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Is Britain's Recovery Too Good To Be True?

Tyler Durden's picture




 

There was more good news for the UK economy this morning; the unemployment rate dropped to 7.1% during the three months to December - the biggest ever quarterly increase in employment. This follows the IMF this week raising its (admittedkly terrible track record-based) forecast for the UK economy; it now expects it to grow 2.4% this year which is faster than any other major European economy. Nick Beecroft, Chairman of Saxo Capital Markets UK, is “optimistic” about Britain’s recovery, but has three concerns...

1. The recovery is too dependent on consumer spending. Nick says that in order to feel "really" comfortable about the recovery, he would like to see growth in business investment ans well as consumer spending.

2. The pound is too strong. Nick says sterling, which is at a five year hjigh against the dollar, is getting too strong for the sake of the recovery. The Bank of England is now starting to get concerned about it too. Nick warns there could even be more strength to come, unless we see an adaptation of forward guidance.

Furthermore, as Bloomberg notes, the pound, despite all the rhetoric from the Bank of England, is now almost 2% (on a trade-weighted basis) higher than when the Bank of England said last month that further gains would endanger the economy.

3. Bank of England could lose its credibility. Nick is worried there is now a risk of credibility for BoE Governor Mark Carney. If he wants to keep rates lower but keep the threshold at 7 percent, people may start to ask what value it actually has.

The Bank of England has said it will consider increasing interest rates from the current record low of 0.5 percent when the unemployment rate falls below 7 percent.

 

Source: Saxo Bank

 

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Wed, 01/22/2014 - 09:33 | 4354961 Cunnial
Cunnial's picture

Heavens above I would nail that asian number into next week...

Wed, 01/22/2014 - 09:39 | 4354974 LetThemEatRand
LetThemEatRand's picture

Nick Beecroft, is that you?  I thought you looked a little distracted during the piece.

Wed, 01/22/2014 - 09:48 | 4354999 negative rates
negative rates's picture

If it was based on our new york economy, then yes.

Wed, 01/22/2014 - 10:40 | 4355203 Occident Mortal
Occident Mortal's picture

According to the ONS the fastest growing categories (quarter on quarter) include:

 

1). +3.8% - Water supply, sewerage etc.

2). +2.5% - Construction

3). +1.4% - Agriculture, forestry & Fishing

4). +1.3% - Distribution, hotels & restaurants

5). +1.0% - Business services & finance

6). +0.9% - Manufacturing

7). +0.4% - Mining and quarrying

8). +0.3% - government & other services

9). +0.2% - Transport, storage & communication

 

That looks like the kind of recovery that the UK would want. Not dependent on Government largese or ballooning financial paper shufflers.

 

Also where does this guy see over dependence on consumer spending??? Water Supply? Sewarage? Construction? Agriculture? Forestry?

Come on pal, get a clue.

Wed, 01/22/2014 - 11:25 | 4355324 max2205
max2205's picture

Sorry UK makes what?

Wed, 01/22/2014 - 14:02 | 4355412 Occident Mortal
Occident Mortal's picture

Our focus is on supplying the four major pilars of capitalism...

 

Drugs, arms, integrated petroleum and banks.

 

Rather than confuse our trade partners we like to offer a sequence of services.

 

1st we turn up with arms, you will need our tanks to fight the crazy guys next door (who we gave a tonne of tanks to just last week).

2nd we turn up looking for oil (you better hope you don't have any).

3rd our banks will turn up to bamboozle your government into signing all kinds of incomprehensible contracts, so that we can channel away your future tax revenue and reduce your risk. Need some swaps? Too much ink in your pen? We can help.

4th our drug companies will turn up, to diagnose everyone as sick. 

 

Yup, we're killing it.

Wed, 01/22/2014 - 15:08 | 4356124 TruthInSunshine
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The U.S. is approximately 35 years behind Britain, following in her footsteps, in terms of devolution of living standards for the mass majority, restriction on liberties, an economy gutted of real industry, and massive (much higher than at present levels) rates of red tape, taxation, fees & an entire litany of other government heavy-handed intrusions.

