Are happy days here again?

Are happy days here again?

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Bank of England governor Mark Carney said today that "A renewed recovery is now underway in the United Kingdom and it appears to be broadening."

Visit our Economy discussion group to discuss the governor’s new strategy.

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By Steve Kesby
07th Aug 2013 12:29

I only heard...

... no increase in interest rates until unemployment's below 7% and then I stopped listening again. All the time you can still see trees, you can't really say you're out of the woods.

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By ghewitt
07th Aug 2013 12:34

May be

Someone should tell that to the governor of the bank; but then standing amongst the trees he sees supplies of quantitive easing not wood.

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Should Be Working ... not playing with the car
By should_be_working
07th Aug 2013 12:47

Inflation

He's waiting until unemployment's below 7% - which is expected around 2016.

Big problem is, where is inflation going to go in the next three years, and is Carney bothered by it?

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By WhichTyler
07th Aug 2013 13:41

Economics 101

Good piece here, clarifying that BoE is not 'targeting unemployment', just using it as a proxy for unused economic capacity ('slack') because while there is no slack, the risk of inflation is lower. In theory.

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By julian.sims
07th Aug 2013 14:10

Not just 7%

It seems clear that although they are 'watching' the unemployment with this 7% in mind, there are some deal-breakers around inflation expections and financial stability which would allow an earlier move.

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By Discountants
07th Aug 2013 14:46

We need to avoid Japan's trap

Japan's stockmarket peaked at 39,000 in 1989 - nearly quarter of a century later it's barely more than a third of that.

Land prices have dropped by a similar amount.

I's growth in output per head over the last 20 years has been 0.7% a year, two percentage points below the 1973-93 level.

We also appear to have suffered a 2% point drop in our trend-growth per head (to zero), this will make future pensions, NHS etc unaffordable within a decade - even after the current level of cuts.

 

Too much capital is stuck in zombie companies who should be dead and zombie homeowners who should be reposessed - none of them would survive if interest rates were at normal levels (we had similar levels of unemployment and inflation in the mid 1990's and interest rates then were around 6% to 8%).

This capital sucked up by the zombies is the reason why small firms can't get funding.

The debt needs to be either:

inflated away (this is happening far too slowly, we'd probably need several years of 10% plus inflation)Grown out of (ain't going to happen with the zombies around)Written off (causing large numbers of zombie businesses and homeowners to become bankrupt, along with most of our banking system)

The last option is the best one in my opinion but it would involve a level of pain that no politician would stand (for example to get our level of hourly productivity back to it's trend level, unemployment would have to rise to 7m)

The alternative is an end to the rising levels of income we have seen since the start of the industrial revolution and a return to the stagnation seen before then

I fear we are in for decade's of stagnation like Latin America suffered after it's debt bubble burst in the early 1980's and like Japan has suffered since the early 1990's

 

 

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Replying to johngroganjga:
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By Discountants
07th Aug 2013 15:10

Disaster vs Catastrophe

Rob P wrote:

Discountants wrote:

 and zombie homeowners who should be reposessed - none of them would survive if interest rates were at normal levels

 

 

I've seen suggestions that up to 3 million homes could be repossessed if interest rates rose by a few points.

3 million homeless families. 3 million empty houses that no one will be able to get a mortgage on. A massive crash in house prices leaving millions more in negative equity. Millions going bankrupt rather than spend a lifetime repaying the banks.

Once you're bankrupt there's little point in working. The social unrest caused by 3 million homeless families would be massive too, as would the drain on social services.

That seems like a recipe for complete economic disaster. 

It will certainly seem like an economic disaster - I would liken it to the pain you would feel removing a nail from your foot after you have trodden on it.

Hurts like hell compared to leaving the nail in there, but the long-term consequences of leaving the nail in there are far, far worse.

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By Carlos_Fandango
07th Aug 2013 15:02

Suggest you look at 'Moneyweek'...they say Britain is bankrupt and due for an economic meltdown any time soon... the country cannot repay it's debts!

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Time for change
By Time for change
07th Aug 2013 15:10

I've only be saying this morning

to a (soon retiring) client that these economic woes have now gone on for the last 5 to 6 years, which is an incredibly long period of time, in modern financial history. In my view, we could have a further 4 to 5 years of real difficulty, at which stage society will have become economically "war" wounded.

Youthful Prime Ministers, ministers and politicians, who have never had to truly earn a living are very quickly impressed by the green shoots of recovery, which might only turn out to be weeds.

Is this not further evidence of the North South divide which was only emphasised once again, by Lord Howell, last week, when he commented about where he felt fracking was more appropriate? The South always seem to see the bright side, long before the North.

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By ghewitt
08th Aug 2013 15:01

Hunger Games Anyone?

Seems to me that all this scurrying about and fear-mongering is just a screen for bringing in more draconian powers.

Money does not exist, it is an illusion that we have all been conned into thinking is real. Pay £1000 into your bank account and they can loan £9000. Where does this money come from that they then loan? Thin air would be good; but not even from there. Truth is it does not exist. People in their homes should stay there if they go bankrupt or cannot pay. The banks are responsible. How can the bank ask for money back that they never had in the first place and does not exist. There are a number of cases - do your own research - where homeowners have challenged the bank on this and won. 

More people need to be aware of this but it never reaches the mainstream media by design. There is far, far more going on that we don't know about and all this 'economic disaster' and the like etc., are designed to instill fear so that we are compliant easy prey, desperate for any 'solution' offered at any cost that is held out to 'save us'. We all need to wake up I think and see through the smoke and mirrors.

Trouble is we are so busy chasing our tails, watching TV or wasting time on social media or any of the other 'bread and games' trinkets that are handed out to eager hands that there is no time for thinking; not to mention an ever ready mass media system that is only too happy to tell us what our thoughts will be - assuming we ever have any.

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