Who remembers the 80's recession?

[Flash In The Pan]

About the export stuff, I wouldn't look at things negatively. As it so happens, most developed and mature economies have gone way beyond being a manufacturing nation (almost everything can be manufactured elsewhere for lesser money). What these countries have moved into is "services". From education, healthcare, tourism and financial services.

This is where the UK comes into play. This is where the UK needs to focus and it does so very well.

Okay, let's look at these areas as a replacement for a manufacturing base in this country...

Education

At present our education system (particularly higher education) is still regarded as being one of the best in the world and overseas students will still pay good money to study here. Standards, however, have been slipping year on year and it would appear that it is no longer a prerequisite even to be able to spell to attain a good pass at degree level or higher.

Even if we do successfully train many overseas students to a satisfactory level, most return to their home countries and help their economies grow strong, not ours.

Healthcare

The only people from overseas who see our healthcare system as being a quality one are those from former colonies who can come here and get operations done for free. In most other developed countries our health service is regarded, at best as second rate.

Tourism

I'm sure there are exceptions, but in my personal opinion we have one of worst tourist industries in the world, compared to most overseas destinations ours are dirty, expensive and staffed by rude people.

Financial Services

In the current financial climate I wouldn't hold that up as a great selling point for UK PLC


When the Ravenscraig steel works closed, 13200 people directly or indirectly lost their jobs, but great claims were made that these had been replaced by new jobs in the service sector.Iin all honesty though, how many steelworkers do you think were hired by the call centres that sprung up in it's place?

Without a manufacturing base we are careering headlong towards fulfilling Napoleon's taunt that "L'Angleterre est une nation de boutiquiers" (England is a nation of shopkeepers), only now the shopkeepers are falling by the wayside too....

 

[whiteflyer]

HOWEVER, for those of us that were around in the last recession, it is also a time of tremendous opportunity for those people / business who can find their way through it the best and position themselves for the market (however it looks) post-recession.

Apparently more millionaires were made in the last recession than at any other time (not counting lotto winners) and the Kennedy family made all their money in the USA great depression , when old man Kennedy bought land on the cheap.


I believe we NEED a manufacturing base if we wish to be a mayor world economy. The service industry need some thing to service, the idea that we can all work in retail and finance is just farcical. I agree with how flash in the pan has summed it up.

 

[Wail]

......

We have been told for years that house prices were over-inflated by 30%, so a self correction was due so why is everyone shocked.

........

Sadly, very true; and this is why I also put some blame on real estate companies along with banks. These two culprits worked to push-up and inflate the prices of real estate.

The down side to what's happening with the correction we're now witnessing is that most people are running into negative equity by no fault of their own. This is a disaster, unfair, and may even be criminal. The problem is, how do you pin-point where there crime originated on something of this magnitude.

......

It's easy to blame the media as they are a soft and easy target and deflect the blame from where it lies. The real cause of this recession is unsustainable levels of lending and personal debt, along with the 'gambling' of money on the worlds poorly regulated financial markets. This has been driven by greed from the lenders and, frankly, the consumer too.

.....

About the media, it's like the paparazzi dilemma. Are they providing us with news that we need, or is it gossip that only inflates a problem?

Take Northern Rock as a case; the bank run that it witnessed was a result of media hype. This is what nearly brought it down. The media is very guilty of inflating the problem, and then hiding behind the lie of freedom of speech / free press etc. In reality, the media makes money on people's agony, problems, and ill-fate, not on good outcomes. Furthermore, there are times when the media should know when to keep silent for the best interest of the whole society.

Sadly, putting a gag order on them would have been close to impossible as it wouldn't be practical to identify what news should not have been brought to light.

Anyways, the point is .. they are guilty of mass-negligence and creating a witch-hunt.

As for the consumer, there is no way I would blame them as the biggest cause has been the securitisation of sub-prime mortgages. Owning a house is a basic necessity by any nation's standards, so how can anyone blame the consumer who agreed to take out a mortgage on a real estate .. regardless of how it's to be paid back. When a bank offers a NINJA loan to someone in that situation, is it realistic to presume that the consumer will say no to taking the mortgage which will get him / her to own a home? The psychological implication of what banks did was beyond inhumane.

