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The New Normal?

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Stephanie Flanders | 13:25 UK time, Thursday, 28 May 2009

We know that interest rates are going to go up eventually. But no-one wants the cost of borrowing to go up right now - least of all the world's overextended governments.

That's why the ructions in the US government bond market this week has people nervous. The interest rate - yield - on a 10 year US treasury bond is now about half a percentage point higher than it was a week ago, and higher than it's been in six months. UK bond yields have risen as well.

There's no point over-analysing a few days' moves in bond markets. Just as you perfect your explanation, investors have a way of turning around to do something different. What matters is the long-term trend.

But the rise in bond yields in the US does flag up two core features of today's misty landscape that will be with us for some time.

The first is that central banks need to handle optimism with care. If you are Ben Bernanke - or Mervyn King - you want to sound confident that policy is on the right track. But you can't sound so confident that people start to expect rates to go up.

This week's rise in bond yields, by itself, doesn't "threaten to stifle the US economic recovery", as one FT headline writer suggested this morning. We don't even know there's a US recovery to stifle yet. But this is certainly an inconvenient time for a sustained rise in long-term borrowing costs.

If yields rise further - and stay there - you can bet that the Federal Reserve will be thinking of ways to push them back down again, perhaps by sending more concrete signals about how long they expect to keep official rates near zero. In the past, Mervyn King has been less keen on that approach because he thinks it limits your room for manoeuvre. (Also, the Bank of England has an inflation target to focus expectations, which the US does not.) But he, too, will want to make sure that higher long-term rates don't get in the way of recovery.

But the second lesson is more fundamental: we all have higher interest rates in our future. And when I say higher, I don't just mean higher than the record lows they are at today, I mean higher than they were before the crunch. An era of cheap money partly got us into this mess. Thanks to the mountain of public debt now sitting on government balance sheets, it's a fair bet that money is going to more expensive when we come out the other side.

Christian Broda at Barclays Capital has run the numbers. As he reminds us, the financial crisis has generated a "scrambling for public funds of war-like proportions".

Barclays Capital chart: Enormous rise in debt in G4 economies

This chart (from Barclays Capital's Global Economics Weekly) shows the expected cumulative change in the level of public debt as a share of GDP in the US, UK and Eurozone just since 2007. The rise is stunning and, as Broda notes, quite likely optimistic.

Other things equal, basic economic theory suggests that a rise in government borrowing on that scale will push up the long-term cost of borrowing once the recovery gets going. Of course, that might not happen overnight, especially with so much slack in the big economies due to the recession. But even sceptics about the effect of borrowing on rates would probably accept that this kind of rise in government debt will have an effect on the cost of debt.

Looking at a range of studies and different ways to measure the impact, Broda concludes that the rise in government debt, by itself, could raise the yield on 10 year government bonds by 1.5-2.5 percentage points. That could push UK 10 year rates to more than 6% by 2011, solely due to the rise in government debt.

These are very rough estimates, and they're open to debate. In the US, especially, the link between higher borrowing and higher rates has been shaky, at best. Indeed, it was the "conundrum" of low bond yields, despite high public and private borrowing, that partly got us into this mess in the first place. Bond yields stayed low in the lead-up to this crisis, even when standard economic theory would have suggested they should rise.

We could face that conundrum again if global growth is as imbalanced as it was in the past. I'll have more on that tomorrow. But the Barclays Capital study is right about one thing. When the advanced economies pull out of this crisis, the level of public debt is going to be the central fact of economic and political life for years to come.


  • Comment number 1.

    Not a 'New Normal' but economic lunacy!

    "We know that interest rates are going to go up eventually. But no-one wants the cost of borrowing to go up right now."(Stephanie Flanders above)

    This statement encapsulates the madness of the present economic management. It will never be the time when anybody wants the cost of borrowing to rise if you are a borrower. However to be a borrower you MUST attract savers.

    Rates must go up and immediately - this is both the imperative of the market and common-sense. If money is kept at being worthless (Zero interest rates) for much longer the trust in money having any future value will vanish. There is no point in saving if nobody is prepared to pay a decent return to the saver - then borrowers cannot borrow and we will have a far far more catastrophic collapse then we have already seen.

    I am already on record as seeing Mervyn King (the MPC), the FSA and the Permanent Secretary of the Treasury as being centrally culpable for the credit crunch and THEY ARE STILL IN POST!!!! WHY??? And they are presently directing policy to destroy what we have left in terms of our faith in the nature of money.

    Rates must be put up to 4 to 6 percent rapidly for there to be any prospect of their being any form of genuine recovery, for without a sensible cost and return regime money itself fails!

  • Comment number 2.

    By what mechanism does a larger public debt lead to higher interest rates for everybody else? Is it just that more sterling is being borrowed from a fixed number of lenders, and increased demand for borrowing allows lenders to increase the 'price' (interest rate)?

  • Comment number 3.

    I'm not an economist so don't really understand this connection between bond rates and the wider economy. Perhaps you could elucidate?

    "Bond yields stayed low in the lead-up to this crisis, even when standard economic theory would have suggested they should rise."

    But what is really scary is according to the graph, debt as a percentage of GDP is set to more than double between 2009 and 2100 for the UK and will continue to rise beyond that.

    These are indeed huge debts and I fail to see how interest rates will not rise substantially before too long. For me personally it would be great as I am a modest saver with no borrowings but I am very concerned about my childrens' generation who are currently working their socks off to pay off mortgages on fairly modest properties. This has the effect of making family life extremely difficult with the concommitant consequences for the children in these families.

    These are the "decent hardworking families" so beloved by politicians of all persuasions but those captains ofindustry/bankers/politicians/landed gentry who have huge pensions or substantial properties and/or land will as usual do very nicely if/when interest rates rise.

  • Comment number 4.

    At least the size of the problem is becoming more visible, ie it is less possible to conceal it.

  • Comment number 5.

    It is a truism isn't it? If people borrow a lot then interest rates go up. For some reason this economic truth did not function over the past ten years due probably to the deflationary affects of Chinese exports coupled to Japan's lost decade.

    I think we are now experiencing the begininings of the adjustment back to normal service. In some respects this is no bad thing, it is just the consequential fallout which is the problem.

    As you say, this will be with us for a long time.

  • Comment number 6.

    One of the most worrying features of the graphs, which is not explained in the text, is the ballooning of UK debt ratios while the US and Europe appear to be moderating. These are only forecasts, but they do suggest that the UK will have to maintain comparatively high interest rates to attract funds, and take a chainsaw to the public deficit to reduce the rate of increase of borrowing. So the economic mid term appears to be high interest rates, high taxes with high inflation. Not a recipe for growth or recovery!

