Independent UK: Warning: Britain faces new recession

[marmar]

Warning: Britain faces new recession
Economy set to relapse into dreaded 'double-dip' downturn, say world's central bankers

By Sean O'Grady, Economics Editor
Tuesday, 30 June 2009


The world's central bankers have warned that the British economy faces relapsing into another recession – the much-feared "double dip" downturn.

A continuing drought in bank lending, evidenced in the latest figures from the Bank of England, and the threat that spiralling public borrowing will feed through to higher interest rates and inflation, are judged by international economists to be mortal dangers to a sustained recovery.

The Organisation for Economic Cooperation and Development (OECD), which comprises the 30 most advanced economies in the world, added to the gloom, saying that Britain remained "deep" in recession and faced a "bleak short-term outlook".

"The recovery is likely to be slow and unemployment is expected to climb significantly," it said, adding that the Treasury could do "considerably more" to fix the public finances.

Both warnings are at odds with recent market optimism and so-called green shoots suggesting that output in the economy may be recovering. But the Bank for International Settlements (BIS), which includes the Bank of England, the US Federal Reserve and the European Central Bank, said it feared that the problems of the world's banks are far from fixed and could easily trigger a so-called "double dip" or "W-shaped" downturn. "A major cause for concern is the limited progress in addressing the underlying problems in the financial sector," it said.

"A significant risk is therefore that the current stimulus will lead only to a temporary pick-up in growth, followed by protracted stagnation." .........(more)

The complete piece is at: http://www.independent.co.uk/news/business/news/warning-britain-faces-new-recession-1724447.html

[ixion]

1. "a temporary pick-up in growth, followed by protracted stagnation"

indeed.

[provis99]

2. the sun sure has set on the British Empire

The country's poorer than Ireland now, ironically.

[Jackeens]

3. Alas, it's not! Ireland is the basketcase of Europe now, having strutted through the last decade

In other words: we're well and truly f**ked.

[DJ13]

4. I wish officials around the world would understand this

A consumer led recession/depression cannot be dealt with by focusing all efforts at rescuing the corporations.

The only way to deal with this is by getting money into the hands of the people so they can feel comfortable spending once again.

[troubledamerican]

5. A global phenomenon

The timebomb set to go off is the $1.4 QUADRILLION derivatives market's "toxic assets" -- money that DOES NOT EXIST.

In other words, all major banks are insolvent.

In other words, the fire of October 2008 panic has been put out, but the smouldering beams and cracking sounds you hear are the sinkhole opening up under the house, where the foundation should be.

In other words, get ready to head for the hills.

There's not enough money on the planet to fix a $1.4 Quadrillion hole.

[anigbrowl]

6. Not exactly

Two things people often forget about derivatives:

1. many contracts are written on opposite events; eg you might take out both buy and sell options on oil; if the price goes up (relative to the value on the option), the sell option is void and vice versa if the price goes down.

2. The actual value of the derivative is only a few % of the notional value of the underlying trade.

These are understandable mistakes, because derivatives are complex and confusing. But statements like the above suggest all derivatives are written on the same underlying assets and will all fall due at the same time. This is not true. In fact, the '$1.4 quadrillion' just states the total notional size of the derivatives market for ALL forward-looking contracts, many of which will never be filled and many others of which will not fall due for years.

Nor is it all debt which must be paid with no reward. If I have an option to buy oil at $100 a barrel in January 2010, all it means is that I expect the price to be higher but I've put a deposit on a barrel at the price now. If the price is lower, well I wasted a few bucks on the option but I just throw it away and buy the oil at $50 or whatever. If it's higher than $100, then woohoo I locked in a good price; I have to pay $95 (I bought the option for $5) but I get a barrel of oil in return, and didn't have to pay (say) $110 so I saved $10 bucks.

In other words, the size of the derivatives market is just the expected value of all possible future deals on which someone has paid a deposit added together. It's not a bill which has to be paid, just an indicator of how much business the world expects to do in the future. (Of course, this is a very simplistic overview, but the bottom line is you don't have to freak out).

[KakistocracyHater]

7. paper debt, with paper Quadrillions being the tip-off, it's FAKE!

yes there is some debt, but it's the debt the banksters have off-the-books & WON'T SHOW to anyone-THAT is the problem. I had read that European countries were also 'bailing out' their banks over there too.

This looks like racketeering on a gigantic scale-I bet the scale of it is what throws most people off.

You have a group of men who say pay us or else......
then you have nations siphoning billions from their treasuries & giving it to this group........
yet there's massive economic troubles still.........
& they insist it's because they weren't given enough money.......

arrest them, the patriot act makes significant economic disruption an illegal act