Who's next? Spain? Italy?

StevieJ

aelitaman wrote: »

If you are going to demolish my argument you need to get your basic facts right. Germany entered recession first. Then the UK, America, France, Japan all entered at the same time. It is reported here.

http://www.thisislondon.co.uk/standard-business/article-23586250-shockwaves-as-germany-goes-into-recession.do

Talking about facts BTW the US measure their recessions differently.

The world's stock markets suffered another round of falls yesterday as the body regarded as the arbiter of US recessions said the American economy's 73-month economic expansion ended in December 2007.


http://www.independent.co.uk/news/business/news/us-entered-recession-a-year-ago-says-nber-1047335.html

StevieJ

Kohoutek wrote: »

Forget what Brown says about not making cuts and being the party of 'investment' - as aelitaman shows, we're running out of credibility with bond investors. Who on earth will keep buying UK debt within a year or so? If Greece wasn't in the eurozone, the market would have completely ripped it to shreds by now just like Iceland.

The UK could easily be next. To restore an iota of sanity to the public finances, we must use primarily public spending cuts, not huge across the board tax increases like the insane 'tax on jobs' that Clown's proposing with his NI hikes.

So why haven't we been 'ripped to shreds' ? we are not in the Eurozone.

Kohoutek

StevieJ wrote: »

So why haven't we been 'ripped to shreds' ? we are not in the Eurozone.

Because the markets have more faith in Britain than Greece or Iceland at the moment. I can't emphasise enough how much we're walking a tightrope.

Unfortunately, there are many triggers that could cause markets to lose faith in Britain that could emerge in the next few months, e.g.

*A failed gilt auction
*A hung Parliament
*It emerges British banks have heavy exposure to Greece
*Our GDP growth figures remain static at 0.1%, or are revised downward.

Use common sense. We have a deficit large than Greece, we have a financial sector that is half owned by the government that is leveraged to an absurd extent - I saw a figure the other day that suggested it could be as high as 1000% of GDP. Without the government stimulus package, we would still be in recession. What happens when the stimulus runs out? There's no money left for another one.

StevieJ

Kohoutek wrote: »

Because the markets have more faith in Britain than Greece or Iceland at the moment. I can't emphasise enough how much we're walking a tightrope.

Unfortunately, there are many triggers that could cause markets to lose faith in Britain that could emerge in the next few months, e.g.

*A failed gilt auction

Is that chicken or egg

*A hung Parliament

Currently expected

*It emerges British banks have heavy exposure to Greece

Where would that be, France and Germany so I believe.

*Our GDP growth figures remain static at 0.1%, or are revised downward.

Q4 will be revised upwards

Use common sense. We have a deficit large than Greece, we have a financial sector that is half owned by the government that is leveraged to an absurd extent - I saw a figure the other day that suggested it could be as high as 1000% of GDP. Without the government stimulus package, we would still be in recession. What happens when the stimulus runs out? There's no money left for another one.

My views above in red.

Kohoutek

The idea that anyone, let alone gilt investors are ready for a hung Parliament is frankly ludicrous.

I understand what you mean by chicken and egg, but as you know, sudden loss of confidence can cause a chain reaction that causes a bigger crisis.

I notice you didn't put a view about the 'recovery' being entirely the result of the government stimulus. I assume you accept that.

Here's an American view on our debt situation:

http://blogs.wsj.com/source/2010/02/04/is-greece-governable/

"And even though the U.K. has a budget deficit as large as that of Greece, investors appear willing to believe that any new government that emerges from elections due by June 3 will pursue a substantial deficit reduction program, and be able to implement it.

Fundamentally, they believe that the U.K. is governable [unlike Greece], and that faced with a serious crisis, its people will grumble, but mostly go along with what’s needed."

You better hope the unions don't decide to throw a spanner in the works at the massive programme of public sector cuts that is needed. On their recent form, it's highly likely.

StevieJ

Kohoutek wrote: »

The idea that anyone, let alone gilt investors are ready for a hung Parliament is frankly ludicrous.

.

Ready for it or not that is what the polls are saying, I would have assumed gilt investors will be aware of this

Kohoutek

StevieJ wrote: »

Ready for it or not that is what the polls are saying, I would have assumed gilt investors will be aware of this

Perhaps that's true to an extent, maybe that's why the biggest bond investment company in the world is saying the UK is a 'must avoid'

http://blogs.wsj.com/marketbeat/2010/01/26/gross-on-gilts-on-a-bed-of-nitroglycerine/tab/article/

"As for developed countries, Gross likes Canada, then Germany and says the U.K. is a “must to avoid.”

“Its Gilts are resting on a bed of nitroglycerine.”

Emy1501

http://www.businessinsider.com/niall-ferguson-us-finances-are-not-much-better-than-those-of-greece-2010-2

Sounds like take your pick from the PIGS but get the impression that it won't be long before we are then the US are involved.

worldtraveller

European leaders are poised to announce a multibillion-pound rescue of the Greek economy today to try to stop its debt crisis spreading to other countries and wrecking the euro.

Finance ministers from the main economies in the single currency area, led by Germany and France, worked through the night to let the EU’s new President, Herman Van Rompuy, save his first one-day summit from disaster by announcing a guarantee that Greece would not be allowed to fail.

There were sharp disagreements yesterday over how to restore market confidence in Greece, with the Netherlands continuing to argue for the Washington-based International Monetary Fund (IMF) to be called in despite strong opposition from Angela Merkel, the German Chancellor.

Mr Van Rompuy is among those insisting that the 16 nations in the eurozone find a solution themselves. Instead of an EU state going cap in hand to Washington, he is proposing an IMF-style austerity programme for Greece. Athens would have to meet stringent reform targets.

One longer-term plan under discussion is the creation of a “European monetary fund” to avoid the humiliation of having to call in the IMF to save the euro. France and Germany in particular have invested a great deal of prestige in the euro.

TimesOnline

HAMISH_MCTAVISH

StevieJ wrote: »

So why haven't we been 'ripped to shreds' ? we are not in the Eurozone.

Because, amongst other things, we are still the worlds 5th largest economy, the worlds 6th largest manufacturer, one of the worlds top 3 financial centres, and we have an independant currency, which can be devalued if needed and has interest rates set for our economic conditions, not Germany or France's......

And our National Debt to GDP ratio is actually far better than many others....

US: 97.5%,

UK: 72.7%,

Germany: 86.6%,

France: 80.3%,

Italy: 121.1%,

Japan 227.4%

Probably worth mentioning Japan hasn't had any trouble financing it's debt....... After 2 decades of running excessive deficits and significant QE.

Probably also worth mentioning that our unemployment is significantly lower than most of the other major countries on that list as well, and that although we have exited recession later, and with lower growth, it wasn't that much later, nor that much lower than some others, and it's a price well worth paying for maintaining a higher level of economic activity and employment during the recession, which we did.....

Gordon Brown deserves a lot of flack for a lot of things.

Being an authoritarian, illiberal, socialist, big government loving, high taxing, nanny state promoting, twit...... for example. Much like all Labour party members.

But his response to this economic crisis has been exactly the right thing to do. Even if we can rightly despise him for running up such a large structural imbalance in search of his socialist utopia prior to it.