  • Comment number 7.

    What happens if Marc Faber is correct and the US sees Zimbabwe like inflation? You admit BOE and FED will not raise rates and can't raise rates in the short term and therefore may miss the opportunity to hold back inflation. Marc is all doom and gloom but you can see his point.
    Funny how all you reporters want positive at the same time. Funny how you all stopped worrying about toxic debt despite the IMF saying write downs would be $4t. How is your investigation into these figures going??

  • Comment number 8.

    We already know that banks are finding difficulty in raising long term finance, excarcerbated by worries over their capital bases. Convergence between this problem, the IMF saying banks need to raise more capital and the need for Governments to guarantee bank funding as well as raise huge amounts of public debt with the consequences you rightly emphasise, means high costs of funds to the punter governing economic performamce. A divide is going to appear between the big corporates who can raise equity and debt on the capital markets and manage bank debt, and SMEs who will pay higher spreads to banks unless they can find private backers, assuming growth returns. QE wont keep this in check - the dynamics are too big.

  • Comment number 9.

    I think pensioners and savers in general will cheer when such a rise materialises. If they have not starved to death by then. Even before the current round of ultra low rates a standard rate tax payer struggled to make a real return on their savings.
    I remember in the late 1980's buying goverment saving certificates which were for five years and paid the RPI + 4.5% per annum free of tax. If they were placed on sale tomorrow the queues would make the run on the northern rock look like a slow tuesday.

  • Comment number 10.

    With so many governments around the world issuing so many bonds, it's inevitable the coupon interest on them must rise, in order to attract investors. The yields of existing government bonds are already rising, as investors lose appetite for bonds now the equity markets have stabilised.

    Also, who wants dollar treasuries when the value of the dollar is depreciating? Sell them now and sell the dollars in favour of a rising currency; then at a later date, buy the dollars and the treasuries back again when the dollar has slumped and yields have increased.....

  • Comment number 11.

    Don't you just love it when some one points out that the elephant in the room is just that: an elephant in the room.

    Intrest rates can't go any lower; they can only go up. When they do (to fund this government's debt), the reposessions, unemployment and decresing tax take that will result, will inflict a world of pain not seen since, well, the Great Depression.

    These balmy days of early summer will be remembered with nostalgia.

  • Comment number 12.

    When are rates going to go up?

    Im sick of my bank having my money virtually interest free.

  • Comment number 13.

    "But no-one wants the cost of borrowing to go up right now".

    This is fundamentally incorrect. There are many people who want the cost of borrowing to increase.

    You may want to revise this statement.

  • Comment number 14.

    The economic wreckovary will ruin us in the form of higher interest rates ,let us hope the pessimists are right ,optimisticaly speaking .

    The older easily repairable cars will have been turned into cubes ,by courtesy of the egonomic wreckskewers fighting for political survival ,with their replacement electronic brain preprogrammed to default type ones destined to litter the streets ,too expensive to repair or run ,then the landfill sites will be dug up to find rusty old brainfree chinese bicycles to repair,so that we can all get on our bikes to scavenge.

    At some point there might come capital flight followed by an attempt at exchange controls .

    We have had the seven fat cat years[2000-2007],now we shall have the results of the seven thin liesir doolittle how now Brown cow shut the gates after the trojan whores have parted years.

  • Comment number 15.

    If it looks like Ponzi financing, and quacks like Ponzi financing..... then it is Ponzi financing:

    For the last 10-20 years we've over borrowed to over consume. The private sector financing of this got its fingers burnt. The current solution seems to be to get the public sector to underwrite our excessive (current & future) borrowings, in order to keep the bubble inflating! Even greater debt for which we barely have the means to service now, let alone compounded debt and interest in the future.

    When will we get a clear answer from the Gvt (or an economist for that matter) to explain where the additional (new!) money will come from, to both pay for our past misdemeanours and our future ones??

  • Comment number 16.

    Stephanie won't you get into trouble for breaking ranks with the massed journalists and politicos who are trying to talk up the alleged recovery?

    I do hope not.

    All but the blind can see these elephants in the room: inflation, lack of access to credit and rapidly rising oil and commodity prices will severely restrict any recovery in the mature/older G8 countries, though the BICs might recover (I'll omit Russia, which has pretty severe problems)

    The New Paradigm is that there won't be a new paradigm; the 2010s will have to be a decade of austerity

    And you know what - I think it is probably a good thing overall, as we cannot afford to go back to the 'business as usual' bingeing of the last 15 years or so; and as for globalisation and free trade, it is in the early stages of its death throes, as the coming GM/Opel/Vauxhall debacle will demonstrate!

    I do feel rather sorry for the few optimistic first-time buyers who will be suckered into new debt traps over the next few months, but doubt there will be that many of them as people are wary of the rallying cry from govt to be reckless and are trying to save money or pay down existing debts

  • Comment number 17.

    Post 3. Hopefully a brief summary.

    The UK and USA need to borrow a lot of money over the next few years and they do this by raising funds via selling government debt in the form of bonds.

    If you have more to sell by definition the potential buyers can become more choosy, after all there wil be another auction along shortly.

    As such governments need to make their bonds more attractive to potential buyers by raising the yield (see paragraph 2 of the article). This makes debt more expensive for governments as they have to pay the buyers a higher yield. Imagine a government bond for 25 years was a household mortgage with a fixed rate of interest over the period so what Stephanie is saying is that the interest rate the governments are having to pay has risen and the cost of the borrowing has commensurately risen. If you continue the mortgage analogy the US loan rate available this week is higher than it was last week and higher than six months ago. This will start to apply in the UK too very shortly.

    Interest rates are at historic lows and must start to rise at sometime. The catch 22 is as follows.

    The government need to raise money and don't want to commit themselves to paying more than they have to.

    Potential buyers of the debt expect rates to be only going upwards so why by now when you can get a better deal next week or next month or next year.

  • Comment number 18.

    I agree with John from Hendon in post 1 and the view his comments represent...what got us into this were the lies and delusions of the 'leverage to the nth degree' decade.

    As J_F_H says, get people saving real money and then there will be some real stuff to profitably lend...the quatatively-eased, pre-election boom, dreamland money is the equivalent to hiring a JCB to dig all the quicker in this hole the Govt are complaining they have fallen into, and Stephanie F's little chart graphically illustrates the scale of the disaster looming.

    Ordering bust banks and zombie building societies to lend aggressively --- and when they won't providing La-La-land money to do it with---- no wonder Christian Broda thinks even those skyscraper columns are liable to prove 'optimistic'---it's hard to factor the pretend effects of pretend money into the real world where the rest of us live increasingly uncertain lives...

