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

kennyboy66_2

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?

Did you post their September figures which suggest GDP growth in September 2009 of 1.3% ?

My view is that (even taking account seasonal factors) for GDP to fall 0.6% in October is pretty unlikely.

For it to rise 1.3% the month before is close to impossible.

Pete111

Thrugelmir wrote: »

Could be far far worse.

Sorry I forgot - Gordon has 'saved us and the world' hasn't he.

No.

He has defered the pain for political reasons and amplified it massively with the truly vast sums thrown at the banks/state

We will have to deal with it for years and years to come as a nation. I hope everyone on this forum has many kids and that they are all very bright - they and their generation will be the ones digging the UK out of this one. :mad:

bernard_shaw

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

But we might be in receivership.

IveSeenTheLight

Pete111 wrote: »

Sorry I forgot - Gordon has 'saved us and the world' hasn't he.

No.

He has defered the pain for political reasons and amplified it massively with the truly vast sums thrown at the banks/state

We will have to deal with it for years and years to come as a nation. I hope everyone on this forum has many kids and that they are all very bright - they and their generation will be the ones digging the UK out of this one. :mad:

Ok, there is a cost to how the government is dealing with this situation.
How is it amplified though? Simply put, is it not diluted by spreading the cost and pain amongst the whole of the UK?, rather than only affacting the unfortunate it would have affected without the stimulus.

lemonjelly

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.

I don't think it it will be.

Thrugelmir

Generali wrote: »

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 Gilts are being sold by pension funds, insurance companies and other financial institutions, not banks in the main. So the cash generated from the sales is being deposited in the banks. Part of the cash is being reinvested in rights issues from Companies. This year around £320 billion of capital has been raised by Companies on the European bourses to reduce bank borrowing. The repayment of debt then brings the banks capital ratios back into line and leaves equity prices higher.

Equity prices are rising as "investors" with no debt and cash to invest are chasing yields. Corporate bonds are dropping in yield too. Certainly getting harder and harder to find good yielding investments. As many companies are cutting dividends. BP published good results. 2 weeks ago, but still cut its dividend by 2% to conserve cash.

Once QE ends what is going to happen to interest rates thats the question.

Pete111

IveSeenTheLight wrote: »

Ok, there is a cost to how the government is dealing with this situation.
How is it amplified though? Simply put, is it not diluted by spreading the cost and pain amongst the whole of the UK?, rather than only affacting the unfortunate it would have affected without the stimulus.

It's amplified because our Govt took the call to defer any cuts until 2010, cut VAT, impliment QE and vastly increase our borrowing to bail the banks out to the nth degree....

I'm told by some that this was the right thing to do and in the very short term (ie before May next year), sure it makes sense in a fingers in your ears kinda way. What concerns me deeply is that in the medium/long term we are now royally shafted........and thats before we get downgraded from AAA.

Ah well.

Rochdale_Pioneers

Pete111 wrote: »

Sorry I forgot - Gordon has 'saved us and the world' hasn't he.

No.

He has defered the pain for political reasons and amplified it massively with the truly vast sums thrown at the banks/state

As have the Americans and the Europeans - you're not one of the Britain in a bubble brigade are you? How could it be worse? Unemployment for one - we're a couple of percent below the European average. We're less than half the rate seen in Spain. Things are quite clearly bad here. But compared to elsewhere we're not doing too badly.

Generali

Rochdale_Pioneers wrote: »

As have the Americans and the Europeans - you're not one of the Britain in a bubble brigade are you? How could it be worse? Unemployment for one - we're a couple of percent below the European average. We're less than half the rate seen in Spain. Things are quite clearly bad here. But compared to elsewhere we're not doing too badly.

By that measure the UK (unemployment rate 7.9%) is doing worse than Malaysia (3.6%), Mexico (6.4%) and Pakistan (5.2%) [figures come from last week's The Economist].

cootambear

Generali wrote: »

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).

Banks are counterintuitive to the needs of the economy. They offer cheap loans when people generally don`t need them (boom times), and won`t loan in slumps. QE money held by banks will be released only when the economy has stabilised, but the amount pumped now in will then be released as cheap money which will stoke asset value inflation ie another HP boom. No, they never learn, they can`t, its called `the self correcting free market`, lol.