The worst part of all this is that the governments (here in UK and in US) stepped in to bail out the banks without any due care to the mortgage holders (be them paying back their mortgage adequately or not). It's as if the government don't care about the average tax payer and only care about the big loan-sharks (banks).

 

[whiteflyer]

The down side to what's happening with the correction we're now witnessing is that most people are running into negative equity by no fault of their own. This is a disaster, unfair, and may even be criminal. The problem is, how do you pin-point where there crime originated on something of this magnitude.

Negative equity is only an issue if your selling and or lose your job, if you going to stay in your home long term it has zero effect. I expect to live in my home until I die, and just don't give a damn what it's worth, so long as I can pay the mortgage why bother.

How on earth can it be unfair or a criminal, buy a car on 100% HP and your in negative equity the moment you leave the show room, in fact buy anything on 100% HP and your instantly in negative equity.


The rise in house prices in not the fault of banks or estate agents, it's the fault of the people who bought the houses at inflated prices, they could have said no it's to much and the prices would not have risen like they did. People have belatedly learn this and this is why price are falling, it's not the banks who are say they are to expensive it the buyers who are now refusing to pay over the odds.

Owning a house is a basic necessity by any nation's standards

Oh no it's not, many many country have a low home ownership,and a large renting base. In Germany more than half of all homes are rented Germany (ex FRG) 55% Germany (ex DDR) 66% and in the Netherlands it's still high but has dropped over the last 20 years from 58% to 46% homes rented.

 

[fracster]

Ain`t no point living in the past,it`s gone.

 

[Defiance]

Northern Rock would have collapsed in time regardless of the media. The fact that the media alerted consumers to it, meant they could act before losing their money and that forced the government into action. Imagine if you were a Northern Rock customer and didn't know that you bank was facing insolvency like the customers of the Icelandic banks who didn't know until after the event. So I don't entirely agree with your point about the media. I'm sure a few bankers are unhappy though as it's forced a level of state control over the banks, but that's what comes of acting with real mass-negligence.

Regarding consumers, is it really necessary for people to use flexible mortages to buy premium cars, boats, or other non-property purposes ? Or worse to provide a lower cost means of paying off excessive credit card bills caused by spending on luxury or non-essential items ? Also, shouldn't the consumer also be able to work out that a mortgage of over 4x salary is going to be hard to repay if the interest rates change or when their low-start deal ends ? I am not saying they are totally to blame or even in the majority, but they do share in it for certain.

 

[photon]

Lord Paul is on BBC News 24's HardTalk right now. Will be interesting to hear what a guy whose wealth is from the manufacturing sector has to say.

 

[Flash In The Pan]

Ain`t no point living in the past,it`s gone.

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[Wail]

Flash,

You make some very logical points, however I will disagree with a lot that you've said.

Education

The standard of education here is by far one of the best in the world; and while the system may be providing something lesser than what was in place a couple of decades ago, it's still one of the best in the world.

What's wrong with teaching and training students from other countries?

A single country cannot be self sufficient. If these students go back to their respective countries to build their economies, so be it. It doesn't take away from the pool of resources that will feed into the UK economy. It's not like there is a pool of £££ from which all the students here (be them from UK, India, Saudi Arabia, USA etc.) have to share. Those who go back to India, will most likely go into the manufacturing industry. Those from Saudi Arabia, will most likely go into the oil and service (a different type of service that is not offered here in UK).

Yes, there can be competition, but not on the scale that will make the UK lose its prime role in this field.


Healthcare

Just like that of education. You'd be surprised as to how many, from none-former-colonies come to UK for medical needs. Even if you want to say the standards are not as good as some other developed nations (which I'd argue that) there is a very big advantage that the UK offers and that's the English language. True, then you could state that Australia and the US have the same language, but none are ideally situated, none are within easy reach, and none offer the diversity that the UK has to offer (being close to mainland Europe is a psychological strategy).


Tourism

Have you been to London in Summer, or over Christmas, or Easter ... or any time for that matter.

The sad part is that, since we live here, we get sanitised by what's on offer and we fail to see the wonderful things that makes this country so great.

