PeteBrant

Well no, our economy is not soley based on the sales of houses. There are all sorts of multi billion pound industries that do not involve the housing market.

NACRO

I tend to go with the US definition as being more accurate

"NBER defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production and wholesale-retail sales."

By which token the recession is here.

NACRO

Like the financial sector

PeteBrant

Indeed!

You can be sure that there ar epeople out there earning a pretty penny off the back of the current uncertainty.

You only need look at Black Wednesday - George Soros reportedly made £1billion profit in a single day

NACRO

Problem is any money being made out of the carnage in the UK is likely to be winging it's way out of the UK economy to somewhere a little safer. You don't imagine that Soros pumped any of that cash back into the UK economy until it was clear recovery was underway do you?

lozgti

No,but Banks,Building societies,Lawyers,Licensed Conveyancers,House builders,construction companies,electricians,plumbers,surveyors,Comet,cu rry's and all the other white good sellers,valuers,removal companies,painnters and decoraters,odd job people,gardners,the motoring industry (which has benefitted from car hungry paper rich Brits),

to name but one or two,do make up a good portion of our economy I presume?

Anyway,the big boys you refer too seem to be getting itchy feet about staying in the UK so there might be a void there too

PeteBrant

The figures, such as they are, do not support the theory that the economy is based on house sales. Sales are thier lowest for 16 years, yet GDP remains predicted to grow


There is a difference between getting itchy feet and pulling out completely. Companies and individuals might make noises about pulling out, but the fact is that London is the financial capital of the world, and if you aren't in it - you're out of it.

Of course that doesn't mean we should become complacent about it.

rossyboy

iTrader: (8)

Headline in local paper today:

Housing bubble could be on brink of bursting - Press & Journal

I'm hoping I've got out in time as per my FTB thread (the flat is in Aberdeen), but they may still pull out.

lozgti

Sales and purchases.And remortgages to free up cash.All gone or going.

Yet the government persist with HIPS as well (another tie up with Europe I believe )

Suppose we are getting distracted from the thread though but the bottom line is.....everything is suddenly getting very expensive and people can't borrow money to deal with it.The Banks are only interested in attracting savers to fill big holes

(Noticed the wine people are talking about wine having to go up 10%.Now that really will peeve me )

Diesel

I really don't agree mate - especially as my TV bought 3 years ago is now twice the size and half the price!

If this inflation figure was real it would be massive. If it was linked to:

• Fuel Costs
• Gas costs (inc rip off repairs)
• Electricity costs
• Council Tax costs
• Water rates costs
• MP's salary rises costs
• MP's fiddled expenses costs
• MEP's dodged tax bills costs
• Car battery price costs (how much!!?)
• Lurpak Light costs (its 25% water so should be CHEAPER!!!)

then we might have a real guide as to what inflation is. 3.3%? Don't make me laugh - every year's council tax hike is twice that!

D

GOLDMAN 555

Inflation is economics 101

We are talking about 4% in the twisted manipulated government list... essentials have gone up nearer 6 to 8% ON AVERAGE!

This country has a massive public sector national health service sector etc etc they are going to have to give these people the massive pay rises(6%) which will make the country go bankrupt.

If you ask me the government care more about not giving huge pay rises to the legions of public sector workers than greedy homeowners.

It’s practically a certainty that interest rates will go into double digits to stop the uk’s balance sheet going into meltdown.


With Oil and food up so much ther is nothing Gordon can do other than crash the economy

Ted Maul

I feel the disconnect between Libor and the BOE rate will reduce significantly (toward the base rate) in Q3 2008 when we see banks not writing off any more sub prime debt, so easing liquidity fears. With that I expect better mortgage rates for house buyers (but not at the levels seen a year ago and with tighter lending criteria) and a flattening / stagnation of the house price curve into 2009.
BOE won't raise rates in the short term as I don't think they feel it will make any real difference to inflation. The may even reduce (bloomberg survey of analysts still predict an average of 0.75% reduction on the base rate by Q3 2009. This makes more sense to me to try to stimulate the economy, as we have the highest rates compared to the eurozone and the US.

Diesel

"Over the last year, the cost of a shopping basket of essentials has increased by 19.8%"

Daily Mail: 'Payment shock': Food prices up 20% | This is Money

Spin that NL !

D

PS how does SN change the URL to a hyperlink on my simple cut and paste - it should say 'thisismoney' not 'dailymail'

PeteBrant

Spin that NL, as in a "reverse spin" to the Mail?

GOLDMAN 555

Stimulate! I'm not sure reverse psychology will work. If you stimulate the economy with high inflation we will end up with hyperinflation and it will cost £1 million to buy a loaf of bread.

Once inflation is in the system you have to stop it otherwise it ends up in a vicious cycle. Let's be clear we are not talking about stagflation we are talking about inflation.


The funny thing about this is that when we had inflation in house prices everyone is really happy. Now it's moved on to commodities is going to destroy everything

zs_phil

iTrader: (1)

did anyone watch the channel 4 news a woman (cant remember who ) said that inflation was reaching 4% ect ect but that is still very very low as in the 70s 80s it reached upto 20% and it wont effect the uk as we have a strong economy
is the government official speaking out of her bum because labour are saying one thing and the press and other parties are saying another thing.


why didnt g.brown and t.blair put money aside in the good years instead of constant borrowing then atleast they could have given tax cuts in places to ease inflation

Ringpeas

As far as I can see, inflation is being driven by :-

Higher energy costs
Higher food (and other resources) costs
higher borrowing costs

How will rising interest rates reduce any of these if anything it will have the opposite effect.
We have to let the economy adjust to the new levels by holding borrowing costs, increasing food and energy production and increasing efficency.
If the price of food goes up then farmers will have more incentive to grow more.
As petrol prices increase, then demand will decrease (to a point)
Once the banks work out how much they have really lost they will start lending more cheaply again.
The government cannot tax itself out of this, or solve it with interest rate movement. It should have invested when it saw this coming years ago.

