economic situation is dire

[johnvillan]

Well the money men are on schedule for Global Domination.

[snowychap]

'Ands up, I was wrong, guv'.

THE chancellor, Alistair Darling, has admitted that he and his Treasury officials got it wrong over the length and severity of the recession and that he will be forced to tear up his economic predictions.

He will slash his growth forecast in the budget and warn that there will be no economic recovery until the end of the year, dashing hopes that last week’s G20 summit will be followed by an early upturn. “ It’s worse than we thought,” Darling said this weekend.

His admission comes as an opinion poll for The Sunday Times shows that Labour has enjoyed a “bounce” from the G20 summit. Support is up by three points to 34%, with the Conservatives unchanged on 41%. The Tory lead is down to seven points, its lowest since December.

In his April 22 budget, the chancellor will predict that the economy will slide by at least 3% this year, its worst single-year performance since the second world war and three times the rate of decline that he forecast in November in his prebudget report.

The weaker growth forecast will mean public borrowing in the coming fiscal year will be well above the £118 billion level that Darling had predicted six months ago, renewing fears about the sustainability of public finances. Independent economists say borrowing could hit £150 billion or more.

In an interview with The Sunday Times, Darling insisted that the economy would emerge from the recession and last week’s G20 announcements would help. However, the chancellor conceded that he had underestimated the depth of the recession.

The economy’s dive over the past six months had been steeper than the Treasury had expected, he said, making it inevitable that he would be forced to revise his forecast significantly. Britain’s gross domestic product slid by 1.6% in the final three months of last year, its biggest drop since the recession of the early 1980s.

Treasury officials said that the first three months of this year were likely to see at least as big a drop. ”We won’t get the figures for another month, but we think they will be bad, because if you look around the world there’s nothing that tells you otherwise,” said Darling.

While refusing to be drawn on precise numbers, officials said his comments were consistent with a drop in GDP of at least 3% this year, compared with the November forecast of a 0.75% to 1.25% decline.

The economy’s biggest single-year fall in the postwar period was in 1980, when it shrank by 2.1% under Margaret Thatcher, followed by a further 1.3% decline in 1981.

It is the first time Darling has publicly admitted that the government’s estimates were wrong, setting the scene for a difficult budget, which the Tories will say provides further

evidence that the government has lost control of the economy. “I thought we would see growth in the second part of the year,” he said.

However, the chancellor now thinks any recovery will come later: “I think it will be the back end, turn of the year time, before we start seeing growth here.”

Darling insisted that last Thursday’s G20 agreement in London would help to boost the global economy, which was crucial for Britain’s emergence from the downturn.

However, he also said it was important to be honest with voters about the situation. “We have to be realistic about this,” he said. “You cannot, you must not, build up false hope.”

Darling spoke out after Barack Obama, the US president, hailed last week’s emergency meeting of G20 leaders as a “turning point” in the battle to repair the world economy.

Hopes that the summit could signal the beginning of the end of the recession were fuelled by a Nationwide building society report showing the first rise in house prices for 16 months and also a series of indicators in Britain and other countries which some economists interpreted as the “green shoots” of recovery.

Yet Darling cautioned against attaching much significance to the findings: “I would say with any figures that come out, you want to be pretty careful about one set of numbers, no matter what they show.”

Asked if the worst was over for the British economy, he replied: “I think there is some way to go yet. A lot really depends on actually how much other countries do.”

His downbeat tone is in contrast to the mood of euphoria that followed last week’s summit. But he insisted he was not being unduly pessimistic, emphasising that Britain would “come through” the recession and that the G20 deal would speed recovery.

Labour MPs have been buoyed by Brown’s performance on the international stage, but there are mutterings that his focus on the global crisis has led to domestic issues being neglected. Darling defended the prime minister’s decision to spend so much time abroad negotiating with world leaders, saying the G20 agreements would not have happened otherwise.

He hit out at bankers who hope for a revival of big bonuses when the economy recovers, warning there can be no return to huge rewards for risk-taking: “I still come across people in the banking industry who give you the distinct impression that once this is all over, we’ll be back to where we were.

“Well, no you can’t, the culture needs to change, the attitude needs to change – I’m afraid there are still people out there who don’t realise the world has changed.”

He dismissed claims by the Tories that Britain could have to seek help from the International Monetary Fund, saying the Conservatives had repeatedly “made the wrong judgement” over the economic crisis: “The position that David Cameron and George Osborne have taken is just plain wrong and if they don’t believe me, they should have a good look at what happened when they were around in office 15 years ago.”