Take it from me, as a Saudi, I am sick of the sun, I am sick of hot / warm climate, I am sick of the seaside, I am sick and tired of not being able to wear raincoats .. the list goes on. Of course, just about everyone in UK want the sun, want a seaside place, want warm climate .. you get the picture.

Then there is the culture and heritage. Though many other European countries offer this too, but - again - what the UK has is the English language. It being universal, means that the majority of the world's population can go, with ease, anywhere to see castles that are 100s years old, cathedrals that are almost a 1000 years old, etc. Now, I can do this in many other countries, but not with the same ease, standards, and quality that I can do it here in UK.

While the UK may not have the same size of a tourist industry as some other European countries, this isn't because of quality or desire .. it's because of the price.


Financial Services

London is one of the two capitals of the world's financial markets. This is how it's been for decades, if not centuries; and this will continue to be the case for a long time to come. Again, the English language is a major factor to this and will continue to be so until China and India shape-up (if at all they can catch up).

The current meltdown is primarily due to the US turning a blind eye to securitisation of subprime (as I've stated earlier, there are even paper written that suggest that the Central Bank in the US and government officials were "bribed" to ignore the risks associated with this type of financial instrument). Because of the size of the US market, the world financial institutions put their money there, only to see it dissolve as the banks there file for Chapter 11.

This meltdown isn't a consequence of the failing here, it's a consequence of following the stupidity that was taking place in the US and placing money over there.

The UK will continue to play a major role in this field, and this negative growth will pass in a couple of years .. just as any market trend. It was inevitable, and it will pass.


Now, I don't say that the UK should forgo any form of manufacturing, only that it will not be able to compete; but there is always a niche market to fill. Take military hardware, luxury brands and products (remember, because of the high cost of living & wages here, this has to be offset by high cost of end-product. The best way to mitigate for this is to offer equally high quality goods). This is why British Lealand (sp) went bust, but RR still goes strong. This is why Rolex (OK, from Switzerland .. but is the same scenario) can still make watches when the likes of Seiko and Rado exist).

One of the things that the UK has, which the world needs is the standard of service; and while this has dropped in the past decades (I've been here for 4 decades now to witness this), it's still one of the best in the world.

 

[Wail]

whiteflyer
Negative equity is as you&#8217;ve said it to be, but still. How would you feel knowing you&#8217;re paying for a house that&#8217;s 30% over priced? You would be feeling very unhappy about it, you&#8217;d be talking to your bank about it too, I am sure.

But there is more to it than just that. Your whole net-worth will drop in accordance; and while many buy a house to live in and use it as their primary place of residence, it&#8217;s still your investment in your retirement and long-term happiness. If your net-worth drops by 30% you&#8217;re not going to be happy.

How can it be criminal? NINJA loans? The world has already witnessed how weak the general consumer is with regards to living on credit, and the negative effects of the credit cards has been seen. Now, banks go and flash mortgages to people who have no means to support a repayment and expect them to be credit savvy!
It&#8217;s like seeing how children love sweets, and then taking the next generation and feeding them in a sweet factory. The argument that the consumer should know better is not a valid point when it comes to borrowing for a house.

As for the rise in house prices, it&#8217;s been fuelled by the buying power that was created by the subprime mortgages. Had this market not existed, the prices would not have escalated to this catastrophic proportion; while we&#8217;d also not have the troubles of the banks&#8217; money disappearing in to real estates that were sold on mortgages which were not to be paid back. It&#8217;s like asking what came first, the chicken or the egg. In this case, regardless of whomever came first, banks and real estate companies had the ability to know what the consumer&#8217;s weakness are, and they attacked on that front. The consumer is the underdog and is not as technically savvy as these institutions. Furthermore, these institutions have a social obligations to say &#8220;no&#8221;, which of course they didn&#8217;t, hence the disaster we now witness.

Well, given the statistics you&#8217;ve shown I&#8217;d still say that acquisition of living homes is high, also, if it is not any higher that does not imply that the consumers don&#8217;t want to own their properties and are happy to rent. It could well be that they can&#8217;t afford to own. Of course, I can argue a lot on those numbers, like factor out immigrants, low-income people, people who do not want to own, etc. and you will then get a real picture. Still, even with the statistics you&#8217;ve demonstrated that&#8217;s a high percentage who do own their homes.

