Blimey: the Bank of England are printing money...

[WilfSell]

...Or quantitative easing as they call it.

We'll be inviting Berlusconi to run the NHS next. And paying 2 million pounds for bread.

Ho hum.

As long as they spend it on public works, I don't mind.

Basically food prices will start to go through the roof because the Dow is falling and the pound is falling in value by the hour.
Your pound is now worth about 93p I read a few hours ago.

Buy clothes for the children in the next sizes up and food that won't go off because everything is about to become more expense, ok we don't care about tv's or sofa's but food and warm clothing is essential.
I'm off to europe in a few weeks and don't smoke but will be bringing back my duty free allowance to barter with, little things will become important as this starts to take effect.

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cestlavie, are you my dh? He and I have been having a discussion about this for the last 30 minutes, and he has been making all your points (more or less in the order you've been making them). If it is you, please do the washing up before you go to bed, and remember to change the thermostat on the boiler.

can i ask a question ? i was wondering why, if the interest rate is now so low, why does my credit card still charge me so much interest, do they not have to lower their rates as well? or not as they are making moey out of my student debts i occurred i s'pose? and still trying to pay off!

It's interesting, because here in Australia we also have a Labour government but they are doing things slightly differently. We have had a cut in interest rates (but ours were much higher to start with).

We have had two "financial stimulus" packages - simply money given to lower earners. We are getting the second one next month - $900 to anyone earning $80,000 or below (not a terrible wage here) and graduated amounts for anyone erning up to $100,000.

The govt is also putting billions into building school infrastructure, various "green" projects and also first time buyers get a grant of $14,000 ($21,000 if you buy a new home). This to support tradespeople and builders, and also get some infrastructure projets done.

It's pure Keynesian economics, which I learnt a long time ago should NOT work - so it's interesting to watch and see what will happen in the longer term.

Worley - the simple answer is "because they can".

Gillian Tett saw it coming.

worley the two are entirely seperate, you have a private agreement with your credit card company.

Ozzie the big difference I have always found in Australia is that they put Australians first, we're so fucked it's not funny.
My friend is also a doctor in Sydney and couldn't believe the number of managers and pen pushers we have in our NHS, all that needs to stop and public sector waste needs to be cut back but then the UK will be shown for the unproductive nation we really are.
What do we do these days ????

Start buying beans Kerry

Sorrento, I think that's true. Plus it does help that we do have a smaller population, and immigration is very controlled (not that I think immigration is a bad thing - quite the opposite as I am an immigrant) which from an economic perspective could be said to be an advantage as Aus can adjust visa allowances in line with available jobs.

Our economy is totally different though - we are basically a primary producer - kind of the "bottom" of the economic food chain, producing minerals, food etc. It will be interesting to see how things pan out in a year or so as our economy is very dependent on overseas exports to China and India.

But yes, the govt is basically happy to do whatever is necessary to keep people in jobs and spending, whatever the correct economic thinking is.

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Generally I have found midwives know everything about absolutely everything so it wouldn't surprise me in the least actually.
And they spend all day surrounded by twats not unlike the politicans.

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cestlavie Try reading Fred Harrison "BoomBust - House Prices, Banking and The Great Depression of 2010" first pub'd in 2005. He also wrote a book "The Power In The Land" in 1983 which predicted the 1991 mini-recession and identfied the basics of the cyclical thing we are all experiencing. 'BoomBust' p.10 on Brown "Instead of accepting the political obligation to maintain full employment, he silently shifted responsibility onto Britain's households.Instead of increasing taxes and/or public debt to finance investment..he presided over the growth of a record level of personal indebtedness.. By July 2004 that debt reached a staggerring £1trillion. To underpin this a blind eye had to be turned to inflation in the housing market.If the business cycle had played out in the way the we would have predicted on the basis of historical trends the price of houses would have deflated in 2001-2..Instead, under GB's stewardship, the residential sector was allowed to bubble. This set new benchmarks for prices: the next housing bubble would have to inflate to stupendous levels before finally collapsing and driving the economy into the Depression of 2010." He wrote to GB about all this stuff in, I think, 1997. Lots of people predicted it the Govt. did nothing because it wanted a 3rd term - end of. They don't care - they'll be alright because they are rich and powerful. Once you 'get-it' it's hard not to feel v.at how done over we've been (esp. if for years was convinced Labourite). It is their fault, they did know what they were doing.

Genuinely - can anyone i.d. a success story re. printing cash (imho Japan doesn't count L-shaped recession still buggered)?

