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

[biffvernon]

Wasn't Moneyweek, last week, telling us now is a good time to invest in fracking?

[UndercoverElephant]

It will only require a small increase in interest rates to tip the balance from our interest being payable to being unpayable.

Which is precisely why it won't happen.

We are in a new monetary age. Before 2008, there were circumustances (the most obvious example being Black Wednesday) when governments would use the setting of interest rates as the tool of last resort to control other things. This is no longer the case. Interest rates are now stuck close to zero, and the tool of last resort is the unbridled "printing" of electronic money (this is used to pay off unpayable debts, to "stimulate the economy" (create the illusion of growth) and also to control the relative levels of currencies and protect export power). Before 2008 this couldn't be the case, because of fears about inflation getting out of control, but now inflation is seen as a good thing (privately - nobody will say this in public) because it inflates away debts.

Everything has changed. The old rules do not apply. If only one, or a few, big countries were QEing then the game would already be up, for them. But because everybody is doing it, and because the massive inflationary pressures are being balanced out by massive deflationary pressures (everybody feeling insecure except the rich), we have the illusion of something like pre-2008 normality.

I think Money Week are wrong. We are not on the verge of a catastrophic collapse. We are on the verge of the biggest property and stock market bubble in financial history, and it will only collapse the when the plug is pulled on QE by China backing its currency with gold.

[clv101]

According to Moneyweek the economy is about to crash catastrophically.

That is the single most important thing for the politicians and central bankers to avoid. We shouldn't underestimate their ability to manipulate the system, such that anything but a catastrophic crash happens. There's no guarantee they'll succeed, but i think a long, drawn out decline is more likely than a fast collapse.

[UndercoverElephant]

According to Moneyweek the economy is about to crash catastrophically.

That is the single most important thing for the politicians and central bankers to avoid. We shouldn't underestimate their ability to manipulate the system, such that anything but a catastrophic crash happens. There's no guarantee they'll succeed, but i think a long, drawn out decline is more likely than a fast collapse.

They can't manipulate the government of the People's Republic of China.

[biffvernon]

According to Moneyweek the economy is about to crash catastrophically.

That is the single most important thing for the politicians and central bankers to avoid. We shouldn't underestimate their ability to manipulate the system, such that anything but a catastrophic crash happens. There's no guarantee they'll succeed, but i think a long, drawn out decline is more likely than a fast collapse.

They can't manipulate the government of the People's Republic of China.

But the single most important thing for the Chinese politicians is to avoid a catastrophic crash so they have a common agenda. The silver lining to Chinese investment in UK infrastructure is that we have a mutual interdependence.

[Snail]

biffvernon:

But the single most important thing for the Chinese politicians is to avoid a catastrophic crash so they have a common agenda. The silver lining to Chinese investment in UK infrastructure is that we have a mutual interdependence.

Exactly

[UndercoverElephant]

That is the single most important thing for the politicians and central bankers to avoid. We shouldn't underestimate their ability to manipulate the system, such that anything but a catastrophic crash happens. There's no guarantee they'll succeed, but i think a long, drawn out decline is more likely than a fast collapse.

They can't manipulate the government of the People's Republic of China.

But the single most important thing for the Chinese politicians is to avoid a catastrophic crash so they have a common agenda.

Yes and no. While the US dollar remains the foundation stone of the global monetary system and there is no other potential foundation in place then it is not in their interest to pull the plug (which they could do already if they wanted to, by dumping their own dollar reserves and US debt). BUT, if they were to back their own currency with gold then this would be, in effect, setting up a new foundation to the global monetary system. At that point all sorts of third parties, such as middle eastern oil exporters and the other BRIC countries, can start an "orderly" transfer from from the old, rotten foundation of the US dollar to the shiny new foundation of a gold-backed Renminbi. This does not lead to a global catastrophic crash, but does lead to an economic/financial catastrophe for the Americans - and to a lesser extent the UK, the rest of Europe, Japan and various other "western" nations. It would be particularly nasty for the Americans because they are accustomed to the system being rigged in their favour, which is not true of the others I just listed. But it would not be a catastrophe for the Chinese. Far from it - they would, overnight, becomes the most powerful financial force on the planet.

The silver lining to Chinese investment in UK infrastructure is that we have a mutual interdependence.

The Chinese aren't dependent on the UK for anything. They can survive without us.

[emordnilap]

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.

Yes.

[kenneal - lagger]

..........The Chinese aren't dependent on the UK for anything. .......

Rolls Royce jet engines? The best in the world, still!

[RenewableCandy]

..........The Chinese aren't dependent on the UK for anything. .......

Rolls Royce jet engines? The best in the world, still!

Dunnit makeyer praad!! (actually, in an odd way, it almost does).

The saddest thing about China coming out on top like this is not so much the effect it'll have on us (bad enough) but the effect it'll have on them: with everybody else's resources, indirectly, at their disposal they've no incentive to re-start looking after their own.