BUT, keep in mind, the problem is with sub-prime mortgages and its securitisation. Who are the targeted consumers of this product? It&#8217;s people with very low income and hence very low education. They were targeted because they are weak in so many areas, but most of all, because they ache to own a place to call home.

 

[Wail]

Defiance,

If Northern Rock (NR) was going to collapse irrespective of the bank run, then that means it was going to collapse due to failed business. Fair enough, and so be it.

In a free market, companies do fail just as others do succeed. It&#8217;s only fair.

Hence, if this was the cause of NR to collapse then the government would have seen this (banks have to report their balance sheet to the Central bank on a daily basis). The Bank of England (BoE) would have known a long time before any collapse that such a collapse was imminent (NR's weak balance sheets would show this coming, and NR's executives would have been discussing this matter with BoE long before). Hence, if the BoE wanted to step in to rescue NR then it could have done so without the need to get the depositors to play any role (which is what the BoE ended up doing anyways).

As such, the bank-run on NR only made the role of the BoE that much harder as not only did the BoE need to provide enough cash to see NR though a credit squeeze, the BoE also had to provide enough cash to sustain all the withdrawals by the clients and when that didn't stop the bleeding, the BoE simply offered a guarantee on all deposits (by effect killing the free market that the UK once was); but the BoE had already agreed to save NR .. so why was there the bank-run? Media hype & consumer lack-of-knowledge.

If, by NR going bust, the 1000s of depositors lose their money then that too is only fair. After all, as a bank client, you&#8217;re either a lender to the bank (when you deposit money you are lending them your money) or a borrower (when you use their credit facilities). If by doing business with them you end up losing, then so be it. That&#8217;s what a free and fair market is all about. People fail to accept that banks can, and do go out of business.

 

[Flash In The Pan]

Flash,

You make some very logical points, however I will disagree with a lot that you've said.

Education

The standard of education here is by far one of the best in the world; and while the system may be providing something lesser than what was in place a couple of decades ago, it's still one of the best in the world.

What's wrong with teaching and training students from other countries?

That remark wasn't aimed at you, Wail, just in case you're under the misapprehension that it was

A single country cannot be self sufficient. If these students go back to their respective countries to build their economies, so be it. It doesn't take away from the pool of resources that will feed into the UK economy.

I have to disagree with you there, if a university can take, say 100 students on a particular course and 90 are from overseas, then only 10% of the university's output is going towards strengthening the UK economy in the future.

It's not like there is a pool of £££ from which all the students here (be them from UK, India, Saudi Arabia, USA etc.) have to share. Those who go back to India, will most likely go into the manufacturing industry. Those from Saudi Arabia, will most likely go into the oil and service (a different type of service that is not offered here in UK).

Yes, there can be competition, but not on the scale that will make the UK lose its prime role in this field.

Yes, these students will return to their home countries and go into areas such as oil production and manufacturing, so we are training up our competitors.

Healthcare

Just like that of education. You'd be surprised as to how many, from none-former-colonies come to UK for medical needs. Even if you want to say the standards are not as good as some other developed nations (which I'd argue that) there is a very big advantage that the UK offers and that's the English language. True, then you could state that Australia and the US have the same language, but none are ideally situated, none are within easy reach, and none offer the diversity that the UK has to offer (being close to mainland Europe is a psychological strategy).

How many of these "healthcare tourists" actually pay for their treatment though? I'll bet the ones that do are in the minority.

Tourism

Have you been to London in Summer, or over Christmas, or Easter ... or any time for that matter.

Yes and I vowed I'd never go back....

The sad part is that, since we live here, we get sanitised by what's on offer and we fail to see the wonderful things that makes this country so great.

Take it from me, as a Saudi, I am sick of the sun, I am sick of hot / warm climate, I am sick of the seaside, I am sick and tired of not being able to wear raincoats .. the list goes on. Of course, just about everyone in UK want the sun, want a seaside place, want warm climate .. you get the picture.

At no time did I make reference to the weather or the seaside, these are things that have nothing to do with rude staff or dirty, crime ridden streets and please don't tell me these coments don't apply to London.

