While housing normally leads the economy out of recession, the prospects for this happening anytime soon seem distinctly mixed. Opinions differ. Here a birds-eye view into the most determining factors.

Magnitude of the Crash
House prices are still falling. The latest (Case-Shiller 10 city index) figures are for October, which showed a 1.1% decline versus September, and a 3.0% decline versus October 2010 (3.4% for the 20 city index).

These figures -- although the worst of the fall seems behind us -- do not really indicate any immediate uptick yet

Household Balance Sheets
Nearly a quarter of all mortgage borrowers owing more than the value of their homes or amounting to roughly 11 million underwater mortgages. There is $700 billion in negative equity in the US.

Since the housing bubble burst in 2006, the wealth of American homeowners has fallen by some $9 trillion, or nearly 40 percent

These are serious figures by any means. And it's not even the end of the story.

Job Recovery
There is little in the way of a job recovery yet. There are still 6.6M jobs less than there were four years ago, with some 23M Americans who would like to work full-time but cannot get a job. The job recovery is way to slow for this to provide an impetus for the housing market

Anyway, people who looking for a housing recovery usually expect that as a sign for the wider economy to recover to normality, as housing usually leads an economic recovery. This time, that doesn't look likely.

Income
Incomes fare little better, with the real income of a typical American household now below the 1997 level, according to Stiglitz.



Mortgage Rates are at record lows, and some people do profit from these and refinance. However, banks have significantly tightened credit policies, and with up to a quarter of people experiencing negative equity, refinancing isn't available for everyone:

Yet as the average 30-year mortgage rate has slipped below 4 percent, the combination of employment insecurity and unusually tight standards for lending are discouraging buyers en mass. Lenders are asking for extensive income verification and tax returns.

New Household Formation
It is tempting to argue that since US population growth hasn't really slowed, it's only a matter of time before that spills over into increasing demand for housing. However, in the present economic situation, there are forces at work that suspend that logic, and this might continue for some time.

For instance, new household formation has taken a hit with 1.5 million young people staying home, rather than looking for a place of their own. This isn't terribly surprising, considering that the young disproportionately suffer from unemployment.

What's more, the birth rate is at an 11-year low
It's because fewer people are getting married -- just 6.8 per 1000, compared to 8.2 per 1000 inhabitants in 2001.

Overhang
The biggest problem with housing is the overhang from the bubble. Foreclosures where up 14% in the third quarter (with respect to the second). It's estimated that some 3.4 million foreclosed homes will be on the books of banks and mortgage companies by the end of this year.

New Home Sales
This is one variable which offers some hope. Basically, new home sales are at multi-decade lows (see the graph below):


According to Warren Hatch from Catalpa Capital Advisors:

    With the supply of new homes at such low levels, even a modest pick-up in the pace of sales could have a dramatic impact. When the housing recovery gains real traction, the current supply of new homes could run out within a few months, leading to higher house prices, a boom in residential construction, and an unexpectedly powerful lift to the US economy.

It's good to see there are some optimists out there, and indeed, housing normally leads the economy out of recession. Very helpful is also that it's a labor intensive industry. But so far little of this is visible, and we've provided some elements that guard against over-optimism.

House Prices to Income
In the same table and graph above it, you can also see that by another measure, house prices to income, the US houses are even more undervalued -- by a substantial 22%.


Considering the very low mortgage rates, the undervaluation is starting to be somewhat remarkable.

Conclusion

This time around there is little evidence that housing will revive the economy. It's more likely to be the other way around. When jobs, income, balance sheets and birth rates return to health, so will housing.

Link -
http://seekingalpha.com/article/316576-housing-employment-and-the-economy?source...
=================================
As I have said previously, the Peak Global Economy from 1995-2005, arose as it basically co-incided with the Peak Earning & Spending period of the Baby Boomer generation, whose Peak years were from 1946-1956.