If one wants to accurately predict what the U.S. will look like in 35 to 40 years, look no further than present day Britain, where the middle class has been eviscerated, and the 1/2% who work in the financial services industry/banking live in London, and enjoy great food, protection, entertainment options, magnificent housing (even if vertical), because they have the financial means to afford the astronomical costs of living there.

The U.S. has New York as it's London, and the rest of the nation will live like relative paupers, with an eviscerated middle class and huge FSA.

Wed, 01/22/2014 - 17:32 | 4356713 BigJim
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I'd say the USA is still ahead of the UK in terms of outright police-state fascism. The British are less hurrah for our men in uniform, protecting our way of life! than the yanks. More Brits have a nuanced view of the law, terrorism,  of Muslim grievances, of the costs (and ultimate failure) of empire.

People rarely fly the UK flag from their homes or businesses, either. In the States, Old Glory is just everywhere. After you've been away for a while and come back you realise just how fucking creepy it all is.

Wed, 01/22/2014 - 22:54 | 4357718 Tinky
Tinky's picture

I rarely disagree with you, but this is an exception. I'd argue that the two, in terms of a timeline, are much, much closer together than that. I'd also suggest that the U.K.'s proximity to Europe will help it (in various ways) as conditions around the world deteriorate.

Wed, 01/22/2014 - 09:44 | 4354988 CrimsonAvenger
CrimsonAvenger's picture

I think we're looking at actual workforce shortages in the UK - why else would they have to hire lingerie models as news commentators?

Wed, 01/22/2014 - 09:48 | 4354997 Hippocratic Oaf
Hippocratic Oaf's picture

They hit the PC button just right.....not too Asian, maybe some negro and white.

Not too British of an accent. that's where we're headed.

Wed, 01/22/2014 - 09:49 | 4354998 Headbanger
Headbanger's picture

She's not Asian:

http://dk.linkedin.com/pub/lea-jakobiak/61/b29/b5b

But I'd probably have a dozen kids with her around the house!

Wed, 01/22/2014 - 10:09 | 4355080 Sudden Debt
Sudden Debt's picture

she looks like a young miss piggy with black hair...

Wed, 01/22/2014 - 12:07 | 4355457 The.Harmless.Who
The.Harmless.Who's picture

 

You might have beaten to me to it by posting about your desires, but I tell you a couple of things right now: 

 

1.  There's a queue forming (with the same thoughts you have)

 

2. Somewhere out there, there's probably a bloke who's bored of ploughing this talking head. 

 

Now, with that out of the way, can I just say that being in the UK (London even!), this so-called recovery is a phoney.  Like the US, the shopping centres (Malls for our atlantic cousins), are full of "Browsers" - this from a nation of shop-keepers.

 

Debt (oh, the number of ads for 4000% APR on the TV are rampant) is out of control.  Property speculation is rife, grownups are living at home or sharing with others - unable to buy. 

 

So, why the optimism in the stats?  Well, the masters of spin are born here for a start, and we love zero-contracts.  

 

What else can I think of? Oh! the service industry. Someone has to serve the elites, and clean up after them. Furthermore, being permanent members of the UN, our arms industry brings home the bacon.  And lastly, but not least, we have the "City" - the biggest casino around.  

 

Massive boost to Sterling right there. 

 

Damn it, in hindsight, perhaps it was better to think about ploughing this chick instead of thinking about the state of the UK. 

 

 

Wed, 01/22/2014 - 14:40 | 4356043 A Nanny Moose
A Nanny Moose's picture

2. Somewhere out there, there's probably a bloke who's bored of ploughing this talking head.

It's nothing a little duct tape couldn't fix.

Wed, 01/22/2014 - 09:34 | 4354964 hugovanderbubble
hugovanderbubble's picture

Saxo Bank is right,

 

UK is afreaking bubble, specially in Equities and Real Estate.

Wed, 01/22/2014 - 09:47 | 4354993 Caviar Emptor
Caviar Emptor's picture

UK economy even more financialized than USA. Re-bubbling banks is a matter of official money printing...errr...policy. Real estate like in US mostly purchased as investment, and a good deal of that is foreign oligarchs laundering...errr....parking cash. Nice recovery brothers

Wed, 01/22/2014 - 09:52 | 4355009 negative rates
negative rates's picture

But their PM's do not have a heart of tungstun, can you say leverage anyone?

