The Great Crunch of 2008?
Gloomy mumbling on the UK housing market from the International Monetary Fund:
“There remains the concern that the US experience might presage steep housing downturns in other countries that have also experienced a rapid rise in house prices, with associated risks for output growth,” said the IMF.
The other European nations that the IMF says are at risk of seeing falling housing prices are France, Republic of Ireland, Netherlands and Spain.
A number of recent reports have pointed to cooling house price inflation in the UK.
The Department of Communities and Local Government said earlier this week that the annual inflation rate for property fell from 12.4% to 11.4% in the year to August.
The IMF has cut global growth forecasts:
In its latest World Economic Outlook report, the IMF now expects the global economy to grow 4.8% next year, [it] expects worldwide 2007 growth to hit 5.2% [and] says the greatest threat to the global economy remains the downturn in the global financial markets.
Oh. That’d be the credit crunch.
The IMF expects the US to see a particularly sharp slowdown in economic growth next year.
It now predicts the American economy will expand just 1.9% in 2008, compared with its previous forecast of 2.8%. […] In Europe, it is projecting that the UK economy will slow to 2.3% in 2008 from 3.1% this year [Emphasis added]
The other day, Northern Rock’s chief executive Adam “not a banker” Applegarth and bank chairman Dr Matt “pop-scientist” Ridley appeared before the Treasury Select Committee and blamed the BBC for the first run on a bank in decades.
Yes, they blamed the BBC. Robert Peston, who broke the story of Nothern Rock’s reciept of an emergency loan from the Bank of England, defends himself thusly:
I understand that Northern Rock and the authorities feel that if they had made the announcement of the Bank’s support in their own time and in their own way, depositors might not have quite been so alarmed. But none of them are actually claiming that the run would not have happened. Because when they ask themselves whether they would have kept their savings in a bank which had been forced to ask the Bank of England for emergency help, they know what the answer is.
I knew Peston was no walkover.
Blaming the BBC is a low blow. The people queuing to get their savings weren’t panicking, they were responding rationally. It seemed as if keeping money in Northern Rock was a risk. Certainly, no other bank had taken the emergency loan from the central bank – and none since.
Peston, as a public servant tasked with reporting on economic matters, could hardly sit on a story of such importance to us all.
Under scrutiny, Applegarth admitted he has no qualifications in banking. The mind boggles. I expect he aced in bullshitting. It says on wikipedia that he “read Mathematics and Economics” at university. The drying up of credit markets was totally unexpected, he says. Hmm…
Ridley, on the other hand, is a aristocratic scientist who writes mass market science books laced with neoliberal politics and subjective, that is to say unscientific, observations. For example, in his opus The Origins of Virtue he suggests that Hitler stole the idea of exterminating Jews and communists from Karl Marx – a communist of Jewish heritage. Ridley is a truly bizzare individual. Must be the gene pool…
So, what next for the troubled Northern Rock?
On Monday, it said it was continuing talks with a number of “potentially interested” suitors, but that discussions were at a very early stage.
Its statement came after a consortium led by Sir Richard Branson’s Virgin Group put forward plans to take control of the bank.
Mr Ridley confirmed that the Northern Rock had now borrowed £13bn from the Bank of England, but declined to guess how much more it might need.
When will these guys resign? Or are they waiting for Branson, or whoever takes control, to give them the chop? Have they no shame?