  • Comment number 19.

    This presents a lot of assumptions, "basic economic theory suggest" for starters. It seems such theories all said what happened, wouldn't happen and yet we continue to rely on this kind of thinking as if it is correct. Since nothing has changed the only thing a recovery will mean is that in the future this will all happen again. Fooling around with interest rates and governmental debt and banking interest is all an economic illusion. The taxpayers own the debt, not the governments or the financial institutions. The opportunity to really resturcture world finance has been lost as the vested interest, political included, are selling us this broken car that they insist will run perfectly with a few minor repairs. Figures don't lie, but liars figure. As soon as there is any sign of recovery the governments, at all levels, will be taxing, not to pay the debt, but for the usual purposes. Welcome to the Monkey House.

  • Comment number 20.

    Stephanie wrote:

    "That could push UK 10 year rates to more than 6% by 2011, solely due to the rise in government debt."

    The assumption that your economist friends are making are probably unrealistically optimistic. The last Barclays predictions of interest rates foresaw interest rates starting to rise by early autumn and then to 1.25 percent by this time in 2010. Certain economists seem now to be revising their estimations upwards quite substantially (as I have been doing for six months). The reason for this is that the delay in putting interest rates up that has already occurred (indeed the stupid lowering of rates to a 315 year low!) This makes a very rapid and very high (an unnecessarily high) interest rate inevitable and for far longer.

    I would venture to guess that interest rates may be as high as ten percent possibly higher and rising by the Olympics! (with inflation almost out of control and salaries held down and houses stagnant)

    This is all because of the mindbogglingly stupid decision to run zero interest rates - which, if you follow the theory they use to connect interest rates to inflation, presages almost infinite inflation - they know this. (In as much as their theory tells them this - if they actually believe their own theory, which I doubt - they just use it as a smokescreen as did Margaret Thatcher's regime but for alternative political ends.)

    The only way to run a stable and sound economy is to do so.

    Not to delay doing so for unsupportable reasons. That is interest rates need to be at least 6 per cent NOW not in eighteen months time, any delay will create economic destruction on a far greater scale then we have seen so far and interest rates that need to be far far higher!

  • Comment number 21.

    "But no-one wants the cost of borrowing to go up now"

    That is going to be the case at any time isn't it? The economic recovery when it comes along is going to be a very fragile thing, so politicaly it will be a difficult decision to make whenever it arises.
    You have to feel sorry for Mervyn King though don't you? He prints lots of new money in order to ward off deflation, then as the markets think we are over the worst the pound starts to rise like a rocket. This in turn will mean that imported goods start getting cheaper month on month, so people will start to put off buying things that will cost them less in say 3 months time, leading to... you've guessed it deflation! In the mean time our exports will fall as they become too expensive, and, whats that coming over the horizon? Its a huge tidal wave of economic migrants lured by our high currency.

  • Comment number 22.

    14. At 3:47pm on 28 May 2009, stilllitterarty

    Agreed - you seem to have excelled your own high standards with this one.

    Pedantic point - most Chinese bicycles are strictly speaking BSOs - bike-shaped objects, i.e. superficially they may look like bikes but if they cost less to buy than a decent chainset and freewheel they are likely to be imposters not worth the effort to try and ride.

    Even more pedantic point - if you need a bicyle to scavenge, how do you get to scavenge the bicycle?

  • Comment number 23.

    As we're waiting for the mods to return from their extended shift change / fire drill / coffee break (delete as appropriate) I don't know which way the debate has turned... hopefully not into another philosophy debate already. So I'll stick to agreeing with some early responses, particularly John_From_Hendon, stanilic and our own Somali Pirate.

    The current economic state is completely artificial, derived from unbelievably low interest rates, several temporary measures and a desire to do nothing to harm the possibility of re-election of the present government. Sooner or later interest rates will have to rise, VAT will return to 17.5 % (or even increase to 20%) and the Stamp Duty threshold will return to GBP 125,000.

    Combine that with the new government (of whatever political leaning) being forced to grab back some of the bucketfulls of cash that have been thrown around and I fear a serious 'double dip' recession; exaggerated by the length of time in which this period of unviable, artificial stability. Personally I'd rather the government had done nothing and looked to support the public.

  • Comment number 24.

    it is a case of supply ans demand, with so much debt needing to be serviced interest rates are bound to rise....5% by year end double figures next year?

    May i add i find it strange that during the biggest political scandal ever, the BBC political editor goes on fact nick and robert are both missing... Well done Stephanie at least someone is giving licence payers a chance to comment.......

  • Comment number 25.

    In Msg 13 tufftimes wrote: "But no-one wants the cost of borrowing to go up right now". This is fundamentally incorrect. There are many people who want the cost of borrowing to increase.

    Now you may or may not want to revise it, but I certainly want to support it! There has been a lot of hand - wringing over those who over - reached themselves on mortages and other credit, but little has been said about those with varying degrees of reliance on savings income or indeed those with an interest in share values. We (I am in the former group, although I have lost handsomely on HBOS shares) appear to have been forgotten (or perhaps deliberately ignored) throughout this whole ghastly mess. I hesitate to use the word "prudence" because it has been completely devalued but the fact remains that those of us who lived within our means and made an attempt at saving have been completely marginalised.

    If and when this current maelstrom subsides it may proved difficult to convince anyone that "saving" in any form is a worthwhile activity as the value of any savings can be completely undermined by the careless and the greedy.

    I wonder if our needs will ever feature in anyone's grand plan. On present showing it doesn't look very likely.

  • Comment number 26.

    29 John from

    HMG remind me of the gluttonus Mr Creosote from Monty Python, no limit to the appetite of debt. Just waffer more, here is a particularly nice coupon. I'm just waiting for the explosion. I'm less worried about interest rates than the public sector cuts. Interest rates are set by monthly committee, if things head south, well further south, then it is simple they meet and say up, the market will drive them. That is easier to do than the cuts in the public sector which look inevitable, that will be delayed for as long as possible. Therefore probably too long. Meanwhile rosy glasses are put on and the expenditure just mounts. At this rate they are going to have to demolish the building to get Mr Creosote out, dead or alive. This debt could develope a life of its own and there will shortly be, if we are not there already, no other route as all funds will be committed. There will be no strategic reserve. No dogs chance. That is what worries me. Particularly as such a mess has been made so far.

  • Comment number 27.

    It looks like the Chinese are tiring of the dollar as QE is devaluing it. They are moving their money to somewhere that can get a return.

    Note that the Pound has not done as well against the Euro. Barry's printing presses make ours look like a child's toy.

    As JFH #20 correctly points out eventually something will give and expect runaway inflation rates with interest rates high but still below inflation so that savers lose again.

