BOE downgrades growth and states inflation will fall next year

GeorgeHowell

It's all about confidence. The longer that people think we are not coming out of the slump, the longer it will take to do so. The stagflation doesn't help either. We are getting screwed by cartels supplying essential commodities, and have another government determined to do nothing about it.

shortchanged_2

GeorgeHowell wrote: »

It's all about confidence. The longer that people think we are not coming out of the slump, the longer it will take to do so. The stagflation doesn't help either. We are getting screwed by cartels supplying essential commodities, and have another government determined to do nothing about it.

Not really, it's all about finances so it's actually a real problem not just a confidence issue. Basically the majority of people have less money/credit than they did a few years ago therefore their spending power is greatly reduced. This is as a result of higher inflation, pay freezes/cuts etc.

Generali

wotsthat wrote: »

As high as 2.7%?

As you allude to, inflation is pretty low in post-Bretton Woods terms. Also, the main cause of price rises was a change in legally mandated prices. That's rather like a change in taxes: it causes the RPI to rise but isn't really inflation.

nickj_2

surely the last period of growth was mostly built on debt ,
the cost of living , inflation and lack of pay rises will give people even less cash to spend , govt depts are cutting back , europe is skint so where exactly is the growth going to come from , china ?

PaulF81

Nicky has nailed it in one. We have already experienced the inflation, during the boom years. We are now enjoying paying for it, and will be for some time. All QE is effectively being destroyed as it is running in to recap for the latest Basel requirements and little is actually hitting the street (good job really or we would be like Zimbabwe).

Did point this out on here, hpc, channel 4 home forums, the ft letters from readers (2005) to which i recieved the below response, and who can forget singing pig, who were the most indignant individuals to receive my message. Some I used to fight it out with on the pig are now bankrupt I believe or in horrendous negative equity. Poor, greedy souls.

Chris Giles: I’ve just checked and net national debt, has not tripled. It has gone from £357bn in 1997 to £466bn in 2005. As a share of national income, it has fallen from 43 per cent to 37 per cent. Now, sensible people can argue about whether the figures are quite accurate, given Labour’s willingness to use off-balance sheet financing mechanisms, but the size of these is small relative to the overall figures. There is no way the national debt can be considered a big problem for the UK.
In terms of personal debt, which has grown much more quickly, but it still has not tripled relative to incomes. The question is whether personal debt’s growth is sustainable or will lead to slower consumption growth in future. The answer is unknown, since it depends, among other things, on the future productivity performance of the UK, but I suspect there might be a period in which consumption growth is slower than it has been. I do not think this makes an unworkable economy, however, just one that needs to be flexible.

This was a reply back in early 2005 from the chief economics editor of the ft. How do times change hey. Hindsight etc etc. all I know is if he had a hat, he should have crapped it out by now. He was right. I didn't know the difference between deficit and debt back then.

The biggest problem with debt for consumption is the economy has to take a double kicking in the future, as not only the capital has to be found to maintain spending, but the cash to service and reduce debt has to be sought too.

PaulF81

nickj wrote: »

surely the last period of growth was mostly built on debt ,
the cost of living , inflation and lack of pay rises will give people even less cash to spend , govt depts are cutting back , europe is skint so where exactly is the growth going to come from , china ?

It's not going to come. Not without a solution to the energy supply problem it's not anyhow.

Thrugelmir

PaulF81 wrote: »

He was right.

Partly.

As we are now finding out. Bank profits were themselves a mirage. PPI alone is forecast to account for £32 billion of previously declared profit.

Resulting in Mr Browns budgets being based on unsustainable GDP figures.

All so easy with hindsight.

So hardly surprising that the BOE is very pro-actively steering the economy. With their private views being grim one suspects.

Thrugelmir

PaulF81 wrote: »

It's not going to come. Not without a solution to the energy supply problem it's not anyhow.

Consume less. There's a starter.

PaulF81

Thrugelmir wrote: »

Partly.

As we are now finding out. Bank profits were themselves a mirage. PPI alone is forecast to account for £32 billion of previously declared profit.

Resulting in Mr Browns budgets being based on unsustainable GDP figures.

All so easy with hindsight.

So hardly surprising that the BOE is very pro-actively steering the economy. With their private views being grim one suspects.

It's worse than that. GDP was heavily supported by excessive consumer debt. Easy to keep out of a recession when you have 5% of GDP based upon mew and credit card loan expansion.

The guy was a complete tool.

coastline

Thrugelmir wrote: »

Partly.

As we are now finding out. Bank profits were themselves a mirage. PPI alone is forecast to account for £32 billion of previously declared profit.

Resulting in Mr Browns budgets being based on unsustainable GDP figures.

All so easy with hindsight.

So hardly surprising that the BOE is very pro-actively steering the economy. With their private views being grim one suspects.

PPI is something thats rarely mentioned as having an effect on the economy...and as you say its a huge payout.
Anyone who picks up a few thousand pounds is going to spend it in general on consumer goods...this has been going a couple of years.
If the government were to give £2bn away in tax cuts in the budget it would make massive headlines in the press.