Darling said he preferred the version of Tory policy being pursued by Kenneth Clarke, the shadow business secretary.

He admitted that he was “frustrated” by the continuing reluctance of British banks to lend, but said measures that the government has taken would soon have an effect.

[johnvillan]

Bill Moyers sits talks with William K. Black, a former financial senior regulator

[johnvillan]

[danversp]

there is a term that few dare speak of, green shoots, well Robert Peston avoids it but read this blog he has written and is Cuckoo his code word for it. did we reach the worse of it just after Xmas and now we are coming out of it but will be a very slow process.

[villal]

did we reach the worse of it just after Xmas and now we are coming out of it but will be a very slow process.

I don't think we've seen much yet - IMO it's going to get worse over the next 12-18 months - and don't forget we have the summer of rage upon us (according to the media) that not going to happen if everything is rosy.

[Gringo]

All the talk in markets is of a possible slowdown in the rate of decline.

Doublespeak

[johnvillan]

guardian

The question that flummoxed the great orator

* John Crace

*

o John Crace

o The Guardian, Friday 3 April 2009

o Article history

Barack Obama, the World's Greatest Orator (™all news organisations), didn't exactly cover himself in glory when the BBC's political editor Nick Robinson asked him a question about who was to blame for the financial crisis. Normally word perfect, Obama ummed, ahed and waffled for the best part of two and a half minutes. Here, John Crace decodes what he was really thinking ...

Nick Robinson: "A question for you both, if I may. The prime minister has repeatedly blamed the United States of America for causing this crisis. France and Germany both blame Britain and America for causing this crisis. Who is right? And isn't the debate about that at the heart of the debate about what to do now?" Brown immediately swivels to leave Obama in pole position. There is a four-second delay before Obama starts speaking [THANKS FOR NOTHING, GORDY BABY. REMIND ME TO HANG YOU OUT TO DRY ONE DAY.] Barack Obama: "I, I, would say that, er ... pause [i HAVEN'T A CLUE] ... if you look at ... pause [WHO IS THIS NICK ROBINSON JERK?] ... the, the sources of this crisis ... pause [JUST KEEP GOING, BUDDY] ... the United States certainly has some accounting to do with respect to . . . pause [i'M IN WAY TOO DEEP HERE] ... a regulatory system that was inadequate to the massive changes that have taken place in the global financial system ... pause, close eyes [THIS IS GOING TO GO DOWN LIKE A CROCK OF SHIT BACK HOME. HELP]. I think what is also true is that ... pause [i WANT NICK ROBINSON TO DISAPPEAR] ... here in Great Britain ... pause [sHIT, GORDY'S THE HOST, DON'T LAND HIM IN IT] ... here in continental Europe ... pause [DAMN IT, BLAME EVERYONE.] ... around the world. We were seeing the same mismatch between the regulatory regimes that were in place and er ... pause [i'VE LOST MY TRAIN OF THOUGHT AGAIN] ... the highly integrated, er, global capital markets that have emerged ... pause [i'M REALLY WINGING IT NOW]. So at this point, I'm less interested in ... pause [YOU] ... identifying blame than fixing the problem. I think we've taken some very aggressive steps in the United States to do so, not just responding to the immediate crisis, ensuring banks are adequately capitalised, er, dealing with the enormous, er ... pause [WHY DIDN'T I QUIT WHILE I WAS AHEAD?] ... drop-off in demand and contraction that has taken place. More importantly, for the long term, making sure that we've got a set of, er, er, regulations that are up to the task, er, and that includes, er, a number that will be discussed at this summit. I think there's a lot of convergence between all the parties involved about the need, for example, to focus not on the legal form that a particular financial product takes or the institution it emerges from, but rather what's the risk involved, what's the function of this product and how do we regulate that adequately, much more effective coordination, er, between countries so we can, er, anticipate the risks that are involved there. Dealing with the, er, problem of derivatives markets, making sure we have set up systems, er, that can reduce some of the risks there. So, I actually think ... pause [FANTASTIC. I'VE LOST EVERYONE, INCLUDING MYSELF] ... there's enormous consensus that has emerged in terms of what we need to do now and, er ... pause [i'M OUTTA HERE. TIME FOR THE USUAL CLOSING BOLLOCKS] ... I'm a great believer in looking forwards than looking backwards.

