31 thoughts on “The UK Balance of Payments sees quite a boost from the lower Pound

  1. House prices endorse the greater fool argument,millions of people have signed up for a life of debt slavery on mortgages they cannot afford.This is a national version of the prisoners dilemma if they all refused to do so prices would be much lower.However this is idealistic that is why we have Government which should provide good governance and therefore regulate against excessive bank lending.I know this is more idealism and again unrealistic.
    However these house prices are destroying the capacity for discretionary spending in the economy and destroying the prospects of future generations.
    The good news is all smoke and mirrors our currency is worth less and as we import much more than we export,our debts continue increase as individuals and as a nation.
    In short the situation will continue to deteriorate we live in a failing system.

    • Signed up to a lifetime of not being able to participate as consumers …in a consumer based economy.

      Good to see more young/middle aged are not buying as they are clearly bright enough to see the bubble for what it is.

      • I guess they’re too busy saving for a deposit and/or paying off the student loan whilst serving coffee in Starbucks on a “gig economy” zero hours contract……

        Good job they don’t have to pay for food & fuel too , and just need a 29% loan to buy a Smart phone ……. just gotta have that than eat…..

        Forbin

  2. O/T and adverting to your post yesterday I found this quite interesting:

    http://www.zerohedge.com/news/2017-03-30/here%E2%80%99s-why-italy%E2%80%99s-banking-crisis-has-gone-radar

    I’m intrigued as to what will happen re a bail in in this matter. Although it’s EU law I can’t see it happening because once folk see their cash being at risk they’ll get it out and there will be bank runs all over the place destabilizing the whole banking system and possibly bringing it down, despite lender of last resort action which may well be of little consequence at the end of the day. I’m sure we’ll get bail outs with a new label and it’s back to square one.

    • Thanks for the link – really interesting article. Were it not so serious an issue, it would be almost comical to contrast
      1. Reality (114 banks in Italy have bad loans in excess of shareholders’ funds); with
      2. The various rules on capital adequacy, stress tests etc etc applied to banks and much bragged about as saving the system.
      How did the banks get so far into this mess?

  3. I guess its time to start up the house prices pump

    got any ideas on how to push them higher ?

    Forbin

    PS: remember , paying more for your house is doing your bit to save the Banks….

    • Hi Forbin,
      While we have Mark Carney in residence at Threadneadle St. we have no worry on prices falling, however to keep the upward momentum I see further desperate measures from the government, all in the cause of “helping first time buyers get on the ladder” of course(sarc).

      Anyone with an IQ greater than their shoe size would see that it does no such thing, since the subsidy will be reflected in the buyers affordability calculation by the lender and so they will just bid up prices even further helped by the government interference, reducing affordability even more and making it harder for those following in their wake. This then requires further intervention to get them on the ladder, and so on.

      Don’t rule out more “incentives” in the form of tax relief, lump sums for first time buyers, tax breaks for the Bank of Mum and Dad giving lump sums for deposits, extending the mortgage period to 30,35,40 years, part ownership, multi-generational mortgages etc.,the possibilities are endless really, but they will move heaven and earth to ensure this bubble never pops.

      The real problem is that most people in the country think their house going up in price for ever is a good thing, oblivious as to why or how it does, to them it just does, it always has done and as far as they are concerned it is the only safe way to make money. This is the mentality that is required to change, but people have been conditioned over the decades to believe housing is a one way investment,that cannot lose.

      Politicians know this to be a sacred cow as well, and ensure interest rates are held artificially low to ensure house prices go up over their term, any political party that was associated with a large drop or crash in house prices would know they will not be forgiven by the UK electorate for decades.

      And yet these people paradoxically always bemoan the high house prices for their children when they leave home, they can’t have it both ways can they? or can they?, yes!!! – the government makes housing and economic policies so that they can have it both ways by giving all these subsidies to first time buyers -their children.

      • You are right but all these plans ignore the “ladder” aspect of the housing market, the “second stepper”.

        You can provide all the incentives at the bottom you like but what happens when the FTB wants to move? They can’t; it’s far too expensive in a high house price environment so the logic is either that you subsidize the whole chain (madness upon madness) or the market grinds to a halt.

      • John Major won in 1992 a couple of years after the last real house price crash this nation has had.

        They’ve a small majority, and with 5 yrs of Tory voting homeowners dying off getting replaced by 5 yrs worth of renters i can see them losing in 2020, purely for not letting the market correct.

      • Too add Help to Buy ISA is a lump sum handout to the middle class savers.

        Just a pity one months HPI wipes this out.

        Just shows that a private education gives nothing more than an ability to bullshit.

      • “The real problem is that most people in the country think their house going up in price for ever is a good thing….”

        Similar thinking pervades NZ society; 2 things kiwis remember – the sinking of the Rainbow Warrior and the October ’87 stock market crash when the local market lost 60% of its value and took 20 years to recover. 30 years on real estate is generally accepted as the only safe way to make money and as a result Auckland appears in lists of the world’s most expensive cities. Of course people complain about affordability but say the answer lies in higher wages and building more houses – nobody wants a price correction.

        • Hi Eric

          When I was younger some of my friends were of Kiwi descent ( mum & dad) and when I was showed pictures of house in your cities they had much more room than here and large gardens. Is that true or were they well off? Also I have the impression there was room for the cities to grow was that wrong?

        • In reply Shaun –
          Generally true. We have a 3-bedroom house of 250 sq m (incl. garage) on a ¾ acre plot. It’s part of a 50-plot subdivision (estate). Worth roughly the same as something half the size I left behind in northern England.

