Are we really entering the longest recession?
Discussion
Listening to LBC earlier they had a Professor of economics and former BOE adviser on.
He more or less said that the BOE doesn't have a clue what it's doing and Baileys poor decision making will almost certainly tank the economy. I'm not sure what the Professor's name was, but he got the big calls right in 2008 when others went against his advice.
I know who i trust more....we're in for another terrible 2 years thanks to the tories.
He more or less said that the BOE doesn't have a clue what it's doing and Baileys poor decision making will almost certainly tank the economy. I'm not sure what the Professor's name was, but he got the big calls right in 2008 when others went against his advice.
I know who i trust more....we're in for another terrible 2 years thanks to the tories.
A lot of armchair experts in here with 20/20 hindsight. I'm giving the benefit of doubt that the BoE is full of a lot of people far smarter than me and the reality is we are just one economy bobbing about in a global economic storm and the reality is there's bugger all the BoE or Government can really do to protect us. We'll just have to ride it out for the next few years and it'll be painful for some.
Having said that, I do think we are having to pass though an inevitable consequence of the country being awash with very cheap money for too long; a situation that has fed a debt-fuelled culture of consumerism and in part driven up house prices. it will be a nasty shock to those who have built a lifestyle based on availability of cheap and easy credit. I'm sure we'll hear lots of people wailing about having to reduce their standard of living and perhaps not being able to afford any longer the cars and houses they'd become used to. Sadly I think they'll have to realise that feeling wealthy from having borrowed money and the reality of their actual wealth are two very different things.
Having said that, I do think we are having to pass though an inevitable consequence of the country being awash with very cheap money for too long; a situation that has fed a debt-fuelled culture of consumerism and in part driven up house prices. it will be a nasty shock to those who have built a lifestyle based on availability of cheap and easy credit. I'm sure we'll hear lots of people wailing about having to reduce their standard of living and perhaps not being able to afford any longer the cars and houses they'd become used to. Sadly I think they'll have to realise that feeling wealthy from having borrowed money and the reality of their actual wealth are two very different things.
biggles330d said:
A lot of armchair experts in here with 20/20 hindsight. I'm giving the benefit of doubt that the BoE is full of a lot of people far smarter than me and the reality is we are just one economy bobbing about in a global economic storm and the reality is there's bugger all the BoE or Government can really do to protect us. We'll just have to ride it out for the next few years and it'll be painful for some.
Having said that, I do think we are having to pass though an inevitable consequence of the country being awash with very cheap money for too long; a situation that has fed a debt-fuelled culture of consumerism and in part driven up house prices. it will be a nasty shock to those who have built a lifestyle based on availability of cheap and easy credit. I'm sure we'll hear lots of people wailing about having to reduce their standard of living and perhaps not being able to afford any longer the cars and houses they'd become used to. Sadly I think they'll have to realise that feeling wealthy from having borrowed money and the reality of their actual wealth are two very different things.
You sound like an armchair expert!Having said that, I do think we are having to pass though an inevitable consequence of the country being awash with very cheap money for too long; a situation that has fed a debt-fuelled culture of consumerism and in part driven up house prices. it will be a nasty shock to those who have built a lifestyle based on availability of cheap and easy credit. I'm sure we'll hear lots of people wailing about having to reduce their standard of living and perhaps not being able to afford any longer the cars and houses they'd become used to. Sadly I think they'll have to realise that feeling wealthy from having borrowed money and the reality of their actual wealth are two very different things.
Acorn1 said:
Both.Cobracc said:
Listening to LBC earlier they had a Professor of economics and former BOE adviser on.
He more or less said that the BOE doesn't have a clue what it's doing and Baileys poor decision making will almost certainly tank the economy. I'm not sure what the Professor's name was, but he got the big calls right in 2008 when others went against his advice.
I know who i trust more....we're in for another terrible 2 years thanks to the tories.
This is like 2008 again. Trying to lay blame on our particular leaders/bankers.He more or less said that the BOE doesn't have a clue what it's doing and Baileys poor decision making will almost certainly tank the economy. I'm not sure what the Professor's name was, but he got the big calls right in 2008 when others went against his advice.
I know who i trust more....we're in for another terrible 2 years thanks to the tories.
Everyone else the world over is in a similar mess.
The only way to cure inflation is to boost supply side, or crush demand side.
Since we’re all about hobbling supply right now, then demand has to be crushed.
fridaypassion said:
A two year recession is virtually impossible. We might have 2 or 3 quarters with a steep drop and climb out from there but 2 years of shrinking GDP? Not a chance.
It's perhaps a perfect storm war/global inflation and of course Brexit, we're in a very weak position as we have 3 issues when everyone else just has two, soon the penny will drop and we'll have to go back into the customs union (if they will let us) Wills2 said:
It's perhaps a perfect storm war/global inflation and of course Brexit, we're in a very weak position as we have 3 issues when everyone else just has two, soon the penny will drop and we'll have to go back into the customs union (if they will let us)
Interesting. And the rest of the poison pill? Euro? Schengen? Ever closer union? I would love to see how that gets presented to the British public…The problem is that the forecast is speculative (as all are) but in a stupidly volatile environment: Ukraine, China, pandemic ad nauseum. The principles behind the forecast are questionable at best:
https://www.ft.com/content/457f5404-54c7-456e-b388...
