The UK economy sits 'on a bed of nitroglycerine', investors warned - Mail

drc

From the Daily Mail;

Don't invest in Britain: The UK economy sits 'on a bed of nitroglycerine', investors warned

http://www.dailymail.co.uk/news/article-1246389/Bill-Gross-UK-recession-The-British-economy-sits-bed-nitroglycerine-investors-warned.html

Gordon Brown's election strategy was dealt a further blow today after the boss of the world's biggest bond house warned investors to avoid the UK economy.
Bill Gross, who runs Pacific Investment Management Co mutual fund, said the British economy was lying on 'a bed of nitroglycerine'.
In his monthly newsletter, Mr Gross said: 'The UK is a must to avoid. Its gilts are resting on a bed of nitroglycerine.






Nitroglycerine: Pimco boss Bill Gross warned investors to avoid the UK economy. Alistair Darling has conceded it will take 'years' to return to pre-recession levels

'High debt with the potential to devalue its currency present high risks for bond investors.

'In addition, its interest rates are already artificially influenced by accounting standards that at one point last year produced long-term real interest rates of 0.5 per cent and lower.'

The warning comes a day after it was revealed that Britain had limped out of recession with an anaemic return to growth that raised fears of a second downturn.
Economists said the fragile recovery suggested a real risk of a 'double dip', in which the economy plunges back into the red.

Output rose by 0.1 per cent in the final three months of last year. Production shrank a calamitous 4.8 per cent over the whole of 2009 and is down 6 per cent since 2008, making the recession the worst since the 1930s.

And separate figures from the International Monetary Fund showed the downturn was six times worse than the global average.

The most vulnerable countries in 2010 are shown in PIMCO¿s chart 'The Ring of Fire'. These red zone countries are ones with the potential for public debt to exceed 90% of GDP within a few years¿ time, which would slow GDP by 1 per cent or more. The yellow and green areas are considered to be the most conservative and potentially most solvent, with the potential for higher growth

Mr Gross recommended shifting assets to Asia and developing countries and on the sovereign debt front said he favored Canada.

The G7 industrialised nations have 'lost their position as drivers of the global economy' and will likely reel for years from the effects of increasing indebtedness, Mr Gross added.
But Britain was a 'must avoid'.
Mr Gross's warning is doubly embarrassing for Labour because Pimco's European investment team is headed by Andrew Balls, brother of Mr Brown's closest ally the Schools Secretary Ed Balls.
The weak growth figures, which were well below City forecasts, are a major blow to Mr Brown, who has pinned his election hopes on an economic recovery.

There was speculation last night that the Prime Minister could even call a snap general election next month to avoid the need for a Budget and pre-empt the next set of growth figures, due in April.
Downing Street said he was 'confident but cautious' about growth. Alistair Darling raised eyebrows yesterday by insisting that he 'absolutely' stood by forecasts that growth would hit 1-1.5 per cent this year.
The Chancellor said the figures underlined the need to continue Government spending to support the economy.


He said Tory plans to cut spending now would 'end up wrecking the recovery'.

He said: 'There are many bumps along the way, we are not out of the woods yet, so I think my caution is right. What I would say though is these figures, which show modest growth, demonstrate the need for us to maintain support for the economy now.'
Mr Darling said there were many reasons to be confident about the recovery, including lower than expected unemployment and fewer home repossessions.

Last night he conceded it would take years before the economy recovered to the level it was at before the financial crisis, warning: 'It's growth, but the figures are very modest. I said at the Budget that we had probably lost about five per cent of out capacity.'

But George Osborne accused Labour of making the recession worse by failing to prepare the economy for the downturn and by destroying business confidence.
The Shadow Chancellor said: 'After this great recession, any signs of growth are welcome, but these very weak growth figures show that Gordon Brown's Government left us badly prepared for the recession and badly prepared for the recovery.
'We urgently need a new model of economic growth that includes a credible deficit reduction plan that keeps mortgage rates low, creates jobs and doesn't choke off recovery.'
LibDem Treasury spokesman Vince Cable said the economy was still too reliant on consumer spending, debt and the struggling financial sector.
James Knightley, an economist at ING bank, said: 'It is certainly possible we get a double dip, because incomes are not going up and there will be more strain from fiscal measures.
'We could yet see a return to negative growth in 2010. It is possible that it will happen as soon as the first quarter, although it may be more of a risk for the second half of the year.'
Analysts warned that the marginal growth recorded at the end of 2009 could be revised down by the Office for National Statistics next month.

