[jeffkrol]

Britain sinks far deeper into recession than expected : The Fiscal Times

so lets cut some more gov spending AND raise taxes....(grabbing popcorn to watch the freak show.. )

But for now, any change to the fiscal austerity program is opposed both by finance minister George Osborne and BoE Governor Mervyn King, who fear it could trigger a loss of confidence in Britain’s commitment to long-term deficit reduction.
"We’re dealing with our debts at home and the debt crisis abroad. We’ve made progress over the last two years in cutting the deficit by 25 percent and businesses have created over 800,000 new jobs," Osborne said in a statement.
"But given what’s happening in the world we need a relentless focus on the economy and recent announcements on infrastructure and lending show that’s exactly what we’re doing.

I thought our clowns were funny..............

"This is terrible data. Frankly there’s nothing good that comes out of these numbers at all," said Peter Dixon, an economist at Commerzbank.
"The economy looks to be badly holed below the water line at this stage. It’s a far worse period of activity than we’d expected."

snicker..............

[jeffkrol]

and it continues.............
UK manufacturing figures deal hammer blow to recovery hopes | Business | guardian.co.uk
comments are interesting............

he data could push the Bank of England to extend its quantitative easing programme when it runs out in November

Yes give the bankers more money, a lot of good that has done us. Just put money into peoples pockets for Christ sake and stop sacking people then you'll might get a bit of confidence back in the economy. Talk about Lions led by Donkeys.

In the short-term, it is possible for the UK to have growth that does not depend on the finite resources of our planet - its called 're-distribution' of wealth that exists but is not being used productively, i.e., its parasitic -debt-based wealth that enriches the few at the expense of the many.

Further, and actually supporting your stance, its clear the global economy needs to move away from its obsession with perpetual growth and move towards conservation of what we have - hence, in many respects austerity is a good thing, regrettably we have the wrong kind of austerity with no social goal in mind, apart from benefiting the global elite.

Unfortunately, for a change in mindset - a new epoch if you like - the powers that be will only act once the present unsustainable system based on capitalism implodes.

Obviously, the 2007/8 wake-up call was not sufficient, so, regrettably for all concerned, the best we can hope for is that the present system collapses quickly under its own contradictions - only then can we have the socioeconomic change you and many others aspire to - that, or an outright revolution, which now seems the more likely outcome.

[Talisker]

Just think – a few more months and you too could have some idiots like ours running the show...

[jeffkrol]

Just think – a few more months and you too could have some idiots like ours running the show...

Unfortunately we do.. It's called Congress...........

[Nesster]

Not the UK, but collateral damage from austerity:
Austerity's Cost: Abandoned Children in Europe - Yahoo! Finance

As the euro zone debt crisis deepens and austerity measures take their toll across Europe, the number of young children and babies abandoned across the region has increased, according to local charities.


The rise in the abandonment of infants across Europe is most visible in the spread of "baby hatches" or "boxes" across Europe, where unwanted infants are left anonymously.

The phenomenon was previously more prevalent among immigrants, but it is becoming more widespread among financially desperate members of the local population.

The hatches are sensor-activated so when a baby is placed, an alarm is activated and a carer comes to collect the child. Despite the practice being widely viewed as contravening the 1953 European Convention on Human Rights, of the 27 EU member countries, 11 countries still have "baby hatches" in operation, including Germany, Italy and Portugal.

In those countries where hatches are illegal, the number of infants abandoned in hospitals, clinics and churches has also risen, raising concerns among European charities, the UN and the European Commission that austerity measures and increasing social deprivation are the catalyst for the rise in child abandonment.

According to SOS Villages, a European charity that attempts to help families in financial hardship before abandonment occurs, in the last year alone 1,200 children in Greece and 750 in Italy have been abandoned. That is almost double the 400 children abandoned in Italy a year ago, and up from 114 children abandoned in Greece in 2003.

With the cost of raising children estimated to be 20-30 percent of an average household budget (per child) in Europe, more families are now struggling to cope with the costs.

[jeffkrol]

Not the UK, but collateral damage from austerity:
Austerity's Cost: Abandoned Children in Europe - Yahoo! Finance

Nesster , that is just sad.....

