So the UK economy is doing OK. Or is it?

[boisdevie]

Don't know whether to class myself as a pessimist or realist but the recent economic recovery stuff in the news leaves me less than convinced. When interest rates go up just a little bit millions of mortgage payers are going to be in the deep doodoo. Am I being a pessimistic bugger?

[woodburner]

No.

[adam2]

The UK economy seems to be doing a bit better than some of our competitors, as may be seen from increased employment and increased retail activity.
In the long term though I still fear doom. Oil production has probably peaked, oil production per head has undoubtedly peaked.
Many other natural resources are becoming more expensive as the easy to obtain reserves are depleted.

I suspect that the traditional boom and bust cycle might carry on for decades yet, but with each bust being a bit bigger and each boom a bit smaller.

I suspect that we are at the beginning of the next boom, which will be smaller than the last one.
It will be followed by the next bust, which I suspect will be a bit worse than the last one.

[Little John]

Don't know whether to class myself as a pessimist or realist but the recent economic recovery stuff in the news leaves me less than convinced. When interest rates go up just a little bit millions of mortgage payers are going to be in the deep doodoo. Am I being a pessimistic bugger?

The trick they are trying to pull off is to inflate the economy back to life just enough to make sure it happens but not sufficiently to cause a run on the money markets.

Up until 2008, CB's lowered interest rates. Banks had to take the cheap money/debt on offer and push it out into the economy one way or another or their competitors would do the same and outcompete them. Thus, in an economy stripped of most primary production, we ended up with a wall of debt with nowhere useful to go where it can generate real primary wealth by selling said primary resource (or products derived thereof) to the rest of the world. And so, it went to the only "safe" primary investment left in town; real estate. In turn causing the exchange value of said real estate to rise commensurately with the debased and inflated supply of the thing it was being exchanged for, namely that debt.

However, the above game could only go on for so long in the best of worlds that was experiencing vigorous growth. In a world of tightening resources and slowing or even contracting economies, however, it was a car crash wating to happen. We had that car crash about 7 years back. Our dear leaders are currently tryng to kick-start the wreck back to life with more debt. It wont work because it can't work.

But then, that may not even be it's primary function. For, the only people who become poorer under such a regime of an inflated money supply being pushed into the banking system and being used by corporate investers to drive up the price of all essentail hard commodities such as fuel and food are people who must rely on a paycheck from month to month, but who have few hard assets of their own. That'll be poor people then. And the only people who objectively feel no effect and, relatively, become wealthier due to the rising exchange value of their asests are people whose exchange value is largely tied up in said assets. That'll be rich people then.

What a f***ing surprise.

In other words, the policies of "recovery" are, in truth, little more than policies designed to transfer a larger share of a diminishing pie to the top few percent.

Which is, of course, why so many people are scratching their heads and wondering to themselves how it is, if the economy is "recovering", that they are struggling so much more.

[Ballard]

Steve, agree wholeheartedly

[boisdevie]

I have to agree with the last poster. I also feel that many of the 'remedies' seem to consist of kicking the ball further down the field. Look at the US increasing it's debt ceiling - bit like an alcoholic having just one more before giving up.

[SleeperService]

Steve you are absolutely spot on I feel.

I liken it to the panic buying you get when it snows for more than ten minutes. Grab all we can because we may not be able to get any tomorrow....

[UndercoverElephant]

Yes to Steve.

Don't know whether to class myself as a pessimist or realist but the recent economic recovery stuff in the news leaves me less than convinced. When interest rates go up just a little bit millions of mortgage payers are going to be in the deep doodoo. Am I being a pessimistic bugger?

Interest rates are never going up even a little bit, and "quantitative easing" i.e. money-printing is never going to stop. At least not as long as the existing monetary system continues to exist. The entire economy is now like a heroin addict's body - the system has re-configured itself in such a way that it is fully expecting the drug (near-zero interest rates and free "monetisation of debt") to be supplied ad-infinitum, and as soon as the supply is stopped it will experience massive withdrawal effects i.e. everybody will stop spending/investing and the stock market will crash. This will harm the interests of those with lots invested in the stock market (i.e. rich people), and it will therefore be resisted as long as this is possible.

I don't know how this ends, but I'm still betting on the Chinese backing their currency with gold, causing a "run on the dollar" and dollar-denominated assets, which in turn will cause a political meltdown in the US and lead to God only knows where.

[clv101]

Let's be clear, there is no 'economic sustainability' and broadly speaking the rich are getting richer, the poor getting poorer. We certainly haven't come anywhere close to fixing the system.

However, that said, the situation is a lot better (by the usual metrics) than many predicted. A lot better than it might have been. The show has been kept on the road - for how long, who knows. That is the first priority of our politicians and our central bankers. That first priority has been met so far, and there was a good chance that it wouldn't be.

So the UK economy is doing OK? No, but it's not doing as badly as feared.

[cubes]

Need a like button for Steve's post!

From what I see here the economy hasn't really recovered at all. Still no jobs for those looking, no (or small) pay rises for those in work and as said above, many people with large mortgages (compared to income) and other debt who're going to be totally f***ed when interest rates eventually rise. No matter how far the government kick the can down the road, these people will lose their houses. The only way out I can see is to 'nationalise' these people's houses, leave them resident as social housing with the option of paying the government back to rebuy their house at some time the future. Probably still won't be enough though.

[SleeperService]

Need a like button for your post as well cubes!

UE makes an interesting point about the interest rate 'plan'. I shall mull that over awhile.

[biffvernon]

it's not doing as badly as feared.

That depends on the feared by whom and when. If we go back to the 2008 crash, or a little thereafter, few (outside PS) were expecting the recession would be as long as it has been and the Office for Budget Responsibility has been regularly moving it's own goalposts, badger-fashion.

[biffvernon]

Of course from the global warming perspective (and not much else counts for much) the rise in GNP is bad news. I guess we can take heart that the GNP growth is tipping in favour of the service sector and away from manufacturing and construction, so the carbon intensity of the economy may be declining.

[woodburner]

I guess we can take heart that the GNP growth is tipping in favour of the service sector and away from manufacturing and construction, so the carbon intensity of the economy may be declining.

Not so fast. Manufacturing effect will be small as it will just be done mostly in China, India etc, and probably using coal to power it. While we're talking coal, most of Australia's electricity comes from coal.

[kenneal - lagger]

According to Moneyweek the economy is about to crash catastrophically. If you include the government's pension liabilities, UK debt is over 900% of GDP, which is the largest in the world. The only other country to have had such a high debt was the Weimar Republic, Germany in the 1920s!! That is the crash which let the Nazis into power.

It will only require a small increase in interest rates to tip the balance from our interest being payable to being unpayable. Then we're toast and in the same boat as Greece and Ireland and possibly worse.