER INTEREST RATES = LOWER REDUNDANCIES

Realy

vigesimal wrote: »

Do you really not understand what she is saying? You can only pay off your mortgage if you have a job and jobs will be going.

Is there a teacher on the list who can help Realy understand what he or she is reading?

Or an economist who can help some of you.:rolleyes:

I do understand, and I have income payment protection which means I would be better of with lower rates. My answer was fine but she failed to get the facts of my answer.;)

PS the idea is to retain jobs not lose them so a rate cut is the only way of lowering business outgoings at the moment other than laying people off.:rolleyes:

Realy

StevieJ wrote: »

OK, watch the blackboard:

LOWER INTEREST RATES = LOWER REDUNDANCIES

Thanks, but that will be filltered out by peoples HPC blinkers.

vigesimal

StevieJ wrote: »

OK, watch the blackboard:

LOWER INTEREST RATES = LOWER REDUNDANCIES

Lower redundancies is not the same as NO redundancies. Do you understand that? If you are one of the unlucky s*ods who lose their jobs, then you won't be able to take advantage of low interest rates to pay off your mortgage. Why are some of you finding that so difficult to understand.

Are some of you so up to your neck in debt that you don't want to think about job loses perhaps and just want to think that you can now pay off your mortgage debts quickly?

Realy

vigesimal wrote: »

Lower redundancies is not the same as NO redundancies. Do you understand that? If you are one of the unlucky s*ods who lose their jobs, then you won't be able to take advantage of low interest rates to pay off your mortgage. Why are some of you finding that so difficult to understand.

Yes your right, why save some people when they can all suffer.

PUT RATES UP ITS THE ONLY WAY FOR US ALL TO FEEL IT!

After all its all about houses init.:rolleyes:

If we did not all have a job would that make it better?

WTF?_2

setmefree2 wrote: »

I think another point on which we disagree is how we got here. The UK & US governments never set out to create a credit boom- housing bubble . It was a result of firstly, coping with the deflationary effects of the flood of Chinese imports coming in to Western Economies which had a massive deflationary impact from 2000 onwards. Secondly, trying to cope with the fall out from the dotcom crash. You sometimes make it sound as if Western Govrnments deliberately went out to create this situation, when in actual fact they were, as they are now, caught between a rock and a hard place. Of course, in retrospect there are many things that they should have done differently and I'm sure we would agree on many of them....

By switching to CPI as their preferred measure of inflation they deliberately biased inflation targeting towards something overly affected by cheap Chinese imports!

IMO this was part of a deliberate strategy to justify keeping rates low and set the economy booming.

And yes, rather than let the dotcom crash play out in a full-blown recession (the USA experienced a mild one) they chose a path of cheap credit and the inflation of other asset bubbles, chiefly housing but equities and ultimately commodities benefited too.

Presumably they thought that they'd come up with something later on And I guess when the bubble went on so long, they thought that there'd been a paradigm shift, they'd got away with it and that the laws of economics really had changed.

From looking at government policy and the way Gordon Brown miserably failed to capitalise on his honeymoon as new PM back in summer 07 to call a snap election, it's painfully clear that the British government at least actually couldn't see bad times coming at all.