After this Boom period from around 1995s to around 2005, which signified the end of the Boomer growth years, it was inevitable that there would be a disruptive period, where the Global Economy would seek a new Economic balance and quite possible a new Political balance.

However, to add difficulty to a set of circumstances that was was always going to present some not too pretty choices, several other events have also intervened -
1) Peak Global Population
2) Peak Energy
3) Peak Debt
4) Peak Climate

So, given all of the "known circumstances", it should be apparent that housing is not going to restart the Economy, that the Economy is not going to restart housing and government/s are not going to restart either housing or the Economy, for quite some time!

Btw, US Population growth is slowing, both in birth rates & by way of migrants heading back home, primarily to Mexico.

The Four Horsemen of Banking (Bank of America, JP Morgan Chase, Citigroup and Wells Fargo) own the Four Horsemen of Oil (Exxon Mobil, Royal Dutch/Shell, BP and Chevron Texaco); in tandem with Deutsche Bank, BNP, Barclays and other European old money behemoths. But their monopoly over the global economy does not end at the edge of the oil patch.

According to company 10K filings to the SEC, the Four Horsemen of Banking are among the top ten stock holders of virtually every Fortune 500 corporation.[1]

So who then are the stockholders in these money center banks?

This information is guarded much more closely. My queries to bank regulatory agencies regarding stock ownership in the top 25 US bank holding companies were given Freedom of Information Act status, before being denied on “national security” grounds. This is rather ironic, since many of the bank’s stockholders reside in Europe.

One important repository for the wealth of the global oligarchy that owns these bank holding companies is US Trust Corporation - founded in 1853 and now owned by Bank of America. A recent US Trust Corporate Director and Honorary Trustee was Walter Rothschild. Other directors included Daniel Davison of JP Morgan Chase, Richard Tucker of Exxon Mobil, Daniel Roberts of Citigroup and Marshall Schwartz of Morgan Stanley. [2]

J. W. McCallister, an oil industry insider with House of Saud connections, wrote in The Grim Reaper that information he acquired from Saudi bankers cited 80% ownership of the New York Federal Reserve Bank- by far the most powerful Fed branch- by just eight families, four of which reside in the US. They are the Goldman Sachs, Rockefellers, Lehmans and Kuhn Loebs of New York; the Rothschilds of Paris and London; the Warburgs of Hamburg; the Lazards of Paris; and the Israel Moses Seifs of Rome.

CPA Thomas D. Schauf corroborates McCallister’s claims, adding that ten banks control all twelve Federal Reserve Bank branches. He names N.M. Rothschild of London, Rothschild Bank of Berlin, Warburg Bank of Hamburg, Warburg Bank of Amsterdam, Lehman Brothers of New York, Lazard Brothers of Paris, Kuhn Loeb Bank of New York, Israel Moses Seif Bank of Italy, Goldman Sachs of New York and JP Morgan Chase Bank of New York. Schauf lists William Rockefeller, Paul Warburg, Jacob Schiff and James Stillman as individuals who own large shares of the Fed. [3] The Schiffs are insiders at Kuhn Loeb. The Stillmans are Citigroup insiders, who married into the Rockefeller clan at the turn of the century.

Eustace Mullins came to the same conclusions in his book The Secrets of the Federal Reserve, in which he displays charts connecting the Fed and its member banks to the families of Rothschild, Warburg, Rockefeller and the others. [4]

The control that these banking families exert over the global economy cannot be overstated and is quite intentionally shrouded in secrecy. Their corporate media arm is quick to discredit any information exposing this private central banking cartel as “conspiracy theory”. Yet the facts remain.

The House of Morgan
The Federal Reserve Bank was born in 1913, the same year US banking scion J. Pierpont Morgan died and the Rockefeller Foundation was formed. The House of Morgan presided over American finance from the corner of Wall Street and Broad, acting as quasi-US central bank since 1838, when George Peabody founded it in London.