But the BOE in its wisdom assumes it will be +10% for the next six months. Of course it will. And I am sure that we are all reassured by their previous success in forecasting sub 2% for years to come just 12 months back.
Unemployment spiralling to 6.4%. When every indicator is of massive employment shortages. Again the principles are out of whack. Absolute crock.
And then they go billy big b
ks with challenging the market on their interest rate assumptions. Right. I suspect the markets will be looking at the above and thinking the rates will be well higher than BOE assumptions. Not least because the BOE couldn’t forecast itself out of tomorrows weather.
I get that the BOE is in reputational recovery mode but this st doesn’t help. A 2 year recession? With Putin et al in play it would have been more sensible to plug a dime in Zoltar and cross fingers.
https://www.ft.com/content/457f5404-54c7-456e-b388...
article said:
Inflation would stay above 10 per cent for the next six months, and above 5 per cent for the whole of 2023. Unemployment, currently at a 50-year low of 3.5 per cent, would end next year above 4 per cent.
If all of this pain was common to both of the BoE’s scenarios, the differences between them were key to the central bank’s messaging.
In the first BoE scenario — normally considered its headline forecast — predictions were based on the assumption that financial market expectations for future interest rates would involve them peaking at 5.25 per cent next year.
Were rates to top out at this level, the BoE Monetary Policy Committee thought it most likely the UK would have to endure eight quarters of economic contraction: the longest recession since the second world war. Unemployment would rise to 6.4 per cent. This economic pain would weigh on inflation, sending it to down to zero by late 2025.
But with the BoE having an inflation target of 2 per cent, Bailey was clear this scenario suggested markets risked getting their bets wrong on future monetary policy. “We think [the] bank rate will have to go up by less than currently priced into financial markets,” said Bailey.
The BoE’s alternative scenario — which is normally buried in the central bank’s forecasting documents — that interest rates stay constant at the current level of 3 per cent was given much more prominence in presentations by Bailey and his team.
For a start M4 broad measures of money suggest that now inflation is on a sharp downwards trajectory. The impact of the Russia situation is being dealt with and prices are stabilising. QT is having an effect as is the Fed’s massively aggressive tightening which is reducing liquidity at a rate of knots.If all of this pain was common to both of the BoE’s scenarios, the differences between them were key to the central bank’s messaging.
In the first BoE scenario — normally considered its headline forecast — predictions were based on the assumption that financial market expectations for future interest rates would involve them peaking at 5.25 per cent next year.
Were rates to top out at this level, the BoE Monetary Policy Committee thought it most likely the UK would have to endure eight quarters of economic contraction: the longest recession since the second world war. Unemployment would rise to 6.4 per cent. This economic pain would weigh on inflation, sending it to down to zero by late 2025.
But with the BoE having an inflation target of 2 per cent, Bailey was clear this scenario suggested markets risked getting their bets wrong on future monetary policy. “We think [the] bank rate will have to go up by less than currently priced into financial markets,” said Bailey.
The BoE’s alternative scenario — which is normally buried in the central bank’s forecasting documents — that interest rates stay constant at the current level of 3 per cent was given much more prominence in presentations by Bailey and his team.
But the BOE in its wisdom assumes it will be +10% for the next six months. Of course it will. And I am sure that we are all reassured by their previous success in forecasting sub 2% for years to come just 12 months back.
Unemployment spiralling to 6.4%. When every indicator is of massive employment shortages. Again the principles are out of whack. Absolute crock.
And then they go billy big b
ks with challenging the market on their interest rate assumptions. Right. I suspect the markets will be looking at the above and thinking the rates will be well higher than BOE assumptions. Not least because the BOE couldn’t forecast itself out of tomorrows weather.I get that the BOE is in reputational recovery mode but this s
t doesn’t help. A 2 year recession? With Putin et al in play it would have been more sensible to plug a dime in Zoltar and cross fingers.Ridgemont said:
Wills2 said:
It's perhaps a perfect storm war/global inflation and of course Brexit, we're in a very weak position as we have 3 issues when everyone else just has two, soon the penny will drop and we'll have to go back into the customs union (if they will let us)
Interesting. And the rest of the poison pill? Euro? Schengen? Ever closer union? I would love to see how that gets presented to the British public…ked up, what's about to happen is on the leave voters, I hope they enjoy it. Wills2 said:
Ridgemont said:
Wills2 said:
It's perhaps a perfect storm war/global inflation and of course Brexit, we're in a very weak position as we have 3 issues when everyone else just has two, soon the penny will drop and we'll have to go back into the customs union (if they will let us)
Interesting. And the rest of the poison pill? Euro? Schengen? Ever closer union? I would love to see how that gets presented to the British public…ked up, what's about to happen is on the leave voters, I hope they enjoy it. Ridgemont said:
Wills2 said:
It's perhaps a perfect storm war/global inflation and of course Brexit, we're in a very weak position as we have 3 issues when everyone else just has two, soon the penny will drop and we'll have to go back into the customs union (if they will let us)
Interesting. And the rest of the poison pill? Euro? Schengen? Ever closer union? I would love to see how that gets presented to the British public…Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff