Thursday, 11 June 2009


yo! good as it gets...innit!

capitulation day
+261... in...


...the zombie capital of the worst...

...the gangreene shoots of zirp forced ungrowth...

...have stolen our hearts away...


..."It really is 1979 all over again – and perhaps even worse. I don't know whether that is something David Cameron is relishing or dreading, but I hope he knows what he's in for....

...we have not dealt with the massive overhang of debt racked up by individuals and governments over the past decade or so.
In the 1930s, the flipside of mass bankruptcy, bank failures and record unemployment was that in a relatively short time private debt levels dropped back down to manageable levels. This time, we have avoided the bankruptcy; the consequence is that we still need to repay the debt.

And, as I wrote last week, the slow reinvigoration of the financial sector is down to the Faustian pact it made with the Government: the public sector has assumed its enormous debts, on the proviso that the banks will operate on a shorter leash. Even amid signs of recovery, those banks remain nervy, paranoid institutions, unwilling to take even mild risks.

In the immediate future, they will remain zombie banks.

Barring another disaster of some sort (which should not be ruled out), the Bank of England will at some point in the next year start raising interest rates. All those households which have only survived because of near-zero borrowing costs will hit a massive financial wall.

They are zombie households.

Then there is the Government. As George Osborne pointed out in his speech to the Association of British Insurers this week, the biggest challenge in the coming decade is how to bring down the national debt. Britain has three options: default on the debt (fatal for our long-term prospects), inflate it away (near fatal, but feasible) or pay it back through a long period of austerity.

The latter course is by no means easy. The Tories insist it can be done through spending cuts, but they will almost certainly also have to raise taxes to get the books back in order. Don't be surprised if VAT is higher than 17.5 per cent before long.

This week, London has been crippled by Tube strikes that presage the next few years, which will be peppered with clashes between heavily unionised public-sector workers and a government with no choice but to bring down costs...."


..."Unveiling mixed results, which saw Homebase return to sales growth for the first time since 2005, Mr Duddy said he will "continue to plan cautiously" for the year ahead.

"I don't think we're strong proponents of green shoots at this early stage of the year," said Terry Duddy, chief executive of Home Retail, which owns Argos and Homebase. "The first quarter was helped by increases in disposable income because of lower interest rates, and it was not offset by unemployment. That could easily change," he said, citing forecasts of unemployment rising to 3 million by the end of the year...."


..."Not that it will feel that good, because unemployment and company failures will continue to rise.
And the big worry is that the British patient, after a feeble recovery, could suffer a relapse.

If the upturn we are seeing now is in large part because of restocking, there will be a spike in orders which will inevitably fall back again. How far they fall back depends largely on the strength of consumer demand.

And there the picture is still pretty gloomy.

Consumers remain shackled by heavy debts, battered by the housing slump, fearful of unemployment and hampered by banks still reluctant to lend.

Public spending provides no alternative, since the massive burden of government borrowing is about to force severe cutbacks.

The industrial production figures show some signs of the hoped-for rebalancing of the economy away from its dependence on the indebted (zombie)consumer.

But without a big easing of credit or a strong rebound in export demand, the recovery is likely to be anaemic, if it is sustained at all."

...times...(petey ; my emphasis and zombie)

..."The fall in Chinese exports and imports accelerated in May, dashing hopes that a collapse in the country’s external trade flows had bottomed out and pointing to the continued weakness in global demand......

....“The global economic situation has hit a bottom but it will still take time to recover. I expect it to take one to three years,” said Hu Yifan, chief economist (global) at CITIC Securities in Hong Kong.

“A technical rebound [in exports] may happen in November but a demand-driven rebound will not come in the short term.”

Beijing has announced a Rmb4,000 ($586bn) stimulus plan after its exports-powered economy was hit hard by weak global demand.

The stimulus packages have spurred investment in government-supported sectors such as transport infrastructure, the power grid and housing, as reflected in a 38.7 per cent rise in fixed asset investment in May from a year earlier.

This marked a larger increase than in April, when FAI rose 33.9 per cent. For the first five months of this year, investments increased 32.9 per cent from the same period in 2008, compared with 30.5 per cent in the first four months of the year and against an estimate of 31 per cent.

“Fixed asset investment in China continues to increase on the back of state-directed projects ... This will help keep the economy growing but there are increasing concerns about the amount of lending that has been required to fund the projects,” said Alaistair Chan, economist at Moody’s"...



..."“Once the 30-year is out of the way, the market should have a window to rally,” said analysts at MF Global. “The bull story rests in higher mortgage rates slowing the recovery.”...FT

..."Now both groups are out on market patrol, trampling green shoots back into the dust. Every $1 rise in the price of oil costs global consumers $82m more a day. Meanwhile UK 10-year gilts on Thursday hit a seven-month high of 3.98 per cent, while US Treasuries sold for 3.99 per cent at auction, their highest since August.

Further rises would lynch the recovery. Then, as market strategist Ed Yardeni puts it, the vigilantes can go back home and do what they like best: nestle up with bonds...."


No comments:

Post a Comment