Despite an uncontrollable desire at times to disappear back under the duvet, click my heels three times and say “there’s no place like home, there’s no place like home” – I still find myself reading the economic alerts from the Bank Of Oz, sorry that should have read The Bank of England.
“I don’t know where we are Toto but it isn’t Kansas”, as a girl with pony tails once said. The current UK economic situation defies description – a recession triggered by exuberant risk, embracing bonus hungry bankers across the globe isn’t that common. A recovery fuelled by unbelievable amounts of cash being stuffed through letter boxes (did you not get yours? or was it just the banks?) is even less common. Last one was the 30’s.
As any wicked witch will scream at you, a house landing on top of you is no laughing matter – unless you are a member of the Lollipop Guild or a Munchkin – however the speech from MPC member Andrew Sentance on the topic of the UK Housing Market did make me laugh… though admittedly only once.
You can get his BOE speech here if you want the non Over the Rainbow version from me, but in short – things were bad, things are getting better, and things might get worse again (Robert Peston eat your heart out for that analysis).
OK, here are some of the stats from the speech…
– House prices down 20% since autumn 2007 to Spring 2009 (the trough).
– House prices up 6% on the year to December 2009 (I don’t hear any cheering).
– US economy will grow 3% in 2010 and again in 2011 (pretty average, but at least it’s +ve).
– The UK currency (previously known as the Great British Pound) is 20% below its average value in the previous decade (exporters can do a Mexican wave).
– But that exchange rate is impacting inflation – it’s been above the target 2% for 27 out of the last 36 months (must try harder).
– The impact of QE will still have a positive impact through 2010 (only available while stocks last).
Right, that’s the stats out the way. The more interesting aspect of the speech is the comparisons it draws from the recession in the 90’s. If you flick to chart 3 (if you have downloaded it) you’ll see how Public Sector net borrowing was reduced then and how it will/may/might get reduced in the coming years. If you squint your eyes it doesn’t look that different – after all what’s 4.5% of GDP between friends? The comparisons though are strangely comforting (or am I being delusional).
So if the Public Sector, as expected, is about to get hammered over the next few years what about the other part of the economy….. errmm, what is it again…. oh yes the private sector. Well good news according to our man at the Bank.
To quote… “modest expansion over the second half of last year provide grounds for encouragement”. Phew!
Apparently Andrew Sentance has been out visiting companies around the country and has been impressed by their ability to adjust and develop new strategies. One of the strategies unearthed was to avoid sacking folk and instead cut hours and salaries, to ensure in turn that they didn’t loose the staff needed when things, hopefully, get/got better. So that’s fine – the Banks lead us into the biggest recession since sawdust sausage was rationed but fair do’s – good to see us all mucking in together.
That mucking in is all to do with the British stiff upper lip and (to quote) business exhibiting “bouncebackability” – now that word made me read the sentence again. Yes Andrew Sentance, MPC member, is quoting from Soccer AM. Bouncebackability made me smile – but the thing that made me laugh was the referenced footnote explaining to those that didn’t get the joke (or watch Sky Sports) that “Bouncebackability was a term coined in a football context by former Crystal Palace manager, Iain Dowie” – brilliant. I bet we didn’t quote football managers in the 90’s to get us out of trouble. Good to see things progressing. Maybe he’s looking for a seat on the couch opposite Helen Chamberlain or to walk up the cat walk with a Soccerette (do a Google if you have no clue what this is all about). Actually appearing on Soccer AM seems like a good plan – it’d cheer me up.
However, not just for the “bouncebackability” remark, the speech is worth a read – it helps put things into context pretty well and doesn’t overdo the problems that lie ahead.
In the 1930’s the folks then escaped the depression by travelling over the rainbow with Judy – 80 years later we’re bouncing back with the help of Soccer AM – oh well. I think I’ll opt for the 30’s approach though – so I’m pinching Mrs O’s red slippers and making a wish…..seems we had the power to go home all along….. there’s no place like home, there’s no place like home…..
ps – pay no attention to the man behind the curtain…. turns out the Great Oz was only a banker!
Helen Chamberlain of Soccer AM – http://www.socceram.com/crew/0,,13879,00.html
and if you are really boring Andrew Sentance speech –