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Unstable equilibrium in 2010

Robert Peston | 19:26 UK time, Wednesday, 30 December 2009

Prognosticating about the ensuing 12 months was like shooting fish in a barrel over the past few years.

The big facts about the noughties were first that there was too much cheap money sloshing about, and then - inevitably - that there was too little.

So my predictions for 2006, 2007, 2008 and 2009 were "boom, overheating, crunch and bust", respectively.

Wobbly me

But for the first Hogmanay in ages, I have little confidence in what the coming year will bring for business, for savers, for investors and for borrowers.

Why am I so wobbly? Well, it is because of the manner by which we avoided a depression in the UK, the US and much of Europe.

With banks, non-financial businesses and households all de-leveraging, all trying to reduce their huge and unsustainable debts, a massive economic heart attack was avoided by a reduction in official interest rates to almost zero, to ease the squeeze on the private sector, and by increases in public spending.

Or to put it another way, any fall in private-sector indebtedness has been offset by a rise in public-sector indebtedness.

Which means that viewed across all economic sectors, the UK and the US are still submerged in debt: the aggregate borrowing of households, companies and government is equivalent to more than three times the value of everything we produce, still greater than at any point in peacetime history.

Patient creditors?

If you add to that the liabilities of banks that should be viewed as unsustainable because they are provided or guaranteed by the state, then the indebtedness of much of the West can be seen as greater still.

So the big intolerably uncertain question for Britain and America (and for Greece, Ireland and others) is can we reduce our debts in an orderly way - one which would be gruelling for us, as we save more and consume less, but not unbearable?

Or will our creditors lose patience and demand their money back - in which case we would have to pay massively more for credit while draconian cuts in government and household spending would be forced on us?

To put it more succinctly, we are balanced precariously.

The most likely tilt on the axis takes us to an indeterminate period of low growth, which won't be painless - because our standard of living and public services would stagnate and unemployment would continue to rise.

But we cannot discount a violent tilt in an altogether more unpleasant direction, where sterling would plummet and the cost of borrowing for government and for us would soar.

What's worse, our fate is not wholly in our control.

We could be a domino knocked over in a chain reaction started by the default of another too-indebted nation.

Or we could be victimised by investors if the current recovery in property and share prices came to a sticky end, since that would lead to further losses for our still rickety banks.

Or inflation could rise faster than the Bank of England expects, which would force it to put up the official interest rate in a manner that dangerously sucked out all that additional cash given by it and the Treasury to consumers over the past year.

Or we could become a pariah for investors if the resolve of the next British government to reduce public-sector borrowing was doubtful.

To put it another way, we're probably in for a period of low growth and slow steady recovery - but a further shock cannot be wholly discounted.

What price shares and gold?

There are also huge uncertainties about the outlook for assorted financial markets.

Take share prices. Even after rising 50% from their lows of early 2009, they don't look particularly expensive on the basis of historical averages for the relationship between prices and earnings or between prices and assets.

But those historical averages may well have been massively distorted by the share-price inflation of the dot.com bubble of the late 1990s and the cheap-money bubble of the mid-noughties.

So if those speculative bubbles are viewed as aberrations, shares may be expensive.

Or take gold.

If we are in for a period of slow steady recovery, in which interest rates rise, gold is greatly over-valued.

But if the dollar and sterling were to plunge - well, gold would glisten even more than it has.

Two 'certainties'

Is there no forecast that can be made with confidence?

I suppose there are just two about which I feel a bit more certain.

The first is that the Chinese currency must surely rise. China's authorities will surely be unable to keep the cork in the bottle, when their economy looks so much stronger than the US's.

Second, even without a sterling crisis, the interest rates paid by the British government must surely increase and the price of gilts (of all maturities) must surely fall.

Gilt prices have been boosted by investors' curious conviction that lending to governments like ours was safer than lending to banks or to the private sector.

But now that the penny has gradually dropped that the banks and public sector are more or less indistinguishable, it has gradually become a tiny bit cheaper and easier for banks to borrow and it will probably become harder and more expensive for governments to borrow.

Update 1145: A number of you spotted a typo which I have now corrected. I wrote that the "price of gilts... must rise", when I meant to say that they must "fall". Sorry for the confusion.

Comments

Page 1 of 3

  • Comment number 1.

    Sorry to be pedantic but surely an equilibrium is stable?

  • Comment number 2.

    Sorry for being picky but isn't 'unstable equilibrium' an oxymoron.

    On a more important point I would be interested to know WHY the chinese will allow their artificially pegged currency to rise - it will destroy their exporting base and make imports expensive (they tend to import high value added goods such as machining centres etc so they can export relatively low value added goods that cant be made economically elsewhere easily. Expect to see other means of controlling the side effects (it is a one party state after all).

    I would be very interested to know what pressure can be brought on the chinese when they are the worlds debt holder.

  • Comment number 3.

    Robert
    Well done for exploring the problems.

    As we should all be aware by now the origins of this Great Recession (Depression) are to be found in the massive leverage (debt) taken on by consumers.

    It is the DEMAND for credit, rather than SUPPLY of credit that is the root problem.

    Politicans, of all hue, are complicit in this: no politican wants to stop the consumer/voter from "feeling" rich by stopping him/her buying that expensive (imported) car they cant afford. Previous generations would only borrow to buy a house, not expect credit on tap for everything.

    With this in mind it is easy to see why the politicans want to blame the bankers. While not without sins, they are only part of the problem. (Indeed, one can argue that their problems are due more to lax regulation on capital requirements than anything else).

    If anyone really wants to understand the BIG PICTURE, by far the best commentary is from the excellent Martin Wolf who writes in the FT.

    http://www.ft.com/comment/columnists/martinwolf

  • Comment number 4.

    The bankers will be laughing all the way to their banks.
    It has become painfully obvious that governments must keep the bankers.
    Also where else would folk with money put it?

    We will see western governments falling over each other to make the pretence of having the best home for money.

    Massive deflation here we come.

  • Comment number 5.

    Evening Robert,
    far be it for me to contradict such an august opinion as Peston on Life, the Universe and everything else, however, if you look carefully at what is happening in Chinas economy you will see that they are going through the same consumer spending problem(which will lead to a bubble) that we did in years past.
    They have provided massive stimulus to their domestic economy which is leading to a massive problem with asset price inflation. So much so that they have had to ask their banks to increase their capital ratios to take some money out of circulation.
    At the same time, their exports have collapsed compared to previous levels and it is only by maintaining an artificially low exchange rate that they hope to restart their export drive.
    This means to me that they will NOT allow their currency to become stronger by any significant amount in 2010.

    The British Government still have not come clean with the electorate on the extent of our problems because they believe it would be political suicide to do so.
    No, I'm sorry, 2010 will be a repeat of 2009, nothing has changed in 2009 and I'm sure that sentiment will apply to 2010.

  • Comment number 6.

    Well, its been a long time coming and in the end was it worth the wait, all the questions we knew needed addressing and have still to be, oh well I suppose this is steph's territory really anyway.
    My question is simple...will '10 be an any easier environment to run my business in than '09 was. I hate to admit it , even to myself actually, but in 25 years of business I have never approached a New Year with such trepedation..is it reading too much into it?

  • Comment number 7.

    Sorry EmKay but unstable equilibrium is not an oxymoron. Imagine a small ball balanced (carefully) upon a larger ball. The system is in unstable equilibrium in that it will not return to that state if disturbed. Rather like our economy.

  • Comment number 8.

    "Second, even without a sterling crisis, the interest rates paid by the British government must surely increase and the price of gilts (of all maturities) must surely rise."

    If rates go up, don't prices go down?

  • Comment number 9.

    The signs that all is not well are already apparent. Denying them and pretending that everything is fine with our economy is just great!

    If we consider that farmers throughout the world have been unable to purchase the seeds they require to grow 2010's crops (due to a sortage of credit) and that tomorrow we have the Codex Alimentarius regulations introduced by the UN/WHO/FAO, it looks like it will be an incredibly interesting year.

    I would expect to start seeing common items unavailable in the supermarkets this year, for a few days at a time. I would also expect to see retailers either negotiating lower commercial rents or closing down altogether. Let's not forget that we don't have the money to keep importing plastic goods from China (not that we need many of them anyway).

    Ho-hum. Interesting times!

  • Comment number 10.

    One question on the wobble...the Bank of England say banks will need to find another £33 billion in new capital and refinance £1 trillion of wholesale fundig over next five years. How, and at what cost to the rest of us?

  • Comment number 11.

    'Unstable equilibrium'

    That means a pendulum/balance to me.

    Humans can swing from being balanced to unbalanced and so can any calm in a storm. I think the words you are looking for, Robert, are, erratic and unstable.

    Anyway, Happy New Year, to you and your many followers.

    Hope you have planned well, for the year ahead.

  • Comment number 12.


    I think you mean that gilt prices will fall rather than rise...

  • Comment number 13.

    Here is prediction that is likely to materialise. As the dollar will keep losing ground and the Chinese will try everything to get rid of it, and as the agreement in Copenhagen reached a dead end, our glorious masters will get together to discuss the plans for the implementation of ONE WORLD CURRENCY - issued and distributed on the same basis as they issue the carbon emissions. The purpose of the currency will be to be able to develop the global trade further and control the climate change.

    The talks will take years but the start will be made in 2010! As for the UK, the country will keep chasing its once great tail ... in vain.

  • Comment number 14.

    7. At 9:06pm on 30 Dec 2009, curiousman wrote:
    Sorry EmKay but unstable equilibrium is not an oxymoron. Imagine a small ball balanced (carefully) upon a larger ball. The system is in unstable equilibrium in that it will not return to that state if disturbed. Rather like our economy.

    >>>>>>>>>>>>>>>>
    Curiousman - you're right - how silly of me

    >>>>>>>>>>>>>>>

    One bright spot in all of this gloom is the prospect of repatriation of some manufacturing to the UK given the collapse of sterling giving the basket case a little filip! Have a look at this link.

    http://news.bbc.co.uk/1/hi/business/8434458.stm

  • Comment number 15.


    Mr Peston wrote:
    ‘Why am I so wobbly? Well it is because of the manner by which we avoided a depression in the UK, the US and much of Europe’

    That ‘we’ some would consider poorly used, because many haven’t avoid the depression. In fact many have lost their, homes, their jobs, their business. The plain truth is that for many there is a depression, and a very severe one at that.

    In respect of a future for this country, the average working Joe & Jane are likely capable of keeping things going. Let’s face it, that’s what they do best.

    But what brings me to the point of anger, is that they will still have to live with the blood sucking banks, which will likely bleed them dry as they go about the business of turning things around.

    If ever there was a time to change the control of money creation, this must surely be it.

    To expect the average working person to somehow dig deep, take the pain, struggle and turn this mess around, without any attempt to change the route cause, would be perhaps the most ridiculous request ever burdened upon a people.

  • Comment number 16.

    "Well it is because of the manner by which we avoided a depression in the UK, the US and much of Europe."

    Altogether too optimistic an outlook. Where is the evidence that we have avoided a depression?

    The British economy is in intensive care, being kept alive on low interest rate drugs, a fiscal stimulus drip and with massive transfusions of quantitative easing. And yet the optimists would have us believe it will be up and about, right as rain in a few days time. More likely the drugs and transfusions will run out before that and we'll see the reality of the prognosis.

    Depressions take a long time to unfold because the quantities involved are so astronomically large. We are simply rolling with increasing speed towards the precipice and there is probably nothing anybody can do about it.

    On the one hand, if the country carries on borrowing, then either we will be unable to pay the interest, or no-one will lend to us. Either way, there will be no money to pay the government employees and people on benefits, except by printing money. So the pound will plummet and all the imported raw materials, food and fuel will rise in price.

    On the other hand, if we cut the deficit by reducing the public sector, then all the shops and services will collapse because nobody will be spending any money, so massive unemployment.

    The only certainty is we are all going to get a lot poorer!

  • Comment number 17.

    #14 EmKay

    Re your "One bright spot ...", if 1 in 7 companies return to the UK for manufacture, doesn't that mean that 6 out of 7 don't return?

    Sounds to me like a classic case of putting the best spin on something to disguise the reality. If it was 6 out of 7 returning, then that might be worth reporting. If it was 8 out of 7, then we would be on the road to recovery!

  • Comment number 18.

    Oh dear Peston,this does`nt sound like your usual pumps`R`us verbiage.

    As for this:

    "So my predictions for 2006, 2007, 2008 and 2009 were "boom, overheating, crunch and bust", respectively."

    Robert Peston on his own BBC-provided blog said in 2008 that 2009 would be "bust"

    That`s not how I remember your output from back then Peston.

  • Comment number 19.

    Why do you think England would have trouble selling its gilts when Japan is approaching 250% debt level to GDP with no problems? The truth is, any nation capable of issuing its own currency can always satisfy its domestic currency denominated liabilities, and investors know that. Therefore there are no limits how much such a nation can go in debt. Interest rates reflect more inflation expectations than anything. And banks wont run out of money... they just issue more.

  • Comment number 20.

    "Why am I so wobbly? Well it is because of the manner by which we avoided a depression in the UK, the US and much of Europe." - Robert Peston, December 2009

    Who says we have avoided a depression?

    "Gentleman, you have come sixty days too late. The depression is over."
    - Herbert Hoover, June 1930

    We all know what happened next.

  • Comment number 21.

    19. At 00:17am on 31 Dec 2009, zfvr wrote:

    "Why do you think England would have trouble selling its gilts when Japan is approaching 250% debt level to GDP with no problems?"

    Because Japan isn`t a crappy bankrupt tinpot Marxist joke of a nation,like our pathetic "Air Strip One".

    BTW,how are the Amerikan bond sales going?

  • Comment number 22.

    19. At 00:17am on 31 Dec 2009, zfvr wrote:
    Why do you think England would have trouble selling its gilts when Japan is approaching 250% debt level to GDP with no problems? The truth is, any nation capable of issuing its own currency can always satisfy its domestic currency denominated liabilities, and investors know that. Therefore there are no limits how much such a nation can go in debt. Interest rates reflect more inflation expectations than anything. And banks wont run out of money... they just issue more.

    ands banks won't run out of money... they just issue more. That is what is so wrong with the present system, creating money from nothing, getting more people into debt slavery, and inflating house prices beyond recognition. You need to be a banker or premiership footballer to own a house in parts of London, and Labour have presided over a situation where many now cannot afford to buy a home. That is their legacy, forcing more people back into rented accommodation, and supporting the financial elites at the expense of the rest of the population.

  • Comment number 23.

    spent the vast majority of 2009 out of work but surprisingly having cut my cloth accordingly will enter 2010 in a better financial position than when working . i now lead a totally stress free existence having learnt how to play the system. true i have very little spare cash but until we come out of this depression i will carry on as 2009 and having spent thirty years in employment i do not feel guilty living of the state.

  • Comment number 24.

    Robert, you failed to mention the steadily rising oil price. This is the "unkown" that will shock the system. "Unknown", that is, to those economists, politicians and commentators who either fail to see the elephant in the room, or choose not to see it.

    Rather than havering about a prediction for 2010, James Kunstler makes the best prediction I've read yet. Unfortunately, I can't provide a link because the BBC always censors it out (because Mr Kunstler uses a rude word in his blog title) ... how sad is that really?

    Anyway, for those interested, I'm sure if you Google James Howard Kunstler (he of "The Long Emergency" fame), you'll find his blog.

    The point is that the rising oil price will tilt economies into shock again, just like it did when it hit $147 in 2008. All the banking-political mafia did then was punt a killer problem a little way into the future. That killer "future" will now be 2010/2011 - only this time, there will be no punting the problem into the future. Just massive deleveraging everywhere.

  • Comment number 25.

    Robert you and most other media people seem to overlook that sterling has already had a crisis. In fact the biggest drop since the 1930s. It gets a bit tedious hearing about a coming sterling crisis again and again as if we had not had one. The effects of this devaluation are now starting to feed into the inflation figures and will cause untold misery for savers while continuing to bail out those who caused the crisis in the first place i.e. the borrowers. Perhaps you should spend some of your energies high lighting this fact. Deflation was never on the cards in this country and was simply used by the governement and most of the media as a smkokescreen while carrying out it's plan to get re-elected. The media has been irresponsible in the reporting of this financial crisis and needs to start challenging this government now. Niall Ferguson is just about the only person out there commenting on the reality of our future.

  • Comment number 26.

    The fragile stability of the economy, as the nation and businesses struggle to cope with the new adverse financial circumstances, may only be temporary as it does depend on the action taken by the banks,if any, to prevent a repeat of the financial crisis and I'm still not convinced that anything has changed.

    It will be a future of mixed fortunes.Businesses which can adapt will survive but others won't.For savers & investors there will be the usual struggle to find a safe but profitable home for their money.And for borrowers,lendings will limited to those with the greatest capacity to pay the loan back.

    For many life will not be lived it will be existed.We will go back to the frugal ways of the 1950's with the make do and mend philosophy that allows followers to do what they need to do but not in lavish style.We may even get to the stage where we keep our money under the bed because we are unable to trust the banks.

    For others life will continue as normal.The pensioners for example were probably living this lifestyle before the credit crunch as will prudent savers.The rich of course will be relatively unaffected.

    The danger will come from the credit card generation, those who live their lives spending without saving as they work their way to maxing out their large supply of credit cards.If, as I mentioned in one of my postings, the banks have not implemented better controls and checks, particularly on the raising of credit limits online, then the prospect of a second round of toxic debt looms large.

    Another financial crisis on this scale would I think wipe us out financially and then we would all have a very bleak future to face so let's hope that those in power adhere to the "prevention is better than cure" philosophy and ensure that it can't happen again.Government ministers,Bank CEOs and boards please note that the ball is in your court.






  • Comment number 27.

    Cheer up Robert, the MPC will save us!

  • Comment number 28.

    I wonder if the concept of a ‘stably expanding economy’ is achievable. The ambition of every government is to deliver continuously increasing affluence, because that it how it will get re-elected. Even Major’s victory in the early 90s happened because people doubted Labour’s ability to deliver this dream.

    I think the belief that we can have an expanding economy is unachievable in the short to medium term. This has absolutely nothing to do with which ever party is in power. It has to do with the fact that other countries are catching us up due to lower labour costs, improvements in the general levels of education and greater self confidence.

    British economic strength, historically, was based on exploiting other countries. We were so used to worldwide dealings, that when we needed finance the help from abroad was comfortably accepted. But jobs follow the money. How many SMEs do we need to replace a steel plant or car plant that has moved abroad? To solve this problem we had to have a booming financial services industry. To keep this industry here all we had to do was have the right regulatory and tax conditions to keep the bankers happy. People want to blame bankers and politicians for our demise, but they also wanted the flashy new shopping centres lined with palm trees and the grey warehouses known as retail centres. Brown’s failure has been that he really believed he had found the solution to ‘ending boom and bust’. He convinced many people that this was true as it is what we wanted to believe. The whole party was kept going by a confidence which a few thought was founded on shifting sand, but no one listened. We had an expanding economy, but it wasn’t a stably expanding economy.

    I think that if we manage to have a stable stagnant economy we will be doing well. Within it there will be winners and losers. The trick will be to get a national mind set that the winners will not be too big and the losers too small.

    In the 50s and 60s there were booms and busts (not as big as the present one) and I remember by father telling me that he could usually predict which companies would fail. You just look in the car park and where you saw brand new flashy cars (Jags in those days) you also saw a company in difficulty. The winners had got too big. Easy to condemn them, but that is human nature which is why a stably expanding economy is unachievable. The actions of politicians are just tinkering.

  • Comment number 29.

    Equilibrium? We are in the grip of an increasing spiral of debt, refuelled by politicians eager for re-election.

    "we avoided a depression"? I don't think so, we are in one which has been skilfully concealed, and is worseniong.

    Otherwise, an excellent article.

  • Comment number 30.

    Good article Robert. Maybe the answer is on "confused.com". However surely next year for us is a game of two halves caused by the General Election. The first half (which might be cut short) is life goes on. The second half depends on whether the Tories get a reasonable majority to do what is necessary - i.e. a plan to reduce debt - or we have a hung Parliament. If the latter then, we are really are in the unknown. As to the world, the East will continue to drive the world economy as we transfer more of our wealth to that region.

  • Comment number 31.

    Brief Synopsis:
    The System (*)
    Is A Fraud
    (*)=Mutabaruka

  • Comment number 32.

    Equilibrium...

    Yes the Equilibrium of the madhouse. The Bank of England is without question running a bubble economy with its interest rates policy - this has unequivocally been (re)confirmed today with the Nationwide house price survey (+6% on the year). This totally unacceptable result of interest rate policy is down to Mervyn King (who should have been fired last year!)

    The Bank are ruining the economy and British society. Their actions are solely responsible for the oncoming and inevitable social and economic destruction of the Nation. These gutless wimps in safe jobs with fat pensions are the rot that is at the very heart of the Nation and we must expunge them and run a rational interest rate policy.

    Zero interest rates are so mad that nobody believed that the Bank would be stupid enough to maintain the policy for more than a few months at the start of 2009 - not even the property market.

    If they needed the zero interest rates then other administrative steps should have been taken so that the largess of this free money did not simply vanish into further overpricing the already grossly overpriced property market, but no, these idiots and buffoons have not only pursued a bad policy they have pursued it in the worst possible way - they MUST be sacked.

    These are the policies of the mad house - some equilibrium Mr Peston some equilibrium!!!!

  • Comment number 33.

    'To put it more succinctly, we are balanced precariously.'

    >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

    http://www.statistics.gov.uk/cci/nugget.asp?ID=199

    UK trade import deficit is increasing as unemployment rises - the government was warned in 2006 by opposition MP's that the UK is importing too much in basic food products but has ignored their representations favouring the supermarket chains (with their big lorries getting bigger and bigger).

    If UK exports cannot recover/improve substantially with interest rates at their lowest in living memory - then our national economy is in real difficulty.

    See the footnote on the VAT scam - How much is involved! What is Customs and Excise doing about it and how much recovered? How many fraudsters jailed? Nil as far as I can ascertain?

    Global/EU taxes do not work - because they are unenforecable across borders unless paid up front by governments using taxpayers money?

    How many 'visitors' to the UK are paying tax 'somewhere'?/ anywhere? The UK's uncollected and ignored taxes are collosal.

    Trade matters more than paper money as trade = jobs (or the lack of them)

  • Comment number 34.

    I dont know what is actually needed for recession to turn into depression, but i have seen absolutely no signs of a recovery and things are still getting worse.

    No doubt the return of vat will produce a better set of short term figures just in front of the election,but our long term outlook as a country is so bleak, with little manufacturing left i see no way to get us out of the mess.

  • Comment number 35.

    A nice well balanced (pun intended) summary article this.

    It does not seem to be stopping Gordon of pre-empting the situation and claiming the 'tories will wreck the economy though'..the economy is already wrecked, it is just most people do not know it yet.

    I expect 2010 will be more turbulant for the Uk than 2009, especially in the second half of the year.

  • Comment number 36.

