2009 March 17 Tuesday
Bank Of England Sees Depression Risk

Britain's central bank expects price changes in Britain to go negative in coming months. The Bank of England reports a significant risk of Britain's falling into a depression.

The country is displaying early symptoms of being trapped in a so-called “debt deflation trap” where families find themselves pushed further and further into the red every month, according to a Bank report published today.

The stark warning will cause serious concerns, since it was this combination of falling prices and soaring debt burdens that plagued the US in the 1930s.

If the central bankers can't avoid a depression then they've learned little since the 1930s.

Share |      By Randall Parker at 2009 March 17 12:18 AM  Economics Business Cycle


Comments
A. Prole said at March 17, 2009 3:03 AM:

In other words the entire economics profession is totally useless.

James Bowery said at March 17, 2009 8:33 AM:

No actually, the entire economics profession is doing exactly what its underwriters want: Concentrate wealth. They don't care about total wealth. We could be at the level of wealth of Ancient Egypt and they'd be happy -- possibly happier.

Wolf-Dog said at March 17, 2009 2:20 PM:

The debt crisis of Europe is actually worse than the crisis in the United States.

Eastern Europe is the subprime region that the Western European banks have lent enormous amounts.

Said E. Dawlabani said at March 17, 2009 9:44 PM:

British banks are among the highest leveraged financial institutions in the world. While we chastise our banks for having a 10-12 leverage ratio, British banks are 40-55 times leveraged. This is only acceptable for emerging economies that were growing 10-15% a year like India and China. Since the British still believe that colonialism is not over for them and their bankers run the emerging world economies, they brought the disease of their own arrogance home after they leveraged the heck out places like Dubai and the rest of the Middle East. The only place that cronies from AIG and Lehman Bros could set up shop legally and escape the scrutiny of too much leverage was London.... Adam Smith is turning over in his grave.

A. Prole said at March 18, 2009 2:15 AM:

Said Dawlabani,
You're talking nonsense.
Since at least the post-war period Britain's own financial position has been precarious.After multiple devaluations of sterling, it was forced in 1976 into an IMF bailout - with horrible strings attached.Since then the British economy is still hostage to international sentiment - witness the economic crisis of 1991.
That Britain is in the position to dictate financial terms to anyone - particularly oil-rich middle eastern states is ridiculous.


Said E. Dawlabani said at March 18, 2009 10:43 AM:

A. Prole;

It is not as much dictate financial terms as it is assimilate the failed model you talk about in countries who's sovereign wealth funds account for trillions USD and lack the local expertise to manage it for them. Look at who ran the wealthiest sovereign fund in the world to the the ground (Dubai World). Its managers ran up outrageous levels of leverage. These were British and US investment bankers who worked for AIG and Lehman in London. They collected hefty salaries and bonuses and knew Big Brother Abu Dahbi will come to the rescue once it all falls apart. It was the local British and US banks that underwrote the soundness of their investments backed by the flood of liquidity from oil. Next on their map are places like Kuwait and whoever can't figure their game out. Brits can't make money at home so they leverage the heck out of the emerging economies and assimilate their failures globally.

A. Prole said at March 19, 2009 2:11 AM:

Said Dawlabani,
Dubai is under absolutely no obligation whatsoever to employ British bankers - if they're no bloody good then kick them out and employ someone who is up to the job just as you would kick out an Indian laborer who was incompetent - forthwith and with no ceremony.

A. Prole said at March 19, 2009 2:44 AM:

Said Dawlabani,
Dubai is under absolutely no obligation whatsoever to employ British bankers - if they're no bloody good then kick them out and employ someone who is up to the job just as you would kick out an Indian laborer who was incompetent - forthwith and with no ceremony.


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