Best of the Week
Most Popular
1. Ray Dalio: This Debt Cycle Will End Soon - John_Mauldin
2.Stock Market Dow Plunge Following Fake US - China Trade War Truce - Nadeem_Walayat
3.UK House Prices 2019 No Deal BrExit 30% Crash Warning! - Nadeem_Walayat
4.What the Oil Short-sellers and OPEC Don’t Know about Peak Shale - Andrew_Butter
5.Stock Market Crashed While the Yield Curve Inverted - Troy_Bombardia
6.More Late-cycle Signs for the Stock Market and What’s Next - Troy_Bombardia
7.US Economy Will Deteriorate Over Next Half Year. What this Means for Stocks - Troy_Bombardia
8.TICK TOCK, Counting Down to the Next Recession - James_Quinn
9.How Theresa May Put Britain on the Path Towards BrExit Civil War - Nadeem_Walayat
10.This Is the End of Trump’s Economic Sugar High - Patrick_Watson
Last 7 days
Macro Could Weaken After US Government Shutdown. What This Means for Stocks - 17th Jan 19
US Stock Market Indexes Reaches Fibonacci Target Zone – Where to Next? - 17th Jan 19
How 2018 Was For The UK Casino Industry - 17th Jan 19
Gold Price – US$700 Or US$7000? - 16th Jan 19
Commodities Are the Right Story for 2019 - 16th Jan 19
Bitcoin Price Wavers - 15th Jan 19
History Shows That “Disruptor Stocks” Will Make You the Most Money in a Bear Market - 15th Jan 19
What Will the Stock Market Do Around Earnings Season - 15th Jan 19
2018-2019 Pop Goes The Debt Bubble - 15th Jan 19
Are Global Stock Markets About To Rally 10 Percent? - 15th Jan 19
Here's something to make you money in 2019 - 15th Jan 19
Theresa May to Lose by Over 200 Votes as Remain MP's Plot Subverting Brexit - 15th Jan 19
Europe is Burning - 14th Jan 19
S&P 500 Bounces Off 2,600, Downward Reversal? - 14th Jan 19
Gold A Rally or a Bull Market? - 14th Jan 19
Gold Stocks, Dollar and Oil Cycle Moves to Profit from in 2019 - 14th Jan 19
How To Profit From The Death Of Las Vegas - 14th Jan 19
Real Reason for Land Rover Crisis is Poor Quality of Build - 14th Jan 19
Stock Market Looking Toppy! - 13th Jan 19
Liquidity, Money Supply, and Insolvency - 13th Jan 19
Top Ten Trends Lead to Gold Price - 13th Jan 19
Silver: A Long Term Perspective - 13th Jan 19
Trump's Impeachment? Watch the Stock Market - 12th Jan 19
Big Silver Move Foreshadowed as Industrial Panic Looms - 12th Jan 19
Gold GDXJ Upside Bests GDX - 12th Jan 19
Devastating Investment Losses Are Coming: What Is Your Advisor Doing About It? - 12th Jan 19
Things to do Before Choosing the Right Credit Card - 12th Jan 19
Japanese Yen Outlook In 2019 - 11th Jan 19
Yield curve suggests that US Recession is near: Trading Setups - 11th Jan 19
How Unrealistic Return Assumptions Are Ruining Your Stocks Portfolio - 10th Jan 19
What’s Next for the US Dollar, Gold, Stocks & Bonds? - 10th Jan 19
America's New Africa Strategy - 10th Jan 19
Gold Mine Production by Country - 10th Jan 19
Gold, Stocks and the Flattening Yield Curve - 10th Jan 19
Silver Price Trend Forecast Target for 2019 - 10th Jan 19
Silver Price Trend Forecast 2019 - 9th Jan 19
Did Strong December Payrolls Push Gold Prices Up? - 8th Jan 19
How to Spot A Tradable Stock Market Top? - 8th Jan 19
Why 90% of Traders Lose - 8th Jan 19
Breadth is Very Strong While Stocks are Surging. What’s Next for Stocks - 8th Jan 19
Half of Investment-Grade Bonds Are Just One Step from Junk Status - 7th Jan 19
Stocks Rallied Again, Still Just an Upward Correction? - 7th Jan 19
Gold Golden Long-Term Opportunity - 7th Jan 19

Market Oracle FREE Newsletter

Bitcoin Analysis and Trend Forecast 2019

UK Treasury Propaganda Warns of 3.6% Brexit Recession, the £64 Billion Question?

ElectionOracle / EU_Referendum May 23, 2016 - 06:07 AM GMT

By: Nadeem_Walayat

ElectionOracle

The Treasury (UK government) is to issue a statement today that basically puts the price of Brexit at 3.6% of GDP or £64 billion, resulting in a 1 year recession (much milder than the last), which is set against a large chunk of the euro-zone having been in economic depression for 6 long years.

Leaving the European Union would tip the UK into a year-long recession and lower Britain's economic growth by 3.6%.

Though the margin of error is probably at least 3% that effectively could completely cancel out the Treasury forecast.


The £64 billion Question ?

Is £64 billion worth the price for freedom, lets see....

1. £500 billion was pumped into the Banks through a myriad of scams, I mean schemes and on top of which we had tax payers taking on the banking sectors liabilities which amounted to about £4.2 TRILLON!

2. The government since 2010 has BORROWED over £750 billion! UK National debt has risen from £950 billion to £1.7 trillion today, which averages £115 billion per year.

So in terms of borrowing, financial crisis and consequences, in the grand scheme of things £64 billion is not of any real economic significance for all the Government needs to do is for George Osborne to call up the Governor of the Bank of England and instruct him to PRINT £64 billion, to transfer over to the UK Treasury, recession averted.