    18. At 00:13am on 31 Dec 2009, BrownbankruptsBrits
    --------------------------------------
    This is the link for the last Peston's Pick of 2008. I think the word "bust" only appears once and not as a prediction.

    http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/12/we_are_the_banks.html

    "...many bigger companies that borrow directly on wholesale markets by selling bonds and other securities are finding it much harder and more expensive to raise money.

    And credit provided between companies that buy and sell to each other is being massively restricted, by a collapse in the availability of insurance for such credit.

    All of which can be summed up as "ouch" for businesses and households - and is the primary reason why some companies are going bust, and why those that will survive are reducing investment and cutting jobs.

    So even with £600bn and rising of support for banks from taxpayers, our banks simply don't have the resources to keep afloat real companies - manufacturers, exporters - that are vital to the future of the British economy.

    Which is why early in the new year, the Treasury will announce details of yet more taxpayer lending, this time to ensure that credit is provided to viable and strategically important companies - such as the more efficient carmakers.

    The line between private sector and public sector, which became blurred in 2008, may become almost impossible to see in 2009."

    Has Peston's tone changed since?

    Interesting to see that either comments now are now mainly from people new this year or else there have been name changes galore!

  • Comment number 37.

    Unstable equilibrium in 2010

    >>>>>>>>>>>>>>>

    I agree but its not an economic equilibrium and I think that is what some may find confusing - its an uneasy socio/political/economic equilibrium - more of a holding pattern of incompetence than a true technical equilibrium - where the UK is now paralysed with our politicians incompetence, inertia and fear as they hide behind the bureacratic layers that they say prevents them from action - G20/EU/Kyoto/Human Rights Act etc.

    In the UK we're mired in a politicians trough of layers and layers of regulation law, trade agreements, protocols, hidden negative agendas and favours that prevents the one thing that we want most to happen - ACTION!

    I think you can smell the politicians' fear at the moment - the fear that breeds the worst kind of inertia amongst these wretched weakling sleazers.

    The UK needs action - and we're getting none at the moment!

  • Comment number 38.

    The inheritance Blair and New Labour has endowed on us is instability, instability, instability!

    Tedious, but we must adjust to that tedium. Life must become humdrum as we plod along paying off the debt burden imposed on us by our self-appointed betters.

    We cannot afford risk-taking any more, so why do we continue to reward the so-called risk-takers? We should rather be rewarding the consistent plodders and dullards who deliver a little piece of simple good value each and every day.

    We need to divert our positive perceptions into those people and organisations that add value into our society and thus enhance both common and individual well-being. This is not fun, exciting or the route to privilege and the idle life of the rich but it is the slow and gradual road towards real wealth rather than the fantasy wealth of endless debt.

    We have to find the means to aggregate wealth and then invest it into creating more wealth in our own backyard. To fail to do this will encourage unrest and that most destabilising event of all, known to history as revolution.

    As a native puritan my simple values have been out of step with modern society for decades. Now that the assertive, the self-aggrandising, the arrogant and the self-opinionated have allowed their obnoxious foolishness to beggar us all I see no reason in listening to their drivelling nonsense any more.

    Boring now has to be the new excitement, consistency the new standard and quality the new objective.

  • Comment number 39.

    2009 was not actually bust.....it was the year the public sector rescued the private sector.It cost a lot of money but without inflation and that was superb.
    2009 was the year the stock market turned around as I predicted it would.
    2009 was the year the property market recovered sustainably as I predicted.
    2009 was the year unemployment rose but much less than anticipated.
    2009 final quarter will be the first quarter of growth for 18 months.
    2009 was the year the pound recovered 20% against the dollar and 10% against the Euro.
    2009 was the year the pundits all got it wrong.
    2010 will be the year the bank shares double and the government recovers the money it lost investing in them.
    2010 will be the year we get back more cash from Iceland.
    2010 will be the year the economy grows at over 3%.
    2010 will be the year that we announce we are going to have a Euro referendum .
    2010 will be the year the builders get building and the property market continues to recover.
    2010 will be the year the public finances start to look better than predicted.
    2010 will be the year the bad debts the government guaranteed will turn out to be not so bad and the government will make a profit on it!
    2010 will be the year the pound regains ground on the Euro.
    2010 will be the year the doomsters don't think it will be.

  • Comment number 40.

    > The most likely tilt on the axis takes us to an
    > indeterminate period of low growth, which won't be
    > painless - because our standard of living and public
    > services would stagnate and unemployment would continue to rise.

    There's pots of money around. A bloke even
    turned up at the pub last week in a Rolls Royce! The
    trouble is, the bill being given not to those with
    pots of cash (bankers, toffs, BBC execs, people with
    two houses etc.) but to modest, sociable people like me.

    All normal people can get out of this with thier shirts
    intact if we just tax the toffs and relieve them of the burdon
    of having so much dough.

    When my mate turns up at the pub on a bike (like me)
    I'll know we're on the right track.

  • Comment number 41.

    Them Belly Full (*)
    /guitar solo/
    A belly full, but them hungry;
    A hungry mob is a angry mob.
    A rain a-fall, but the dirt it tough;
    A pot a-cook, but d' food no 'nough.
    A hungry man is a angry man;
    A rain a-fall, but the dirt it tough;
    A pot a-yook, but you no 'nough'
    A rain a-fall, but the dirt it tough.
    A pot a-cook, but you no 'nough;
    A hungry mob is a angry mob;
    A hungry mob is a angry mob. /fadeout/

    (*)=Robert Marley

  • Comment number 42.

    For those who in Sctumland?

    Are we supposed to think that Schtumdog Trillionaire's ever increasing bank bail out debt burden is something we are supposed to be pleased about?

    The fact that Schtumdog Trillionaire rescued the banks and prevented the UK sliding back 500 years in time to avoid millions of people having to dig up worms in the fields so that we can try and avoid catastrophe and eat - Are we supposed to be grateful for this?

    Schtumdog rescued the banks in 2008/2009 because there was no other choice - this was not an issue of economic management - this was an act of sheer desparation - an attempt to put right some of the problems created and grown by our current Labour government

    This was a Schtumland News Bulletin!

  • Comment number 43.

    38. At 10:24am on 31 Dec 2009, stanilic wrote:
    As a native puritan my simple values have been out of step with modern society for decades. Now that the assertive, the self-aggrandising, the arrogant and the self-opinionated have allowed their obnoxious foolishness to beggar us all I see no reason in listening to their drivelling nonsense any more.
    Boring now has to be the new excitement, consistency the new standard and quality the new objective.
    -------------------------------------

    Stanilic, I totally agree with you - only a new age of puritanism can bring back the state of stable equilibrium in the UK.

    What are the chance of that happening? Almost zero at the moment. The media keeps propagating a lifestyle which completely the opposite of puritanism and a whole generation grows up with the aspirations to be a rock star, fashion designer, photographer, unskilled celebrity, banker, etc. It is only the first time immigrants who are wiling to do dirty jobs for less money, but wait till their children follow the aspirations of the rest.

    Puritanism backed with a strong commodity-based currency made New England a prosperous and relatively fair country and it became the engine of what the later USA. It's time we learn from history.

    For the age of new Puritanism we need radical reforms, such as:

    1. Abolish of Central Banking and allocating the money supply control to a state bank.
    2. Separating the interest rate on business and personal loans
    3. Direct democracy on decisions like governments budget
    4. Withdrawing of all British troops abroad.
    5. Reducing of government expenses and taxes on the working population
    6. Stopping the propaganda of celebrity lifestyle
    7. Providing free university education for wealth creating skills
    8. Reforming the laws on drug crimes and pornography.
    9. Control of immigration
    10. Control of population growth

    Do we have a government that can carry out such bold reforms?

    HAPPY NEW YEAR TO ALL!

  • Comment number 44.

    39. At 10:26am on 31 Dec 2009, onward-ho:

    I hope you're right, such unbridled optimism.