Wed, 01/22/2014 - 10:08 | 4355079 disabledvet
disabledvet's picture

the USA...which to my knowledge HAD a reserve currency going into QE...didn't "do QE" because "we had this huge jobs boom right around the corner." My understanding on the events of 2008 are thus: "we panicked like mofo's and went cryin' to our mama"...in this case "The Federal Government." In short..."this whole free market capitalism thing is really a total bunch of bullshit." The "joke" of course is that "no one told Ben Bernanke" and he proceeded with a policy where "the money people pay." This was called "QE"../and it involved such a mass of Bullshitski only Wall Street would be enamored with. It drove down demand, annihilated taxpayers, destroyed Governments and created a permanent underclass. "And this was considered great news." And why not! When the whole thing is a scam anyways dependent on a taxpayer earning "less than the minimum wage" with "benefits that in fact turned out not to exist"...nay, veerily...what's not to LOVE! Of course there does seem to be some confusion as to why ratings at CNBC remain at "perma-lows." (yes...I still listen in. the irony is truly wanton...and somehow to my liking.) but whilst Sleeping Beauty awaits her Prince isn't the question "if all is well why exit?" I just can't get out of my head a little voice saying "all is not well. All is bad actually."

Wed, 01/22/2014 - 10:32 | 4355168 XAU XAG
XAU XAG's picture

@hugovanderbubble

 

So true

Wed, 01/22/2014 - 09:34 | 4354965 Max Damage
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Am in the UK construction sector for housing and our sales are strong. Many seem to believe we are over the worst. I don't as we all know the UK is bankrupt along with most western nations and this recovery will be fleeting. Debt will come back to the fore sooner or later. Only this time the debts are higher, and the governments have no bail out room left

Wed, 01/22/2014 - 10:25 | 4355145 Winston Churchill
Winston Churchill's picture

I have a very old friend who is a small developer in the UK.

He says he cannot raise finance at any rate to build out his land bank.

You must be much closer to the money spigot.

Wed, 01/22/2014 - 11:10 | 4355296 Max Damage
Max Damage's picture

We sell chemicals needed to make PVC windows, gutters, pipe, etc, etc. So yes we are. Business is strong but we have took market share with good products. The market itself has fell 20% since 2007 for our products, but we have been quick and good at seizing oppertunities. Those who have survived the last few years are doing ok. Others either died or are in a mess now. 

But as said above I think this is only fleeting as the macro problems are bigger than they ever were now

Wed, 01/22/2014 - 17:34 | 4356741 BigJim
BigJim's picture

UK energy prices are higher than the US, the housing stock is a lot older, so there's more of an incentive (and market) to upgrade to double-glazing.

Wed, 01/22/2014 - 10:32 | 4355176 XAU XAG
XAU XAG's picture

@Max Damage

 

nail meets hammer!

Wed, 01/22/2014 - 09:34 | 4354966 IridiumRebel
IridiumRebel's picture
Is America's Recovery Too Good To Be True? Is Belgium's Recovery Too Good To Be True? Is France's Recovery Too Good To Be True? Is Spain's Recovery Too Good To Be True? Is Italy's Recovery Too Good To Be True? Is THE WEST's Recovery Too Good To Be True?

YES YES YES

Wed, 01/22/2014 - 09:35 | 4354969 Nex
Nex's picture

Scotland referendum about independence. Same for Spain and Catalonya.

Wed, 01/22/2014 - 09:37 | 4354972 Stoploss
Stoploss's picture

Been real quiet over there for the last few months.

 

 

Dat not good..

Wed, 01/22/2014 - 09:38 | 4354975 dildo o flaherty
dildo o flaherty's picture

I'd have more trust in a wheelbarrow full of shite than the manure that Nick Beecroft talks.

Wed, 01/22/2014 - 09:39 | 4354976 madbraz
madbraz's picture

Wow, the top 0.01% of the world congregates in one spot (Davos) to define how miserable the bottom 90% will be and how much their children will suffer based on their "findings".

An avalanche would do the trick.

