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Cautious good cheer

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Stephanie Flanders | 13:47 UK time, Wednesday, 11 November 2009

When Mervyn King does cautious optimism, you can keep the emphasis on cautious.

The Bank's new forecast for the economy is rather more upbeat than it was in August, and to judge by the "backcast" for GDP, it expects some upward revision of not just that disappointing third-quarter decline in output, but some earlier ones too (though not the kind of dramatic change to the picture predicted by the likes of Goldman Sachs).

Lest we get carried away, the governor insisted that the risks to the GDP forecast were on the downside. As he repeated many times at the press conference, the big picture was that the UK and other advanced economies faced "a long hard path" back to where we were. That has not changed.

The Bank's best guess is that we won't get back to the level of GDP before the
recession hit until at least the latter half of 2011:

Projection of the level of GDP based on market interest rate expectations and £200 billion asset purchases

And yet... even the Bank accepts that there is something odd happening in the labour market - and it's odd in a good way.

As the chart below from the Inflation Report shows, even before today's news, employment had fallen by much less than the fall in output would have led you to expect.

GDP and employment

The October jobless figures only make the point more starkly - by either the quarterly ILO measure or the monthly claimant count, unemployment has risen by the smallest amount since the recession started last spring. This is not what anyone would have predicted even six months ago.

As the Bank points out, we can't declare a bright new world just yet. It could be that more onerous consultation arrangements and so on are making it harder for firms to lay off staff quickly. The largest rise could be yet to come.

But as I have said before, there has clearly been much more downward adjustment in wages and hours than in the past - including a sharp rise in part-time employment, as seen in today's data.

That has not done anything to help young people, as the figures show. And the squeeze on incomes is bad news for families who were already struggling - and for demand economy-wide in the future.

But given the long-term cost of being out of work - for individuals and for the economy - the slowing rate at which people are losing their jobs overall has to be cause for good cheer, however cautious.

Comments

Page 1 of 3

  • Comment number 1.

    To Ms Stephanie Flanders

    I have now read two of your articles and posted the following on the ‘Boxed In’ article, and now I post it here:

     Ratings agencies (Fitch more recently) have suggested that if the Bank of England undertakes any more quantitative easing, the UK will lose its AAA credit rating.

     Quantitative easing is way of funding government without breaking section 104(1) of the Maastricht Treaty.

     Mr Stheeman (The head of the Debt Management Office) gave evidence to the Treasury Select Committee in early November and confirmed that they were cooperating with the Bank of England in the gilt market, but that when Q.E. stops, there could be a problem selling gilts

     The current quantitative easing will likley see the Government through to Easter 2010.

     The Bank of England has signalled a likely end to quantitative easing, so the UK doesn’t lose its credit rating and the decline in sterling is halted.

     If the Government cannot rely on quantitative easing to fund the Public Sector in 2010, around 1 million public sector employees could lose their jobs and/or pensions/services/benefits will have to be cut or extinguished.

    I noted one comment that tends to sum up what many people seem to think namely: ‘It’s definitely a train not a light’

    What do you think?

    Regards
    John Dempster

  • Comment number 2.

    This is still much ado about little. It will take several quarters of statistics for any conclusions can be drawn and probably over a year before anyone can say the recovery is sustainable (until the next implosion!)My confusion is about where will the growth (if it is here)be coming from and to where are we recovering - reduced public expenditure, resumption of growing indebtedness, export led growth ha, ha), trickle - down from renewed bonuses. Perhaps QE is funding another bubble. Most likely is the respite before the other side of the hurricane.My comfort point for the end of recession is when there are regular substantial fall in the unemployment totals. This can be accelerated by targeted public works and enhanced benefits for the seriously poor funded by taxing the highly paid and high CO2 producers.

  • Comment number 3.

    Essentially, QE means that HMG is printing money to pay for a deficit that can't be funded through normal borrowing. In turn, QE is undermining confidence in sterling, which is reflected in the weakening of the credit rating. This in turn means higher interest rates, which in turn will dent economic viability.

    So it's a viscious spiral with only one solution - which is that cutting public spending is imperative.

    This year, government is set to spend 49% of GDP whilst raising only 35% in tax. Taxes are going to have to rise massively, and there will need to be very deep cuts in spending, and yes, that does mean huge job cuts.

    This mess is the consequence of simple incompetence - spending has got out of control on the assumption that revenue growth would never falter because of the abolition of "boom and bust". If we survive this at all, we shall do so in a permanently weaker and poorer state.

  • Comment number 4.

    Hi Stephanie,

    Having read Adam Posen's recent speech that QE does not influence inflation in a monetarist mechanistic way, I am intrigued as to why QE ( 200 billion sterling) is built into the growth projection as an unqualified assumption. IF the QE boost was excluded or regarded as impaired what then for growth and prices? The key judgment made today by the MPC appears to be that the expansion of the asset purchase QE programme ( 175 to 200 billion?) should reduce the margin of deflationary spare capacity and " bring inflation back to target more quickly." Given the evidence which Mr Posen and the BoE recites about disfunctional credit, how does that work? Is it just by creating an artificial asset value bubble?

  • Comment number 5.

    "Cautious good cheer"

    Oh so what are we cheerful about Stephanie? Are we appluading the fact that only an extra 30,000 people lost their jobs last quarter?
    I know you were a student once - don't you remember you weren't an unemployment statistic until September? - assuming you didn't walk straight into your BBC job.

    Maybe we should cheer the BoE's new found optimism - although their QE actions seems to contradict this view as well as the statement made by Merv in this article:

    Bank of England Governor Mervyn King said the U.K. economy faces a “hard path” back to health and he has an “open mind” on further bond purchases, signaling officials aren’t ready to withdraw stimulus yet. "

    http://www.bloomberg.com/apps/news?pid=20601085&sid=aOlKPg363wrM

    Stephanie, you're trying to point out the brightly coloured bits in a sea of puke - it's still puke, no matter how many carrots and peas there are within it.

    Tackle this question Stephanie - when this recession started (or rather the credit crunch) many anaylsts and Economists pointed out that traditionally the longest and most severe slowdowns in history were started by a lack of credit - crunch, squeeze whatever.

    So why has history now been forgotten? What has changed? Are we simply playing a game of 'hope over reality'?

  • Comment number 6.

    Dempster (Post 1) - Well put!

    Gordon Brown is delaying taking action so the forthcoming collapse in employment, caused by the forthcoming slashing of public services and public sector layoffs (to help to balance the books and spiraling debt), will not occur on his watch (so he can try to avoid the blame for it).

    Take a look at http://poweromics.blogspot.com/2009/09/challenging-poweromics-and-looking-for.html also. It doesn't take a rocket scientist to work any of this out, but the Government and mainstream media seem to struggle ! .... Is this because they are incapable, or because they prefer to ignore the blindingly obvious so they can 'spin' something completely different to reality?

    You may want to look at this link if you're struggling to answer the above question ... http://poweromics.blogspot.com/2009/09/bbc-part-of-conspiracy-preventing.html

  • Comment number 7.

    One reason that you didn't mention is the cost of redundancy. A lot of companies will do everything they can to avoid redundancy because the cost to them is too great. This suggests that the labour market is not really as flixible as the government would have us believe.

    I know of companies that have done prepack administrations simply to avoid redundancy costs.

  • Comment number 8.

    The following has been lifted directly from the Bank of England web site:

    'The Bank's Financial Stability Role'

    'A stable financial system is a key ingredient for a healthy and successful economy. People need to have confidence that the system is safe and stable, and that it functions properly. The Bank's role is to contribute to maintaining the stability of the UK financial system.'

    Now if by failing to act to prevent the financial crisis and by then introducing the Quantitative Easing policy, which has de-stabilised the Gilt Market, they cause hardship and loss to people resident in this country.

    Do they have liability for the consequences of their actions?

    They admit they have role to keep the financial system stable and Quantitative Easing, has likely adversely affected the Gilt Market according the Debt Management Office.


    To The Governor of the Bank of England

    I John Doe (hereinafter referred to as the claimant) believe that the Bank of England (hereinafter referred to as the defendant) owes me a duty of care in maintaining financial stability in this country, and that they have failed in that duty, in that the financial system is not stable, and this instability has caused me loss, the extent of which I detail on the attached pages.

    Love John

  • Comment number 9.

    The BBC lunchtime news was like a Labour party political broadcast. Bad news dressed up as good news. Sure, unemployment's rising - but at a slower rate than before, folks. Sure, we're still in recession - but the figures were maybe wrong folks. Sure, Mervyn King's pessimistic - but isn't he always, folks. The fact remains that the Government and the Bank of England have failed dismally in their efforts to persuade banks to lend again. Business and individuals are still being starved of funding required to operate normally. So after the pre-Christmas splurge, we will return to a very hard January, February and March. And unless and until the banks stop withdrawing their support for the wider economy - they're STILL cutting overdrafts - and start lending properly, the figures will continue to show stagnation and unemployment will continue to rise. Caledonian Comment

  • Comment number 10.

    Whilst I don't want to be accused of talking down the economy, it's worth pointing out that the public sector hasn't yet entered its inevitable recessionary period.
    Also, quite a lot of the jobs cuts being made by the big corporations are being delayed to 2010 or even 2011.

  • Comment number 11.

    3. At 2:51pm on 11 Nov 2009, Friendlycard wrote:

    "So it's a viscious spiral with only one solution - which is that cutting public spending is imperative. "

    ....or raising taxes - let me guess, you work in the private sector perhaps?

  • Comment number 12.

    Unfortunately i feel the world of reporting is dominated by the politics of who can say what these days, the phrase "Cautious Good Cheer" on a day when its reported a further 30,0000 people have lost their jobs, 14,000 of which in Wales, raising Welsh unemployment to 8.7% and total unemployment in the UK to 2.4m, is a sign of optimism. When Lady Vardera talked of seeing a few green shoots, she was slated for this, even though it now seems to be clear that the general reporting of the economy was too glomy earlier in the year.

    Frankly i suspect, things are getting better seems of little comfort to those where things can't get any worse.

    I personally will not be happy until a large proportion of that unemployed figure is back in work, and people on reduced hours back to normal working weeks

  • Comment number 13.

    7. At 3:06pm on 11 Nov 2009, JHarvey765 wrote:

    "One reason that you didn't mention is the cost of redundancy. A lot of companies will do everything they can to avoid redundancy because the cost to them is too great. This suggests that the labour market is not really as flixible as the government would have us believe."

    In my current company they got rid of all the permanent staff first (redundancy) and retained all the temporary and contract staff. This is because they got the expensive redundancies out of the way at the start - leaving them with the 'free option' of getting rid of more later - should things get worse. Doing it the other way around leaves risks that you cannot afford to make the cuts needed and stay afloat.

  • Comment number 14.

    Post 5 (writingsonthewall) - well put too!

    I particularly loved this ... "Stephanie, you're trying to point out the brightly coloured bits in a sea of puke - it's still puke, no matter how many carrots and peas there are within it".

  • Comment number 15.

    Dempster - I agree with your analysis. The treasury and BoE are obviously deliberately seeking to reflate asset values and create controlled inflation through their monetary policy (both conventional and unconventional). They fear deflation far more than inflation. The problem is controlling it. The trick which they may or may not manage is not to damage the UK's credit rating thereby pushing up yields on gilts. If they fail, the yields on gilts will shoot up, debt service costs on government debt will become unaffordable and we will have to say hello to the IMF. Alternatively the BoE can continue its QE exercise to purchase government debt and we can say hello to hyperinflation. Like you, I cannot see how the BoE will get away with any more QE beyond the £200bn figure without damaging its credit rating and therefore there will have to be massive cuts next year.

    I think that it was a NIESR report earlier this year which mentioned that it bwould take 20 years to get the UK's finances back on an even keel. That pre-supposed interested rates on government debt of 4-5%. If rates significantly go beyond this, we are talking about a whole new scenarios - The UK could find itself paying 15% or more of its tax take on servicing debt interest. Historically, that usually leads to default.

    On a related point, I think the BoE and Treasury are misleading the public in relation to the purpose of QE. It has not resulted in more credit becoming avaialable to the SME sector (although admittedly it has made capital available to the big corporates which can access the capital markets and bond markets). It has however been a very useful way to fund government debt.

  • Comment number 16.

    Most economists, even with their poor models, can see that the rise in asset prices, e.g. stockmarket, is a result of the government bailout money ploughed into the banks.

    Many see the next crash coming.

    Confirmation of the Marxist analysis that the credit system merely transforms the underlying profitability crisis in production and does not solve it.

    20 years since the death of state capitalism, now the death of the social democratic & liberalist versions of capitalism.

  • Comment number 17.

    14. At 3:36pm on 11 Nov 2009, leanomist

    Why thank you :-)

    I have a much better phrase which sums up our voting choices - unfortunately it won't get past the moderators!

  • Comment number 18.

    Has anyone else noticed how civilised and on-topic this forum is without JadedJean?

    Although I have to say (regretfully), I almost miss his/her crazy rantings!

  • Comment number 19.

    16. At 3:45pm on 11 Nov 2009, duvinrouge wrote:

    "20 years since the death of state capitalism, now the death of the social democratic & liberalist versions of capitalism."

    Is the plan to keep changing the name so the dumb-dumbs don't see it's still Capitalism and think they have got something new, and more importantly something that works?

    If the world is falling for this trick, then maybe it deserves what it will receive in the end - a return to slavery.

  • Comment number 20.

    It is good to know that we may again achieve the pre-recession level of GDP by the end of 2011. However, will this not be in depreciated pounds? When (if ever) are we likely to achieve the same level of GDP in real terms that we had achieved before the recession?

  • Comment number 21.

    Post 17 - I can imagine ... and would love to see it! If you post it as a comment on the Poweromics blog (e.g. http://poweromics.blogspot.com/2009/05/democracy-what-democracy.html ) - I'll make sure it's published ... having made reference to many of your insightful comments on it before!

    I've also posted a petition questioning the voting system (and the level of real democracy) in the UK on the 10 Downing St web-site too ... http://petitions.number10.gov.uk/peopledemocracy which I hope people will sign to register/demand change ...

    As Edmund Burke famously said, 'For evil to flourish, all it needs is for good men to do nothing' ... and lest we forget how true these words are.

  • Comment number 22.

    Nos 4 - was interested to read Adam Posen speech at least what I understood of it.

    Isn't the point of QE or mirage money that eventually banks will lend so when it happens were being told we don't get inflation ? Some one explain to me in layman's terms because I thought that was the point of QE to help banks to lend. And when all this made up money comes out what will happen in terms of inflation ?

    Where is the value when something is just plucked off the virtual money tree ?

    Is QE a form of delusion then and therefore a delusion upon a delusion ?

  • Comment number 23.

    Post 20 (Michael) - a good point well made too.

    I think this post http://poweromics.blogspot.com/2009/08/printing-money-inflation-and-spin.html supports the point you make too.

  • Comment number 24.

    I think chart 3.6 is very revealing.

    Note how much unemployment is out of kilter. There is a lot of employment out there which will eventually feed through with the various private and public sector schemes designed to keep the unemployed employed and this is before the inevitable public sector squeeze.

    I note that UK gilt yields are rising even with more quantitative easing and expect it to spike when QE ends along with other schemes like the old bangers subsidy ends and the like.

    NIESR have already stated that they think October saw a fall of -0.6 in GDP which makes it hard for the 4th Qtr 2009 to turn positive and then we're into 2010 where we may see an acceleration in rising unemployment, pound falling, gilts rising and inflation rising.

    Calm before the storm anyone?

  • Comment number 25.

    # 20 - a similar point can be made in relation to the value of all assets which are denominated in sterling. Whether it be the stock market or the housing market, should the effect of the depreciation of sterling not be factored in to any assessment of the drop in value?

    # 22 - as I mentioned in my ealier post, QE is not working if the intention is to increase bank lending. What it is doing is driving down yields and making more funds available at cheaper prices in the bond markets but only the big corporates can access this.

    # 18 - on JJ, I agree it has all become very civilised. I was half expecting JJ to post following a recent post on this (or maybe it was the NN blog) which included a link to a report on the utterances of the Chief Rabbi about Europeans being to materialistic to breed. I thought it was right up JJ's street - but so far, JJ has not returned.

  • Comment number 26.

    WOTW - I know you don't like public sector/private sector comments but I think that one reason why the job market drop doesn't match output drop is that the public sector have not taken any action over their level of employees.

    Another reason is that there are fewer companies involved in something that 'outputs' and even in the private sector many comapnies operate based on govt grants for training etc so again they are unaffected.

    BUT underlying all this is the simple fact that service companies generally provide services to companies that make something - as these companies reduce and service companies increase we become a country more and more that is simply paper shuffling whilst our balance of payments position gets worse and worse.

    How many real jobs exist in this country where something is produced?
    How many people does this country really need to continue to function?
    What do we do with all the people who are not really needed - at the moment the answer is we pay them and that keeps the money going round and round but is that a long term solution?

    I am an accountant for a manufacturing company - do they need me - I think the answer is probably yes at the moment - one to deal with HR, bank requirements etc where only I have the required skill set in the company but also to help set prices etc. Even the Chinese have accountants.

    If everybody sat down and asked that same question would the answer always be yes - i'm not sure it would, I'm not absolutely sure its a yes for me!

  • Comment number 27.

  • Comment number 28.

    11. writingsonthewall wrote:

    ".....let me guess, you work in the private sector perhaps?"

    Yes, and I'm proud of it.

    But the point I was making was that we are going to need BOTH spending cuts AND tax increases to bridge a huge chasm between income and expenditure. We're on watch from the markets - we either live closer to our means, or we see our rating cut, the pound slide even further, and interest rates rise.

    Currently, the gap is 14% of GDP. Assume that we need to get that down to 3% (the level defined by Maastricht as 'prudent'). Doing it entirely through tax increases would mean pushing up taxes by about 31% (11% as a % of 35%). That would be a disaster - businesses would leave in droves, and individuals' disposable incomes would crater.

    But neither can we do it all through spending. Here, we'd have to cut spending by 22%. Again, not feasible.

    So we need a combination of both. We could put the UK onto a sustainable trajectory with a 10% cut in spending and a 10% rise in taxes. It's not a very palatable option, but not impossible. And spending far more than we earn in taxes, and then simply printing the difference, is a recipe for disaster.

  • Comment number 29.

    The innovation at #27 is conservatively worth............... Trillions.
    It also digs some of our friends abroad out of a li'l hole.

  • Comment number 30.

    Merv has contrived to blow 200 bn - the only result of which is to reflate the (unsustainable) housing bubble and equities.

    Zero interest rates have led to a totally irrational exuberance in the domestic budgets of mortgage holders who are, as we speak, getting themselves into more debt (or not reducing their debt) and spending the cash on current consumption. This will stop, as will QE and then there will be one hell of a price to pay (in unemployment and inflation) and Merv is not such a fool as not to know it! Yet, in his accustomed way, is scared to frighten the horses. Isn't there a hymn about a bleak mid-winter! It is the poor that pays the price and the City and Merv don't give a damn!

    Dave boy your (and your successor's) legacy has already been blown! Even Merv said this in code today! He has done what can be done at the wrong part of the economic cycle it is the recover that needs helping, but what he has done is to cushion the collapse leaving nothing to help the recovery what an idiot! He has ushered in twenty years of stagnating decline - the only group saved are the bankers this is a disgrace!

    2 Pounds to the Euro anyone!

  • Comment number 31.

    Adjust property value, derivatives respond.

  • Comment number 32.

    24. Rugbyprof:

    "Calm before the storm anyone?"

    Exactly. I think the markets realise that, realistically, nothing is going to be done before the election. But they will expect immediate action thereafter. And i just can't see any government doing what is necessary.