    Reminds of Donald Sutherland playing Oddball in Kelly's Heroes.

    Oddball: 'Why don't you knock it off with them negative waves? Why don't you dig how beautiful it is out here? Why don't you say something righteous and hopeful for a change?'

    Moriarty: Crap

  • Comment number 45.

    Hi

    Steve Keen has been banging on for ages that ratios of debt burden to productivity (debt to GDP ratio) are the main indicator of recession and that converting private to public debt does not solve the problem (as evidenced by Japan)

    What I think needs to be done is that banks need to be seized or placed under regulation so that monthly repayments on home, small business and consumer loans have their interest component reduced to practically nothing. At the same time the monthly repayment amound could be reduced to say 90% of original amount. This total effect would be rapid deleveraging while giving people extra income. The banks themselves would be funded by rises in income tax.

    In short, nationalise the banks and reduce the overall debt.

  • Comment number 46.

    stanilic has it right. We need more living within our means and real productivity. debt is an addiction.

  • Comment number 47.

    #39 - REALITY CHECK - as below :)

    ''2009 was not actually bust.....it was the year the public sector rescued the private sector.It cost a lot of money but without inflation and that was superb''. --

    Reality check =
    Yep lets just keep on borrowing 12 Billion a month shall we and see where that gets us..


    ''2009 was the year the stock market turned around as I predicted it would.''

    Reality check =

    Where else was all that printed money showered upon the irresponsible banks going to go?..To form another bubble of course so they can do it all again..

    ''2009 was the year the property market recovered sustainably as I predicted. ''

    Reality check =
    The Do-Do would recover with this much borrowed and printed money swillibng around the system. The underlying 'real' economy has been kept alive by a cocktail of symptom supressing drugs so it can take the stage for one last hurrah....or die of an overdose....


    ''2009 was the year unemployment rose but much less than anticipated.''

    reality check =

    Only because the flexible workforce has absopbed it by short time working, working 3 and 4 day weeks to keep their jobs, this is not factored into unemployment figures ( I wonder why?)

    ''2009 final quarter will be the first quarter of growth for 18 months.''

    Reality Check =

    See answer above concerning the Do Do.

    ''2009 was the year the pound recovered 20% against the dollar and 10% against the Euro.''

    Reality Check =

    Its all relative, they are in a lot of trouble as well..how did we fare against asian currancies and economies with a strong balanced commodities and manufacturing base like Brazil and Australia?

    ''2009 was the year the pundits all got it wrong.''


    Reality check =

    There are no genuine pundits, anyone who gets asked an opinion in mainstream media is leveraged to the hilt to some self interested party or other, the journalists simply report that, the columnists are the only ones with a clue..but nobody reads them and they are outside of the various ruling 'clubs'


    I dont even want to look at your statements for 2010.

  • Comment number 48.

    Gordon 'global' Brown has told us in his New Year Address to the Nation that .... now we are out of the recession and the economy is growing, in 2010 we shall all share in the prosperity that his policies will bring - and to not let the Tories ruin it.

    Why all the doom and gloom? The boom is here - I heard it from Gordon's own mouth!

    We are saved.

  • Comment number 49.

    Statement 1: "...the UK and the US are still submerged in debt: the aggregate borrowing of households, companies and government is equivalent to more than three times the value of everything we produce, still greater than at any point in peacetime history."

    Statement 2 "To put it another way, we're probably in for a period of low growth and slow steady recovery..."

    The truth of statement 1 clearly excludes the probability expressed in statement 2. Are BBC journalists contractually obliged to emphasise a bland and cosy unreality?

  • Comment number 50.

    I think that you are only partially correct about gold.

    It is currently over valued, but it is a strategic commodity that is in declining supply. Unlike oil, there are no alternatives but, on the other hand, it is more or less infinitely recyclable - but only if a suitable infrastructure is put in place - and no-one wants to pay for this.

    Without gold we cannot sustain the sort of technological society that we espouse. The consumption of gold is inexorably increasing and, for some reason, central banks are back in the market buying gold to store away - which is a complete waste and helps no-one except themselves.

    There are several other metals that are equally important that are also in short supply and with declining production, they include tantalum, niobium, neodymium and most of the (other) transition metals. All of which are used in electronics in increasing amounts.

    The anarchic state of tantalum ore mining is one of the reasons why the Congo is the mess that it is in. Tantalum is used in nearly every computer based device that we have. Niobium and neodymium (amongst others) are found in few places and are essential for the magnets in the motors of electric cars - there is nowhere near enough to go around for the "electric economy". Other transition metals are used in huge quantities for "low energy" light bulbs. Oh and lot of these metals come from China...

    So my prediction for the next 10 years (if not just 2010) is an increasing lack of usable gold and other important metals - these commodity prices will increase and control of some metals ores may even spark a war or two.

  • Comment number 51.

    Message 43

    My dear plamski, it is very nice that you find some agreement with the sentiments I expressed earlier but you then go on to issue a manifesto. Manifesto's lead to dogma which, in turn, leads to error. A pragmatic approach set within a general standard of values is more difficult to manage but it is what we must do as the world is not teaming with liberal consciences.

    Furthermore, we do not need a government to do these things for us as we need only give reign to our simple common-sense in the management of our affairs. No puritan congregation ever acknowledged a bishop despite many bishops being very pleasant chaps much given to charity and good works.

  • Comment number 52.

    Penny For Your Song/Dub (*)
    (*)=Derrick Harriot/U-Roy

  • Comment number 53.

    I am still very puzzled as to who are the creditors of the golbal debt. For sometime I thought between them China, Japan, Russia, Saudi Arabia and Norway are the world's largest creditors. Now I am not sure at all.
    The debt of UK alone is more than the combined foreign currency reserve of China and Japan put together.

    Who are the creditors? Creditors hold the upper hand over debtors. Most of us have borrowed money and know that lenders often dictate terms to borrowers - T&C, collaterals, guarantees, interests ... On a larger scale, creditors probably influence or even dictate government policies, regulations and laws. It is a subtle complete loss of sovereignty which most of us do not see. I don't think the creditors will let us, the world, pay off its debt.

  • Comment number 54.

    53. At 12:34pm on 31 Dec 2009, puzzling wrote:
    Who are the creditors?
    ------------------------

    Haha. Congratulations for the common sense, sir. Tell me of your education and to send my kids there.

    Who are the creditors, indeed? THAT is the question for 2010!

    Don't expect any straight answers for fear of conspiracy theory accusations! But consider that the world debt is as surreal as the whole concept of Fractional Reserve Banking and fiat money as whole!

    We live in a fantasy world soon to be invaded by the creditors from Mars :) :) :)

  • Comment number 55.

    51. At 12:14pm on 31 Dec 2009, stanilic wrote:
    Message 43
    My dear plamski, it is very nice that you find some agreement with the sentiments I expressed earlier but you then go on to issue a manifesto. Manifesto's lead to dogma which, in turn, leads to error.
    -----------------------------

    I again agree with you in principle. The manifesto was more intended to give indications of the faults in the system, that's all.

  • Comment number 56.

    53. At 12:34pm on 31 Dec 2009, puzzling wrote:
    Who are the creditors? .....I don't think the creditors will let us, the world, pay off its debt.
    -------------------------------------
    I expect it is all another huge bubble of circular debt that cannot be unravelled, unable to be fully understood and therefore never paid off.



    45. At 11:34am on 31 Dec 2009, Oblivion wrote:
    What I think needs to be done is that banks need to be seized or placed under regulation so that monthly repayments on home, small business and consumer loans have their interest component reduced to practically nothing. At the same time the monthly repayment amound could be reduced to say 90% of original amount. This total effect would be rapid deleveraging while giving people extra income. The banks themselves would be funded by rises in income tax.
    -------------------------------------------
    This sounds as if it is leaning towards my first ever comment (Stephanomics 18/11/09) when I asked about cancellation of all debts.