[Nesster]

Here's an analysis that seems to sum up the global problems pretty well

Five years on, the Great Recession is turning into a life sentence - Telegraph

China is sufficiently alarmed by the flint hardness of its "soft-landing" to talk up trillions of fresh stimulus. The European Central Bank is preparing to print “whatever it takes” to save Spain and Italy. Markets are pricing in an 80pc chance of yet more printing by the US Federal Reserve in September or soon after.

There is no doubt that the three superpowers acting in concert can launch a mini-cycle of growth early next year - assuming they deliver on their rhetoric - but the twin headwinds of debt-leveraging and excess manufacturing plant across the globe cannot easily be conjured away.

The world remains in barely contained slump. Industrial output is still below earlier peaks in Germany (-2), US (-3), Canada (-8) France (-9), Sweden (-10), Britain (-11), Belgium (-12), Japan (-15), Hungary (-15) Italy (-17), Spain (-22), Greece (-27), according to St Louis Fed data. By that gauge this is proving more intractable than the Great Depression.

---

The original trigger for the Great Recession has since faded into insignificance. America’s house price bubble -- modest by European or Chinese standards -- has by now entirely deflated. Warren Buffett is betting on a rebound. Fannie and Freddie are making money again.

Five years on it is clear that subprime was merely the first bubble to pop, a symptom not a cause. Europe had its own parallel follies. Britons were extracting almost 5pc of GDP each year in home equity by the end. Spain built 800,00 homes in 2007 for a market of 250,000. Iceland ran amok, so did Latvia and Hungary. The credit debacle was global. If there was an epicentre, it was Europe’s €35 trillion banking nexus.

Monetarists blame the ECB and the Fed for keeping money too tight in early to mid 2008, pushing a fragile credit system over the edge. They blame “pro-cyclical” regulators for aborting recovery ever since by forcing banks to raise asset ratios too fast. They are right on both counts.

Yet the `Austrian School’ is surely right as well to argue that a rise in debt ratios across the rich world from 167pc of GDP to 314pc in just thirty years was bound to end badly. There comes a point when extra debt draws down prosperity from the future. The future arrived in 2008.

A study by Stephen Cecchetti at the Bank for International Settlements concludes that debt turns “bad” at roughly 85pc of GDP for public debt, 85pc for household debt, and 90pc corporate debt. If all three break the limit together, the system loses its shock absorbers.

“Debt is a two-edged sword. Used wisely and in moderation, it clearly improves welfare. Used imprudently and in excess, the result can be disaster,” he said.

Creditors and debtors may in theory offset each other, but what actually happens in a crunch is that borrowers cut back feverishly. Creditors do not offset the effect. The whole system spins downwards. It is debt’s fatal “asymmetry”, long overlooked by New Keynesian orthodoxy.

It is how people behave, and how countries behave. Creditor Germany did not offset the squeeze in Club Med. Creditor China did not offset the squeeze in the US. The world contracted.

But why did the credit bubble happen in the first place? You could argue that it is merely the flip-side of too much saving. The world savings rate has crept up to a modern-era high of 24pc of GDP. That is the most important single piece of information you need to know to understand the great economic drama we are living through.

There is nowhere for this money to go. The funds flood into investment -- now a world record 49pc of GDP in China -- or into asset bubbles.


---


So my candidate for chief cause is Asia’s `Savings Glut’, and indeed whole the structure of East-West trade under globalisation.

The emerging powers built up $10 trillion of foreign reserves -- ie bonds -- in a decade. They flooded the global bond market. That is why spreads on 10-year Greek debt fell to a wafer-thin 26 basis points over Bunds in the bubble.

They also flooded Western markets with cheap goods, driving down goods inflation. Western central banks -- in thrall to inflation-targeting -- cut short-term interest rates ever lower. They set the price of credit too low, forcing pension funds and insurers to hunt frantically for yield to match their books. The central banks compounded the effect.