Peabody was a business associate of the Rothschilds. In 1952 Fed researcher Eustace Mullins put forth the supposition that the Morgans were nothing more than Rothschild agents. Mullins wrote that the Rothschilds, “…preferred to operate anonymously in the US behind the facade of J.P. Morgan & Company”. [5]

Author Gabriel Kolko stated, “Morgan’s activities in 1895-1896 in selling US gold bonds in Europe were based on an alliance with the House of Rothschild.” [6]

The Morgan financial octopus wrapped its tentacles quickly around the globe. Morgan Grenfell operated in London. Morgan et Ce ruled Paris. The Rothschild's Lambert cousins set up Drexel & Company in Philadelphia.

The House of Morgan catered to the Astors, DuPonts, Guggenheims, Vanderbilts and Rockefellers. It financed the launch of AT&T, General Motors, General Electric and DuPont. Like the London-based Rothschild and Barings banks, Morgan became part of the power structure in many countries.

By 1890 the House of Morgan was lending to Egypt’s central bank, financing Russian railroads, floating Brazilian provincial government bonds and funding Argentine public works projects. A recession in 1893 enhanced Morgan’s power. That year Morgan saved the US government from a bank panic, forming a syndicate to prop up government reserves with a shipment of $62 million worth of Rothschild gold. [7]

Morgan was the driving force behind Western expansion in the US, financing and controlling West-bound railroads through voting trusts. In 1879 Cornelius Vanderbilt’s Morgan-financed New York Central Railroad gave preferential shipping rates to John D. Rockefeller’s budding Standard Oil monopoly, cementing the Rockefeller/Morgan relationship.

The House of Morgan now fell under Rothschild and Rockefeller family control. A New York Herald headline read, “Railroad Kings Form Gigantic Trust”. J. Pierpont Morgan, who once stated, “Competition is a sin”, now opined gleefully, “Think of it. All competing railroad traffic west of St. Louis placed in the control of about thirty men.”[8]

Morgan and Edward Harriman’s banker Kuhn Loeb held a monopoly over the railroads, while banking dynasties Lehman, Goldman Sachs and Lazard joined the Rockefellers in controlling the US industrial base. [9]

In 1903 Banker’s Trust was set up by the Eight Families. Benjamin Strong of Banker’s Trust was the first Governor of the New York Federal Reserve Bank. The 1913 creation of the Fed fused the power of the Eight Families to the military and diplomatic might of the US government. If their overseas loans went unpaid, the oligarchs could now deploy US Marines to collect the debts. Morgan, Chase and Citibank formed an international lending syndicate.

The House of Morgan was cozy with the British House of Windsor and the Italian House of Savoy. The Kuhn Loebs, Warburgs, Lehmans, Lazards, Israel Moses Seifs and Goldman Sachs also had close ties to European royalty. By 1895 Morgan controlled the flow of gold in and out of the US. The first American wave of mergers was in its infancy and was being promoted by the bankers. In 1897 there were sixty-nine industrial mergers. By 1899 there were twelve-hundred. In 1904 John Moody - founder of Moody’s Investor Services - said it was impossible to talk of Rockefeller and Morgan interests as separate. [10]

Public distrust of the combine spread. Many considered them traitors working for European old money. Rockefeller’s Standard Oil, Andrew Carnegie’s US Steel and Edward Harriman’s railroads were all financed by banker Jacob Schiff at Kuhn Loeb, who worked closely with the European Rothschilds.

Several Western states banned the bankers. Populist preacher William Jennings Bryan was thrice the Democratic nominee for President from 1896 -1908. The central theme of his anti-imperialist campaign was that America was falling into a trap of “financial servitude to British capital”. Teddy Roosevelt defeated Bryan in 1908, but was forced by this spreading populist wildfire to enact the Sherman Anti-Trust Act. He then went after the Standard Oil Trust.