    Interest rates do need to go to 6% so asset prices fall and we can return to economic sense.

  • Comment number 28.

    #17 Ian_the_chopper -You are far to rational.

    The real deal is that the US wants to sell loads of debt. When the potential buyers get out their economic textbooks the US gets out its printing presses and 12 carrier battlegroups. It says look buy this debt, or we will buy it ourselves via the mechanism of these handy printing presses. If we do this then we will destroy the $, and that is big problem for you as you already own so much of our worthless debt. If you think that this is blackmail well we don´t care because our words are backed by 12 carrier battlegroups.

    #13 tufftimes. You misunderstand the phrase "But no-one wants the cost of borrowing to go up right now" This refers only to the opinions of financial oligarchs and their political servants. They don´t care what you or anyone else may think, therefore there is no point in even acknlowleging that you may disagree. Your role is simply to buy things.

  • Comment number 29.

    Looks like the moderators have gone AWOL too.

    This, Stephanie, is ..profanity filter removed.. Lending may need to be restrained, but that does not mean high interest rates. It means care about whom lent and under what conditions.

  • Comment number 30.

    I do wish SOmali Pirate would make a stronger case for us helping the Somali Pirates into being a Somali government. They are obviously motivated, intelligent and well-intentioned. Why not put them in power?

  • Comment number 31.

    BY the way...don't worry about the above. As I mentioned in a previous post - this is nonsense. Just give it a week or so. Oil prices in dollars cannot be permitted to drop. Someone dumped something and bought dollars, bonds, something, this is a blip.

    Watch the dollar sssssssssssssssssssssssssssssslllliiiiide.

  • Comment number 32.

    #24. jolo13 wrote:

    "May I add I find it strange that during the biggest political scandal ever, the BBC political editor goes on fact Nick and Robert are both missing"

    I wonder if it has anything to do with the elections due on the 4th!!!

  • Comment number 33.

    Interest rates

    - You can get higher than the standard deposit rate if you shop around. This focus on the BoE rate is not representative of the savers market which has moved away from the BoE rate. That is why many borrowers do not usually see a low rate for any length of time

    - The banks dont want to lend into housing, hence the deposit criteria which is stopping FTB. That is one big lending sector stalled.

    - People dont want to borrow, they are worried about their jobs, this will worsen as the job cuts get going, we are only 1/4 of the way through the job losses.

    - Official inflation figures are low so interest rates will be low.

    - House prices have to fall, well they don't have to but it looks highly likely. Some figures have suggested 4 million households with negative equity if they drop back to the historical ave earning ration. Any significant raising of interest rates realistically will cause problems in this sector as they have no way out via sale.

    - The effects of a recession are coarse and arbitary. The principle is assets decline in value, savings decline in value, people lose their jobs. It is not unreasonable that savers also suffer alongside the other groups I am afraid. I am a saver so I am not unaffected. A lot of saving will have been built up in good times, ie as a spin off of the debt incurred by others. Why does anybody think savers are a special case, particularly when so many people are losing their jobs. The pain should be shared, that is the only hope of digesting the beast. Like I say it is a coarse mechanism so it will not be fair, but there is nothing less fair than somebody working hard and losing their job arbitarily. That is the hardest call. As the brunt of this is falling on the younger age group it is hardly unexpected that a different problem is felt at the other end of the age span, where the savers will be dominant.

    - The minute interest rates go up then FX will rise and imports will rise creating other problems.

    - Interest rates cannot stay low for long, they will be forced high sooner or later. A breathing space is good news. There are enough problems looming. In particular how to get people back to work and how to raise enough tax to keep public services in place.

    - If somebody has money and doesnt want to save it then spending it is generally a good thing at this point surely as not many people are spending. Hence the slump.

    - I'm not particularly wild about any model that says this or that about the impact of interest rates because so many models are broke. This is new ground.

    I would however feel happier if Prof D Blanchflower was somehow involved in running the show. Because you can take a committee to water but you can't necessarily make them think.

  • Comment number 34.

    Stephanie wrote:
    "When the advanced economies pull out of this crisis, the level of public debt is going to be the central fact of economic and political life for years to come."
    I agree, but I think it is going to become central before we pull out. I don't see a recovery anytime soon, because I believe this is a bear market rally based on smoke and mirrors and misplaced optimism about the financial sector in its broadest sense - that includes government treasury departments in the US and UK.
    In many respects, the expanding government debt is merely a relocation of the debt held by the private sector in the lead up to this fiasco. Neither the US or UK government have acted prudently to solve the problem. They simply postpone or more likely compound the problem.
    Our politicians and bureaucrats have simply created a new playing field, where the economy is moving into potential stagflation, which some of us will remember is a miserable place to be. Against this backdrop I sense interest rates will have to rise along with taxation. If this is unacceptable, then we are likely to see the gap between government expenditure and income to get larger, the cost of borrrowing by governments to get higher and unemployment to remain high, at which stage we will be told their is a new higher level of natural unemployment. What brave politician will also admit that there will also be a long-term reduction in standards of living due to the ongoing levels of public debt?

  • Comment number 35.

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

  • Comment number 36.

    It just occurred to me reading interest rates going up - and house prices supposedly going up 1.2% in May. When will it be safe to buy? Surely those buying now need to be careful not to overextend. Should they do so it's quite possible they'll regret it in the future. Also what's the general view on how long interest rates stay so low? We seem to be chugging along but it all seems so - well paper over the hole in the water pipe. How real is it all? FTSE going up, house prices going up yet average house prices still six times average earnings. Can't help feeling second and harder bump down the road.

  • Comment number 37.

    Today's FT points out that Europe does not do Quantitative Appeasing. Instead, the eurozone's commercial banks buy the government debt. This builds the banks' capital and uses private sector money to pay for the bonds issued by various European governments.

    The banks can borrow from the European Central Bank at 1% and then lend to the European governments at 4%.

    Seems sensible to me.

  • Comment number 38.

    34 Straightalk

    ...ongoing levels of public debt...

    ''Since 1997, take-home pay has only grown very slowly because of increased taxes.'' Norman Lamont writing in the Torygraph 23 Dec 2008

    Well Norm is not one of my favourites since his ERM bigtime goof, but he has a point. Taxes have marched forward in parrallel with any growth and nothing was kept to hand. Total tax take has run at 43 to 46 pence in the pound for decades, usually up at the 46 end. To this has been added other wheezes, PPP, PFI to get liabilities off account. The 46 pence in the pound seems to be a limit to taxation as similar figures are in place over most developed countries with welfare provision in europe. You would have to be suspicious that exceeding 46 percent has damaging effects or else somebody would be doing it such is governments delight in collecting tax.