    Our politicians are being less than honest about this. The deficit is GBP 175bn. Mr Osborne's 'tough' proposal at the conference would save just GBP 7bn. Mr Brown plans to realise GBP 16bn, but that's a one-off sale of assets that cannot be repeated year after year.

    Think of it like this. We need to cut the deficit by at least GBP 150bn. That equates to GBP 5,900 per household. This is going to get very unpleasant.

  • Comment number 33.


    So, this year the government has printed £200 billion to maintain public expenditure: and took the hit on the value of the £ (while presenting this as good news for exports). It couldn't borrow the money this year - and surely will not be able to either borrow it or print it next year.

    With central & local government spending at roughly £650bn this implies prodigious spending cuts and/or tax increases will be necessary if ends are to be made to meet.

    The problem is that either, or both, will lead to a further squeeze on demand and reduced investment/profitablility in the real economy: and this, in turn, could lead to a reduction in tax revenues and or increased spending on "automatic stabilisers".

    Could someone do the rudimentary maths to estimate the likelihood and scale of this risk. It would be far more interesting than the regular reporting of the latest set of figures that are "less bad than expected" as of these straws in the wind were green.

  • Comment number 34.

    In addition to my comment (#24) and GRIMUPNORTH's (#26) I'm not sure if people get the inefficient allocation of resource going on in the UK economy right now.

    Recovery takes place when investment of financial and human capital is allocated for wealth creation (i.e. producing goods for both export and domestic consumption (economic definition), not misallocated on schemes that have political ends.

    As a business we've had our best years in the last two years and are profitable. We expect growth in 2010.

    Are we looking to hire? NO
    Are we looking to optimise productivity with current staff? YES
    Are we looking to borrow money? NO, we are paying off any debt we still have as quick as possible
    If our bank (its one of the nationalised ones) comes knocking on our door with £500,000 to help with growth would we take it? NO, NO and NO.
    Are we looking to hire in 2010 if our growth of 50% is realised? STILL NO.

    Are we looking to rebase abroad? For the first time YES and we are technically a service company.

    If anybody wants to understand what is really going on in the economy then I suggest Mervyn, Gordon, Alistair, Stephanie and Uncle Tom Cobleigh have a private interview with me so they can get it....

  • Comment number 35.

    Nos18

    Someone who knows jaded_jean suggested he had forgotten his password - laughable and more like the beeb have stopped him at least till he moves home gets a new ISP and starts up again. Making comments that countenance Afgan woman's rape, that the mentally ill are 'poison' and being 'agnostic' on the holocaust and that Hitler wasn't looking for war - well now what a charming fella.

  • Comment number 36.

    An intersting point on the markets that I picked up recently. While many suspect that the increase in the FTSE 100 is at least partly sue to QE, there is another factor. Only around 30% of the earnings of FTSE 100 companies are made in the UK - the rest are the result of overseas activity. Therefore, even for those that argue that markets reflect the underlying economy, the rise in the FTSE 100 does not necessarily reflect an increase in confidence in UK plc.

  • Comment number 37.

    At 5:21pm on 11 Nov 2009, GRIMUPNORTH77 wrote:

    "How many real jobs exist in this country where something is produced?"

    For the last 30 years, the two key pillars of our REAL economy have been:

    - North Sea Oil
    - Arms manufacture

    Good old BP and BAE! But now their star isn't shining so bright:

    http://www.optimumpopulation.org/blog/?p=1388

    Regrettably the finance sector is NOT a contributor to the REAL economy, and therefore will NOT earn us out of this mess:

    http://www.bbc.co.uk/blogs/thereporters/stephanieflanders/2009/07/is_double-dipping_the_new_green_shoots.html

  • Comment number 38.

    Oh dear Steph, being consulting via your connections with too many of the incumbent ' experts' who allowed this to happen in the first place!

    You would be better of doing your own bit of free thinking rather than reporting the views of various leveraged parties, you could do alot worse than looking into the questions posed by #1.

    Your post is a bit out of touch with reality I am afraid, the jobless figures dont look so bad because of more flexible working practises many people are working 4 day weeks rather than being made redundant, if you pro rata the rate of short time working into the overall unemployment figures you would get something closer to reality, and closer to what was expected I suspect.

    Not to mention the seasonal effects (as others have pointed out) of 30,000 temp post office workers to name but one!!

    The government is borrowing 10 billion upwards month on month and printing 10 billion upwards more. that is a big fiscal gap to fill by any concievable 'fragile' economic recovery even by the bank of Englands reckoning. The fundamentals underpinning it all are just too weak, especially in the UK.

    Do you really think recovery will be such that by the time they have to stop printing (and borrowing)the withdrawel of that stimulus will not have a negative effect?

    You dont have to crunch any numbers to see the truth of what i am saying, you just have to stop regurgitating the incumbants leveraged and self interested view......please.

    Jericoa

  • Comment number 39.

    Friendlycard #28 AND #32

    AGREE.

    My only comment is not sure about acceptance of tax rises or benefits cut (see the recent furore over childcare vouchers for example).

    Having put all my savings into the business and earned peanuts for the last several years - the thrill of paying more tax as you can probably tell doesn't fill me with happiness.

    I believe economic commentators are also missing the fact that many SMEs and self employed (that are left anyway) have reduced their efforts over the past 12 months.

    This 'effort gap' may well be lost in any recovery if we get higher taxes because the more effort-reward will be perceived to be not worth it - it's a drag factor. If anything taxes have got to be cut (e.g. see Germany's planned stimulus) and we know we can't go there. It's what anybody who has never worked in the private sector doesn't get........

  • Comment number 40.

    Two pieces of good news. Wages and hours are taking more of the strain of falling output; and the Bank of England is showing a realistically wide range of possible future paths of GDP. The second will help firms and consumers to build the appropriate degree of uncertainty into their planning, and so aid healthy recovery. What I doubt is the likelihood of the Bank's least unlikley GDP path being realised.

    QE seems to have postponed the realisation of substantial losses in the housing and stock markets. I wonder how much of them are still to come, however carefully the bank and Treasury tread in draining off QE?

  • Comment number 41.

    Something does not add up. Either the unemployment figures are wrong or the economy is a long way out of recession. It is impossible for an individual to get an overview of the country as a whole, so I can only go an my own anecdotal evidence.

    This leads me to believe a) We are a long way out of recession and b) Shopkeepers are making price increases stick. The latter I see as evidence that serious inflation WILL bite us.

  • Comment number 42.

    # 37 - your link on North Sea oil was spot on. What is disappointing about the current government is its failure to recognise this. It has failed to introduce tax changes to promote investment in North Sea oil and gas so that we can maximise the benefits of the industry to the UK. One effect of the "credit crunch" and drop in oil prices from their peak has been to reduce greatly the levels of investment in the North Sea. An effect of this is that the decline in production of oil and gas will be much more rapid than it might otherwise be. The worst case analysis that I have seen suggests that with current investment levels, the UK will only be able to meet 11% of its own gas requirements within a decade. One problem that few outside of the industry recognise is that even a temporary halt in investment will have a premanent affect. The basic point is that a lot of the infratructure (pipelines, etc) required to get oil and gas onshore is old and won't last forever. If much of the remianing oil and gas is not recovered in the next few years then it is unlikely that it will ever be recovered as the existing infrastrucure will have been decomissioned and it will not make economic sense to build new pipleines etc to get the oil/gas onshore.

  • Comment number 43.

    On the unemployment figures, my guess is that employers and employees are taking a much more flexible approach during this recession than previous ones, e.g. introducing 9 day fortnights etc. While this might limit unemployment, it also means that there is a fair amount of slack in the workforce if we see a recovery. This will mean that we may see a slower increase in employment with any recovery.

  • Comment number 44.

    Hi Stephaine,

    just saw your piece on the 6 o clock news re the unemployment figures and there's something that the current figures just don't record, namely unemployed people like myself who have received either a payoff and/or a pension from their previous employer which is enough to prevent them
    signing on for benefits at the job centre. I believe there must be somewhere in the region of 200,000 people that fall into this category, still looking for work but just not appearing in any Govt figures. We are like the forgotten people of this recession with no benefits provided and no assistance given at job centre's to get back into work, even though, as in my case I've worked for 29 years and have paid tax and Nat insurance all through this period.
    Just wondered if you've investigated this?

  • Comment number 45.

    Marking-to-market virtually eliminates credit risk, this is widely understood. What was not known was the risk reduction occurs by eliminating credit, full stop. :) That's what it does.
    #27 #29 #31 are an interesting proposition. I can think of no better place to celebrate them than the ground floor St. Mary's Axe. http://www.essential-architecture.com/LO/001-gherkin3.jpg Friday 13th, ToT 1600. Discussion of theory and practical implementation of a property revaluation's effect at reversing, stabilising and envigorating the existing derived mortgage finance market. Those who have the topic nailed already, may prefer to consider the distriburion of prime numbers and the DD Wobble Effect.
    http://files.myopera.com/herosrest/albums/700510/BILL.png
    [Unsuitable/Broken URL removed by Moderator]

  • Comment number 46.

    I understand very well that Mervyn King the BofE and the media including their econonomics editors have responsibility not to undermine the UK economy with statements which may damage 'confidence' there is also an 'over-riding' responsibility on all and sundry to be accurate and impartial.

    I do not see how Mervyn King/ BoE can be regarded as having provided a 'forecast' - in fact his/the BoE statements are so vague, ambiguous and inconsistent as to the real position, direction of the UK economy, to be worthy of nothing but ridicule and skeptism.

    According to Mervyn King's forecast statements, diagrams and figures - just about anything can happen - Well we already knew that didn't we? This is absolute buffoonery!

    Has Mervyn King considered resigning his post at the BoE?

    The world changed in terms of its capital, resource and other markets and dynamics in 2008/2009 and on top of that the UK now has a poor internal economic structure - much weaker than in 1978-1982, 1990-1992 'recessions' because of the level of debt and lack of UK having an 'internal regenerative capacity' - i.e a 'driver' component to its economy.

    The UK economy is now in a holding position that is supported, pumped and primed with QE until the general election. This is an artificial construct for the Labour government to continue clinging on to power.