John Hawksworth, an economist for PricewaterhouseCoopers, said: 'Given the normal margin of error for such preliminary GDP estimates, the difference between 0.1 per cent and zero growth is statistically insignificant.'
The UK's 4.8 per cent slump was six times larger than the 0.8 per cent contraction across the world economy, according to the IMF.
Output fell by 2.5 per cent in the U.S. and by 3.9 per cent in the euro zone.
The outlook for 2010 is also decidedly sub-par for Britain, according to the Washington-based fund.
It predicted the economy will expand 1.3 per cent in 2010, well below the 2.1 per cent growth expected across advanced economies and the 2.7 per cent gain forecast for the U.S.
Experts said the Bank of England may now keep interest rates at 0.5 per cent for much longer.
The GDP figures sparked heated exchanges between Business Secretary Lord Mandelson and former Tory chancellor Ken Clarke on Channel 4 News last night.


Lord Mandelson said the recession was now behind us and the growth figures would be revised up.
He claimed: 'The economy has emerged more strongly and more intact than was predicted.'


Mr Clarke countered: 'That's not true. This is the deepest and longest recession we have ever seen.'

As both men raised their voices, Mr Clarke at one point said: 'For heaven's sake behave yourself.'
Presenter Jon Snow intervened to urge them to call a truce.

DaddyBear

Lord Mandelson said the recession was now behind us and the growth figures would be revised up.

I'm not uaually a conspiracy theorist, but this smacks of data manipulation. How does he know it's going to be revised upwards??
Having seen Madelslime on C4 news last night its quite clear that he's lost the plot and absolutely desperate.

chucky

DaddyBear wrote: »

I'm not uaually a conspiracy theorist, but this smacks of data manipulation. How does he know it's going to be revised upwards??
Having seen Madelslime on C4 news last night its quite clear that he's lost the plot and absolutely desperate.

because it only contained 40% of the total incoming data and the stronger sectors data (manufacturing) hadn't been fully recorded...

drc

DaddyBear wrote: »

I'm not uaually a conspiracy theorist, but this smacks of data manipulation. How does he know it's going to be revised upwards??
Having seen Madelslime on C4 news last night its quite clear that he's lost the plot and absolutely desperate.

I think that the whole bloody government have lost the plot. Especially our glorious leader comrade McBroon :mad:.

DaddyBear

chucky wrote: »

because it only contained 40% of the total incoming data and the stronger sectors data (manufacturing) hadn't been fully recorded...

If you look at past forecasts, there is an equal amount of upward and downward revisions.

The_White_Horse

anyone who voted this labour filth into power should hang their head in shame. anyone with half a brain knew it would end in disaster. They are fine for debating their ridiculous hippy ideas in coffee shops, whilst eating lentils and wearing sandals, but they should NEVER be allowed to run a country!!!!

they are borrowing GBP6k a second, every second. In 5 seconds they borrow more than the average national salary.

they have not only destroyed the country for us, but for our children and our children's children.

and the worst thing is, they are not even sorry. they are sanctimonious and believe they have done us good.

I hope they are destroyed in this election, so their poison never comes back to haunt us.

Call an election NOW!!!

DaddyBear

SO how long before we get a gilt failure????

ninky_2

ooh a ring of fire near a bed of nitroglycerine. i'd watch that. sorry i don't really understand economics but isn't nitroglycerine worth quite a bit these days. if the uk's nitroglycerine goes up in smoke as a result of the ring of fire will other countries nitroglycerine supplies be worth more?

doire_2

Dear oh dear the UK is in a right mess. Imagine the caranage after the election when the government has to face up to it :eek:

cogito

DaddyBear wrote: »

SO how long before we get a gilt failure????

The Greeks managed to sell a much oversubscribed bond issue this week without trouble. If they can do it, why should we worry?

DaddyBear

Wait for it










Wait for it



















Wait for it