In 1912 the Pujo hearings were held, addressing concentration of power on Wall Street. That same year Mrs. Edward Harriman sold her substantial shares in New York’s Guaranty Trust Bank to J.P. Morgan, creating Morgan Guaranty Trust. Judge Louis Brandeis convinced President Woodrow Wilson to call for an end to interlocking board directorates. In 1914 the Clayton Anti-Trust Act was passed.

Jack Morgan - J. Pierpont’s son and successor - responded by calling on Morgan clients Remington and Winchester to increase arms production. He argued that the US needed to enter WWI. Goaded by the Carnegie Foundation and other oligarchy fronts, Wilson accommodated. As Charles Tansill wrote in America Goes to War, “Even before the clash of arms, the French firm of Rothschild Freres cabled to Morgan & Company in New York suggesting the flotation of a loan of $100 million, a substantial part of which was to be left in the US to pay for French purchases of American goods.”

The House of Morgan financed half the US war effort, while receiving commissions for lining up contractors like GE, Du Pont, US Steel, Kennecott and ASARCO. All were Morgan clients. Morgan also financed the British Boer War in South Africa and the Franco-Prussian War. The 1919 Paris Peace Conference was presided over by Morgan, which led both German and Allied reconstruction efforts. [11]

In the 1930’s populism resurfaced in America after Goldman Sachs, Lehman Bank and others profited from the Crash of 1929. [12] House Banking Committee Chairman Louis McFadden (D-NY) said of the Great Depression, “It was no accident. It was a carefully contrived occurrence...The international bankers sought to bring about a condition of despair here so they might emerge as rulers of us all”.

Jack Morgan responded by nudging the US towards WWII. Morgan had close relations with the Iwasaki and Dan families - Japan’s two wealthiest clans - who have owned Mitsubishi and Mitsui, respectively, since the companies emerged from 17th Century shogunates. When Japan invaded Manchuria, slaughtering Chinese peasants at Nanking, Morgan downplayed the incident. Morgan also had close relations with Italian fascist Benito Mussolini, while German Nazi Dr. Hjalmer Schacht was a Morgan Bank liaison during WWII. After the war Morgan representatives met with Schacht at the Bank of International Settlements (BIS) in Basel, Switzerland.

Baltic Dry Index
The Baltic Dry Index (BDI) is a number issued daily by the London-based Baltic Exchange. Not restricted to Baltic Sea countries, the index tracks worldwide international shipping prices of various dry bulk cargoes.

The index provides "an assessment of the price of moving the major raw materials by sea. Taking in 26 shipping routes measured on a timecharter and voyage basis, the index covers Handymax, Panamax, and Capesize dry bulk carriers carrying a range of commodities including coal, iron ore and grain."

Why economists and stock markets read it
Most directly, the index measures the demand for shipping capacity versus the supply of dry bulk carriers. The demand for shipping varies with the amount of cargo that is being traded or moved in various markets (supply and demand).

The supply of cargo ships is generally both tight and inelastic — it takes two years to build a new ship, and ships are too expensive to take out of circulation the way airlines park unneeded jets in deserts. So marginal increases in demand can push the index higher quickly, and marginal demand decreases can cause the index to fall rapidly. e.g. "if you have 100 ships competing for 99 cargoes, rates go down, whereas if you've 99 ships competing for 100 cargoes, rates go up. In other words, small fleet changes and logistical matters can crash rates..." The index indirectly measures global supply and demand for the commodities shipped aboard dry bulk carriers, such as building materials, coal, metallic ores, and grains.

Because dry bulk primarily consists of materials that function as raw material inputs to the production of intermediate or finished goods, such as concrete, electricity, steel, and food, the index is also seen as an efficient economic indicator of future economic growth and production. The BDI is termed a leading economic indicator because it predicts future economic activity.

Because it provides "an assessment of the price of moving the major raw materials by sea," according to The Baltic, "... it provides both a rare window into the highly opaque and diffuse shipping market and an accurate barometer of the volume of global trade -- devoid of political and other agenda concerns."