    QE is a good thing as is obviously necessary in last resort - but there is an old saying 'it's not what you do but the way that you do it' and the current labour government is 'living off immoral earnings' with QE and numerous people have been jailed for that over last 100 years or so - the Labour government could turn a cream tea party into a sleaze orgy with a skunk spiff to follow the scones!

    Passing off QE support for a 'recovery' is obviously misleading and false. The current UK economic depression is long term because of the level of debt and weak UK economic structure. Businesses have squeezed employees with wage cuts etc and the current unemployment figures can get a lot worse if the costs to employment/businesses start to rise in 2010/2011:

    Higher taxes
    Higher fuel and energy costs
    Inflation
    Weakening pound
    Intrerst rates will increase as some point to control inflation and ... yes... the EU may yet intervene.

    The question is and which the BofE have 'evaded' in their forecast - Is what happens next year after the next general election when public spending is cut, unemployment rises further, taxes rise, inflation rises, interest rates rise?

    This is less than a year away and the BofE should be able to take an overall view of the economy and make a sensible overall forecast without writing nonsense.

  • Comment number 47.

    Why is it impossible to find Mars bars on Venus?

  • Comment number 48.

    Actually the employment change compared to GDP change makes perfect sense.

    As I've mentioned before, firms have been firing external suppliers and contractors first. This was the main cost.

  • Comment number 49.

    #47 - She eats them.

    Mark to market accounting with FAS157, nowadays Topic820, is the biggest regulatory blunder in history. The greatest destruction of wealth that has ever occured. All done on a whim.

  • Comment number 50.

    People need to wake up - because a lot of people aint going to get no justice tonight.

    There is no improvement, only continued decline masked by a giant propoganda attempt to convince people that truth is lies and freedom is slavery. Orwell was a prophet, and his prophecy is coming true before your eyes.

    GDP numbers, unemployment numbers and all other macro economic indicators have been twisted beyond meaning. Only a high priest of sophistry could impute meaning from this twisted farago.

    Look at gold prices, look at the US$ index - meltdown is coming. There is no way out. Prepare to defend yourselves because no-one else will do it for you.

    Consider that the US has now committed in excess of $23 trillion to bailing out its financial system. Consider that ALL domestic US debts could have been wiped out for less than half this amount. Ask why this option was not chosen. Ask why this option was never even discussed.

    In the US 0.1% of the population own 6% of the nations wealth. Ask what other society has ever avoided economic catastrophe with such wealth imbalances. The UK is lock step with the US in terms of economic and foreign policies. Little Brother will be crushed in the same avalanche of debt that will wipe away Big Brother.

    The Europeans won´t save you. Look at Spain, Ireland, Italy and Portugal. Ask how long the Germans are going to carry this burden, and ask why they would want to add to it by taking on the UK and it´s "because I deserve it" mentality.

    Look at the argument about childcare. Is it a good idea? Eating food is a good idea, but people starve even though they know that eating would be beneficial. When you aint got no money you aint got no choice, so who cares whether something is a good idea. Look at the people arguing in favour of continued childcare - Broadly speaking they are the same people who acquised in giving all and more of the nations money to a few banks. These people are not sane and yet they still retain proximity to the levers of power. That means that the general population is not sane -because any sane group of people would act to remove the exercise of power by the insane.

  • Comment number 51.

    39. Rugbyprof:

    You make some very good points.

    Essentially, we're in a bind. If we cut public spending, we get a downwards impact on demand. If we go on borrowing at these levels, interest rates go up. If we go on printing money, sterling slumps and inflation soars. And if we raise taxes then, as you rightly say, we get the drag effect.

    I think one does need private sector experience to understand this. And I would add that we're in a global economy. If taxes are pushed too high, companies won't invest here. Bright entrepeneurs, who might otherwise have started new SMEs (which are the lifeblood of the economy) will start their businesses overseas instead.

    Capital, innovation and management are global, and countries have to compete to attract them. This doesn't seem to be understood in the UK.

    Bottom line is that the world is competitive. It doesn't owe us a living. We don't have a divine right to be one of the world's richer economies. We have to earn a living like everyone else. And part of that means living within our collective means.

    I'm quite sure that no politician is going to tell us this ahead of the election. After it, we're either (a) going to get a very nasty combination of spending cuts and tax hikes, or (b) going to try to muddle through, which could be lethal, because running deficits and printing the difference is viable only as a very short-term strategy.

  • Comment number 52.

    If QE has contributed to a bubble in British home prices, I'm certain it was intentional. Here in the US the government is moving heaven and earth to prop us the housing market, most recently extending the first time home buyers credit and broadening it to include non-first-time buyers. Steve Keen gives a very nice explanation on how these home buyer credits can prop up housing prices by $200K or more (his discussion is re Australia, but it would apply to the US just as well):

    http://www.debtdeflation.com/blogs/2009/11/04/its-the-leverage-stupid/

    My guess is they're trying to "de-tox" all that toxic waste (CDO's and such) by artificially elevating home prices, while they temporarily repair banks' balance sheets by flooding them with printed money. Which implies the banks are *still* bust, in spite of all these green shoots.

    #18, 25, and 35:

    This is just a theory, and I hope I'm wrong, but I don't think we'll be hearing from JadedJean any time soon:

    http://news.bbc.co.uk/2/hi/europe/8341489.stm

    His/her last post was 10/27, and Dr. Levi-Strauss died 10/31. I recall another poster mentioning that JJ was an anthropologist who lived in France.

    #37: HawkeyePierce

    You forgot drugs. :) North Sea oil is declining, but Afghanistan opium production is increasing:

    http://en.wikipedia.org/wiki/Opium_production_in_Afghanistan

    And since it looks like we'll be there for the next 100 years, I'm sure BAE, et al, will be doing well too. The wonders of a diversified economy!

  • Comment number 53.

    I believe industry is in a tougher position than any one realises, business runs on finance, it's tougher to come by and asset values are down. Government will have to reign back, receipts will continue to dimish. The support for the economy was neccesary, no other choice but it has not been as straight forward as it is put across. Banks in trouble are in trouble, hence the guarantee schemes and there may be a surprise before years end. Everything banking is driving up the cost of finance, the opposite of what is required. People, generally are far more cautious with expenditure, those able to, business as well, will be reducing exposure to negative equity and waiting, praying. That is a frame of mind that no nurturing or public speaking bravado can overcome. Human nature, talk-talk politicians are simply doing that, talk-talk and everyone knows it. The economy contracted, it continues. I see a reason why, it is a very logical reason from the circumstances that exist. December and January will be interesting times, there is no more help to come from government, hopefully baby is able to climb out from the plug hole.
    l don't see how anyone can reasonably look you in the eye stating the economy is going to grow, it is paper profits and numbers on balance sheets that are growing exponentially. Some sectors, financial and electronic trading, commodities futures etc seem to do very well. We will see, there is a nasty, nasty bunch of bad news still to come and ducking it is pretty pointless. All the bad news and further setbacks are in the public domain, you just have to dig them out from the oceans of self interest and lobbies that try to paint the sky green and the sea orange. The fields for these 10 new nuclear generators should already be being dug up and prepared, not in an endless paper chase of Whitehall empire building, i'm not knocking the civ's they do their thing and hold the place together but this ho hum, make do and being treated like a mushroom is due an airing. I would like to,at the moment, run into some of the politicians and the double speak going on and simply tell them, to their face, you are lying. You are lying to everyone.

  • Comment number 54.

    FaustKnits

    Personal fan of Steve Keen myself.

    RE JadedJean - while I'll be damned.

  • Comment number 55.

    #53

    I work in a bank and here's an odd thing - CEE banks are propping up their Western parent companies, rather than the other way round, though God himself will fry in hell before they admit it. The Western banks had to write down all these bad assets, but CEE, especially Poland, CZ, SK, didn't really bother.



  • Comment number 56.

    Make herosrest (#47) PM and Armagediontimes (#50) his Chancellor. You've got my vote boys.

  • Comment number 57.

    no.53

    Try getting on question time...maybe we should all go!!!


    Politicians...poor puppets, one has to almost feel sorry for them, i think they actually mean well but in their struggle to satisfy some psychlogical 'need' as a professional politician (why else would anyone do it!!) they all seem to have missed out on the real life experience outside of the mercilessly lobbied and manipulated tri-partite political bubble. As a result we are ruled by a professional political class that are as ineffectual as they are deluded, easy prey for those whom wish to apply legal and financial leverage by stealth without the manipulated even realising that is the case.

    These guys actually think they are running the show!!!


    I am not being too harsh am I?

  • Comment number 58.

    Friendlycard (#51)

    I believe your analysis to be correct. And you're right about earning a living - I sense too many in the UK believe that to be the case, living off the last 300-odd years of global trading which is about to come to a reality face-off.

    As for the commenters here - pretty much right in most cases.

    The problem is we're having to blog here on what is, let's face it, a substandard commentary from a supposed BBC economics expert and she's not the only one.

    Just read through SF's entry again and you can see the holes in what is a rather facile explanation of what's going on. I know she's trying her hardest - but that's media for you with Government help.

  • Comment number 59.

    Until we get increased demand in the economy employment prospects especially for young people looks very bleak. I see no grounds for much optimism.

  • Comment number 60.

    Shouldn't employers be encouraged to hire people (through lower taxes, especially on employing under 21s), rather than stopping them firing them, through long redundancy processes?

    And what was the point of doing an outside broadcast from the BoE on the 10 o'clock News tonight? How much of my licence fee did that cost?

  • Comment number 61.

    Mervyn can see the green green shoots ofoAAAme forming ,the type that sprout optimisticaly from horizontal trunks that have been hewn down before the maaagic mushrooms and tentaaaaaaaacles of dry rot emerge to feed and profit from d caaamposition

    The "for Keynes" silly QE'rs will carry on punmping andumping their unproductive dyddle doe into vacuAAA's holes whilst AAAwaiting the splAAAshback that indicates the begining of an eternal bond age for those Aye Aye and AyeRRs that cannot see to inkfinity and beyond ,with lord Upwardly mobile worming his way into the seat of power , hastening on the day.