  • Comment number 57.

    41 52.......55
    sofa king ......are you kikidread?
    And whatever happened to Alexander Curzon? He was a closet conspiracy theorist too but I kinda miss him..... AND HIS GRAPHICS.
    plamski.....are you AC gone lower case?

  • Comment number 58.

    57. At 1:17pm on 31 Dec 2009, onward-ho wrote:
    plamski.....are you AC gone lower case?
    ------------------

    My name's Plamen. What's yours?

  • Comment number 59.

    It's China holding our debt and much of everything else.

    If their bubble bursts - we're in trouble.

  • Comment number 60.

    Our government is currently spending 25% more than it earns, every month. If I ran my home or my business on that basis, how long would I last? We are told that not to do this would be catastrophic as the 'recovery' would stall. This is surely unsustainable and just deferring the inevitable, even in the short term. The risks from an interest rate rise (or AAA rating change) are horrendous.

    Unfortunately, the actions needed to solve this ie to reduce spending by over 25%, now, immediately, are political suicide. None of the three main parties will have the guts to do anywhere near this. As a consequence, the UK as a world force, is finished and China takes everything.

    The only hope we have is an immediate and massive government spending cut (painful), followed by a massive increase in low skilled jobs (100's of thousands) that pay enough to live on. The way out of this is to start making things again and make it worthwhile to innovate, invent and build through small government and low tax.

  • Comment number 61.

    58
    You can call me onward.

  • Comment number 62.

    What was our real underlying trend economic growth rate in the last economic cycle? Before the current crisis there was some suggestion that it had risen from an historical 2.25% to 2.5%. We have now lost 6% as permanent structural loss and also about 10% was a one off increase due to a increase in the size of the work force mostly from immigration. Therefore over the whole cycle that drops us to about 1.5 - 1.25% per year. But we have also gone in for considerable comsumer borrowing increasing our indebtedness by about 60% of GDP over the cycle. Most of which was ultimately financed from abroad. That in turn reduces the sustainable rate by almost 4% per annum into negative territory.
    Is this a true picture or am I missing something fundamental?

  • Comment number 63.

    I'm with croydo (#16). The extent to which we are in debt as a nation is truly scary, and whatever the details are, the one thing of which I think we can be pretty certain is that it's not going to end well.

    FWIW, my prediction is that we'll carry on much as we are until the election, and then with the pressures for re-election removed, whichever party is in power is going to have to take some tough decisions.

    And boy, will they be tough!

  • Comment number 64.

    61. At 1:26pm on 31 Dec 2009, onward-ho wrote:
    58 You can call me onward.
    ------------------
    Aha, staying in the closet, then!?

  • Comment number 65.

    Happy New Year from Schtumland 2010!

  • Comment number 66.

    "So my predictions for 2006, 2007, 2008 and 2009 were "boom, overheating, crunch and bust", respectively."

    If true, that's an impressive record. Are there any links to those predictions? I'd be interested to see exactly how the predictions were worded.

  • Comment number 67.

    Surely with all the money printing, rising prices, inflation and depression will surely follow, with a significant rise in the gold price.

  • Comment number 68.

    39. onward-ho:


    Can I have some of those happy pills you keep taking?

  • Comment number 69.

    sofa...you are kiki!

  • Comment number 70.

    Here is a prediction: Gold price will be stoked up in part by national banks, so that when it bubbles out of the pot and when they all raise interest rates in concert the price will collapse. This will help get rid of all the funny money recently created.

  • Comment number 71.

    Are dreads in the Bible? Regrettably, I cannot give you a definitive answer either way. ...

    Samurai Champloo - Battle (*)

    (*)=Guru rapper from Gangstarr aka "Gifted Unlimited Rhymes Universal" as a backronym and the less often used "God is Universal, he is the Ruler Universal"

  • Comment number 72.

    At the moment we've got a truly surreal situation where the people who can't afford to buy things seem to think they have some kind of right to credit so they can have the stuff anyway. Then the banks have been given lots of money to lend but can't take risks on lending it to those who can't repay it.

    Enough consumers are still either losing their jobs or worried about their jobs that even the ones who are considered creditworthy are less inclined to actually take credit, fearful of being unable to repay.

    In isolation this wouldn't be a big problem but when the economy is so heavily based on consumer spending it's catastrophic. Of course anyone who was watching the signs could have seen it coming years ago - at some point people with rising levels of debt stop spending and start repaying in earnest - all that has happened is that this phenomenon has affected millions of consumers at once (which in turn is no big surprise).

    The planned rise in NI contributions (effectively a tax on hiring people) will discourage companies from taking on more staff, and the return of VAT to 17.5% will simply make purchases more expensive. The withdrawal of the scrappage scheme will remove the temporary help to the motor industry and when all three take effect the consequences can be nothing other than another retraction.

    Of course if the government had any desire to do what was right by the country it would have avoided these situations. Extending the scrappage scheme to include cars up to, say, 18 months old would get more bangers off the road and make the whole process more affordable (let's face it, people who drive such old cars either don't want or can't afford a brand new car). The VAT reduction should either be kept or shouldn't have been introduced in the first place.

    It's hard to see how the government actions are designed to do anything other than harm the recovery so when they lose the next election (as they almost undoubtedly will) they can howl with outrage at the nasty Conservatives for wrecking "their" recovery.

    And of course even this doesn't address the dual elephants in the room of the monolithic social security budget and swelling ranks of public sector non-jobs that we can't afford to fund.

  • Comment number 73.

    Given all the debt sloshing around, surely some inflation be a good thing? It would reduce the real value of all our debts.

  • Comment number 74.

    Here's another dose of cheerfulness to consider.

    If I borrow money to buy a house and fail to repay, sooner or later the bank comes and repossesses my house.

    When we see our national debt of some £850,000,000,000 and rising quite fast, just who has lent this much money? What, if any, security has been offered?

    The analogy isn't perfect on the basis that as an individual I can't (legally) just print the money to repay my mortgage but whatever the nation does bodes very badly for the future.

    If we default explicitly nobody will lend us money in the future except at very high rates, which means we need a balanced budget almost overnight, which in turn means overnight slashing of budgets.

    If we default implicitly (i.e. by significantly devaluing the currency) we'll struggle to borrow money in the future except at significantly higher rates, which causes the problems described above.

    If we repay the money in full, hahahahahahahaha! Like we've got the money to do that...

    The only remaining question is, if individuals on the street can figure this out why can't the people lending billions to the government? Or do they know something we don't?

  • Comment number 75.

    #73, inflation is great if you've got overall debts. But it's less great for people on fixed incomes, and if it gets out of control it's dreadful for everyone except the government.

    If your mortgage devalues to the point you can effectively repay it out of your pocket change but your salary has simultaneously devalued to the point you can't afford food, you're no further forward. Look at the problems of hyperinflation over the last 100 years or so to see just how bad it gets.

  • Comment number 76.

    #45. Oblivion wrote: That all debts should be forgiven...

    Your idea has one tiny little flaw. Once you have forgiven all debts and by so doing transferred all the wealth of the savers to the borrowers - the more profligate or which will get given the most.

    How do then you propose to ever persuade savers to save again when the result of their prudence has been to have their accumulated savings confiscated?

  • Comment number 77.

    74. At 2:07pm on 31 Dec 2009, ThoughtCrime

    There are several posts that recur on these pages that warn of dire consequences of economic collapse with even the spectre of revolution.
    If it came to it and we were all shafted anyway then I expect that we should all default at the same time regardless of ability to pay, that would lead to a new order..... or would it?

  • Comment number 78.

    At present there are two choices available to get us out of this mess.

    Repay borrowing or inflate our way out of debt.

    At present there seems to be little energy concentrated on repaying money and instead the government has conveniently been forcing institutions such as bank to buy it's debt.

    I think that just like the 70s inflation will return with a vengence.

