Alessio Rastani appears on Swiss Financial Television, Dukascopy, to discuss whether the UK is really coming out of recession. This is after reports came out last week that the GDP figures show the UK is out of recession.
But do you agree with this? Do you think one quarter growth shows a significant change in the economy or is it too early to call it a victory? Leave us your comments below.
Hi Alessio. Good work. The audio was a bit scratchy so a bit difficult to understand but I got the gist of it. No I agree with what you said, but how long do you suppose we could be in this mess? I just don’t see a way out. Thanks.
Hey over here in Italy it’s just abysmal. So many disillusioned young people in Verona. I was wrong to leave the UK.
Thanks for the input Pirooz, yes I am aware of the situation over in Italy. It is quite perturbing.
Agree Alessio, “… nothing to get excited about..” We’re not out of recession.
I currently live in Lymington (posh town on the Hampshire coast) and there are plenty of shops empty in this high street….
Thanks Lesley. Is that Lymington Spa? I have heard of it. Sounds like a nice place by the Sea.
Hi Alessio. All what said seems to be right. Things do not look good also in Poland. There’s only a small part of society concerned about the situation and preparing themselves to the Real crisis. All the rest complain at politicians or consume blindly without slightest consciousness of what’s to come in few months. They are fed by mainstream lies and horseshit news, like the one according to which real estate slowdown is over or recession would not be painful.
Politicians themselves raise taxes, put more pressure on comapanies and small business, cut some of social privileges, etc. To solve problems they choose the worst possible methods and sollutions.
This way the economy slows down. People get more angry and pissed off every day. Some will save their asses but majority would probably get wiped out.
Good job Alessio! Thanks.
Thanks Lukasz for your very detailed and informative comment. I have Polish friends here too who would echo what you say. Cheers.
Hi Alessio,
The UK is following the path of the US and is running a big budget deficit. Even with this big deficit the UK is only managing a 1% growth. This is not even real growth because adjusted for inflation (even with the cooked statistics) it is a negative growth which the UK is facing.
– A lot of UK export is going to other European countries so no increase expected from here.
– The large banking sector will be further reduced.
– The low interest rates on treasury bills are unsustainable and rising rates will have a dramatic impact on the huge outstanding debt.
Instead of getting out of a recession the UK (and a lot of other countries) will slip into depression the coming years.
Here in the Netherlands we try to keep out deficits down but we will be pulled over the edge of the cliff by the destructive EU policy.
We are in the process of a global economical meltdown and piling up more debt will not help the problem but it is the chosen dead end path.
Best regards,
Frenchy
Frenchy – very good point! I agree with you, piling on more debt is exactly what the policy makers are doing, and it is the wrong course, and we are powerless to change it. All the best to you in Holland.
GDP figures are statistics; therefore they are subject to a margin of error.
Unfortunately the margin of error, known by the statisticians who compile it is not published.
If the margin of error is greater than 1%, which is likely to be, it means that nobody knows if UK is formally out of recession or not. The exact figure might be zero or even slightly negative. This could work the other way around when the published figure is say -0.8%. When the statistic is close to zero within the margin of error, economists should be honest and “we dont know”.
Interesting perspective Pedruska. I didn’t think of it that way. Many thanks for your input.
May be the economist can be right but the ordinary people like myself and many others who are out of work do not feel the same. So it is just wait and see game.
Jose – Very grateful for your comment. Thanks!
1% growth lol, the world’s western government’s are going to qe into oblivion until the baby boomers wealth has been destroyed leading to a currency collapse, a temporary srd will be installed through the imf before the nwo single digital currency! then its game over and a return to a medieval serfdom.
Stavros – lol – yes I totally agree with your sentiments. I’ll be interested to see if it’ll 1% growth next quarter as well. I doubt it.
Hi Alessio
You’re right – the mentality is still one of anxiety and recession.
There is very little confidence in our leaders or the future – and until that changes the economic situation will stay the same. Throwing money at it will only distort the situation.
The Olympics were a very nice blip – but do not a trend make.
Thank you Deborah for your input. Very excellently put. Many thanks.
I’d vote for him as prime minister. He’s not afraid to tell the truth.
Hey Tom. Cheers! I assume you were talking about me. Well, thanks – can’t say I would enjoy being prime minister. I’ve always preferred Secretary of State role personally. lol – All the best, take care.
When the GDP figures came out, was good to hear some good news about the economy. But as you say, Alessio, what really counts is consistency.
Thanks David- you’re absolutely right – it is consistency is what we need. Cheers.
Hi Alessio,
I totally agree and this CNBC article says something too…..
Britain Will Be Third World Economy by 2014: Authors
cnbc.com/id/49568596/
Thank you for your insights
Grace
Grace thanks very much for the interesting article and input. Hope you’re well. Grazie mille. Take care.
alex, QE means an increase in money from essentially nothing as are federal reserve notes and loans. if you indebt ppl with nothing and they pay it back the banks win as they charge interest on that nothing. if they lend you money to buy your house with nothing and charge interest on that nothing, and the borrower cant pay the bank seizes your assets, but they do this having never having had anything. its not about economic growth its about totalitarianism, power and control…. the faster the debt rises the more power banks and governments have over peoples freedom…QE/loans is in effect printing power from….you guessed it….nothing.
Kevin, that’s true – QE is destructive by nature and all it does it gives a temporary fix which has long term negative consequences. And by that time all our current politicans will have retired – and therefore absent from blame.