 

Wed, 01/22/2014 - 17:37 | 4356758 BigJim
BigJim's picture

All it takes is for one local air force praetorian to decide he's sick of this shit, and drops a couple of hellfires on the hotel. That would do it.

I wonder if the local military remove all the ordnance from their fighters, bombers and drones for the duration of these events (like I've heard US soldiers are instructed to divest themselves of their bullets when Zero comes to visit)?

Wed, 01/22/2014 - 09:42 | 4354981 JustObserving
JustObserving's picture

Isn't the US official unemployment 6.7%? Shadowstats says it is 23%.  And here is someone who claims it is 37.2% and the misery index is the worst in 40 years:

Don't believe the happy talk coming out of the White House, Federal Reserve and Treasury Department when it comes to the realunemployment rate and the true “Misery Index.” Because, according to an influential Wall Street advisor, the figures are a fraud.

In a memo to clients provided to Secrets, David John Marotta calculates the actual unemployment rate of those not working at a sky-high 37.2 percent, not the 6.7 percent advertised by the Fed, and the Misery Index at over 14, not the 8 claimed by the government.

http://washingtonexaminer.com/wall-street-advisor-actual-unemployment-is...

http://www.shadowstats.com/alternate_data/unemployment-charts

Wed, 01/22/2014 - 10:04 | 4355053 gwar5
gwar5's picture

Read that interesting report yesterday, but I still like Shadowstats as the gold standard of reality because Williams has doner it for years and uses the same official methodology used in 1990 and 1980, so it's possible to compare apples to apples. 

 

Unemployment could be higher if take into account hidden job losses ---- but employment could also be a little lower if one could track jobs being performed off the books for cash. Net-net, I go with Shadowstats.

Either way, there are no jobs and we are in a Depression.

 

 

 

Wed, 01/22/2014 - 10:13 | 4355094 disabledvet
disabledvet's picture

yeah...perrrty much. "we're exiting." It does truly beg the question "what the hell is everyone else doing?"

Wed, 01/22/2014 - 17:39 | 4356762 BigJim
BigJim's picture

Yeah, I'd be interested to know the 'shadowstats' figures for unemployment in the UK... and the labour participation rate, which is the big 'tell' for the US.

And the average number of hours worked per citizen, so part-time labour is accounted for too.

Wed, 01/22/2014 - 09:44 | 4354983 youngman
youngman's picture

They have a lot of jobs moving all that gold and silver around....in other news..did you see where Nigel Farge was hit on the head by some protestor....lol

Wed, 01/22/2014 - 10:15 | 4355101 disabledvet
disabledvet's picture

the true meaning of powerlessness...is to laugh and behold.

Wed, 01/22/2014 - 09:43 | 4354986 Reformed Sheep
Reformed Sheep's picture

There seems to be a bit of misguided optimism here, with the incumbent moron politicians already gleefully cutting up the land into potential fracking zones that can be sold/leased to foreign energy companies to "lower our energy cost and increase our energy independence and provide thousands of jobs"... No mention of how quickly production drops off a cliff with these sites, or the potential to royally fuck up our water supply. Oh never mind, we can always just start buying water from Nestle, and there will be plenty of environmental clean-up jobs in the post-fracking era...

 

Wed, 01/22/2014 - 10:40 | 4355207 XAU XAG
XAU XAG's picture

@Reformed Sheep

On the fracking .gov just see £ sighns.........

Guess we will pay alot for this folly

I laugh because we will prob frack scotland away from England and it will cause so many probs, we are a small Isle not the US...........fracking will end in tears!

Wed, 01/22/2014 - 17:41 | 4356765 BigJim
BigJim's picture

WIth their weather, the last thing the Brits need to worry about is their water supply.

Wed, 01/22/2014 - 09:45 | 4354991 Racer
Racer's picture

They are being extremely draconian on people on unemployment benefits and forcing them into "jobs" that have zero hour contracts or have to travel 90mins each way to work, which in the UK is extremely expensive because of high fuel and a transport system that is overcrowded and expensive.

Some recovery!

Wed, 01/22/2014 - 10:44 | 4355220 XAU XAG
XAU XAG's picture

@Racer..............it's all about numbers

 

High fuel costs from over taxation on fuel

10 years ago, if you was a high rate tax payer for every £100 of fuel you only actually got £10 worth due to taxes.......they have increased the vat since

Wed, 01/22/2014 - 09:44 | 4354992 Dr. Engali
Dr. Engali's picture

"Nick is worried there is now a risk of credibility for BoE Governor Mark Carney. If he wants to keep rates lower but keep the threshold at 7 percent, people may start to ask what value it actually has".

 

If the Bernank has shown us anything, it's that the goal posts can be moved to where ever they want them to be.

Wed, 01/22/2014 - 09:47 | 4354994 GrinandBearit
GrinandBearit's picture

Recovery? He wants consumer spending and housing market to drive it? - LOL!

The MSM lies and propaganda is non-stop.

Where does the MSM go to find these so-called "reporters"?... modeling agencies?

Wed, 01/22/2014 - 09:52 | 4355014 buzzsaw99
buzzsaw99's picture

don't knock the move toward young fuckables. would you rather look at buttaroma and herera reading the latest propaganda?

Wed, 01/22/2014 - 09:46 | 4354995 Josephine29
Josephine29's picture

I was reading earlier that this is something which is very familiar for the UK economy.

 

Two familiar problems arise

This mini-boom brings with it two very familiar themes of UK economic history. Firstly there is our chronic trade problem.

Net trade had reduced growth in Q3.

Apart from being yet another forecasting error as the Bank of England had been optimistic for this we see that the UK is in danger of facing another trade constraint as domestic demand booms and sucks in imports.

This is usually combined with something which confirms its instability and here it is.

the growth in household spending had been associated with a fall in the saving ratio from almost 8% to just over 5% of household income.

If we look at the UK mini-boom from this background I suggest this from Status Quo as a musical accompanyment.

Again again again again, again again again again
Why don’t you do it, why don’t you do it again

http://www.mindfulmoney.co.uk/wp/shaun-richards/thats-another-fine-mess-...

 

So the "recovery" is just in time for a general election and no doubt the usual bust will come after it!

Wed, 01/22/2014 - 11:08 | 4355236 XAU XAG
XAU XAG's picture

@Josephine29

 

And don't forget the good old credit cards!

 

And yes all good for the elections.........unless interest rates HAVE to rise then it's watch out below


Wed, 01/22/2014 - 09:50 | 4355001 MFLTucson
MFLTucson's picture

If they are using the same fraudulent accounting as the US, then yes, it is too good to be true

Wed, 01/22/2014 - 09:55 | 4355008 Sean7k
Sean7k's picture

What happens when the chinese stop shopping and investing all their liquidity outside china? What happens when all those loans get called in and the money has disappeared overseas?  What happens when the yuan collapses? If you aren't paying attention to china's loan problems and emigrating wealth class- you won't see it coming.

Oh, and yeah, that was only posted to show off the Swedish-Indonesian chick. Well done Tylers.

Wed, 01/22/2014 - 09:53 | 4355013 gwar5
gwar5's picture

If the Brit recovery were real they wouldn't be offering bonuses to doctors to kill off the elderly. 

 

Wed, 01/22/2014 - 09:57 | 4355028 writingsonthewall
writingsonthewall's picture

LIES.

 

The rise in consumer spending is due to buy-to-let landlords 'dressing' their bubble flats in anticipation of the massive rents they have been told by estate agents they can expect on their property.

 

The unemployment rate is only falling due to 2 things:

1) Part time jobs and masses of new 'self unemployed' - where you register as self employed but you don't actually do any work!

2) Benefit squeezes which is forcing people to not register as unemployed (as you get no money anyway) - but the number of 'economically inactive' people are rising.

 

I myself haven't needed to work for 1 1/2 years now - but I'm still counted as 'employed'

 

Nick Beecroft is a fool - he's targeting symptoms as causes. Tax receipts are what matter - and they are falling year on year.

 

There is NO recovery while interest rates remain at a HISTORIC LOW. Why don't the lamestream media and echo chambers like Beecrfot EVER point this out.

It's like you saying your car is 'fixed' because it's 'moving.......on the back of a tow truck'

The housing bubble in the UK is well out of control already - you can tell this because now the lamestream media are talking about a 'possible bubble' and you know when they mention it - it's well underway!