  • Comment number 79.

    68. At 1:52pm on 31 Dec 2009, warwick wrote:
    39. onward-ho:


    Can I have some of those happy pills you keep taking?

    If it ain't happy ,it ain't happenin'!

  • Comment number 80.

    78,

    Some would even go as far as to say, that plan - is very much under way as we speak ;-)

  • Comment number 81.

    #62 Anthony_analyst wrote about the destruction of wealth over the economic cycle and estimates an annual negative loss of 4 percent.

    I fear that your negative estimate is well short of the mark. You have not taken into account the effect of the increase in indebtedness over the cycle. Tricky to estimate but a way would perhaps be to compare the relative proportion of future liabilities to income that is presently built into the mortgage burden on households (the more so when interest rates rise to rational levels.)

    I can't do the sum (perhaps someone can?) but my guess is that when the sum is done you will find that we now have mortgaged our future (leveraged) to a considerably greater extent than at the beginning of the cycle. The effect of this will be to reduce the sending power of our future incomes and in consequence the ability for personal expenditure to pull the economy out of recession. This future burden can be reduced to a present value today and this can bee seen to reduce your negative estimate of 'growth' over the cycle. (i.e. we haven't yet paid for the current expenditure.)

    This 'spending today' that has vanished into inflation in house prices may well drag the country to its knees and my estimate is that it may represent as much as 25 percent reduction in our national cyclical growth. (This economic error can be placed fairly at the door or Mervyn King and his predecessor.)

    The consequences of this burden will not only be economic, but also social, which in turn will have negative economic consequences (through the further degradation of the social contract that is based upon stable societal generational replacement (i.e. more family break up >> poor educational outcomes for the children >> poorer workforce abilities... etc... etc...) - In summary: the effects of hugely overpriced homes today will generate huge damage not only to the economy but to society which will in turn damage the economy.

    House price inflation is probably the single most damaging economic factor possible for any Nation - however bankers and politicians see it as a good thing - they are conmen.

  • Comment number 82.

    Ref. the anguish about introducing some humility into Big Banking.
    How about the solution proposed in the USA by the "liberal" Arianne Huffington in the Thursday (today) Huffington Post?
    She urges middle America to take their savings out of the Big Banks and move into the smaller local 'mutual' style banks across the Country.
    That should make the big boys sit up smartly and start taking some medicine. Goodbye to shareholder payouts etc.

  • Comment number 83.

    ANd while there are those on here making predictions, I thought I would add my very own.

    We will be at War with Iran before the summer of 2012

  • Comment number 84.

    Buffalo Soldier (*/**)
    (*)=Robert Marley (**)=Junior Delgado

  • Comment number 85.

    Dear Mr Peston,
    your predictions, if we take you literally, sound fairly ... accurate.
    You write:
    So my predictions for 2006, 2007, 2008 and 2009 were "boom, overheating, crunch and bust", respectively.
    While I cannot remember any of that, my advice would be to divert your interests to the arts of divination and horoscopes.
    What's your sign?

  • Comment number 86.

    "So my predictions for 2006, 2007, 2008 and 2009 were "boom, overheating, crunch and bust", respectively."

    Sorry RP, but I do get upset with told you so's, especially when they differ from my recollections of what was said and frankly if your going to make these type of statements i think you should reference them.

    You also do not mention that many (although in my opinion unfairly) feel you played a bit part in your predictions of crunch comming true.

    Please do not remind us of your unstable equilibrium prediction which, if the phrase does have a meaning would be a catch all for all situations.

    Your actual predictions for 2009 were very similar for 2010, i.e. strong Chinese economy, guilts prices to fall and period of payback. none of which is greatly different to most peoples anticipations.

    Your summary of: "To put it another way, we're probably in for a period of low growth and slow steady recovery - but a further shock cannot be wholly discounted." imo is quite positive, it dosen't sound like a prediction of bust in 2009 came true


  • Comment number 87.

    I am wondering if the doom laden predictors (like myself) have a set of attributes in common.

    1. Passed over for power or promotion.
    2. Frugal and risk adverse.
    3. Not ostentatious.

    If it all goes pear shaped in 2010 then it will not be good news for any of us. In a strange way my own plight is outweighed by the sight of those who have power being in more of a quandry and that the good will triumph over evil now all the rules have changed.

    Of course there is the chance to get power denied as the great all fall, but in reality the likelihood is that the powerful will pass the pain onto the righteous and the old order will be preserved.

    Happy 2010 everyone!

  • Comment number 88.

    #83 JavaMan

    Look on the bright side...there will probably be some lucrative IT jobs going in Tehran after the war in the 'reconstruction' phase.

  • Comment number 89.

    My one prediction for 2010 is that the shares of Lloyds and RBS will start to move up significantly. This will only happen after these banks have given huge numbers of shares and options as bonus payments with an exercise price based on the current very low share prices. How many of these shares have been "shorted" since the government insisted that the majority of banks should pay bonus by way of equity rather than cash.

    If I am right our bankers will be having another laugh at us when they reap these future payments!

  • Comment number 90.

    Re: 22
    'You need to be a banker or premiership footballer to own a house in parts of London, and Labour have presided over a situation where many now cannot afford to buy a home. That is their legacy, forcing more people back into rented accommodation, and supporting the financial elites at the expense of the rest of the population.'

    Hmmn, 'Forcing' people into rented accommodation, how appalling..I mean how do these bottom feeders in the pond of life actually sleep at night knowing that by having to live in rented accommodation they are such abject failures? Mind you, unless you have paid off your mortgage or can slap down x hundred thousand quid in cash to buy a property outright you are simply renting your house from the bank...think I'm joking? See what happens if you miss three payments in a row on 'your' property..

    Your attitude is symptomatic of the problems facing this countries economy, you are 'nothing' if you aren't buying your own home or changing your car every two years or having at least two exotic holidays a year. This is adult peer pressure of the most insidious kind, the sort that drives people to take all of the 'equity' out of their homes and sign up for a dozen or more credit cards just so they can give the appearance of having 'made it' to their sad circle of friends and acquaintances who base their opinions of someones value to society on the perceived worth of their material possessions.

    'Why shouldn't ordinary people be able to better themselves, you commie b###ard?' I can hear Maggies Children howling..My answer is they don't know what 'bettering themselves' means if their entire futures are mortgaged up to the hilt in one way or the other..but thats ok because if they are lucky it will be another generation that has to clear up the mess and go back to actually living within their means..

    Over to you Onward :)

  • Comment number 91.

    One for sofa king...

    ...if you listen to the words of this song you might actually understand something - 'ideas are bullet proof'(instead of posting drivel).

    Muse-Uprising (V=Vendetta)
    http://www.youtube.com/watch?v=lHYFgM9YPJg

    Happy New Year ;o)

  • Comment number 92.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 93.

    Anyone who runs a business (and there are a few on this blog) knows what the realities are in the UK.

    2009 hasn't been a punishing year for everyone---but for just about everyone I know it has been; and I hear hardly a word anywhere of anything other than expectation that 2010 is likely to be worse, not better.

    The only thing propping it up has been public sector spending and that's stopping now, either after the election or, if we are really unlucky, before it. Neither the consumer, the SMEs, The PLcs,, the Chinese, The Americans or anyone else is going to pick up that big a rope and take the strain.

    That's one of those; " Everybody knows, what everybody knows---" things. Whatever they're actually saying out loud.

    Slightly changing tack---It wasn't in a 'business' context, but PD James editing the 'Today' programme on R4 produced the most interesting, and for the participants; most challenging, news programme, I have heard (or seen) for ages--- just because the guest editor wasn't part of the endless 'metropolitan media/political/business' scene.

    That got me thinking that perhaps we need more outsiders---

    Maybe if the Board do ever resign at RBS (did they ever do that? what happened there? If they didn't, why didn't they? Is there NO way we can provoke them to do it??) We can get PD James to Chair it--- and a few decent decent non-execs (Vince Cable, Niall Ferguson, Nouriel Roubini, Joseph Stiglitz, Merryn Somerset-Webb)the non execs and chairman would seek a decent CFO, and, boy, anyone could be the CEO, COO and Exec Directors of Marketing, communications, Sales etc----because---

    'Everybody knows, what Everybody knows'!!

    --- There are probably tens or hundreds of thousands of people who could do those jobs perfectly competently; it's making sure the THING being done is the 'RIGHT THING' that's the difficult job--- the Banks aren't attracting the 'best people' with these salaries and bonus packages, they're attracting precisely the wrong people, and because nothing has changed there--that's why next year I feel nothing will change.

    Still , mustn't grumble!...So best wishes for a Happy New Year!









  • Comment number 94.

    90Thankyou !
    Material wealth is not immaterial,it can gnaw at our souls if we crave it too much, it can inspire us to do great things, it can land in our laps out of nowhere ,and it can disappear into thin air.
    It will return, it has already gone,it means nothing,it means everything.
    But hippies do not build roads or open banks.
    We need materialists,they do stuff to get things,some good ,some bad.
    We need borrowers and we need spenders, we need savers, we need givers.But also we need dreamers and useless people and spivs .....some of them can sing and paint and end up making more cash than a car factory ever could.Look at Subo, Cowell, Branson,the horrid Gallaghers,the even worse Hirst,Mr Bean,AND THESE TERRIBLE TRADERS WHO EARN MILLIONS AND LOSE BILLIONS......we need 'em all.
    It is all a bit-like musical chairs....when the music is on ,the market is booming.....but when the music stops...... if you are not sitting down firmly on your seat...... you are out of the game.
    The ones who got into the market 2 years ago are stuffed, the ones who got in 9 months ago are laughhing.The ones who sit on the fence will not fall on their bottoms ,but they won't have as much fun as the ones who are playing the game but they won't have the pain of those on their bottoms.The game is always changing but it always stays the same.
    The game or the fence? The seat or the floor?
    Government debt is not the same as personal debt.
    Remember everybody moaned when Gordon was being too prudent and not spending enough cash.But look around....this is still a fantastic country.
    We are poorer but we do not go round executing people who are mentally unwell....at least not anymore....though we used to.But we do try to extradite them to USA .....GORDON GET THAT SORTED IT IS A NONSENSE!
    China is us a hundred and fifty years ago.....THE WORKSHOP OF THE WORLD.
    China is us 3 years ago.....their property market boomed 50% this year and the Asian stock market rose by 70%.
    Which is not exactly sustainable is it?
    China is us 10 years from now....they are technologically and infrastructurally way ahead on many counts.....but they still do not understand about human decency and fairness the way we do, THOUGH THEY ARE NOT INVOLVED IN FRUITLESS EXTERNAL WARS AND DO NOT KOWTOW TO DODGY BIG PALS.
    GORDON OR WILL IT BE DAVID, END THESE STUPID WARS ....THEY ARE BANKRUPTING US.
    THE CHINESE WOULD HAVE BEEN LIKE OUR MPS WITH THEIR EXPENSES CLAIMS TOO ,BUT THEY WOULD EXECUTE THE ONES WHO WERE CAUGHT OUT IN THE EXPENSES SCANDAL ,WHICH IS RATHER AN ATTRACTIVE NOTION.
    We are China three hundred years ago with a failing empire and a loss of our technological and commercial edge to the strangers on the other side of the world.
    It took 60 years for China to recover psychologically from the Revolution ,and it still has not come to terms with the awfulness of Communism.They are sophisticated but they are savages so the stereotypes go.But actually they are mainly nice and normal and clever and funny.
    They will need our due processes, our health and safety systems, our approaches to poverty and health management, our ideas on diversity, sexuality, tolerance , our music ,our humour,our media, even our version of the 3rs......reason, rectitude and reflection .
    They will want to read our books and watch our telly programmes and their children will want to play their guitars the way we do.They will visit London and Edinburgh, they will study at Glasgow and Manchester.They will buy up Mayfair.
    THEY ARE ALREADY HERE AND THEY LOVE US.
    THERE WILL BE A BILLION EXTRA CHINESE AND A BILLION EXTRA INDIANS WITH CASH AND TASTE TO BUY BRITISH STUFF AND VISIT US ON HOLIDAY.
    We are going to have to pay a lot more for plastic toys ,jumpers and tellies, but we will buy their electric cars which will sort out our carbon targets.WE NEED TO COPY WHAT IS GOOD ABOUT THEM TOO.

    SO WHAT WILL BECOME OF US?
    WE ARE RIGHT IN THE HEART OF THE WORLD AND WE HAVE GREAT THINKERS AND CREATORS.....I THINK WE ARE GOING TO BE OK.
    THAT IS 2010 FOR US AND CHINA.

  • Comment number 95.

    #92 e2toe4

    Re PD James : I found her interview with the DG very entertaining. His lucid and clearly articulated responses aptly demonstrated his worth to the BBC, er you know, going forward, compared to the private sector, you know, I could get paid more somewhere else, you know...

    Made my day.




  • Comment number 96.

    The only guarantee I can see in 2010 is manipulation of everything.
    Bobby is correct in my view (unless the wheels come off as they should); constant manipulation to maintain equilibrium.

    The Banks and the Gummint can't afford a correct property re-valuation (domestic or commercial) -so they will manipulate and spin data, re-possessions, re-mortgaging figures.

    The big investors will keep pushing up the oil price until they can get the money back they lost ramping oil up to $140 dollars plus a year or so ago. They still have tankers parked-up all around the world with oil they paid over $100 a barrel. We are in for a decade of corrupt speculation on energy and foodstuffs. (You will never get to pay an honest price again.)

    Dollar and gold will bounce around up and down, irrespective of fundamentals. Poor sterling won't know where it should be.

    As long as Merv. can keep QE from reaching the High St. he will avoid the inevitable inflation for another wee while.

    The Stock market will be manipulated by the big players and high frequency traders. The big players can’t have the major corporations defaulting on their debts, so only way is up in fits and starts.

    The Auditors will be told that no bad news will be allowed. All but 10% of the Ftse 350 will be in deep doo-doo, but you won’t get to know. Forget any dividend.

    The true picture of UK inflation will be distorted and re-calculated until it fits the rosy picture we are presumed to be dumb enough to swallow.

    If Unemployment figures look intolerable, there will be a hundred new 'skill-seekers' initiatives so they don't get to counted in the totals.

    All-in-all, the massive correction and facing-up-to-facts will be delayed as long as possible. Why are those fools in control?

    And finally, don't be surprised if World Statesman of the Year looks for some way to excuse us from a general election in 2010.

    Happy New Year? I doubt it.

  • Comment number 97.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 98.

    The banks and probably many other financial instutions - pension funds etc, have been encouraged by the government to repair their balance sheets by loading them up with gilts. If one certainty in this very uncertain world is that gilt prices must fall, then another must be that the banks will be in a very sticky place when they do. This has concerned me for a while - or have I misunderstood something?

  • Comment number 99.

    GB gave the B of E control over MLR as soon as he came to power ( makes you shiver, that phrase) in 1997. Then he gave it responsibility for controlling inflation. If only he had left it with sole power to regulate financial institutions but alas no. Still the B of E ( MPC)are our last hope and unlike HMG are still fairly highly respected at home and abroad. If their QE turns out to have been ill advised then we are in for a very very rough ride. What they need are more powers with zero political input into their decisions. The treasury should dance to their tune until we are completely through this recession i.e. min 12 years time.

  • Comment number 100.

    Some commenters on here have indicated that equilibriums must be stable. This is false. Examples of unstable equilibrium: a marble at the very top of a hill or a pencil balanced on its tip.

 

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