    The outcome can only be as the economy contracts tax take totals contract, they are a broad percentage. There is inevitably a higher welfare bill with more people out of work. Add the cost of intervention into banks and the whole thing looks to be at risk of being undo.

    Massive borrowings, higher welfare costs, substantially low tax income. Repeated assurances along the lines of we know what we are doing when there is absolutely no evidence of this, just a small point. Ever changing and worsening forecasts month by month. Ratings agencies saying where is your payback plan you havent got one. You wouldnt even begin to listen to this if it wasnt coming from HMG.

    The unnerving thing is there is no reason to believe that either the end point of the public debt is known even roughly, or that the duration of the likely recession trough is known even vaguely, I for one find the staement that it will be on the up at Xmas doubtful. This leaves the public services as the jam in the sandwich at some point with apparently a huge range of negative outcomes.

    As anything that can go wrong will do, and there is a tendancy for over optomistic forecasting I would like to hear some proposals to deal with the problems. And I am afraid that no proposals to me means no idea. It is incumbent on Brown to state his case as he has the data to hand. If he doesnt do so fairly soon it has the opportunity to create yet more problems.

    Problems in world trade are an effect not a cause and the problems are here and now. A lack of attention to domestics is what got us here.

  • Comment number 39.

    37 MrT

    Yeah but, No but, Yeah but. Where does the ECB get its money at 1 percent, thats my reaction, not from governments surely, and why route it via the banks who lap up 3 percent for passing the parcel over, why not cut out the middleman. It sounds like another merry-go-round or a pass-the-parcel game where the wrapping is paper currency and kept at each unwrap. Can somebody elucidate, or even explain.

  • Comment number 40.

    No.33. glanafon wrote:
    "I would however feel happier if Prof D Blanchflower was somehow involved in running the show."

    The car has crashed. Even if we ask the World Rally Champion to drive it, he won't be able to control the wrecked car in the way we'd like. However, some might say the current driver is simply driving the car deeper into the ditch.

    Austerity Britain is coming, and it will be here to stay......

  • Comment number 41.

    "When the advanced economies pull out of this crisis, the level of public debt is going to be the central fact of economic and political life for years to come."

    Please miss, what are the advanced economies going to be producing other than lots of 'low-skilled' babies? How will thye pay off their debt? Is this a bit like African debt miss?

  • Comment number 42.

    Comment 13 - You're right. A lot people living on savings interest would like to see interest rates go up. I should have used my words more carefully. But even those people could suffer from a more prolonged recession, which might happen if future "green shoots" are killed off by higher rates.

  • Comment number 43.

    Message 22 Thorntonheathen

    Bicycle shaped objects and certain parts for same from China carry an antidumping duty of 48.5% when imported direct from China into the EU on top of the 14% standard import duty.

    The best way to get your bicycle shaped object from China is to get the bits shipped to Bangladesh where a nice man will screw them all together with chainsets from that other nuclear power, India and ship them to the UK together with a duty preference document that eliminates the anti-dumping duty and a portion of the standard import duty. This is called globalisation which is a posh term for heating up the climate with CO2 emissions from burning bulk oils in vessel turbines as otherwsie useless rubbish is shuffled around so that someone somewhere can get paid a bonus for not doing very much.

    Given the relatively simple engineering involved in the construction of a bike frame I cannot understand how it could not be cheaper to make them in the UK given more than two million or more unemployed and growing plus a further three milion economically disengaged. I mean we are also a nuclear power like China and India, or are we?

  • Comment number 44.

    #42 StephanieFlanders wrote:

    "But even those people could suffer from a more prolonged recession, which might happen if future "green shoots" are killed off by higher rates."

    Let me counter your arguement:

    No, I have to disagree on several grounds concerning the " green shoots killed off by higher rates" phrase:-

    1. If a business needs zero interest rates to survive it is not a business it is a basket case and should close. And what is more its use of capital is grossly inefficient and hence damaging to the value of the currency.

    2. Any business worth being called a business makes money and does not consume capital. The only reason to borrow is for expansion or restructuring. Presently there is perhaps a lack of demand, but this has not been very evident except in the dinosaur heavy metal and building industries. The latter's problems are also contributed to by the overvalued land banks that have to be written down caused by the unsustainable boom in credit that debased to value of the money in the boom years. Indeed it can be argued that this overhang of overvalued land is a far bigger damner on recovery and as such these business should be let go bust so as to ensure that the land asset is released to the market at a far lower price and this would be far more beneficial to any green shoots than sustaining the unsustainable overvalued land held by these businesses and as such zero interest rates are themselves a damner on recovery.

    3. Returning to your theme of a "prolonged recession". I think you are on shaky ground here too. For would it not be better to liquidate the business and hence rapidly redistribute the assets and monopolies that they hold at a far lower price so that new businesses could have access to the assets that are being kept from the market?

    So far from shortening the recession zero interest rates are prolonging the recession and are fundamentally destructive to economic recovery! I also repeat that to run a sound economy one needs to start doing so and cease the insanity and economic illiteracy of zero interest rates. (see #20 above)

  • Comment number 45.


    tufftimes (#13) "But no-one wants the cost of borrowing to go up right now".

    This is fundamentally incorrect. There are many people who want the cost of borrowing to increase.

    You may want to revise this statement.

    SOME(x)=NOT(ALL(x))=at_least_one(x); and ALL(x)=NOT(SOME(x))

    And she did. But note, the laws of logic don't generally apply in the highly intensional Land of Oz and Wonderland. Extensionality makes for bad copy, or none at all - as I tried to show yesterday over the TUC 'report'.

  • Comment number 46.

    No.39. glanafon

    The European banks can borrow from the ECB but that doesn't necessarily mean they do. The less they borrow, and the more they use private money to buy the government bonds, the better.

    In theory, there is more private money used in the European way, when compared to the British way.

    "Where does the ECB get its money from?" is a good question.
    It may be answered by this article from the FT (link below):

  • Comment number 47.

    No.44. John_from_Hendon

    We should stop complaining, and just accept that the feckless and reckless get rewarded, while the productive and sensible are punished.

    That is how British society works these days.

    Why should we try to change it?

  • Comment number 48.


    MrTweedy (#47) "We should stop complaining, and just accept that the feckless and reckless get rewarded, while the productive and sensible are punished.

    That is how British society works these days.

    Why should we try to change it?"

    That's dysgenic talk MrTweedy. But I fear you are accurately voicing a view which is sadly representative and growing amongst the paradoxically ever shrinking 'productive and sensible'.