          Austin Mitchell was right when he christened NZ the “half-gallon, quarter acre, pavlova paradise”
          http://www.teara.govt.nz/en/artwork/1997/the-half-gallon-quarter-acre-pavlova-paradise

          There is room to grow, but the infrastructure expense (roads, sewerage, water and so on) means that cities (Auckland, Wellington, Christchurch) look crowded in comparison to the rest of the country.

        • Shaun, I’d note some geographic challenges to Auckland and Wellington. Auckland is built on a narrow isthmus with many water channels dividing up the land, which limits transport links and encourages urban sprawl. This leads to horrible congestion. Likewise, Wellington was built upon a fine natural harbour with sea limiting land. Much of the land has very steep hills. Both Wellington and Christchurch sit on major earthquake faultlines. In Christchurch’s case they are zoning some land as unsuitable for building due to earthquake risk. It boils down to location.

          Lack of unused land near central Auckland means that greater urban density is needed. The Nimby’s should not have a veto over land they don’t own …

        • Yes ExpatGB, some days it feels like the whole country is geographically challenged. Steep unstable hills, earthquakes, volcanoes! Right now driving in the northern half of the South Island is challenging because the main east coast arterial road is still closed due to the M7.8 Kaikoura earthquake last November (some parts of the South island moved 5 metres closer to the North Island!)

          Auckland congestion is a popular talking point. Getting in and out of the airport can be a nightmare as there is no direct rail or road link to the city centre, and we won’t get one soon – this from the NZ Herald:
          http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11824942

          Sometimes there’s trouble in paradise.

  4. Thanks for the link, BobJ. As Tyler Durden noted, bail-ins became part of the standard EU tool-kit after Cyprus in 2013. John and Jonathan Theodore argued in “Cyprus and the Financial Crisis” (p.138) that this was a questionable innovation: “If you are a business, a saver, retiree, investor, or anyone else with cause to have a moderately large deposit account, then the safety of your money depends, at the last resort, on the political considerations of the European Union and the IMF. A practice that used to offer high liquidity, no risk, and minimal returns, now offers conditional liquidity, minimal returns, and risks which are absolutely unknown.”

    • Hi Andrew

      Thanks for the reference.

      What I find extraordinary about these rules is that they don’t have the air of rules for a remote contingency – we have insolvency rules as a part of the system and that is reasonable – but rather a resolution mechanism that will have to be used and perhaps extensively; in other words: expect more banks to get into trouble in which case we’ll have to shift the burden off the State. In a way it’s a confession of failure and helplessness which is rather depressing.

  5. I guess this is a tell

    http://www.bbc.co.uk/news/business-39453844

    can we really run a service based economy on yuge debt , shrinking wages and BTL landlords?

    I smell a bail-in !

    Forbin

    PS: I predict will be sold as a “one off ” that majickally happens several times

    and still wont work , if any thing it will cause a massive Bank run .

    I suspect we’ll see the Financial Universal Combined Economic Directive soon to bail in/out and shake it all about Banks

  6. As I feel like i am a barometer of the average person, just bought a new £40k car on PCP with only £2k deposit and doubled my mortgage so i can give my 2 kids a bedroom each. I will let you know when i am doomed and the cards start to fall.

    • Steve good luck but your example is exactly why things cannot continue .£40 Grand cars rented out for £2kdown payment so a 5% deposit and you have doubled your debt your house.
      All this money you have borrowed did not exist before you requested it ,currency/debt is being created out of thin air ,.
      Yourself and millions of others will spend years of your life repaying the capital and interest on these loans to organisations who lent you money they did not have in the first place,for possessions that are only as expensive as they are because of the asset price inflation caused by the fraudulent paper money system,which always ends in failure.
      Sorry to be so pessimistic.

      • “the fraudulent paper money system,which always ends in failure”. It hasn’t yet and the Gold standard certainly failed in the sense that it allowed hardly any growth at all so it was abandoned.

        I’m sure you know that you have described bog standard fractional reserve banking and I see nothing wrong with it as long as it’s carefully regulated and monitored.

        • Jive Bunny you may be correct ‘as long as it is carefully regulated and monitored ‘but that is not the situation we are in.The currency/debt as they are the same are being expanded exponentially,interest rates which should regulate the system are being suppressed because the debt/currency has reached the point where normal interest rates will crash the system,so debt which is the problem is continuing unabated.
          There can only be one outcome and it is not good the only question is when the Ponzi scheme ends…the cracks in the system are visible,the politicians are in denial they will be as powerless as King Canute when the dam bursts.
          Your point about the Gold standard is correct The last incarnation collapsed when Nixon ‘suspended’Bretton Woods on Aug 15 1971 because the US had over extended itself with the pointless ideological Vietnam war and could no longer afford to exchange a dollar for an ounce of gold.
          However to say there can be no growth under a commodity money system is not correct the Industrial revolution took place under a gold standard.

      • I didn’t say there could be no growth under a commodity based money system (commodity based system brings a whole new emphasis to gold – crops are commodities and they may be increased rapidly…). I said the gold standard allowed HARDLY ANY GROWTH. AT ALL. There is a difference.

        On the present monetary system it is in crisis but that is as you say because it is has not been regulated. My point is there is no reason why a carefully monitored and regulated fiat system shouldn’t work. That the Establishment has failed to regulate effectively is no reason to abandon the system, it should be carefully regulated and monitored as the gold standard is inherently limited in productive growth to gold output which grows very slowly – doesn’t matter if you have a slowly growing population but that is not what the world is faced with.

  7. I suppose that one of the problems nowadays is job security, as for many the job for life age which would give some confidence in paying for the attached millstone, is now it appears to me at least, to be a thing of the past.

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