John Ward February 19, 2010 credit ratings, Darling Balls scrap, Hedge Funds making UK a target, No QE, private sector dead, UK Economic indecision

Seven Deadly Reasons why Darling’s 60 economists are hopelessly wrong

The Slogger outlines why the ‘experts’ have got it wrong yet again

1. How any economist can ‘know’ at the moment what either Party will do is beyond me. The Brown/Balls v Darling/Mandelson schism changes the Party’s mind each week about how much and when and what.
2. Over at the Treasury, they are dreading the Budget. Darling and Balls will still be arguing in the taxi going to Westminster.
3. These signs are very, very bad indeed as far as the S&Ps and Fitchs are concerned: it suggests politics taking over from good governance. Both these rating agencies are leaking that unless action is taken and soon, they will downgrade the UK from AAa.
4. Senior Eurozone credit managers believe that the people in Athens are far more on the ball than our Treasury is…but the Treasury’s hands are tied by politics.
5. Much more of this and we will start to attract unwanted attention from the Hedgies.
6. There is no way the private manufacturing sector is anywhere near ready to respond without further QE. King has pulled this plug because the cupboard is bare.
7. It matters not if 260 economists sign letters: they don’t get out enough. This is about commercial anthropology, not dusty graphs and shiny elbows.

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1

Ralph Kent on February 20, 2010 at 11:11 am

http://legacy.signonsandiego.com/uniontrib/20081010/news_lz1e10schiff.html

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Ralph Kent on February 20, 2010 at 11:09 am

There's an alternative way that story played out, as occurred in Japan in the early 1990s.A man buys a flat with a 100% mortgage for £100000. Unwittingly, he has been duped into paying top price at the top of the market.The financial crisis occurs, millions lose their job. Our man tells the bank he can't afford to pay his mortgage any more. His bank says 'well, in that case, we are going to repossess your property'."Do what you have to do" says our man "after all, I have no equity in it anyway, you own it". The bank looks to see what similar flats are now selling for – and sees £50,000, given the market is awash with people who overstretched themselves and have been forced to sell."We've changed our mind" says the bank "we aren't going to repossess you – you can carry on living there on reduced mortgage payments". And hence, Japan's near zero growth economy for the past twenty odd years.What I like most about this story is how the madness of 100% and 105% mortgages comes back from being the individual's problem to the bank's problem.Its a bit of a poetic counterpoint to how their greedy gambling stopped being their problem and became every one of ours problem.Might be worth bearing in mind when the money finally runs out and asset prices attain a realistic level. Should be an interesting day all round….

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Ted Treen on February 19, 2010 at 5:42 pm

What you can do with £100.00 ?It's a slow day in a little east Norfolk town. The sun is beating down,and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit. On this particular day a rich tourist is driving through town.He stops at the hotel and lays £100 on the desk saying he wants to inspect the rooms upstairs in order to pick one to spend the night.As soon as the man walks upstairs, the owner grabs the £100 and runs next door to pay his debt to the butcher.The butcher takes the £100 and runs down the street to repay his debt to the pig farmer.The pig farmer takes the £100 and heads off to pay his bill at the supplier of feed and fuel.The guy at the Farmer's Co-op takes the £100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her "services" on credit.The hooker rushes to the hotel and pays off her room bill with the hotel owner.The hotel proprietor then places the £100 back on the counter so the rich traveller will not suspect anything.At that moment the traveller comes down the stairs, picks up the £100, states that the rooms are not satisfactory, pockets the money, and leaves town.No one produced anything. No one earned anything.However, the whole town is now out of debt and now looks to the future with a lot more optimism.And that, ladies and gentlemen, is how the British Government is conducting business today…

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Ralph Kent on February 19, 2010 at 5:35 pm

You can tell Brown's getting rattled – what with Jan's borrowing and today's retail figures (love the way they keep emphasising the snow as if there was no way they could have factored that into their forecasts!!). The fact Brown is lashing out at the press for even mentioning the recession / depression is amusing. Obviously his tacit acceptance of 10xBTL self-cert mortgages back in the first half of the last decade had no bearing on the problems we are now facing….those pesky journalists, getting us into this mess…

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John Ward on February 19, 2010 at 5:18 pm

RalphPerhaps this is like Brown's retinal detachment – no vision, insight or foresight. And above all, no connection with what is…or what might be – beyond megabucks, banks, mad bourses and 'history is bunk'.Except history isn't bunk, and an unholy cross between Weimar economics and Nazi fear-mongering may be leading us all to unpleasantly dark corners.

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Ralph Kent on February 19, 2010 at 4:57 pm

read your comment today on stephanomics – good post. i think ultimately the economists have to say that – firstly – turkeys don't vote for christmas, and secondly, they realise the economy is a busted flush – we can't lower interest rates any more, the recovery's not coming, so the only hope left is to keep pumping with funny money in the hope that the old girl will fire up again. basically shoving it all on red, closing their eyes and hoping.i'm an economist too – i did three years at a top uni back in the day, and that's my opinion.the issue is the detachment – the people in the city driving the dow and ftse to new highs are precisely the same people who have no engagement with the real world, and when you're making a quarter mill a year, the prospect of higher taxes is somehow easier to shrug off, I'm guessing?

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Demetrius on February 19, 2010 at 4:49 pm

There's a breathless hush in the close tonight……

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