Community Views : What’s on the boards today….3rd May 2011

3rd May 2011

The Telegraph

"High debt levels pose "massive" economic challenges that would be exacerbated by higher interest rates, the Governor of the Bank of England said."

stephenmarchant writes: "Damned if he does, damned if he doesn't! The BoE should leave the Govt to control it's spending addiction and concentrate on managing inflation. However, he is now signalling that the BoE will continue with the transfer of wealth from pensions and savings to debtors. The economic system is broken and we are slowly but surely drowning in stagflation. How long before we reach the tipping point where the masses realise that saving is futile and the Govt turn once again to the printing presses to fund their spending? Nothing short of Marshall Plans with structured default will now rescue indebted Western Govts."

Caratacus replied: "Nail on head, Stephen. It's like watching the plate-spinner at the circus. All the plates are wobbling and the plate-spinner is ever more frantically dashing hither and yon trying to keep them from falling. His knees are due to pack in at any moment and the plates will fall one by one …"

The Guardian are also discussing the rate rises:

"Base rates are expected to remain at 0.5% when the Bank of England's interest rate setting committee meets this week amid predictions that real incomes will fall for the fourth year in a row – the first time that has happened since the 1870s."

cbonn comments: "Until the government actually comes up with an idea on how to grow the economy, a rise in interest rates will simply be another kick in the teeth to an already hard strapped public who are being hit by high fuel & food costs. Unfortunately, Gideon has so far proved himself to be completely clueless in so far as the economy is concerned. We, the public, deserve better than bullshit i.e. "We are all in this together"

The Independent have also reported on how the consumer is being affected:

"The typical household will see its disposable income fall by 2 per cent this year, the equivalent of £780, one of Britain's best-known economists warned today, and will have to wait until 2015 to see its finances recover to the peak seen at the end of 2009."

49niner comments: "Let's all make ourselves thoroughly miserable and predict doom, gloom, plagues of frogs and locusts and all the rest. If that is what is happening then frankly should we be surprised? It was inflated house prices and a huge consumer binge often funded by equity release that got us into such an almighty mess in the first place. When you're in a hole stop digging. If house prices are flat and consumer spending is subdued then perhaps that's a sign the economy is adjusting, hopefully to a more balanced model. We need to repeat the mistakes that lead to the last two recessions like we need a hole in the head. Because of the crash and the yawning gap in the public finances, there is no option but to cut back on public services. It's happened before and people have found new jobs elsewhere. I've worked in both public and private sectors. Skills are transferrable. I've been saying for months I expect 2011 to be a difficult year. Throw in the turmoil in the Middle East and the tsunami in Japan and we're getting the perfect storm. But we've come through a lot worse and survived. Ask the generation that lived through WW2. Personally I don't feel particularly squeezed. But then I didn't borrow much during the boom years and what I did I've paid off. Having suffered badly in 1990-92 I saw what was coming this time around and acted accordingly. Advice to all those feeling squeezed this time – learn the lessons of the crash. Don't bet the house on an unsustainable consumer binge. Those who don't learn from history are doomed to repeat it."

The Telegraph

"British manufacturing activity grew less robustly than expected in April, at its weakest pace in 7 months, and a sharp slowdown in new orders cast a cloud over what has been a rare bright spot in the UK economy."

Caledonian_Comment says: "Not the time to be raising interest rates. This newspaper has been lauding these PMI figures in recent months as if they were more significant than ONS statistics on growth. So it must gall its reporters to have to print a fall in the figu

Reuters has this story also.

FT Alphaville is reporting on how Bin Laden's death will affect the markets and risk lowers:

Vinny Catalano, CFA writes: "How does one measure an event of geo political significance when there is no way to quantify its impact on risk premia (or other valuation metrics, for that matter)? If Mr. El-Erian or PIMCO has developed such a tool, it would be most interesting to read. Otherwise it is just another opinion."

The Motley Fool community has also been discussing this.

On Bloomberg they are reporting on how the risk remains after the death of Bin Laden.

and Citywire have covered more on how the markets are doing today:

"Overnight Markets: Stocks retreat despite initial bin Laden euphoria"


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