 

Buy to letlandlords are now applauding sub 5% yields on their property - considering the cheapest BTL mortgage out there is aout 4% - then it doesn't demonstrate they have a handle on the maths.

 

A raise of rates will push all these BTL fools into bankruptcy - or they will try to jack up rental rates - which will end in a similar catastrophe.

 

Still - low rates keep the sheepeople happy - and thanks to my bet AGAINST the BoE in 2008 - I am now DEBT FREE and I have a lot of gold for backup when the currency finally loses all credibility.

 

So the longer the fools believe we're in recovery (when we're not) - the better for me I suppose.

6 years of historic low interest rates - only a jackass would even mention the word recovery in this context!

Wed, 01/22/2014 - 10:32 | 4355170 reload
reload's picture

very true regarding the `buy to let` insanity.

Every person I meet these days is either boasting about their fixer upper btl investment - or the btl investment in student accomodation they plan to make.

These would be rent collecters are in for a rude awakening. I do know one person with a portfolio of 60 debt free buy to lets - and he says it is a complete pain. The only yield is at the bottom end of the market where the tenant is a benefit rercipient. Currently rent is often paid directly to the landlord - which will change under the universal credit / single benefit payment scheme. Rent is a long way down the list of priorities for many of these tennants, and getting rid of a non payer takes on average 6 months.

 

Wed, 01/22/2014 - 10:54 | 4355250 XAU XAG
XAU XAG's picture

@writingsonthewall

 

That is a big ditto from me


Wed, 01/22/2014 - 10:06 | 4355063 Calculus99
Calculus99's picture

Many English pricks will still be saying 'we need a weaker sterling' when 10 US cents buys £1.

 

Wed, 01/22/2014 - 10:23 | 4355142 HamRove
HamRove's picture

Nothing like sexy women to sell the recovery....there will be a recovery..right?

/sarcastiface

Wed, 01/22/2014 - 10:45 | 4355215 Colonel Klink
Colonel Klink's picture

Whichever Tyler puts the videos on autoplay, please FIRE YOURSELF!

Wed, 01/22/2014 - 19:13 | 4357017 bentaxle
bentaxle's picture

You got caught doing what?

Wed, 01/22/2014 - 10:45 | 4355224 Lord Peter Pipsqueak
Lord Peter Pipsqueak's picture

The pound is always overvalued according to polticians and central bankers who always take the easy fix of devaluation over dealing with the long term structural problems of the post war UK economy.The clip of course compares sterling at highs to possibly the only weaker currency than itself the dollar,what they don't tell you is that after 2008,the Bank of England devalued sterling twenty percent and it is still almost at those levels against stronger currencies like the Euro and the Norwegian Kroner and Aussie dollar,and now they are saying it is too strong again, so what are we to do?Devalue the currency every five years?

A government running a structural deficit over one hundred billion pounds a year and over a trillion in debt has to make MASSIVE changes,but the group of limp wristed wimps in the coalition couldn't agree on what biscuits to have with their morning tea let alone make the necessary changes to welfare,pull out of Europe,impose a total ban on all immigration and enforced repatriation for all immigrants found to have falsely entered the country in the last twenty years, a cap on benefits for all unemployed after the first child is borne,a proper enforcement of payment for treatment on the NHS for foreigners using it as the World Health service,immediate end to ALL foregn aid(which would alone save over 10 billion a year) and end the scandal of old people care costs where old aged pensioners have their house and life savings stolen off them to pay for care after having paid taxes all their life.

This recovery is a total mirage based on the housing market which in the case of the UK economy is the tail wagging the dog,since I have said many times before on ZH,the UK economy IS the housing market,and political parties that do not maintain a buoyant housing market are swiftly dispatched at the next election.

Hence Osbornes desperate attempts to throw petrol on the previous fire,by keeping interest rates artificially low with QE and now the help to buy scheme,which has already been criticised by the CEO of Legal and General as generating absurd house prices in the capital and should be ended immediately.

Ill give it a couple more years, and when the bubble pops again and the govt hasn't got any more money to bail the banks out , it will devalue sterling again, but next time it will be massive, it will have to be in order to inflate away what will be likely to be over 1.5 trillion in debt by then and rising at over 150 billion a year,probably a 30-50% haircut.

The only question then will be how long before some expert or economist comes out and says the UK economy is still weak and it is because sterling is overvalued?

 

Wed, 01/22/2014 - 11:00 | 4355271 XAU XAG
XAU XAG's picture

@Lord Peter Pipsqueak

 

Could not agree more!

Wed, 01/22/2014 - 10:54 | 4355254 smacker
smacker's picture

I believe the 7.0% unemployment target set by Carney before he would raise interest rates was simply bullshit to appease punters and give them at least one justification for Zirp.

Now that official unemployment has reduced to 7.1% and 7.0% is likely very soon, Carney will find another reason not to raise interest rates, possibly by reducing his target to 6.5%.

Whatever, we now know that interest rates are at Zirp because that's what Cameron and Chancellor Osborne want, to appease voters with mortgages and other large debts.

Wed, 01/22/2014 - 12:04 | 4355460 reload
reload's picture

Government debts as well as privte sector ones.

Even though the BOE now owns 30% of the Gilt market - and even though it sends back the interest recieved on them to the treasury, the cost of running gov debt is significant and could force the government to shrink if it rose. Smaller government is NOT on any of these `leaders` minds.

So I expect the BOE to buy more and more Gilts - an excuse will be found. The end game is to get them all onto the BOE ballance sheet and then convert them to zero coupon perpetuals. Voila; end of debt problem,  except institutions with Gilts on their books will need to replace them with something else - the money will need a home, possibly/likely in the UK.

 

Wed, 01/22/2014 - 13:42 | 4355839 maneco
maneco's picture

Don't forget that zirp and QE is necessary to keep the UK Zombie Banking Sector alive too!

Wed, 01/22/2014 - 10:58 | 4355264 yogibear
yogibear's picture

It's extreme government spending and debt propping up the economy. Like the US.

 

Wed, 01/22/2014 - 13:40 | 4355831 maneco
maneco's picture

The U.K. is the 51st state after all!

Wed, 01/22/2014 - 11:00 | 4355267 dizzyfingers
dizzyfingers's picture

http://www.marketoracle.co.uk/pdf-1016/The_Inflation_Mega-Trend_Nadeem_Walayat.pdf same as USA. Someone said yesterday US real unemployment is 37%...sounds right to me.

Wed, 01/22/2014 - 11:03 | 4355280 XAU XAG
XAU XAG's picture

They think the RECOVERY has reached 

Escape Velocity

 

But the rocket has a rope attached to it called debt load, and that is what will bring said rocket back to earth

Wed, 01/22/2014 - 11:58 | 4355429 tony wilson
tony wilson's picture

printing money by the trillion to buy china poundland plastic.

china ipads and fones.

printing 50 pound notes as your only manufacturing base  super cute.

Wed, 01/22/2014 - 12:25 | 4355542 Sandmann
Sandmann's picture

Nick, you need to shed some weight. You used to look much fitter and good living is a life shortener

Wed, 01/22/2014 - 12:36 | 4355585 Hedgetard55
Hedgetard55's picture

The debt will have to be paid back, one way or another, either through hhigher taxes or currency devaluation. There is no free fish and chips, lads.

Wed, 01/22/2014 - 13:16 | 4355756 FreeMktFisherMN
FreeMktFisherMN's picture

It's unreal to read over and over people's concerns about 'too strong' a currency. Since financial meltdowns throughout history have ALWAYS coincided with robust currencies, right? (which isn't to say the pound is even 'strong' given it's still fiat and is just stronger when compared to other toilet paper).

Greeks and all sovereign nations need to regain their sovereignty and get out of the euro, but it's not a panacea to just print drachma then. They need to go on the gold standard. This BS about 'weak currency a stimulus to economy' is just neoliberal garbage as imports just become more expensive, and production is a means to consumption. Who cares if you 'make money' priced in your own garbage currency if you can't afford anything with it?

Wed, 01/22/2014 - 14:55 | 4356088 Rising Sun
Rising Sun's picture

Fucking liars!!!!!

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