He hasn't got a clue !

Obama is a puppet who does not understand what is going on. Without some one feeding him his lines on an autoque he doesnt know what to say.

[tinker]

Just watching the price of imported goods rising very quickly. Items we could all afford last year will be out of our reach, its going to get very tough in the UK before it gets any better. IMO

[Gringo]

Currency based protectionism - has worked for the chinese these past few years.

[Clarry]

Anyone see the documentary about the 1929 Stockmarket collapse last night on BBC4? Very informative and interesting, and of course, relevant.

Probably be repeated.

[snowychap]

HSBC offers home loans to buyers with 10% deposit

Homebuyers with small amounts of money to put down on their new homes will find it easier to secure a mortgage from next week, after a £1bn loan promise by one of Britain's biggest lenders.

From Tuesday HSBC is increasing the maximum amount it will lend as a proportion of the value of the property being mortgaged - the loan-to-value (LTV) ratio - to 90%. The bank is making £1bn available to housebuyers with deposits of 10% at a two-year fixed rate of 4.99%.

It is a marked improvement for first-time borrowers and other buyers with small deposits. At the beginning of 2008, borrowers could get mortgages worth more than the value of their properties. But by the end of last year, most lenders had reacted to falling house prices and a steep increase in borrowers defaulting on their debt by reserving the best deals for people with deposits of at least 40%.

HSBC was among the lenders that required larger deposits, but it started relaxing its criteria last week with the introduction of competitive tracker loans for borrowers with 15% deposits.

The latest move also reflects HSBC's growing role in the mortgage business. It now has 10% of the market and has allocated £15bn for new mortgages this year. The bank lent half that amount in 2007 before the credit crisis devastated the sector and many of HSBC's rivals.

Joe Garner, group general manager of HSBC's personal financial services division, said: "Although house prices have fallen, and continue to fall, they won't fall forever. These changes mean we can continue to give customers the best possible deal on their mortgage."

The relaxation in lending criteria for buyers has been welcomed by mortgage brokers and product comparison sites.

Michelle Slade, spokeswoman for price comparison website Moneyfacts, said: "We are starting to see signs that mortgage lenders are more willing to lend and it appears we have finally turned a corner. It suggests that HSBC believes that house prices have started to get as low as they are going to go. They obviously now feel that they can offer such mortgages without the fear that the borrower will quickly fall into negative equity."

"Hopefully other providers will follow HSBC's example and more providers will offer competitive deals for those with small deposits, which will help kick-start the mortgage market further," she said.

Melanie Bien, director of mortgage broker Savills Private Finance, said: "There are 90% deals available elsewhere, but they're not as competitive as this. A 10% deposit is do-able for many first-time buyers, even if some still have to resort to the bank of mum and dad for a top-up."

Is this the start of the next bubble or the last one patched up and being reinflated?

[danversp]

whilst we base our economic system on the housing market then it will start another bubble but the 'green shoots' of credit lending that Robert Peston talked about in my earlier link are showing a few stronger signs of growth.

[snowychap]

'Growth' based on what?

[danversp]

growth in the availability of credit, the statement from HSBC sort of backs up what Peston was saying

[snowychap]

That wasn't my question.

The suggestion was that increased offering of credit was a sign of 'green shoots' which in turn was a sign of 'growth'.

My question was intended to point out that this 'growth' doesn't actually appear to be built on anything apart from a relaxation of credit. That's kind of what got us here in the first place.

If the point you made was that an increase in lending shows signs of a growth in lending then that is rather self-evident, isn't it?

[ahamaad]

Well the BoE will make a decision on interest rates today and people are forecasting that it will stay at 0.5% which I don't really see the point of, they should just follow the USA example and put them down to 0% not that any banks are likely to pass on rate cuts to the consumer.

[Gringo]

There is no point in curring interest rates any further

Price of credit is not an issue. I would have been happier if they had left rates at 2% and started the printing presses earlier.

[ahamaad]

There is no point in curring interest rates any further

It will to me as I have just switched to a tracker mortgage and am £300 a month better off

:winkold:

[trimandson]

There is no point in curring interest rates any further

It will to me as I have just switched to a tracker mortgage and am £300 a month better off

:winkold:

Out of interest (obviously, don't answer if you don't want to), what's the loading rate on your tracker? ie are you 1% above BBR for 36 months?