Then there is the culture and heritage. Though many other European countries offer this too, but - again - what the UK has is the English language. It being universal, means that the majority of the world's population can go, with ease, anywhere to see castles that are 100s years old, cathedrals that are almost a 1000 years old, etc. Now, I can do this in many other countries, but not with the same ease, standards, and quality that I can do it here in UK.

While the UK may not have the same size of a tourist industry as some other European countries, this isn't because of quality or desire .. it's because of the price.

So, what your saying is that our tourist attractions are overpriced? I would have thought that in itself was a major hurdle in trying to generate revenue from them..

Financial Services

London is one of the two capitals of the world's financial markets. This is how it's been for decades, if not centuries; and this will continue to be the case for a long time to come. Again, the English language is a major factor to this and will continue to be so until China and India shape-up (if at all they can catch up).

The current meltdown is primarily due to the US turning a blind eye to securitisation of subprime (as I've stated earlier, there are even paper written that suggest that the Central Bank in the US and government officials were "bribed" to ignore the risks associated with this type of financial instrument). Because of the size of the US market, the world financial institutions put their money there, only to see it dissolve as the banks there file for Chapter 11.

This meltdown isn't a consequence of the failing here, it's a consequence of following the stupidity that was taking place in the US and placing money over there.

The UK will continue to play a major role in this field, and this negative growth will pass in a couple of years .. just as any market trend. It was inevitable, and it will pass.

Fair point, but as many of the subprime loans were issued or underwritten by UK institutions then this sector too will be under a great deal of pressure and on it's own financial services are not enough to run an economy on

Now, I don't say that the UK should forgo any form of manufacturing, only that it will not be able to compete; but there is always a niche market to fill. Take military hardware, luxury brands and products (remember, because of the high cost of living & wages here, this has to be offset by high cost of end-product. The best way to mitigate for this is to offer equally high quality goods). This is why British Lealand (sp) went bust, but RR still goes strong. This is why Rolex (OK, from Switzerland .. but is the same scenario) can still make watches when the likes of Seiko and Rado exist).

British Leyland went bust as the result of trade union activity, a decentralised management structure and poor quality control.

Rolls Royce may still be going strong, but it is now owned by BMW.Under British ownership the company sank into an abyss and produced cars that were every bit as unreliable and rust prone as those rolling off the production lines at Longbridge or Cowley.

Interesting that you should pick Rolex as that was originally the brand name of British company called Wilsdorf and Davis, who, had they remained UK based would probably long since have gone bust.

One of the things that the UK has, which the world needs is the standard of service; and while this has dropped in the past decades (I've been here for 4 decades now to witness this), it's still one of the best in the world.

The problem with having a service-based economy is that, as witnessed with the call centres, there is always someone cheaper in a developing country to pull that rug out from under our collective feet...

 

[Defiance]

The point is that the consumer has a right to know what a bank is doing with their money, and that includes the views of outsiders, e.g. the media, who do not have a direct and vested interest in the business. A free and fair market should include freedom of information as part of it. That is the world that we now live in whether we like it or not. The media were not wrong in their analysis of Northern Rock's position and not wrong to communicate it. They do not want a recession any more than anyone else as it hurts their businesses and revenues, so it's important they get it right and communicate it properly (remember they are not all tabloids and they all communicated the stories).

I also don't think average people can accept that mainstream banks can fail, particularly through irresponsible business practices that the consumer has no control over and which governments have failed to regulate. Nobody in the UK would consider their savings as a risky form of investment versus say shares, where there is a much clearer defined risk of loss as well as gain. If that were the case, then we would all hoard our money under the floorboards instead. The average consumer does understand that their return can vary in return for how long they invest it for, or through changes in interest rates.

The consumer, however, always has the right to vote with their feet and that is a risk which banks and lenders do have to take as part of being in business.

 

[ppp]

So far I think its not as bad as the 80's but in the long run I think the impact will be much much worse

 

[fraggle101]

I didnt know it had ended! for me at least it never did!!!

 

[Flash In The Pan]

T

I also don't think average people can accept that mainstream banks can fail, particularly through irresponsible business practices that the consumer has no control over and which governments have failed to regulate.

