December 31, 2008
Knighthood for failure
Story link: Knighthood for failure
Maybe the role was forfilled, but it still begs the question whether it was actually deserved, based on highly critical conditions within the markets in the UK.
The Treasury’s top official, who was at the helm during the boom before the credit crunch, has been knighted for his role in dealing with Britain’s deepening financial crisis.
The move, as the pound plunged to a record low against the euro and after another slide in house prices, prompted protests that the honour was premature and self-congratulatory.
Paulson and the US crisis
Story link: Paulson and the US crisis
In some respects he is right, but the Government will always try and do what they feel is in their best interest at the time, this doesn’t mean that the future of the economy would be stable based on their decisions though, as we can see now!
Henry Paulson, the outgoing US Treasury Secretary, said the US Government had to battle the financial crisis without the tools needed to do the job effectively.
Mr Paulson also said any future regulatory overhaul needed to ensure that financial system infrastructure could allow for the failure of large institutions.
US Consumer confidence drops
Story link: US Consumer confidence drops
The shopping figures over the festive period were likely to likely to be the make or break of the economies worldwide and by the looks of it, it’s the break here.
The retail industry has always been a hard industry to survive in at the best of times, so its likely we will see many more drop over the next few months.
American house prices fell by their fastest rate on record last month amid deep pessimism over the economy and the expectation of the worst Christmas shopping figures for 40 years.
The data reveal that the world’s biggest economy shows no sign of recovery. This will increase pressure on Barack Obama, the US President Elect, to slash the rate of income tax as soon as he enters the White House on January 20.
UK House prices sliding with force
Story link: UK House prices sliding with force
I wouldn’t say it would be the easiest to predict, unless your going with a basic prediction of will they rise, or will they fall, as that is pretty obvious over the next 12 months.
The biggest prediction that needs to be backed up with solid evidence is when house prices will begin to stabalise and then increase.
UK House prices sliding with force
The year that is now drawing to a close ought to have been the easiest 12 months to predict for the property market in a long time.
By late 2007 the market was already starting to slide. In the US, prices were plunging at the fastest rate on record – showing that even in less overvalued markets property values could suddenly fall. The securitisation market had seized up, removing the very foundations from the mortgage market and stifling the availability of finance even for those with decent credit records. Northern Rock, once the UK’s most active mortgage lender, had effectively collapsed, removing another support for lending.
The financial crisis
Story link: The financial crisis
Its nice to read some text that isn’t media hype for once and there is some great information to be had here, depending on how its interpreted.
This week I have a special Outside the Box for you. My long-time friend Doug Casey wrote a very prescient piece back in 1997. He has updated it somewhat for today’s times. The critical part is a summary of the work of Richard Strauss and (friend) John Howe and their book The Fourth Turning, which I consider one of the more important and prescient (that word again) books of the last 25 years. (Amazon.com). It should still be read today. It is seminal to understanding the times we live in.
Doug summarized the book and makes some observations based on that understanding, many of which turned out to be true and some of which may well be in out future. I think you will find this to be very useful and enlightening if you are not familiar with their work, and a great review if you are.
More to come in 2009
Story link: More to come in 2009
If you take a look at a few countries that have a strict lending criteria compared to the UK, you will see that the value of house prices run parallel to levels of lending, i.e.: they are a lot cheaper in comparison to UK properties.
Maybe the drop is going to be a lot worse than we first thought?
However much you think your house is worth now, it seems it may be rather less valuable in a year’s time.
In 2008, house prices suffered their biggest fall on record, outstripping the annual drop seen in 1990, and even that of 1932 during the global depression.
December 30, 2008
Get on the ladder if you can!
Story link: Get on the ladder if you can!
The figures on paper look reasonable, but lets not forget the main reason why people aren’t jumping on the property band wagon and that is mainly due to the banks strict lending criteria which basically freezes a large percentage of potential buyers out of the market completely.
Although first time buyers are largely still unable to enter the market due to the lack of mortgages and the requirement for large deposits, those wishing to upgrade their property will see many opportunities to do so in 2009.
Miles Shipside, commercial director, Rightmove, said: “Those looking to upgrade from a terraced to a semi detached property in 2007 would have needed an average of £25,535 additional funds for the purchase.
Property has a way to go
Story link: Property has a way to go
So very true, its not the fact of if the market will correct itself, because of course it will, it’s a matter of how quickly.
These lines from the 1977 classic Hindi film Gharonda would, in brief, encapsulate the struggles that most people go through while buying a home, especially so in the last 2-3 years.
Residential property prices crashed in the mid-1990s, and it took till 2002-03 for them to start rising again. When they did, however, the progress was rapid. Within a short span of time, the prices had risen so much that the budget buyer, who comprises the bulk of the market, was left out in the cold.
US buys less from Germany
Story link: US buys less from Germany
This is the impact a glitch in the economy can have on hundreds of other businesses which is definitely not good for either the economy or the individual sector of the economy.
When American consumers stop buying, companies around the world suffer — even those that do little business in the United States.Skip to next paragraph
Take Hawe Hydraulics, which makes valves and conduits here in southern Germany. Its sales have boomed in recent years, driven largely by demand from China and the rest of Asia. But in the last few months, new orders have virtually dried up, almost overnight.
Deflation and Inflation
Story link: Deflation and Inflation
There are some very detailed and reasonable predictions for the year ahead here, although I think I’d wait for the Bank of England and possibly an announcement in the New Year before I went it to similar amounts of detail.
UK inflation for November as measured by the CPI continued its sharp decline, falling by 0.4% to 4.1% from the peak of 5.2% for Septembers data. The Bank of England would have been aware of the sharp fall in Octobers inflation at the earlier November MPC meeting that saw an near unprecedented panic interest rate cut of 1.5%, followed by a further 1% cut in December that has taken UK interest rates sharply lower from a peak of 5% in early October to stand at just 2% today. The interest rate cuts have been accompanied by BOE statements that UK economy is expected to contract by 2% GDP during 2009, that puts the UK on target to experience a worse recession than that of the early 1990’s. However as my earlier analysis suggested that the UK could experience a decline of as much as 3% for 2009 which would make this recession just as bad if not worse than that of the early 1980’s which wiped out much of Britain’s manufacturing base.