Recivery by year end? Maybe... maybe not.

Wookster

British economy may not recover by year end
Tom Bawden

Britain’s gross domestic product (GDP) fell by 0.6 per cent in October, fuelling anxieties that the economy could remain in recession in the fourth quarter, according to an initial estimate from the National Institute of Economic and Social Research (NIESR).

The institute's estimate for past month contributes to an overall 0.4 per cent decline in output in the three months until the end of October, the same level as in the three months to the end of September.

After the surprise 0.4 per cent decline in third quarter GDP, which measures there period between July and September, economists had been confident that Britain would return to growth in the fourth quarter, after six consecutive quarterly declines. However, there are growing concerns that Britain may have to wait until the first quarter of next year to leave the recession and today’s NIESR figures will do little to remove those doubts.

David Buik, of BGC Partners, said: “We’re getting a very strong message from Mervyn King [the Bank of England Governor] that the British economy still faces very deep problems. This week he has announced another huge banking bailout and increased quantitative easing by £25 billion. It is possible that we may grow this quarter, but if we do, it won’t be by more than 0.2 per cent.

The article continues:

http://business.timesonline.co.uk/tol/business/economics/article6904628.ece

A sorry state for us all.

Whatever happened to Britain being uniquely placed?

Pete111

Wookster wrote: »

The article continues:

http://business.timesonline.co.uk/tol/business/economics/article6904628.ece

A sorry state for us all.

Whatever happened to Britain being uniquely placed?

We are...just not in a good way.

:eek:

Thrugelmir

Pete111 wrote: »

We are...just not in a good way.

:eek:

Could be far far worse.

treliac

Wookster wrote: »

The article continues:

http://business.timesonline.co.uk/tol/business/economics/article6904628.ece

And as one of the comments following the article states:-


"Interest rates won't rise for at least 18 months. They'll also have to keep printing money for the next 12 months. When the history of this crash is written it will show how close Britain came to bankruptcy - bankruptcy for one of the biggest economy on earth.We're in the worse place possible to make any sort of recovery and unemployment will hit 3 million. I'm surprised there isn't rioting in the streets by now. We could host a brand new olympics in every city in England for the next 40 years with the money the BoE have printed. What a mess."


Hope they don't mind being quoted!!!

Afriend_2

The UK economy is in a bad state. The way I see it the UK can either:
(1) stop QE. this could lead to high unemployment, wage deflation, debt defaults, bringing about a downward spiral.
(2) continue QE. this will lead to price inflation, but lower unemployment (the UK economy is no zimbabwe).

Neither is ideal, but we are where we are. Of course the underlying problems of productivity, competitivity and infrastructure will need addressing in either case.

Was that intelligent enough for you Cleaver or should I post a picture of a monkey?

lemonjelly

Thrugelmir wrote: »

Could be far far worse.

I agree. I believe it will get worse before better too.

I anticipate we'll have over 3 million unemployed. If you add in other changes to the welfare system over the coming year, there is (imo) a real risk of as high as 4 million (though some of the rises will be due to people coming off Incapacity benefit onto JSA).

Afriend wrote: »

The UK economy is in a bad state. The way I see it the UK can either:
(1) stop QE. this could lead to high unemployment, wage deflation, debt defaults, bringing about a downward spiral.
(2) continue QE. this will lead to price inflation, but lower unemployment (the UK economy is no zimbabwe).

Neither is ideal, but we are where we are. Of course the underlying problems of productivity, competitivity and infrastructure will need addressing in either case.

Was that intelligent enough for you Cleaver or should I post a picture of a monkey?

Yup. Thing is, will they know the right time to press the stop" button on the printer?

Euphoria1z

what happens if they dont stop printing? does everything become really expensive due to high inflation? and then interest rates rise and the value of money goes down in the long run (like zimbabwae?)and anyone with exisiting debt has his debt wiped away? is that the jist of it?

kabayiri

lemonjelly wrote: »

I anticipate we'll have over 3 million unemployed. If you add in other changes to the welfare system over the coming year, there is (imo) a real risk of as high as 4 million (though some of the rises will be due to people coming off Incapacity benefit onto JSA).

It's difficult to rely on figures such as JSA as an absolute, though it can show trend obviously.

Somewhat anecdotal, but I know quite a few people who for various reasons have not 'signed on' despite being out of work.

Is this just a local one-off situation? I dont know.

HAMISH_MCTAVISH

kabayiri wrote: »

It's difficult to rely on figures such as JSA as an absolute, though it can show trend obviously.

Somewhat anecdotal, but I know quite a few people who for various reasons have not 'signed on' despite being out of work.

Is this just a local one-off situation? I dont know.

Probably not.

Both of us have, at various times over the years, been without work for several months (although never at the same time).

Neither of us have ever signed on for any form of benefits. Just cut back the spending a bit and live on one income, which we can do easily.

And if, as has usually been the case, you find work before the severance package runs out, so much the better and bank the difference.

Really2

Recivery by year end? Maybe... maybe not.

But there might be a recovery.

Generali

Euphoria1z wrote: »

what happens if they dont stop printing? does everything become really expensive due to high inflation? and then interest rates rise and the value of money goes down in the long run (like zimbabwae?)and anyone with exisiting debt has his debt wiped away? is that the jist of it?

At the moment, the Government is 'printing money' (not literally) and, in effect, gifting it to the banks by buying assets from them at above their market value.

Increases in the money supply lead to increased inflation as there is more money chasing the same number of goods. If there are no more goods and more money then the money becomes worth less.

So is the increase in the amount of money the banks are holding inflationary? Not right now IMO. The reason is that the banks are either unwilling or unable to lend the money out therefore the money going to the banks is getting stuck with them and isn't being used to bid up the price of goods in the real economy.

For as long as banks don't lend out the money they are being given, the increases in the money stock won't cause inflation as they won't feed through to the money supply. If the Government was to change tack and use QE to cut taxes that could be inflationary but then consumers may just use the money to pay off debt which again wouldn't cause inflation.

There is an argument that increasing asset values (eg stock market rises in the past few months) have been driven by banks using the money that they are not lending to buy up shares etc instead but I don't agree with that.

The above all depends on the Government/BoE not having a brain freeze and doing something really dumb like printing trillions of fivers and handing them out on street corners or something. Having said that, I never thought I'd see the day that a peacetime UK Government was running a deficit in excess of 1% of GDP per month and gifting itself billions of pounds by using it's position as the only body in the UK able to issue legal tender (Scottish and Northern Irish notes aren't legal tender, they're promissary notes).