Western multinationals played their part in this saga. They drove up the profit share of GDP to historic highs, playing off wage rates in the US and Europe against cheaper labour in China, Latin America, or Eastern Europe. That too concentrated wealth among those who tend to buy shares, land, and Impressionist paintings, rather than goods. The GINI coefficient of income inequality went through the roof, as it did in the late 1920s. It is a formula for asset bubbles.

The credit bubble disguised the exorbitant imbalances in trade, capital flows, and incomes. The game could continue only as long as the West in general -- and the Anglosphere and Club Med in particular -- were willing to run ruinous current account deficits, borrowing themselves into dire trouble.

As soon as the debtors hit the brakes and slashed spending, the underlying reality was exposed. There is too much saving and too little consumption in the world to keep growth, and people in jobs. It is the 1930s disease. On this the Keynesians are right.

None of this would have been any different if banks had been saints. The forces at work are tidal in power.

So this is where we are in the summer of 2012. The imbalances are slowly correcting. Wage inflation has eroded Asia’s competitiveness. China’s current account surplus has dropped from 10pc of GDP in 2007 to around 2.5pc this year.

Yet Europe refused to adjust. Germany is still running a surplus of 5.2pc, down from 7.4pc in 2007. The North has refused to offset the demand squeeze in Club Med. Indeed, Germany legislated its own internal squeeze through a balanced budget law and imposed this curse on the rest of Euroland. The effect is to trap Euroland in chronic slump, at least until the victims rebel and take matters into their own hands.

As for our debt mountain, we have barely begun the great purge. Michala Marcussen from Societe Generale says the healthy level is around 200pc of GDP for advanced economies. If so, we have 100 points to cut.

This cannot be achieved by austerity alone because economic contraction would tip us all into a Grecian vortex. Such a cure is self-defeating.

Much of the debt will have to be written off. Whether this done by inflation (1945-1952) or default (1930-1934) will be the great political battle of this decade. Pick your side. Pick your history.

[jeffkrol]

Should be highlighted..

Germany is still running a surplus of 5.2pc, down from 7.4pc in 2007. The North has refused to offset the demand squeeze in Club Med. Indeed, Germany legislated its own internal squeeze through a balanced budget law and imposed this curse on the rest of Euroland. The effect is to trap Euroland in chronic slump, at least until the victims rebel and take matters into their own hands.

[Nesster]

They also flooded Western markets with cheap goods, driving down goods inflation. Western central banks -- in thrall to inflation-targeting -- cut short-term interest rates ever lower. They set the price of credit too low, forcing pension funds and insurers to hunt frantically for yield to match their books. The central banks compounded the effect.

Western multinationals played their part in this saga. They drove up the profit share of GDP to historic highs, playing off wage rates in the US and Europe against cheaper labour in China, Latin America, or Eastern Europe. That too concentrated wealth among those who tend to buy shares, land, and Impressionist paintings, rather than goods. The GINI coefficient of income inequality went through the roof, as it did in the late 1920s. It is a formula for asset bubbles.

And these two paragraphs pretty much nail the supply side economics - all that wealth accumulating has no place to go, so it (and the pension funds etc) start to speculate. And corporations just jack up profits rather than tending their consumers/laborers.

Like government spending, who saves and how makes a difference.

[GeneV]

And these two paragraphs pretty much nail the supply side economics - all that wealth accumulating has no place to go, so it (and the pension funds etc) start to speculate. And corporations just jack up profits rather than tending their consumers/laborers.

Like government spending, who saves and how makes a difference.

What the world financial markets really need is a big influx of the U.S. Social Security funds, but we will leave that for another thread.

[jeffkrol]

Still screwed................

Well, pretty soon the Coalition is going to have to make the case for doing something different. The best way to restructure the economy toward growth is to shrink the size of government, diverting as many resources as possible into the private sector. But it will be incredibly difficult to make that case unless the public clearly understand the scale of the problem, and what the proposed solution aims to achieve.

That's why I suggest that Chancellor George Osborne take inspiration from Paul Ryan: Explain where we are and why we're here, and what the government intends to do to get us out.

Ryan Bourne: What George Osborne Can Learn From Paul Ryan - WSJ.com