NACRO

If interest rates don't rise then the prices of these items will spiral due to inflation (wages etc). As was said earlier it's a vicious circle and unless the BofE takes control then 'stagflation' is going to be a reality.

Ringpeas

I will have to agree to disagree with you there Nacro.

mart360

Apparently Merv's letter has been received at downing street.

The contents are believed to be along the lines of:


"Gordy, Well the figures are truly crap, what do you expect??

Seriously man, you messed around with the figures and sold off any reserves we had for what?


Lets see shall we,

Blair force one, hmm 1.2 billion for a jet that never got off the chairmans blotter,never mind the runway.

Separate parliaments for Scotland and Wales, wonderful idea mate, but what do we get in return, oh yes, i forgot, we pick up the costs for there free further education & prescriptions.

Its ok i suppose, the double duty your milking in for the increase in petrol prices, must be bolstering the pension funds for your mob somewhat. What was the figure you mentioned for the final salary?

Still the 23k tax free allowance for no questions asked about the spending on second houses should be a bonus, should tied you over for a few months.


Well i hate to be the bearer of bad news, but i,ll get it over and done with now to save any grief later.

We've done the sums, and its going to hit 7 possibly 8% in the next few month,s so i,l save your the trouble of the PR and spin machinery going off on one about an open letter.

I suggest you let us print some more money, or invent some new stealth taxes, as you aint going to get any joy our end.


You could as a last resort, try one of them loan company's they advertise on telly, they don't care about your circumstances, and that you own your own home, Ahh mmm i guess thats a no no then.

Hang on your in luck, that bit of legislation you brought in years ago should help. Owe more than 15k, yup, the figures show you do, cant repay it? Sorted than, drop me a letter back matey and i,ll accept your offer and we can write off the debt. Jobs a good un"

Merv


Mart

Ringpeas

Terminator X

iTrader: (7)

How should the powers that be reduce inflation then & why will it do so? Can't see an answer above ...

TX.

fast bloke

I've decided to take up gardening.........


p.s. - Mervyn King seemed to indicate that they believe inflation will drop below 2% within 2 years, so the chances are they will do nothing with rates for a few months anyway

Diesel

To start maybe a cap and effective regulation on fuel and energy prices? The supply companies are making a killing at our individual and the economy in general's expense at the moment. These things are far too important for the country to let greedy capitalists gorge upon.

A windfall tax has been mentioned, but this is too after the event, and doesnt help companies and individuals RIGHT NOW.

There must be some form of price fixing or cartel in operation as they are all making a mint at the mo...

D

NACRO

I believe in Santy Claus so why didn't he take the mince pies I left out for him?

Holding rates isn't going to see inflation do anything other than spiral, let's face it they need to raise them. King knows that but he's hardly going to come out and say it. Better by far to spin and say inflation will drop back to below 2% in 2 years due to magic fairy dust or whatever.

NACRO

How do you think the banks/private equity/financial institutions are making all the money back they lost in bad debts?

That's right from John T Sucker the commodity consumer.

fast bloke

They can easily reduce inflation by hiking interest rates and taking money out of the consumers pocket. The problem is that higher rates will depress growth and potentially cause recession, higher unemployment etc.

Look at it like the beginnings of a tank slapper on a bike. If you try to correct it you will make it worse and you WILL crash. It you take your hands off the bars it will stop, but you have no idea where you will end up - you might crash, you might not.

Our current inflation 'spike' (we won't know if it is a spike or a trend for a few months) is directly related to oil prices. Interst rates won't control oil prices, so the BoE could increase rates tipping us into a recession while oil continues to increase, causing inflation to increase....if this happens we are foobarred. There are 9 broad outcomes

Interest rates up and:
oil up - foobarred
oil level - inflation will reduce eventually, recession is likely
oil down - inflation is sorted, recession is likely


Interest rates level and
oil up - increasing inflation, probably recession
oil level - inflation will reduce eventually, possible mini recession
oil down - inflation will reduce quickly, probably avoid recession

Interest rate cut
oil up - soaring inflation eventually leading to us all being foobarred
oil level - inflation will remain extremely high, recession unlikley,
oil down - inflation will remain extremely high, real growth is probable

So if you consider that they have no control of oil prices, the best course of action is to leave rates as they are, where they have 2 reasonable outcomes. If they either increase or decrease rates, they are virtually guaranteed to have runaway inflation or recession. If oil continues to rise there is no course of action that won't hurt


Now - anyone know where I can get a solar powered lawnmower

NACRO

Those 9 broad possibilities are limited to the first 3 in my opinion.

Recession is already inevitable the problem is that vested interests are in denial.

The situation rather than being a tank slapper is more like being in a car that's oversteering in a bend. The no rate rise option is like taking your hands off the wheel, closing your eyes and hoping for the best.

Dieseldog

I agree - for all commodities it seems they conjure up an excuse why prices are going up. "A cold snap in Florida?" oooh, expect orange juice to go up 20% in Tesco's." Floods in Iowa? The world price of a bushel of corn leaps. I'm no great economist but i simply don't understand how tiny ripples can affect the markets so much if it's not contrived or manipulated.

Plus if you sit down and look at the raw material cost element of a product, it'll only be a small percentage of the final selling price, so how the hell does a change in that raw material cost produce such a dramatic increase in the cost of the procuct on the shelf in Tesco's? It's all BS, frankly...

At least it is according to the facts in my head!