Not likely ?

Think again, it is already happening RIGHT NOW! Using what I termed several years ago as the Quantum of Quantitative Easing (July 2012 The Quantum of Quantitative Easing Inflation is Coming!) that explained in detail where this game of money and debt printing is going in terms of the REAL debt burden, which basically means that the real UK debt burden is about 30% lower than the actual reported debt to GDP ratio suggests because of the fact that the government is paying interest to itself via the Bank of England which in effect acts to cancel 30% of the public debt, which is why the Debt to GDP ratios that academic economists tend to obsess over are meaningless as a consequence of the Quantum of Quantitative Easing, which is why they cannot see the inflationary consequences of what is going on in the asset markets. Know this that the Quantum of Quantitative Easing is PERMANENT, so whilst the monetized debt may still officially exist, it HAS in effect been cancelled because it will NEVER be repaid but instead rolled over in perpetuity as Inflation does its job of eroding away ALL of its value.

For more on the UK economy and prospects for interest rates for over the next 2 years then see my recent in-depth analysis (06 Feb 2016 - UK Interest Rates, Economy GDP Forecasts 2016 and 2017 ) and accompanying video:

https://youtu.be/75y5aLczdy0

So the government is already getting FREE money from the Bank of England EVERY YEAR to tune of about £20 billion per annum. So what difference would a one off print run of £64 billion make? NONE!. In fact this probably IS the policy that will be implemented post Brexit so as to AVOID the forecast 3.6% drop in GDP!

The Bank of England has already done the same every year since 2008! That in totality (QE, funding for lending scheme) totals MORE than £500 billion! Or near TEN TIMES the UK Treasury's estimated cost of a Brexit.

The government repeatedly puts up a smoke screen (lies) of how much it intends to borrow for instance the new Conservative governments debt fantasy of a year ago was for a surplus by 2018 of £5.2bn and total borrowing of £115 billion.

  • 2014-15 : £90.2bn
  • 2015-16 : £75.3bn
  • 2016-17 : £39.4bn
  • 2017-18 : £12.8bn
  • 2018-19 : £5.2bn surplus
  • 2019-20 : £7bn surplus

Which at the time I warned would probably turn out to be triple that amount or near £315 billion -

My forecast conclusion is for the Conservative government to again borrow at least £200 billion more than the OBR is forecasting today i.e. At least +£315 billion by March 2020 as illustrated by the graph with the risk that borrowing could turn out to be as high as +£350 billion which is set against the OBR/ governments forecast of just +£115bn.

A year on the OBR in March 2015 increased the forecast amount the government was expected to borrow by +£62bn, from £115 billion to £178 billion. However this is still £135 billion LESS than my forecast of £315 billion as the following updated graph illustrates, which now also includes an additional year forecast by the OBR for 2021 which is equally unrealistic at -£11bn in a perpetual game of smoke and mirrors played on the general public.

So with a hole of £135 billion yet to be filled towards a borrowing total of £315 billion then expect the governments' department for economic propaganda to keep revising the amount the government is expected to borrow higher every year by at least another £135 billion this parliament. Whilst at the same time conjuring deep deficit reductions and even surplus forecasts for far distant years that will never materialise just as has been case for every UK government of this century! This illustrates the debt and deficit game that the Government tends to perpetually play in which respects the supposed £64 billion BrExit cost would go the same way, swallowed up by statistics and slights of hand.

The bottom line is that the Bank of England would PRINT 3.6% of GDP (£64 billion) to monetize government debt to cover the UK Treasury's forecast of the consequences of a Brexit. Though of course the UK Treasury is painting the worst case scenario, so the amount requested to be printed could be as little as £18 billion or 1% of GDP. Either way it will be of little economic consequences as recession will have once more been averted just as has been the case for every year since 2010.

And then we have yet to factor in the benefits of having a whole layer of bureaucracy removed that is holding the UK economy back. So instead of taking a 3.6% hit the UK economy could get a 3.6% BOOST! Never mind all of the civil and social benefits of CONTROLLING IMMIGRATION! i.e. school places, NHS, housing, jobs and wages.

EU Referendum - Counting Down to BrExit!

Counting Down to Freedom - Support Our BrExit Campaign

The latest EU referendum opinion polls put the LEAVE and REMAIN camps virtually neck and neck on 44% with 12% of those polled undecided. Which compares against a month ago of 42% LEAVE and 48% REMAIN, 10% undecided. So it is no wonder that the REMAIN camp has gone into full blown panic mode with a relentless torrent of fear mongering emanating from the establishment REMAIN camp. Instead I offer my latest video in this series as a message of HOPE, a message of a New Dawn, New Life for Britain!

With just a month to go the Market Oracle's own 9 month long BrExit campaign has been ramped up a few notches as we enter this last stretch, producing Brexit resources from in-depth analysis, rebuttal articles such as this, many videos, and also active on the social networks so as to do our best to do our part in Britain not wasting it's very last chance for freedom which you too can support allowing us to continue to intensify our efforts to counter the daily barrage of REMAIN propaganda as well as to keep producing video's that help spread the case for BrExit being good for Britain.

Counting Down to Freedom - Support Our BrExit Campaign

And also ensure you are subscribed to my always free newsletter (only requirement is an email address) for forthcoming in-depth analysis and detailed trend forecasts that include the following :

  • BrExit to Save Europe from the Apocalypse
  • US Dollar Trend Forecast
  • UK Housing Market Trend Forecasts
  • US Stock Market Forecasts
  • US House Prices Detailed Multi-Year Trend Forecast
  • Gold and Silver Price Forecast

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2016 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules