The news remains dominated by factory closures, reports of poor sales figures, lay offs and company bankruptcies. Ministers continue to find green shoots where the rest of us see a frozen wasteland.
Expect more of the same in the days ahead. Today we will hear how car sales have fallen off a cliff. House building is well down. People are unlikely to commit to big ticket items, even if they could borrow to buy, when they fear for their jobs and feel under pressure to repay debt.
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January 22, 2009
Strangely enough my (mutual) building society wrote to me yesterday offering to loan me money.
I do have savings with them, and my mortgage is very small, so I guess I seem like a sound borrower. But why would I want to borrow money at rates greater than my mortgage (which I could in theory extend under the terms and conditions) and far greater than my savings rates of interest?
The world has gone mad (but you knew that already)!
January 22, 2009
Last week a well respected private boarding school in our town had its overdraft of £500,000 called in by one of the leading banks. This would have meant closure of the school, loss of 160 local jobs and nearly 400 pupils having to make alternative schooling arrangements.
In just over a week, this sum has been raised by parents who will have a charge on the building as security and earn 5% interest on their money. This interest percentage is higher than the bank would have paid the parents for savings, and the school is paying less than the bank would have charged.
So much for Gordon getting the banks to lend and save jobs……….but this time it has probably benefited everyone involved.
January 22, 2009
My prediction is that the Govt will do something about this, those in power want our independance and you have just made a move for independance, they will return.
January 22, 2009
Yep, it’s the lack of demand stupid!
No not you JR – excellent interview with Jeff Randall last night and good to see your opinions being sought ever wider (including in shadow cabinet we trust..?)
Following yesterday’s predictions of sterling’s woe by Jim Rogers the 1st Post has reproduced an article by Philip Delves Broughton from November. It seems no less apposite 2 months on.
We Essex Boys do admire a good analogy to focus the mind and get a political point across. Part of Mr Broughton’s article, with your permission, is reproduced below….
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“Now, if you were a lender looking at the United Kingdom’s credit application, how would you feel? Here is a client who spends around 10 per cent more than he earns every year. His income is now set to fall, while his expenses will rise as he has to support ailing family members and pay a mortgage about to reset to a higher interest rate.
He acquired his main asset, his house, with a 95 per cent mortgage and the house has just fallen 15 per cent in value. The client advises that he is going to solve this blip in his personal finances by running up every available line of credit he can and spending. He is already awash in consumer debt and has the lowest savings rate among his neighbours.
Are you ready to lend? Or more inclined to run screaming from the room?
Meanwhile, every other lender around is running around with his hair on fire, not lending to anyone. And the client is also asking to borrow money in a fast-depreciating currency, so the value of his repayments, if you are a foreign investor, is set to fall. Are you ready to lend? Or more inclined to run screaming from the room?”
January 22, 2009
Brown is going to turn it into a depression, he is doing everything that has been done before leading towards depressions.
This goverment needs removing NOW by political means or by the Queen herself before we get what is happening in Iceland (as i don’t think the British would be as polite/restrained as the Icelandic people)
January 22, 2009
Below is a brilliant summary (as usual) from Hayek; written in the shadow of the economic collapse in the 70’s:
My proposal is not, as I would wish, merely a sort of standby arrangement of which I could say we must work it out intellectually to have it ready when the present system completely collapses. It is not merely an emergency plan. I think it is very urgent that it become rapidly understood that there is no justification in history for the existing position of a government monopoly of issuing money. It has never been proposed on the ground that government will give us better money than anybody else could. It has always, since the privilege of issuing money was first explicitly represented as a Royal prerogative, been advocated because the power to issue money was essential for the finance of the government— not in order to give us good money, but in order to give to government access to the tap where it can draw the money it needs by manufacturing it. That, ladies and gentlemen, is not a method by which we can hope ever to get good money. To put it into the hands of an institution which is protected against competition, which can force us to accept the money, which is subject to incessant political pressure, such an authority will not ever again give us good money.
January 22, 2009
Do you know what saddens me?
When dear old Mr Major was battling on under constant bombardment for sleaze, inefficiency and stagnation (oh to have some of that back now!), the Conservatives produced the “Demon eyes” poster. Very bad taste that. Oh My!
There was, I seem to remember another Conservative advertisement about Britain’s future under a Labour government with the current woes clearly predicted. “What a load of rubbish!” cried the Good and beautiful people of the day as they welcomed the Great Leader with the anthem: “Things can only get better now I’ve found you”.
We just never learn.
January 22, 2009
Another reason people are not buying,even with savings on mortgage repayments and petrol , is the basic deflationary impulse: why buy now when prices are probably going to fall further? People in Northampton are buying a lot of items: but in closing-down sales!