    But, is it productive, and is it sensible? 'Children' need management and protection from themselves precisely when they don't want it. Their cries for help are often quite deceptive ;-)

  • Comment number 49.

    Amazing. The dollar back down against CZK to where it was 3 days ago in the space of a few hours. The GBP getting stronger, the USD getting weaker and the trend the same for at least a month.

  • Comment number 50.

    When will Economists like Flanders realise that some normal distributions in the real world have fat tails. Continually picking over the Bank of England's confidence interval charts for inflation is futile. Hasn't a 50% fall in asset prices been enough to let them break out of their rigid paradigm? Oh wait, I'm sorry, wasn't that supposed to be a 10 standard deviation event?

  • Comment number 51.

    John From Hendon,

    I would recommend a look at 'Infectious Greed' by Frank Partnoy, a very lucid critique of how investment banking changed during the late eighties and through the nineties. What has this got to do with your posts? Simply that businesses, even well managed ones, have massaged their accounts in such a way that the annual reports now hide as much as they purport to reveal and it is apparent that many companies futures depends entirely on such things as the level of interest rates - not because it makes borrowing cheaper or more expensive, but because they have massive bets in play regarding which way rates will go.

    Ordinary shareholders would be horrified to discover the kind of 'securities' that most businesses have invested in, which is why they are all traded in a totally unregulated manner, 'Over The Counter'and kept off balance sheet

    Your classical rules of economics have been thrown out of the window I'm afraid and basically the rating agencies are to blame (I won't bore everyone with the details, just read the book, its brilliant).

  • Comment number 52.

    No.49. FrankSz

    Remember the old adage that a nation's fortunes are dictated by the currency and government bond markets.

    That is where the real action happens.

  • Comment number 53.

    I was under the impression that the fundamental problem was that China had undervalued its currency the Yuan. Which is kept at a fixed rate against the dollar. This means a continuing trade surplus with the USA which in turn leads to an accumulation of Dollars. Which China must use to buy US assets mainly Treasury Bonds. This is economically irrational as it fails to maximise Chinas income from its trade with America. But the Chinese Government does it to avoid unemployment and social instability. As it has a basically closed economy. in terms of currency. it can do this.
    This had the effect of holding down interest rates in the west. With interest rates artificially low investors were driven to take excessive risk in pursuit of reasonable returns. Until eventually the sub prime crisis forced a reassesment of just how risky some assets were.
    This resulted in the system freezing up as fear of losing capital replaced the pursuit of higher returns. All the steps taken so far are to unfreeze the banking system and reduce the damage caused by the freeze.

    The fundamental problem still remains. Unless the Yuan is allowed to float and trade comes more into balance China will continue to be a forced purchaser of US T-Bonds. forcing interest rates down in the US and the rest of the world. Once the economy picks up surely this will once again cause consumers in the west to save too little and consume too much in order to balance out china (who is consuming too little and saving too much).

    So the fundamental problem will remains.
    Interest rates will be higher but not high enough to encourage a rational level of savings in the west.

    Have I misunderstood something ?

    Please feel free to correct any part of this view you think is wrong.

  • Comment number 54.

    50. At 11:18am on 29 May 2009, MaverickGoose123

    only a normal population, when submitted to reductive analysis, will be statistically represented by a normal distribution.

    maybe there is no such thing as a normal population.........or, in other words, is there a useful definition of normal?

  • Comment number 55.

    citygambler (#51) "Your classical rules of economics have been thrown out of the window I'm afraid and basically the rating agencies are to blame (I won't bore everyone with the details, just read the book, its brilliant)."

    Why do reporters like Stephanie Flanders keep writing as if there's a planned, machine-like economy out there, why do people like John_from_Hendon appeal to people in 'government' to change the wizards, and most oddly of all, why do so many become outraged when told that the 'totalitarianism' guff is largely just systematic anarchistic/free-market propaganda?

    Answer: Intensional opacity and stupidity (much in vogue). Extensionalism in language and life is just sooooo totalitarian. Girls just want to chat and have fun.

  • Comment number 56.

    '...Interest rates are going to go up eventually. But no-one wants the cost of borrowing to go up right now...'

    Err, the cost of borrowing is up, is waaayyy up.
    Who can borrow money at anything remotely close to the Base Rate?
    Banks are currently trying for 5% above base for those of us who are being ripped of by our debtors with slow payment and can't drive a hard bargain.

    I got a laughable letter from one of my credit card companies last week. They are going to increase the interest rate by 5% (to 22.5%) thank you very much. (In a period when interest rates have dropped 4.5%, they feel entitled to go in the opposite direction by approximately the same margin.)
    Unfortunately for me there is always a balance on that card (heavy expenses) so not an efficient way to borrow money. But none the less, daylight robbery.

    Still, nobody accountable.

  • Comment number 57.


    Anthony_analyst (#53) "The fundamental problem still remains. Unless the Yuan is allowed to float and trade comes more into balance China will continue to be a forced purchaser of US T-Bonds. forcing interest rates down in the US and the rest of the world. Once the economy picks up surely this will once again cause consumers in the west to save too little and consume too much in order to balance out china (who is consuming too little and saving too much)."

    It's a pretty good strategy for the world's most faithful and successful Stalinist Planned Economy to destroy what it ideologically most despises don't you think?

    Inscrutibly better than neutron weapons, no grounds for justifiable retaliation either.

  • Comment number 58.

    ThorntonHeathen (#54) "only a normal population, when submitted to reductive analysis, will be statistically represented by a normal distribution.

    maybe there is no such thing as a normal population.........or, in other words, is there a useful definition of normal?"

    Maybe you only know how to write nonsense?

  • Comment number 59.

    No.53. Anthony_analyst

    I'm not really sure myself, but my thoughts (for what they are worth) are as follows.

    The yuan is not a traded currency; so I'm not sure how one arrives at an exchange rate USD against the yuan.

    Speaking personally, we pay our Asian sub-contractors in dollars, and they presumably pay their workers in home currency. The state must take the dollars in exchange for issuing the home currency. The Chinese state is then left with a big pile of dollars, which it must do something with. It will have choices such as:

    (i) The Chinese state can't sell those dollars in favour of yuan, because the yuan is not traded. However, it could sell dollars and buy euros, and invest the money in German bunds.

    (ii) If the Chinese state wants to inject money into its own economy, it could buy gold with its dollar reserves and then use this gold to back the printing of its own yuan and pay its workers in yuan.

    Given the yuan is not traded on the open market, I assume the Chinese state applies a fixed exchange rate against the USD, when its workers are paid in yuan. As long as the Chinese economy keeps growing and Chinese wages remain low, an artificial fixed exchange rate is unlikely to result in price inflation for Chinese made goods, especially as the yuan is backed by such large reserves of gold, USD and euros.