Well done. Here in the States, companies continue to miss on top line revenue and GDP continues to grow at 2ish pct. how can an economy grow this fast (only two ways: population growth or efficiency) or govt is “investing” in our future thru higher defense spending or counting the Fed’s QE as apart of GDP. The dam has lots of holes and these central banks and their puppets (politicians) won’t be able to fix the overly indebted countries as this single problem needs to get fixed. Ironically, over the past 4 yrs, this problem hasn’t been fixed … Just transferred
Dan – exactly. So much for the message of “change” that was promised 4 years ago…
Alessio you are dead on. As always your insights and straight talk is so appreciated. The government is desperate to prop up consumer confidence. What it comes down to is good old fashioned propaganda for the masses. Europe has many years ahead of rebuilding their economies.
Thanks Ravi. I think you’re right. The government would undoubtedly seize any chance of good news to show recovery. too soon.
Totally agree with what you say. While I live in Australia, I don’t have first hand experience of Europe and the US, but I don’t see how the “can kicking” by the IMF and the ECB and sovereign banks and the Fed can help long term. One thing I notice is the fact that the main stream press tend to play down the financial crisis so I tend to get all my information on-line where a far more accurate commentary can be found.
I have great faith in assets, particularly bullion as insurance against what I see as a rolling global crisis coming down the line with social unrest as the world-wide debt has become an impossible burden that cannot now be inflated away….. Although the currency wars developing will give it a damned good try. I am not optimistic. We have lived high off the hog for too long thinking it could go on forever. We are now reaping the consequences. Perhaps everyone should follow Iceland’s example and default and take the pain because they are now well on the way to climbing out of the hole they dug for themselves.
Chris – I share your enthusiasm for bullion (metals) as the best way to hedge against inflation. I can’t say I favour what Iceland has done – not after I read some of the ghastly real-life horror stories of what people have gone through over there (it’s mentioned in the book “Whoops!”.) Many thanks for your input.
Hi Alessio,
Definitely, I do agree with your interpretation for the situation in the UK. However, I strongly believe that the country is not as bad as the other European countries (excluding Germany) and at least it has its own currency which enables the country to implement the appropriate monetary policy which can lead the economy out of recession. The UK doesn’t follow destructive policies like those forced by the technocrats of Brussels and has more chances to overcome this crisis.
Here in Cyprus it used to be a tax haven with thousands off-shore companies coming and rest their money but as happened to the other southern European economies, the troika came to cut wages, social privileges and privatize all the public assets in order the international capitalist to make further profits. All the households are highly indebted and nobody watches the future with optimism, and without optimism in the economy don’t expect things to get better.
Best regards,
Evangelos
Thanks Evangelos. Interesting points.
UK public debt to GDP ratio is 87% with unemployment rising. Companies are generally slimming down and government sets expenditures ceilings. Parking tickets most in London became a tax for motorist since they are issued by City of London and Boroughs fully unfair. If the financial elite
leaves London the country is finished.
Very true Richard. And interestingly it is the financial elite that are being penalised – and it wouldn’t surprise me if they moved their business elsewhere.
I see a good common sense in Alessio comments and forecasting. Nobody does have crystal ball but Alessio get it right in many cases, if you follow him. Keep up a good work, Alessio.
Best, Vadim
Thank you Vadim. Much appreciated.
Hi Al,
First off, keep up the good work! Its refreshing for some one in the public eye to speak sense, rather than the usual rhetoric and towing the party line.
Am I the only one in thinking that this depression could have been solved in 2008 by letting the ‘too big to fail’ banks go to the wall? Why not allow market forces to sort things out? Yes, we would have endured pain, but anything is better than this protracted bleeding of wealth and disposable income of the common man. The inner cynic also cant help but notice the definition of fascism as ‘the merger of state and corporate powers’ (just look at Greece, Italy et al who have Goldman Sachs boys at the helm…)
I work in construction, which in the last 5 years has seen my salary almost half, with living almost double. I am not alone! Trust me when I say, PFI is going to be the final nail in the coffin, the government is going to be hit with some major bills in the next 10 years due to Labours great idea of ‘buy now, pay later’.
Rant over!
James
Hi James – thanks for your comment on the article and video. I appreciate your kind feedback, cheers. In regards the whole “too big too fail” banks and letting them fail – well, I’ll be honest, that is a tough one. I personally think that had we allowed them too fail it would have been a disaster for everyone involved, not to mention that we would have sinked into depression. I think that we had no choice but to save the banks – for everyone’s sakes. However, the part where I do see your point is that – the banks took all that money and did not lend it out. Instead, they filled their own pockets with it. I’ve heard some of the horror stories of countries that were allowed to go bankrupt – like Iceland – and believe me you would not want to have gone through that. ANyway, thanks again for your comment.
If there is growth in one quarter it could mean that the recession is over, but in order to know for certain I must know what caused this growth. Was the growth caused by austerity measures and businesses in the private sector taking actions similar to Henry Ford, or is it just the result of digitizing money? If it is a result of QE then you got to be freaking crazy to think that it will work! Then again who the heck am I what heck do I know?
Todds(1994) in his article claimed that GDP could replace monetary aggregates guide for monetary policy, because monetary aggregate less reliable. Events in 1992 and 1993 when relations between money supply and economic growth was hardly found showing that recession didn’t affect the economic activity. The economic growth at that time instead of decline was growing by 3.3 % as measured by GDP. This research had been done in order to find another benchmark when define value of yield of securities.
From my perspective, GDP does not reflect true situation, coz by definition it does show the economic “activity”, which have been seen as something for short term and it is not a mirror. “Activity” is not the same yet as “reasonable outcome”. Even when people shopping or even, lets assume that banks lend for businesses it doesn’t mean that it will work out because, simply there is a question stands if this money come form simply printing, it means that it will work in the same scheme, and will lead to the situation that even can be worse. You cannot stop people lend money to buy clothes or things that they actually don’t need, so it means that they will go and spend borrowed money, here we go, gdp increase
Thanks Saida for your input on this article, much appreciate it.