I was sent that book by someone and it is a shocker!I am going to re read it as I didn't give it my full attention at the time and just skimmed over it.There is NO WAY a lot of speculators would have had the knowledge to sell up late 06 if this information wasn't available and the govt would def have had access to it.In 2005 the Bof E were leaned on to lower interest rates to keep the bubble going longer as it really should have crumbled then

frankly i don't think it's a big deal whether someone predicted a recession or not.

The problems brewing in the credit markets were obvious to anyone who cared to take an interest, including bankers and politicians.

Borrowing conditions between 2003 and mid-2007 got progressively easier for individuals and companies. Clearly there were bigger risks with 125% mortgage loans and corporate loans that didn't give creditors the immediate right to call in their loan if interest payments were missed.

Many, many stories in the financial and mainstream press highlighted these risks. Usually they included a quote from an analyst saying something like - "it could all blow up, but it's hard to see what the trigger will be." That was mainly because interest rates were low and debt was affordable to service. There was no clear reason to think banks would suddenly stop lending to each other and that wholesale lending markets would dry up for both banks and the "shadow banking system" that includes hedge funds, SIVs, etc.

Gordon Brown can say "no one saw it coming," and he's sort of right in that no one predicted exactly what would come to pass from August 2007 (what the "trigger" would be). But it's no excuse for being asleep at the wheel when it came to regulating the financial system effectively, or for allowing the housing market to run as far as it did.

The IMF warned for years that the U.K. housing market had reached bubble proportions. It didn't take a financial expert though to see that having to pay 5.7 times average earnings for the average UK house was not a sustainable proposition.

Unfortunately a lot of homeowners and prospective buyers were happy to believe things like "house prices can only keep going up in the UK - because there is limited supply, immigration, always more suckers, blah blah blah"

goodnightmoon/ stickybun: thanks for those recommendations

iorek: interesting about Gillian Tett - she would have been a high profile name but clearly (as her article indicates) she was in the minority at the time.

goodnightmoon: I think you and I will have to agree to disagree on this. There is a big difference between believing that the economy might be over-heating/ house prices are over-valued and predicting a house price crash and the current recession. Virtually no-one predicted a crash until the market started sliding in early 2007 and certainly no-one predicted a recession like the one we're experiencing. I understand that those economists above did (and almost certainly others) but they were in the less vocal minority - the more vocal, more well-known commentators and organisations has slightly different views as below. And that's leaving aside the more partisan viewpoints of all the central banks, financial institutions and corporates. My point isn't that people shouldn't have seen it coming - they should as is now evident. My point is that many, many people did not, including just about every Western government, every central bank, every regulatory authority and every capital market. And you what, I didn't see it coming either. I thought that funds would slow, credit would reduce and there would be a readjustment in asset prices (including house prices) but I never expected anything like this.

?Over the past year, house price growth has slowed in many countries, consistent with the historical cross-country synchronization in these prices... the slowing house price appreciation in Australia, Ireland, and the United Kingdom has brought house prices in these countries closer to current estimates of fundamental value? Looking forward [on GDP growth] as the factors that dampened activity in 2005 wane, growth is expected to pick up to 2.5% in 2006 and 2.7% in 2007 [continuing] into 2008.? (IMF, April 2006)

?In this respect, it is comforting to note that in many countries [other than the US], households seem well prepared to cope with the consequences of a downturn in housing markets... Household balance sheets are generally sound and debtservicing burdens still moderate, although some low-income households may be overstretched. A cooling housing market should therefore not necessarily be a cause for anxiety.? (OECD, November 2006)

?A year ago, all the talk was about the degree to which house prices were too high. Overvaluation was taken as an accepted fact. Now, the consensus has shifted to the point where few believe house prices will decline from their current levels - close to record highs relative to income - for some time. Analysis of the housing market suggests that so long as real interest rates do not go up again, house prices seem sustainable at their current rates.? (Financial Times, March 2006)

?Our research shows that fundamentals adequately explain the current level of house prices? (Department of Economics, Oxford University, March 2006)

FTSE Real Estate index was up just under 5% over the entirety of 2006 and just under 10% at its peak over the year (Bloomberg)

Funnily enough I said to dh the other week that they should just print some more money. I have no idea about economics whatsoever so I had a chuckle to myself when I realised that it actually was a viable option.

cestlavie - I don't think we are disagreeing about anything. It was impossible to predict exactly what would trigger a slowdown or crash, and the knock on effects. So many areas of the financial markets that have triggered and/or exacerbated the damage were relatively new and untested in times of stress.

Vince Cable has likened the labour party to a bad bank- toxic and badly managed. I couldn't agree more.