  • Comment number 60.


    The cycle you describe is right, but the causality is wrong. The problem was the move away from gold in 1970 which forced the Chinese to accept paper dollars in return for the goods they supplied. Those dollars had no use outside of the US, so they were reinvested. They could have exchanged but that would have just driven up local prices and reduced export ability. Western globalisation took advantage of cheap labour to import deflation and offset the growing inflation as the dollars got recirculated. The main cause of debt and irresponsibility was the US's need to keep opportunities and avenues open for foreign reinvestment of dollars. Without those avenues there would be a move away from USD, because the USD is backed mainly by a) the belief in US economic growth and b) the forced coupling to OPEC oil pricing

    Green tech will decouple the USD from OPEC oil. China is already diversifying from US exports. The future for the USD is, long term, down. The main reason it is up now is because of the need for liquidity. If the need for liquidity drops, the USD will drop.

    Regarding interest rates, I think people are making the mistake of confusing 'willingness to lend' with 'interest rate'. The retail interest rate is dependent on many factors, but getting a mortgage now requires 25% deposit instead of 0% etc. etc.

  • Comment number 61.



    Why do you keep putting titles on your posts?

  • Comment number 62.

    J_f_H wrote:

    If a business needs zero interest rates to survive it is not a business it is a basket case and should close. And what is more its use of capital is grossly inefficient and hence damaging to the value of the currency.

    Absolutely agree here the discount rate to assess investment decision making is all over the place at the moment

    Published interest rates close to zero (tbf you wouldnt base discount rate on this short term palliative/expedient rate, would you?)
    Access to debt (if you can find it) 10-15%+ for corporates
    Long term bond rates climbing as pointed out
    Everybody else well north of there

    If you were prudent and basing a long term investment decision on DCF you would use the longer term rates but at those cut off points you wouldnt be investing in steady sustainable projects (which would be to the long term benefit of the economy) but skewed towards the higher margin (and likely riskier) punts that are on offer.

    Same applies to equity cost of capital the lack of liquidity in the global economy for some time to come will naturally enough drive risk premiums and cost of capital higher and encourage high margin (higher risk) investments.

    This is before we consider the crowding out of disposable income through higher taxes, interest, inflation [exacerbated by decline in overall GBP exchange rate] and deleveraging. Disposable income providing the long term cash returns on the investment or not as the case may be.

    The PRC seem to realise now that the USD which they hold in bucket loads will soon be worth nothing and soon enough there will be no (US, UK) export market for their goods. That suggests they may try & switch to internal directed production and moves to protectionism, causing further decline in world trade.

    Even before the expenses red herring I dont have confidence in politicians to get us through this over the years we have attracted a certain sort of person to the executive and they have no apparent skills to sort this one out.

  • Comment number 63.

    FrankSz (#61) "Why do you keep putting titles on your posts?"

    Why don't you?

  • Comment number 64.


    I assume you have heard of MAD.

    My bet is that the Chinese will allow their dollar assets to devalue, because they can't afford the consequences that a dollar collapse would have on civil order. They are bluffing at the moment by "secretly" selling dollar assets to try and convince the Fed not to perform quantitative easing. But the reality is that the Chinese assets are not worth what they are currently valued at, and at some point the Chinese will accept this. Better to have your assets revalued at 50% of their current value than have them worth nothing at all.

    The West AND China allowed this mess to develop. Neither side has covered themselves in glory.

  • Comment number 65.

    Because I am not a lunatic?

  • Comment number 66.

    No.64. tufftimes

    If the Chinese sell USD and buy dollar denominated commodities, then the price of the commodities will rise as the value of the dollar falls.

    Therefore, the Chinese could buy gold or copper or coffee or oil or sugar as a hedge against the falling dollar.

    As the dollar falls, other currencies must appreciate. Another option for China would be to sell dollars and buy the appreciating currencies.
    Then China could buy the dollars back again when the USD has slumped completely, and make a profit.

  • Comment number 67.

    ahoy there Stephanites; great to see that Stephanie reads these posts and occasionally replies, as at #42; let me know when you want to run your story on the economics of piracy and I'll tell you all about it over a bottle of grog or 2; it would be even better than your Somali goat story, but not a word to Mrs Pirate ok?

    I'd agree with #56 allmyfault that the real cost of borrowing is actually at a bit of a historic high - the banks are charging 5%+ above base rates for most loans and credit card rates etc are very high now

    #36 densesingularity all this talk of house prices we hear IS ASKING PRICES so pretty much meaningless; I can ask for a million bucks for a row boat with a hole in the bottom but it does not indicate a recovery in the worn-out rowboat market, just that I am either daft or suspect that someone else may be! we all need to remember that statistics can be very misleading and in finance almost always are intentionally massaged before release as well

    #43 stanilic about your Chinese bicycles and globalisation; why not make a better bike where the bike buyer is.... I think that the answer you seek will come fairly quickly - within 2 or 3 years - with oil going back up to $200 barrel and other raw resources too; at which point the recent experiment in primitive, cheap-oil driven globalisation
    will be over; we're just going through another phase in the ongoing struggle to stop being so stupid in everything we do; I think (and hope) that local production of bicycles, food etc will start to recover, though overall 'traditional' measures of GDP will go down, our quality of life will go up; and the sustainability will be much greater, though it may be too late to stop severe global warming

    the amount of dirty bunker oil used to move all this stuff around is a disgrace and I try to do my bit by intercepting a few ships at sea, but my motives are sadly misunderstood

    FrankSz - thanks for your kind comments but as a Pirate I prefer an anarcho-syndicalist approach and do not seek govt office! though the promises of moats, duck houses and all the other fringe benefits available in the UK are attractive

  • Comment number 68.

    FrankSz (#65) "Because I am not a lunatic?

    No. It's because you are conventional. Alas, the problem with most people posting here is that they think/write ways which they have been taught to think/write, and much of that is known to be irrational. Stephanie says she and most other reporters didn't see this coming. But why not? There are people who have been looking at the economic/demographic trends for years and they're not exactly in the backwaters (see ETS).

    If you look more carefully into what I've been posting, you'll see that the sources of the data trends are sound/relible - in fact, these are the sources of reliable data. Why?

    What I am describing is what is really happening. How do I know this and how do I know you and others here are misguided? Well, just try following the links and spend a bit of time on it all - you may find out.

    You may not like being told this, but it's true, and the alternative is you'll remain misguided.

  • Comment number 69.

    Re 66

    Some questions.

    How long does it take to exchange 1 trillion dollars for commodities ? And what happens to the price of the dollar while those exchanges are taking place ?