    Money /capitaAAAl is fugitive and on its way to Eastern civilliesAAAshun.

  • Comment number 62.

    Conducting interviews with our government and Finance boffins is not the straight forward piece of armour polishing many seem to expect. It is l should imagine a minefield of trusts and respects. Taking a minister to task, might well lead to adoration here, in some quarters, it would however effectively bar further access to that individual somewhere down the line. Trust and regard go with the job, which is not investigative journalism, though there is the mother, the true Ma, of all stories awaiting some bright spark.
    The Beeb are not crusaders, that is how it should be. They address the broad spectrum, do it better than well and report accurately. There's is not to wield the sword's, that is our job. How?........... that is the question. Embarrass say Gorbon Brown, and there would be hell to pay. He is actually a wonderful cuddly guy full of the joys of life and burboned by his charge of 60+ million twits who all know better than he. I truly wish the guy would stand up, lose his rag, blow away the cobwebs and then simply turn things around. It isn't actually that difficult to do.

  • Comment number 63.

    This is just a game of economic Pooh Sticks and the fact one stick come through the bridge before another is meaninless.

    BTW post 56 Err I vote for 'Eros Rest - for the Ministry of Luv - meself. Eros being primordial god of sexual love and beauty, worshipped as a fertility deity. lol. Thats what we need.

    Arm n a Leg Time would never be a member of a government. Much happier throwing logic bombs at them.

    In view of the fact that the last figures I saw suggested that the the public sector employment was still growing at 2 percent, whilst at the same time the economy had shrunk by the best part of 10 percent, considering inflation, it would hint that a substantial overhang of redunancy is accumulting in the public sector. However much tax is obtained by stealth ot highway robbery it will simply not be possible to plug the whole hole. If Browns tax take has been running at 46 percent direct and indirect for years and years - a EEC (developed country) fairly typical figure - then very crudely to prop up the Brown circus it has to rise to unsustainable levels. Or perhaps some clowns have to leave the circus.

    Hence decimation pending. From wiki - ''A unit selected for punishment by decimation was divided into groups of ten; each group drew lots (Sortition), and the soldier on whom the lot fell was executed by his nine comrades, often by stoning or clubbing. The remaining soldiers were given rations of barley instead of wheat and forced to sleep outside of the Roman encampment.

    Because the punishment fell by lot, all soldiers in the group were eligible for execution, regardless of the individual degree of fault, or rank and distinction.

    The leadership was usually executed independent of the 1 in 10 deaths of the rank and file.'' (This seems to have stopped as a policy, this group seems to be rewarded come what may)

    The digestion of monumental long term debt and the marked reduction of the public sector is still not in process. Has not even started. More of a Pooh Log than a Pooh Stick. I cannot understand why David Cameron wants the job of clearing the blockage.

    It is quite obvious what the problem is if you try to buy anything much specialist for manufacturing in the UK. It is not made here. It is sometimes not even imported and sold here, because nobody much is manufacturing here. It has to be bought in other countries directly and personally imported. QED I am afraid. Personally it would be almost certainly easier for me to do what I do either on mainland Europe or in the USA or possibly S America. I can only conclude that the UK is in a very poor position and it is down to sustained poor strategic thinking.

  • Comment number 64.

    God you lot are depressing.

  • Comment number 65.

    58 Rugbyprof

    The problem is that only a very few blog here, a few more may read, the vast majority do not know where to seek the information. ''Who controls the past controls the future. Who controls the present controls the past''. George Orwell. I would suggest that in Orwell doublespeak Economics = Politics, like Peace = War, Freedom = Slavery, all points to that.

  • Comment number 66.

    #1 and others

    It's often asserted by bloggers (see the very first blog #1 in this chain) that QE is a means of the BoE funding the Govt, as if through QE the BoE is "printing money" which is then used to fund Government, ie pay for public sector wages, infrastructure investment, etc. This is based on a mis-understanding of QE. While QE poses a number of risks, it doesn't represent direct financing of Government by the BoE and so it doesn't mean that, once QE stops, that the Government suddenly needs to find a huge quantum of new buyers for its debt - at least not directly. Read on if you're interested just how QE raises inflationary risks and impacts the Government funding challenge...

    This mis-perception about QE arises because people think that QE represents the direct purchase of gilts by the BoE from the Debt Management Office (ie from the Government). This is not the case. QE represents the purchase of existing gilts (ie gilts that have already been sold by the Government) from the private sector owners of those gilts - typically, banks, insurance companies, pension funds, etc. When it purchases a gilt from such an institution, the BoE doesn't literally deliver cash to the seller, it electronically "creates" the money by providing that the seller's bank account is credited and by simultaneously creating a corresponding reserve (a credit) at the BoE for the seller's bank. Effectively, it's exactly like putting cash in the seller's bank account and then the seller's bank taking that cash and putting it on deposit at the BoE. It all cancels out, except the seller now has cash in its bank account instead of gilts on its balance sheet, and the BoE both owns the gilt and is "holding in reserve" the corresponding cash on behalf of the seller's bank.

    What's the good of that? It replaces assets on the balance sheets of the previous owners of the gilts (banks/insurance co's) with cash. This improved liquidity is supposed to give those institutions (banks) the confidence to lend more or go out and spend money on other assets. It also maintains the price of gilts by creating 'artificial' demand from the BoE. Maintaining gilt prices maintains the confidence of all those other investors who own gilts, again ensuring that they keep spending and lending. And high gilt prices obviously mean low yields and more attractive conditions for borrowers.

    Obviously there is a danger that all this 'cash' injected into the system stimulates inflation. That will present a risk to the Government as it will make it more difficult for the Government to sell gilts which it desperately needs to sell in order to bridge the fiscal deficit. But obviously the logic is that without QE we would face deflation - so the BoE is trying busily to balance the risks here.

    My point is that withdrawing say, £20bn of QE, doesn't in itself mean that the Govt suddenly has a £20bn hole in its finances - which is what some bloggers seem to assume. What it means is that gilt prices will be somewhat lower than they would otherwise have been and the cost of funding the Government debt will rise - ie the interest rate required to sell Government debt will be higher. But it's important to note that a higher rate on Government debt means a BETTER deal for potential buyers of that Government debt UNLESS they think inflation will be worse as a result of the lower QE, which is unlikely. So withdrawing QE doesn't pose a direct and immediate risk to the Government funding equation - but it will make it more expensive for the Government to borrow and will add more and more interest costs to be paid going forward - ultimately by taxpayers.

    The danger to Government finances is not from stopping QE and somehow creating an immediate corresponding hole in the Government finances, but of QE being over-applied, thereby creating the spectre of rampant inflation which destroys the ability of the Government to borrow. If this risk should arise (and it's perfectly possible, perhaps even likely) the Government will have no choice raise interest rates dramatically - with all the obvious implications for the real economy. Staglfation here we come.

    Of course, the impact of stopping QE could be negative - higher yields and gilt prices can ripple through to lower confidence and less borrowing and spending, and lower tax revenues but this is hardly an objection to QE. Just as QE is designed to stimulate confidence and borrowing, stopping QE is designed to choke off excess inflation.

  • Comment number 67.

    Interesting that everyone is talking as if the recession is over.

    1. It isn't.
    2. It will get worse.
    3. If more debt is created to fuel the existing debt, it will get worse still.

  • Comment number 68.

    re #62 - read burdoned for burboned.................. hmmmmm. (blush..)

    :) http://www.sysopt.com/forum/showpost.php?p=1487683&postcount=12

  • Comment number 69.

    Some good posts tonight... I'm hearing commercial property and CC debt are the next black holes. And a word to the wise...don't get caught holding equities when the election takes place/QE runs out.

    The obscured unemployment comments tie in with my personal experience in an SME.

  • Comment number 70.

    glanafon, your #63 - Decimation worked though, the troops were scared more of their commanders than Spartacus and his revolting slaves who were defeated and crucified along the Appian way.
    Public sector will be a huge headache down the road aways........ and generating inflation to fill the gap between growth and expenditure, abyss..... does not seem amiss. If growth is negative in the sense that the economic base(size) took a step backwards and is comparable to say 4 or 5 years ago but expenditure raced away from 2008, then there is a hiccup or two that l don't think anyone has properly mulled over.

  • Comment number 71.

    44. At 6:40pm on 11 Nov 2009, John Hughes-Narborough wrote:
    Hi Stephaine,

    just saw your piece on the 6 o clock news re the unemployment figures and there's something that the current figures just don't record, namely unemployed people like myself who have received either a payoff and/or a pension from their previous employer which is enough to prevent them
    signing on for benefits at the job centre. I believe there must be somewhere in the region of 200,000 people that fall into this category,
    =================
    I believe there are considerably more, I am one 6 without work since a Government owned Bank replaced us with Foreign Nationals.


  • Comment number 72.

    No66.

    I am sure your economic theory is totally sound within the context of accepted economic theory (which got us into this mess).

    All facinating intellectual gymnastics it is too, but it still does not change the bottom line.

    It is obvious we can not afford the huge goverment and standard of living we have become accustomed to which is proven to be built up of nothing but intangibles of the types you so eloquently describe.

    lets accept the academic value of your post, How do you think the economy will be performing in the first quarter of 2012?

  • Comment number 73.

    For those posters who are thinking there will be massive redundancies in the Public Sector.

    I wonder how many public sector workers will actually be made redundant rather than just allow natural wastage to whittle the numbers down. given the power of the unions, I think it highly likely that what will actually happen is that spending on activities rather than people will be cut drastically more than would be required if there were people cuts as well.

    If only the 'expenditure' budgets and not the actual people are cut then the suppliers to the public sector will be hit hard thereby creating even more difficulty for the private sector.

    I suppose we will find out after June 2010!

  • Comment number 74.