During the war, my gran invested her life saving of £800 (which would then have bought a couple of bungalows) in war bonds, with a government guarantee of all her capital back plus a fixed return at the end of hostilities.

She got a total of £160 back. These weren't rich people by any means, my grandfather was a disabled ex-serviceman who could only find work as a watchman, who placed their trust in the government of the day the way people are being told to do by this administration.

If it all hits the fan I reckon the chances of getting even the £35k underwritten by the government back should banks start collapsing is slim at best.

 

[photon]

A cautionary tale, indeed: http://www.thisismoney.co.uk/saving...n_article_id=363216&in_page_id=7&in_a_source=

Our Govt still has pre-Napoleonic debts!: http://news.bbc.co.uk/1/hi/magazine/4757181.stm

 

[Wail]

In case anyone hasn&#8217;t yet noticed, I&#8217;m loving this thread


Flash,

I didn&#8217;t even see that as aimed at me, though it may well have been; but I have lived, on and off, in the UK long enough to call this my home.

It would be great, really great, if universities got so well filled up. Simple solution, open more universities and all win.

But even if a Saudi student, who had studies industrial engineering here, were to go back to Saudi he would still not pose a threat to the UK oil industry. Every country has various unique abilities and assets. To Saudi Arabia it&#8217;s the ultra cheap oil, that does not go so well here in UK. Cost of extracting 1 barrel of oil from North Sea is over $30, while cost of extracting the same from a Saudi oil field is just about $1! There is no way the UK oil market can compete, and it doesn&#8217;t compete, but it still survives due to many other economic factors. The same would apply for various industries.

As such, you are not training your competitor, you are training someone who will help build the industry as a whole and each will target a different market.
Point to be made; the UK, like any other country, cannot be isolated and it has to focus on what assets it has.

I too, hate London in summer, it&#8217;s as if its lost its identity! But the crowd demonstrate how powerful the city is, and will continue to be for a long time to come. A concrete building in Dubai (as an example only) cannot compete with a stone that was put on top of one another 100s of years ago which still stands tall today (Big Ben to name one). Concrete cities just don't pull attraction.

True, you didn&#8217;t mention the seaside and weather, but my point was to highlight that we get sanitised from the beauty of our own country, and what it has to offer.

Even though there are some rude staff here and there, but in general everyone has been more than pleasant to deal with, and I've been around and about the UK for over 40 years. Dirty streets? They are a lot cleaner than a few decades ago, when dog poop littered the pavements and you couldn&#8217;t walk from A to B without stepping in a puddle. Crime, this I have to agree with you, it seems to only be getting worse; but this is easily mitigated against, don&#8217;t go out at times or to places that attract such crimes (it&#8217;s like someone stating &#8211; and this was mentioned in another thread here on TP &#8211; that you should not go to Saudi Arabia because, as a Westerner, you&#8217;d be killed!).

No, the tourist attractions, and everything else, in the UK are not overpriced; they are higher priced that those in, say, Spain ... and a lot cheaper than Monte Carlo; but the prices here are relative to what the country has to offer in many respects. It&#8217;s all relative to the country&#8217;s ability to deliver. Coming to the UK is a luxury, by any measure. The higher cost is a reflection of the luxury of being here.

Rolls Royce is no more German than City Financial Group (Citibank) is Saudi. Just because the majority shareholders are from another country doesn&#8217;t make it a foreign company. It&#8217;s still British, made in UK, by UK skilled hands. Market it well, and it will survive.

&#8220;Made in GB&#8221; does sell, and sell very well, all over the world. As a matter of fact, it is always sought after.

Sorry, but call services &#8211; though a part of the service industry &#8211; is not what the UK has to offer. The skill level there is ultra low, if existent at all (excuse my rudeness). Compared to medicine, art, education, finance, consultancy etc. it doesn&#8217;t compare.

 

[Tumbleweed.]

I remember the fluorescent socks and drain pipes :shrug:

 

[Wail]

Folks, as much as I want to discuss all the points further .. and much to my pleasure, I really can't, sorry! I need to hit the bed, and I am going to be busy the next few days with a lot of family obligations.

So, please excuse me as I am not just walking out of a discussion .. but I will not have the time to follow-up on this.