    Can you buy 1 trillion dollars worth of commodities faster than the Fed can electronically magic up 1 trillion dollars in quantitative easing ?

    Can the Chinese buy up commodities faster than the Japanese, or indeed anyone else with substantial dollar holdings ?

  • Comment number 70.

    Message 67 somali_pirate

    Hope Technology have demonstrated that top-end UK bike manufacture can be done profitably. However, as usual, the volume is down-market and so the manufacture goes where the labour is cheapest. I tried to get funding for bike manufacture in the UK some fifteen years ago but nobody wanted to know which was probably right as most of the then remaining bike makers have gone bust since. There are still some guys hanging on in there on the back of quality, brand and the recent Olympic success. Good luck to them all!

    However this goes beyond bikes as where I grew up in North London there used to be small workshops all over the place full of people doing greasy technical things of one kind or another. They seemed to die out in the early Seventies when a better and easier living could be had working at the town hall.

    With regard to Mr Tweedy's comments about China buying commodities, it has been postulated that China is using its reserves of US dollar to buy up rare metals such as copper.

    The appearance of China as a world economic power over the last twenty years has distorted the economic frame of reference and may well have fooled the more trivial economists into thinking that there was a new paradigm which included the abolition of boom and bust.

    So, there is a new kid on the block and we have just got to adjust. The economic outcome of that adjustment is that we will need to find work for our people as we have no money left for the welfare support we have all been paying taxes for over the last sixty years or so.

    What a way for the Welfare State to go: destroyed by a bunch of foreign socialists! You could not make it up.

  • Comment number 71.

    68 JadedJean

    "Alas, the problem with most people posting here is that they think/write ways which they have been taught to think/write, and much of that is known to be irrational."

    I am sure Franksz now feels thoroughly chastised, as do I. If only everyone was as rational as you. Well, I hardly dare imagine how wonderful life would be!

  • Comment number 72.

    No.69. tufftimes

    It can be done by taking out futures, forwards, swaps and derivatives contracts. This will lock in the hedges now, without having to immediately flood the market with dollar selling.

    If China doesn't like the USA devaluing the dollar, it can simply refuse to buy new issues of US treasuries. China is a market maker, and the USA needs China's money.

    If it likes, China can buy mining companies and pay for them with dollars. It can buy many types of assets with dollars, including art and western engineering expertise. Asset prices are low at present, and offset the falling value of the dollar.

    China is not the prisoner; it is the US and the UK who need China's money.

  • Comment number 73.

    ThorntonHeathen (#71) "I am sure Franksz now feels thoroughly chastised, as do I. If only everyone was as rational as you. Well, I hardly dare imagine how wonderful life would be!

    Perhaps you should try harder? Perhaps you are not able to do any better? perhaps you can't take instruction? The behaviours you're emitting are predictably representative of what has to change if anything is going to improve. I have doubts that they will because of this inability of most people to change much. You and FrankSz might give some thought to that (along with the other substantive points that I've been drawing attention to).

  • Comment number 74.

    No.66 Error
    China wouldn't have to sell dollars to buy dollar denominated commodities...
    What I meant to say was China would sell US treasuries, or refuse to buy new issues, and use the dollars to buy other assets (like commodities or companies) instead.

  • Comment number 75.


    stanilic (#70) "What a way for the Welfare State to go: destroyed by a bunch of foreign socialists! You could not make it up."

    Oy can, and you just have!

    This line's been tried and widely satirised. But here's a tamer version which even LibertarianKurt might approve of.

    Our Welfare State (and that of the US people) has been being hawked off for decades. Guess whose bright idea that was? It 'magically' released loads of 'locked up' other people's liquidity...;-)

    My life....

  • Comment number 76.


    China needs the US to continue buying its goods. Otherwise mass unemployment and social upheaval.

    Market traders will sniff out very quickly if China starts dumping dollars in earnest. It won't be possible to write vast amounts of futures contracts, buy commodities or exchange vast amounts of currency without the markets finding out very quickly. And once they do the game is well and truly up (maybe we're seeing this starting with the current dollar devaluation).

    Either China and the US work together to try to manage a soft(er) landing, or they can hit the nuclear button with the Chinese selling as fast as they can and the Americans printing as fast as they can. This situation will benefit neither party in the long run, as it will make for a colossal mess on both sides.

    Anyway, whatever your opinion, this weekends meeting should set the scene. If the Chinese really feel they are in a position of strength surely they will make restrictive and public demands of the Americans as regards the amount of QE allowed. If not then we can expect and announcement of mutual co-operation for the economic good of both parties. It's going to be interesting to see how the dollar reacts.

  • Comment number 77.

    FrankSz (#65) Aren't you supposed to be a) 'out of here' and b) ignoring me?

    Are you into drama/hair-flicking? ;-)

  • Comment number 78.


    a) Yes I was, but I came back.
    b) Most of the time, yes, but sometimes you deserve a telling off.
    c) No

    You have to admit it though. You are a complete and total nutter.

  • Comment number 79.

    FrankSz (#78) "You have to admit it though. You are a complete and total nutter."

    On the contrary (as you'll come to appreciate if you put some work in as directed).

    How much skill do you have in the analysis of your own and others' behaviour? Observe carefully how things have been going - whose analysis/description has been more accurate/predictive over the months? ;-)

  • Comment number 80.

    #51. citygambler wrote:

    "Your classical rules of economics have been thrown out of the window I'm afraid and basically the rating agencies are to blame".

    Sad, causal and true.

    However, the old rules did predict the fall and the 'modern' economists and ratings agencies were proved to be wrong.

  • Comment number 81.


    Here's a question/point to ponder for all those who have called for MPs to fallen on their swords over the unforeseen Credit Crunch/self-serving behaviour of those in public office and Financial Services whose behaviour has been at the expense of the rest of the population:-

    If what's said here is not the case, why have we not heard of a major purge of Civil Servants in the Treasury, FSA and DTI?

    Is it not their function if we still had effective governance rather than Wizard of Oz theatrics/sinecures, to be accountable to MPs for overseeing and regulating i.e. governing as the executive arm of the state?

    Have we not had empty rhetoric/deregulation from Treasury MPs? Ruth Kelly went to spend more time with her family very early did she not? What would Yvette Cooper know? Why all the attention on the non-professional public face of all this, i.e. the House of Commons sinecure hopping politicians rather than permanent professional Civil Servants?

    It's almost as if MPs and Civil Servants colluded in all of this is it not? Why the extreme lack of governance if not to explicitly let the system fail......... so it could be restructured?

    For compliance with what? The Lisbon Treaty?

  • Comment number 82.

    Apologies for the first paragraph.


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