    62 'eros rest

    ---- Simple to turn it around -----

    Have you ever engaged with Whitehall at a senior level simply to get Case Law routinely implemented in routine decision making, bearing in mind statue once passed is almost immediately extended by case law, some comments are that case law is 90 percent of law. Bearing in mind that adminstration is done largely in accordance with shortform bulletins issued from Whitehall. Or that some law is a pile of paper over a metre high. The reality is it is immpossible for anybody other than a few to know any field in detail so implementation is made by people who do not know what they are implementing. Further consider this - there is apparently no budget held by some government departments for maladministration liabilities. So they either get it right or do not acknowledge failures easily. This hints at serious inertia.

    Perhaps you should go to the High Court, where there is a fast track which you have to negociate to get onto and effectively have to have the agreement of the other party to make representation in chambers to fast track. Fast is sort of 2 or 3 years, slow is 5 maybe 7 years or more. Or to spend 5k with a barrister you are likely to spend 30K on preparing a brief for the worthy.

    So many of the things which appear in need of action impinge on law and postions are likley to be protected and fought in court. That is just the matter of law. Let alone policy decisions which in reality mean taking money away from groups of people. Just wait - lobbing against any cuts or action has only just started. Those that benefit from a status quo will act to try and defend the status quo.

    Meanwhile, elsewhere, those without such restrictions will not sit still.

    You are not talking of action, you are talking of trying to dismantle an entire culture without it ceasing to function. Bearing in mind intervention is unlikely to only take out the stuff intended to be taken out. That is the way intervention works. Good Luck.

    In the US a few decades ago it was felt that the job of being at the top of a big automaker was not a job, it was not possible, the beast was too big to steer by any one individual. The need for increasing responsiveness in the management of big organisations has reached the point that decisions have to be made before the effects of the last decision has been effected. Dawrinisn in modern organisations demands ever increasing specialistaion to aid efficiency, increasing efficiency drive faster decision making, the feedback loop, or control loop, fails and efficiency fails suddenly. That is all you are seeing around you. The only way forward is cellular self determining management modules, ie small, networked. This process is fought by those in central authority, the last thing they want to see is neural networks. If a US automaker shows signs of managment problems then what problems affect a nation or global businesses.

    Just a point of view

  • Comment number 75.

    #53 herosrest. You are in error. You write: "The support for the economy was neccesary, no other choice..."

    There has been no support for the economy. There has been support for financial oligarchs cum kleptocrats. Consider that the US has committed in excess of $23 trillion in gifts, and wealth transfers to its "too big to fail" institutions and that this amount is more than double the amount it would have cost to write off all US household debt.

    Who is meeting these costs? - why the over indebted US household sector since there is no other possibility. Unless of course the intention is to default on debt and have the Chinese pick up the bill. If this route is chosen expect life ending consequences.

    We are facing catastrophic meltdown - now is not the time to regutgiate the propoganda from the insane.



  • Comment number 76.

    #63 glanafon. You are looking at something an order of magnitude more extreme than decimation!!

  • Comment number 77.

    70 'eros rest

    I consider the economy present is what it should be in view of the long term underlying decline of the real economy, in particular manufacturing. All else being froth, bubble blowing by Brown. I dont really see what all the fuss is about. The froth bubbles popped and it has dropped back to what was really sustainably there, Brown's Ail has revealed Brown Ale, bit flat and not the Champers it was said to be. The problem is there will not be enough jobs for some and there will not be enough tax for some. But it is what it is.

    Other countries represent a real problem in terms of high tech, other countries represent a problem in terms of low cost labour. imho, could be wrong. I would suggest globalisation, as such, is pretty much done, however. It has nowhere to go as a process.

    Business is likely to split into small responsive flexible units or very large IT based admistrative organisations which have inherent flexibility and responsiveness problems. The first group has inherent novel technology limitations due to size, the second group has decision making problems inherent in it. The first group - if it focuses on flexibility and evolves - can survive fairly easily. The second group has to seek monopoly to overcome structual inefficencies but is limited by anti-monoploy national regulatory action. This is why its preferred place has evolved to be multinational, it is an attempt to diminish national based regulation, however with the size of a multinational decision making has to become the overarching problem hence the current failures.

    So in business it is actually quite simple, you either sail on a big ship and know that it will hit a iceberg sooner or later and whether you get into a lifeboat is arbitary, or you seek a small craft and have to have the skills to navigate and avoid the big ships. The minute a small craft grows to any size it will be snapped up by a big ship, or will be targeted by a spotter in the low labour zone as a pirate opportunity. Its very simple, imho.

  • Comment number 78.

    I am earnestly serious regarding the folly (stupidity) of the GAAP FAS157 & FAS 159 accounting for derivatives through 2006 until now and ongoing. They are the culprit, regardless of motive and intent. It is ongoing, more trouble to come in Finance and then It starts on the Insurance industry. It is the cause of problems because it did something very daft, it frightened people when they looked at their 'new' balance sheets, in fact it panic'd people. No one had thought through its practice or implications until it was in their lap, it has many more problems to cause and quite frankly, simply is a grotesque horror story that must be recognised for what it is. Right or wrong, it killed credit - murdered it, why? is one story but more important is how and prime, stop any more damage. It just rolls along destroying swathes of wealth.
    The easiest way to illustrate what l am saying is thus, October 28, 2009 - - Year-on-year US house prices declined more than 10 per cent. This was taken as a positive — August was the seventh consecutive month with improved annual rate of decline. US house prices are now at autumn 2003 levels.
    That is the only GAAP that matters. Watch it close or chasm. It will foretell the future.
    Autumn 2003 to Winter 2009. That is the extent of damage done!

  • Comment number 79.

    70 EmmKay

    If a business is effectively wholely dependent on the public sector then it is the public sector, no difference. It doesnt matter how long the process is it will happen. The end result will always be the same. Many businesses are dependent on public sector expenditure. But if expenditure drops, the need for admistrators of said expenditure also drops.

  • Comment number 80.

    errata

    Post 79 should ref post 73

    Apologies

  • Comment number 81.

    76 Arm n leg

    Decimation being one in ten, an order of magnitude would be 100 percent. This may indeed be possible, only modern man thinks the Earth is beneath him. Good to see you are in an opto-mystic mood. lol

  • Comment number 82.

    64. At 10:49pm on 11 Nov 2009, Mark Saville wrote:
    God you lot are depressing.
    ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Not at all, ,we are merely daaaaaaaaamping the unjustified euphoreAAAh caused by the QE'rs vascilaaating with the Nayshuns bottom line at this time in the uneconomic cycle.


    And we cannot afford the mortgage interest increase that comes with the so called wreckovary [the yolke will be on us].

    The only way economic growth will truly recover ,is if Britains ageing horn of trident plenty is decommishioned in the bankster /pollytitians bottom line AAA's signified with the iMPortall words "I'M F EE" atop a jolly roger


    Rule BritAAAniAAA BritAAAniAAA RULES THE wAAAves [soon to be wAAves]

    Britains on the never never never will be slAAAves [SOON TO BE SLAAVES]


    For sum reason pollytitian/banksterrs can never resist aaa vortex [where the enticing curvaaature of spaaaace and time etc etc etc.......]when it presents itself with the tried and tested importall words "I'm free" and "frying tonight" yes they just have to go all the way even beyond the event hurrizone.

  • Comment number 83.

    glanafon, your 74. I was being idealist. I thought it, think it still and said it because it is fair comment. Thanks for picking me up on it, the matter is apotheososis, its practice cumbersome. Finance now runs at the speed of light, simple basic concepts mushrooming through logical derivations. The GAAP is a lumbering gargantuan attempt to protect shareholders interests in various ways. Just laugh. It is a civil Service wet dream.
    The game has already moved on and left its detrius scattered about for the rest of us peering out from our slit trenches. Finance is power and it has morphed and changed, it started in the 80's as the traders moved out of their pits and believe me, if you want to make money these days, by the shed load, no questions asked go trading, go short. The banks and Insurance were in it up to their bottom lips and joy all round until a bunch of sillies wenOTT and loosed Mr. Hertz on the world.
    Modern electonic trading, destroy the world and get filthy rich doing it. Finance is out of control, the accounting rules were a twice over magic bullet that backfired horribly and is staffed by apotheososis. They did nothing wrong ha ha!, it is all with our(their) best interests at heart. These people are clinically insane. Nut jobs, for the squirrels and their accounting is poison.

  • Comment number 84.

    armagediontimes, your #75. Eventually, even if simply by process of elimination :) the US will..... get it right. Be assured of that. Interesting political times there at the moment as the Presidency and various components of power feel their way around each other. The Yanks will get their show on the road one way or other, they have a quite brutal way of inducing reality. We have the problems and need to do what this country does very, very, well. Use its head and get down the Fox & Duck.

  • Comment number 85.

    Well done everybody for defending the mural high ground provided by the BBC message boards ,fortunately we can pith downwards from the commaaanding heights of freedom on those that would take away our rights and taunt them with "come and get it"and "say AAAAh",particularly at those that are paid twice nay thrice[when flipping double dipping tripping is inkluded] to defend them ,who would fight with their li[v]es to protect our right to be imprissonned without trial and

    Our right to have our DNA PUBLICLY held despite commiting no crime , so that it may be planted later at the scenes of crimes to fit the innocent up ,if they that must be obeyed are ever disposed to so choose.

    For obvious reasons DNA found at the scene of a crime is not primafacie evidence of someone being at the scene of a crime because it can be planted,it leading to the automatic investigation of the original dna possessor, who becomes guilty until proven automaticaly guilty.


    "The big ideAAA" crew that allowed the self destructive banking system to prollifferate because they refused to ask "what if" of the knighted banksters of the AAApeocaaalapse on whoresback will just search for new trojan hobbywhoresies to wheel into town,they cant help themselves since they have not the heart will or inteligence to discern the differance between "appearing to do good", and "actualy doing good "which requires a wisdom that cannot come from university degrease.

  • Comment number 86.

    This out there in the wild and just made laugh, coffee went everywhere ****........... ho hum
    "In the latest attempt to prove that nobody ever learns anything from history, the Bank Of England is practically betting the Devonshire farm that by putting the UK's economy on nitrous, it will recapture all the lost output during the recession, and that it will be able to time the stimulus exit perfectly, thus avoiding hyperinflation, or so thinks Citigroup economist Michael Saunders. We are fairly confident that the Weimar Republic also did not have hyperinflation as a policy end goal. Saunders was quoted by Bloomberg, that “Policy has been set to produce a boom to close the output gap in the next few years.”
    Consumer led, of course. There is a generation on tap that think the same way as the top tier, they simply speak a different language and enjoy trips to Venus. Use them!

  • Comment number 87.

    SpartacusmartyrAAAs, your #85. Do you punt at Cambridge?
    http://www.flickr.com/photos/56087830@N00/3673046868

  • Comment number 88.

    Thats it Hero,the central banks will woo the AAA's hole economy to the point of Aye aye aye ....then withdraw if such a thing be inhumanly possible whilst turning to the Bankers[bankers]saying over to you Jolly Roger.

    Even if such an outcome were inhumanly possible ,it would not produce the patter of little feet,but it would get THE Bigfoot banking system out of trouble for another weak,and the weaks are a long time in pollytricks

  • Comment number 89.

    Those who got to grips with the (Mark to Market) concept last, were coping with the 1930's depression. As soon as 'mark to market's' implications and power of destruction were comprehended - IT WAS HISTORY.
    BIG NUMBERS - If you are not sure of the difference, think of it like this.
    A million seconds is 11 days. A billion seconds is around 32 years. And a trillion therefore is 32,000 years.
    A couple of excerpts from http://www.bearmarketinvestments.com/over-1-trillion-in-excess-reserves-not-a-problem-according-to-goldman-sachs lifted from Θ lifted from Golden Sacks inc. (Who may or may not have a couple of handles on the bigger Renoir. It is worth the skim for the sheer scale of stuff.
    -1 - 'Many market participants and economists worry about the large volume of excess reserves in the US banking system, which just crossed the $1trn mark on the way to $1.3-$1.4trn by next March. Some see this as evidence that the banking system is not lending enough while others worry about inflation implications.'
    - 2 - 'Our lack of concern about inflation in the short run reflects the large amount of slack that is currently in the US economy. Suffice it to say that with the unemployment rate now at 10.2% and still likely to rise from here, bank lending of excess reserves would have to occur on a massive scale to prompt the changes in BEHAVIOUR that would have to occur to close the gap that now exists between GDP and its potential.
    To put the point differently, excess reserves are not some secret sauce that creates inflation out of thin air, as many seem to imply when they worry about the inflation consequences without specifying how those consequences materialize. While it is always possible that inflation expectations could be influenced by the large volume of excess reserves, large changes in behavior are needed to transform those expectations into actual inflation. To facilitate those behavioral changes, lending would have to change on an equally impressive scale. And if this were to occur, Fed officials would be the first to see it – in their informal contacts with bankers, in the lending survey, on banks’ balance sheets, and eventually in the data on spending (retail sales, factory orders and shipments, construction outlays, and the like) that we all look at every month.'

  • Comment number 90.

    SpartacusmartyrAAAs, your 88 - The banks were hoist by there own petard. There is this wonderful PR image of angels in armani, actually look closely and on a rushed morning it is just possible to dicern the out line of fin and pointed teeth as they smile. A war went on, continues now actually, about who owns business, who gets what and the paranoia of greed, share/stock holders, not yer average Mutuals, mind you, greed from those who believe (need) more, more, more, injured by events like Enron and the continuing scandals. Regulation is caught in the middle and as all things money, no one is ever reasonable. Greed is an illness that must be seen for what it is. A purely destructive illness that is as dangerous as drug addiction or gambling. I honestly feel sorry for the majority of capable and able bankers, impossible is the situation some are now facing. It is a crazy situation with no resolution of the differences in sight because there is a basic mistrust between investors and those handling their money. The differences of opinion are wrecking the world with GAAP. Eventually, a shareholder in Basle will know who it was that dropped a paper clip through a crack in the floor in Darwin and be sueing them!

  • Comment number 91.

    Where this all got the rails twisted is as follows. Business borrows to fund its doings, that is the way it has been and the Clinton/Greenberg combo realised the process would work as a muck... (sorry) wealth spreader to masses if they purchased property and accumulated wealth in the form of home equity. Of course banks and finance hijacked the scheme into a gravy train of interest payments when infact what was required was paying down principal. Everyone jumped on the bandwagon and cc's exploded. Now......... much else was occuring, the junk bond market found Insurance and business began using insurance to cover balance sheet deficiencies during troubles, it was all lucrative, dodgy business. Kinda frowned upon when it goes public or the holier than thou get a finger into it with only half the story to hand.
    Flip side of the coin, Investors, many professional who know the game, others with gold teeth, personality problems, criminal proceeds, inherited wealth they don't understand and greed factors as big as Nelson's Column. They would buy into business and think they own it - a debatable point because, they were not in at the start building up an enterprise and sharing risks, they just sit back and call in expensive accountants to screw every penny that can be taken in profits for themselves, hence low pay. They don't put up money for expansion or development,...oh no, no, no............ the usinesses have to borrow. From banks, who make a living lending money............. you can begin to see how a problem developed.
    Investors and their accountants got the idea that get rid of the borrowing and interest payments to banks and all that interest payment money could divert to them. That is why there will be no growth and that is why the system is firked. Insanity. There is much, much, more but that's the general state of play. The lending, generated growth and some people decided the lending is a problem. There will be fireworks once everyone - all parties, erm....... humanity gets a real handle on what has gone on and where a few people want it to go. It is not governments doing this. It really isn't. File that one with the trash!

  • Comment number 92.

    above should read Clinton/Greenspan............

  • Comment number 93.

    Hero,the maximum liability for the hole derrivative structure is 60 TRILLION dollars or so according to estimates ,theirfore 1.4 trillion dollars of F'ED diddle doe to back stop paper loooooosses that prevent greater exponential paper losses could, be electronic paper well spent from the standpoint of supporting the financial administrative house of cards .

    I say could be, because the blood sucking leacheAse ruinning the banking system are creaming off bonuses derived purelely from the FED intervention dollars that they have USED TO CREATE AAArty fishall ASSET BUBBLES IN SPECIFICALY TARGETED MARKETS ie used it to create brand new ponzi pie/s in the sky to sell to maaawons from which their paper proffits bonus are derived before rolling up their bags and leavink destined to be ghost towns, monies, which if left in the banking system would support many times their face value in leviraged credit[capital] to the real economy on main street as opposed to mind games on wall street.


    Theoretically the fed could and probably will Monet ayes the AAA's hole structure at a cost of 60 trillion dollars[Give me your tiered and mhuddled AAA'sses yearning to be F'ed] this would not in itself cause inflation unless panic insued[as if it wouldnt ha] as everyone went for doors at the same time to the few real lifeboats[assets] [now].Fortunately the money would be electronic and one lapto]p would be necessaaairy with no trees being saccrificed.

    The banking system has spent two IN Godlessness WE TRUST decades consuming its seedcorn [wheeling it through the front door icons past shareholders with a laaabottomy icons in wheelbarrow icons as banksters bonuses in orgiaaastic greed fittingly described as a bonfire of the vanities and replacing it with ultimately worthless derrivatives, ie it has raided old mother hubboards cupboard replaceing her stock of real food with sausages made from whatever was in the skin at the time of slaughter and canned[embaaalmed and untraded ] Strategicaly Hyped Investmen Tranches .

    Real capital produces growth as Fekete has explained and it is the equivalent of semen in male sperm ,the devastation of the capital markets is taking place behind a torrent of money[semen] produced by the federal reserve bankers that has lost its wrigglies and doesnt know where to find them like poor BOE Peep and which was put in holes where it had nowhere to go anyway, ie the federal reserve is firing blanks into AAA's holes with the help of the banksters high on diddledoe no longer interested in society as a whole but only trying to save themselves and their index linked AAA's holes .

    True capital is concentrated and gets to the egg in an environment that is conducive to growth[womb service] ,low interest rates coupled with massive leverage destroys previous capital investments that can never be liquidated but can only be written off or sold to taxpayerrs intent on an eternity of bondage[Fekete].

    The house of cards cannot sustain demographic shifts with YOUr0peans destined to poverty in old age with no children of their own to care for them and depreciated capital or non existant pension pot ,while the origanal GuAAArdians of the financial system swAAAn arround the Med looking for sky of their favourite shade of blue..



    FED Monies that should be used FIRSTLY to revive main street economy and theirfore automaticaly reviving derivatives markets is being used to by pass main street and injected into asset bubbles to create AAAcountancy fictions that preserve the right of rotten stAAAtAAAs QE'rs to eat pension monies to inkfinity and beyond


  • Comment number 94.

    No 26 "Even the Chinese have accountants."

    Actually the Chinese have a surfeit of accountants at the moment. In the 80s, when China relaxed it rules on traveling abroad, many students left the country to study abroad. Because of historic reasons and because of the influence of the overseas Chinese, the subjects of choice were medicine, engineering and accounting, in that order.

    Now, they still need desperately more doctors and their massive infrastructure projects still need more engineers but accountants are in over-supply !!

    Where once, all accounting was done by hand, many if not most accounting are now computerised especially since China is the world's largest manufacturer of PCs !! The need for more accountants have shrunk.

    All this from a boring old ex-bean-counter and old China hand !! :-)

  • Comment number 95.

    No 30 J-f-H "2 Pounds to the Euro anyone!"

    Naaw !! Considering the relative strenghts of manufacturing, exports and spendings, I think it'll be more like 1 quid 50 to a Euro with the "arrogance" card played to the bitter end !!

  • Comment number 96.

    N0 39 "(see the recent furore over childcare vouchers for example)."

    The cut in childcare vouchers are a politically motivated cut that has absolutely no basis in economic reality. It hits working (and tax-paying) mums while *MAYBE, just MAYBE* benefiting the schooling of 2 year olds from poorer families who already contribute nothing to the economy.

    This is more "burning of crops" in Our Glorious Leaser's "scorched earth" policies in the lead up to the next election as he probably finally realise that *HE* cannot win the next election. Labour *MAY* have a chance with a different leader but not when "scorched earth" policies are practiced under the Labour banner !!

    Looks like Our Glorious Leader will lead the Labour Party into 21 more years in the wilderness !!

  • Comment number 97.

    At 11:06pm on 11 Nov 2009, ddelanom wrote

    That QE was helping the economy because:

    it's exactly like putting cash in the seller's bank account and then the seller's bank taking that cash and putting it on deposit at the BoE. It all cancels out, except the seller now has cash in its bank account instead of gilts on its balance sheet, and the BoE both owns the gilt and is "holding in reserve" the corresponding cash on behalf of the seller's bank.

    What's the good of that? It replaces assets on the balance sheets of the previous owners of the gilts (banks/insurance co's) with cash. This improved liquidity is supposed to give those institutions (banks) the confidence to lend more or go out and spend money on other assets.


    Agreed, but the other assets they’re spending it on are new gilts issued by the DMO, they’re not lending it out to business!

    That’s why there’s a problem.

  • Comment number 98.

    Get ready for our nation's "renegotiation" of its debts:

    http://www.prudentbear.com/index.php/thebearslairview?art_id=10307

    "So which major country, the United States, Japan or Britain, will default first on its foreign debt?"

    "The worst budget balance of the three deficit countries is in Britain, where the forecast budget deficit for calendar 2009 is a staggering 14.5% of GDP. Furthermore, the Bank of England has been slightly more irresponsible in its financing mechanisms."

    "Default (doubtless disguised as with Argentina as 'renegotiation') would in that case inevitably follow."

    So when our country financially capitulates in the not too distant future, our leaders will revel in the glory of being the ones who negotiated an economic truce, rather than a surrender!

    Ahh, makes you proud to be British.

  • Comment number 99.

    98 Hawkeye - see paragraph from bottom of article you pulled your info from - this is an exaggerrated column designed to fear and forecast the worst - the truth is likely to be somewhere beter than this but worse than everything you read and hear elsewhere.

    The Bears Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that, in the long '90s boom, the proportion of "sell" recommendations put out by Wall Street houses declined from 9 percent of all research reports to 1 percent and has only modestly rebounded since. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere

  • Comment number 100.

    66. At 11:06pm on 11 Nov 2009, ddelanom wrote:

    #1 and others

    It's often asserted by bloggers (see the very first blog #1 in this chain)

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

    No we're told by the government BoE and BBC editors

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

    that QE is a means of the BoE funding the Govt, as if through QE the BoE is "printing money" which is then used to fund Government, ie pay for public sector wages, infrastructure investment, etc. This is based on a mis-understanding of QE.

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

    Indirect financing of government - the government needs to raise cash by selling its gilts - if no is buying then QE is required?

    >>>>>>>>>>>>>>>>
    While QE poses a number of risks,

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

    We can we agree on something!

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

    it doesn't represent direct financing of Government by the BoE and so it doesn't mean that, once QE stops, that the Government suddenly needs to find a huge quantum of new buyers for its debt - at least not directly.

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

    You're definitely writing rubbish now and repeating yourself

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

    Read on if you're interested just how QE raises inflationary risks and impacts the Government funding challenge...

    Must we ...this is really boring!

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

    This mis-perception about QE arises because people think that QE represents the direct purchase of gilts by the BoE from the Debt Management Office (ie from the Government).

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

    After several months of government lies most of us on this blog have figured this out for ourselves

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

    This is not the case. QE represents the purchase of existing gilts (ie gilts that have already been sold by the Government) from the private sector owners of those gilts - typically, banks, insurance companies, pension funds, etc.

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

    According to you - It get's worse - the gilts are re-purchased as at a more favourable bond yield otherwise no one would re-purchase them? More long term IOU for the taxpayer?

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

    When it purchases a gilt from such an institution, the BoE doesn't literally deliver cash to the seller, it electronically "creates" the money by providing that the seller's bank account is credited and by simultaneously creating a corresponding reserve (a credit) at the BoE for the seller's bank.

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

    It's 'funny money' and represents an imbalance of liability and actual money supply - the kind that can be inflationary

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


    Effectively, it's exactly like putting cash in the seller's bank account and then the seller's bank taking that cash and putting it on deposit at the BoE.

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

    Who is the seller ? The HM Treasury and the BofE are effectively one and the same?

    >>>>>>>>>>>>>>>>>>>>>>>>
    It all cancels out,

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

    NO IT DOES NOT! QE IS A LIABILITY THAT WAS NOT THERE BEFOREHAND!

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

    except the seller now has cash in its bank account instead of gilts on its balance sheet, and the BoE both owns the gilt and is "holding in reserve" the corresponding cash on behalf of the seller's bank.

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

    AT WHAT INTEREST RATE OVER WHAT PERIOD ON WHAT SMALLPINT?

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

    What's the good of that?

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

    In an economic depression is temporarily stops the economy falling further on the expecation that a strong recovery is otherwise on the way

    >>>>>>>>>>>>>>>>>>>>>>>>>>>>
    It replaces assets on the balance sheets of the previous owners of the gilts (banks/insurance co's) with cash. This improved liquidity is supposed to give those institutions (banks) the confidence to lend more or go out and spend money on other assets.

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

    Well show us where this is being done - amounts dates, comapny names, banks, brokers, fees bonuses, projects - PROVE IT!

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

    It also maintains the price of gilts by creating 'artificial' demand from the BoE.

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

    Yes - we know this - there is weak demand for UK government and company gilts because buyers do not wish to be paid in BGP's - several years down the line in case the UK currency weakens significantly - currency risk!

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

    Maintaining gilt prices maintains the confidence of all those other investors who own gilts, again ensuring that they keep spending and lending. And high gilt prices obviously mean low yields and more attractive conditions for borrowers.

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

    The banks trade between themselves and get rich - and mouch of the money goes overseas and has zero benfit to the UK real economy

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

    Obviously there is a danger that all this 'cash' injected into the system stimulates inflation. That will present a risk to the Government as it will make it more difficult for the Government to sell gilts which it desperately needs to sell in order to bridge the fiscal deficit.

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

    So banks keep snapping up the cheap UK gilts at preferential rates, terms and conditions and are then free to spend/loan the money anywhere in the world or hide the money in a tax haven or lost in electronic communications, totally untraceable and without jurisdiction including using banker's satellites in space.

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

    But obviously the logic is that without QE we would face deflation - so the BoE is trying busily to balance the risks here.

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

    But without QE the government would have to cut public spending NOW with 'savage cuts' but it does not wish to do that as it hopes to spin and lie it's way into clinging on to power.

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

    My point is that withdrawing say, £20bn of QE, doesn't in itself mean that the Govt suddenly has a £20bn hole in its finances - which is what some bloggers seem to assume.

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

    What do you mean by withdraw?

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

    What it means is that gilt prices will be somewhat lower than they would otherwise have been and the cost of funding the Government debt will rise - ie the interest rate required to sell Government debt will be higher.

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

    The prices and rates must be extremely attractive and represents debt and liability for the UK taxpayer

    >>>>>>>>>>>>>>>>>>>>>>>>>
    But it's important to note that a higher rate on Government debt means a BETTER deal for potential buyers of that Government debt UNLESS they think inflation will be worse as a result of the lower QE, which is unlikely.

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

    Fair point but the risk have not been explained - and if the Governeror of the bank of Engalnd cannot forecast growth infaltion and debt into the enxt year - how can you assert that QE will be beneficial on this basis

    THIS IS BUFFOONERY!

    >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
    So withdrawing

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

    Withdrawing?

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

    QE doesn't pose a direct and immediate risk to the Government funding equation

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

    Poses a nasty and potentially damaging risk to the UK taxpayer through higher long term debt liabilities and inflation just so that the Great Perpe-'trator' Brown can stay in power!

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

    - but it will make it more expensive for the Government to borrow and will add more and more interest costs to be paid going forward - ultimately by taxpayers.

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

    How much extra in costs and debt and when and TO WHOM? THIS CONCERNS THE REAL PRICE OF QE!

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

    The danger to Government finances

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

    The danger to UK government finances is the Great Perpe-Trator!

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

    is not from stopping QE and somehow creating an immediate corresponding hole in the Government finances, but of QE being over-applied, thereby creating the spectre of rampant inflation which destroys the ability of the Government to borrow.

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

    YOU NEED TO APOLOGISE TO PEOPLE ON THIS BLOG WHO HAVE BEEN MAKING THE VEY SAME POINT FOR NERALY A YEAR!

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

    If this risk should arise (and it's perfectly possible, perhaps even likely) the Government will have no choice raise interest rates dramatically - with all the obvious implications for the real economy. Staglfation here we come.

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

    Already extremely well documented on this and other blogs - you really should do some research before writing inaccurate statements

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

    Of course, the impact of stopping QE could be negative - higher yields and gilt prices can ripple through to lower confidence and less borrowing and spending, and lower tax revenues but this is hardly an objection to QE. Just as QE is designed to stimulate confidence and borrowing, stopping QE is designed to choke off excess inflation.

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

    WE KNOW ALL THIS - what is the risk, probability, real latent liability cost to the taxpayer and opportunity cost damage of not making sure that the banks spend all of the QE money NOW and where it needs spending instead of syphoning some or all of it off around the world chasing interest rate movements over-night to grow bank profits and banker's bonuses

    YOu really are not telling more than a handful of people on thos blog anything new - it's all been said.

    Can yoy quantify the costs, effects, liabilities to the UK citizen in terms of banking sleaze, opportunity cost, debt, liabilities and immoral practice by our government?

    If not then I think that apart from whinging about people being genuinely concerned about QE, the timing, cost and the way it is being used - then I put it to you that you have very little or anything to add to what has already been posted by those who you seek to criticise!

    QE is just headline grabbing and the real details that really matter to the British public are deliberately cloaked in secrecy to evade proper scrutiny, transparency and examination.

 

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