Another index, the HARPEX, focuses on containers freight. It provides an insight on the transport of a much wider base of commercial goods than commodities alone.

Other leading economic indicators — which serve as the foundation of important political and economic decisions - are often measured to serve narrow interests, and subjected to adjustments or revisions. Payroll or employment numbers are often estimates; consumer confidence appears to measure nothing more than sentiment, often with no link to actual consumer behavior; gross national product figures are consistently revised, and so forth. Unlike stock and bond markets, the BDI "is totally devoid of speculative content," says Howard Simons, an economist and columnist at TheStreet.com. "People don't book freighters unless they have cargo to move."

Impact of 2008 financial crisis
On 20 May 2008 the index reached its record high level since its introduction in 1985, reaching 11,793 points. Half a year later, on 5 December 2008, the index had dropped by 94%, to 663 points, the lowest since 1986; though by 4 February 2009 it had recovered a little lost ground, back to 1,316. These low rates moved dangerously close to the combined operating costs of vessels, fuel, and crews.

By the end of 2008, shipping times had been already increased by reduced speeds to save fuel consumption, but lack of credit meant the reduction of letters of credit, historically required to load cargoes for departure at ports. Debt load of future ship construction was also a problem for shipping companies, with several major bankruptcies and implications for shipyards.
This, combined with the collapsing price of raw commodities created a perfect storm for the world's marine commerce.

During 2009 the index recovered as high as 4661, but then bottomed out at 1043 in February, 2011, after continued deliveries of new ships and flooding in Australia.

Link -
http://en.wikipedia.org/wiki/Baltic_Dry_Index
===============================
As can be seen from the above chart the Baltic Dry Index is collapsing again and this is a portend of things to come!

ALMOST 30,000 jobs were lost in December, with part-time workers feeling most of the pain.

Full-time employment rose by 24,500 to eight million in December but part-time employment was down 53,700 to 3.37 million

Despite the big drop in overall job numbers the unemployment rate remained at 5.2 per cent.

This was because fewer people were actually looking for work and have fallen out of the labour market and participation rate.

The big drop in part-time employment reflects tough times in seasonal industries such as retail and hospitality.

The weak job data is adding to the case for interest rate cuts next month, economists say.

HSBC chief economist Paul Bloxham said the data made a cash rate cut by the Reserve Bank of Australia (RBA) more likely.

"The data shows that unemployment has been on a slow grind for some time now," Mr Bloxham said.

"I think this is still consistent with the RBA cutting interest rates next month, which is what we expect to happen.

"With the participation rate falling and employment also falling, it does look as though the labour market is still softening."

Total employment fell 293,000 to 11,421,300 in the month, according to figures released by the Australian Bureau of Statistics (ABS).

The forecast was for total employment to have risen by 5,000 in December with the unemployment rate at 5.3 per cent, according to the median of 13 economists surveyed by AAP.

Full-time employment rose by 24,500 to 8.051 million in December while part-time employment was down 53,700 to 3.37 million, the ABS reported.

The December participation rate was 65.2 per cent, compared with an unrevised 65.5 per cent in November.
The participation rate was forecast to be 65.5 per cent.

The Australian dollar plummeted about one third of a US cent after the ABS released the latest job data.

CMC markets foreign exchange dealer Tim Waterer said the headline reading of 29,000 jobs being shed prompted the sell-off.

"The break-down showed there as a decent rise in full-time jobs," Mr Waterer said.

"24,000 full times jobs were created and the reason for the headline numbers was part time jobs lost.

The dollar bounced back quickly before slipping again.

The figures released at 11.30 (AEDT) showed unemployment dropped to 5.2 per cent, in-line with market expectations.

Total employment fell 293,000 to 11,421,300 in the month.

At 11.29 (AEDT), prior to the data release, the dollar was at 104.23 US cents before dropping to 103.94 US cents 1131 AEDT.

It had recovered slightly by 11.34 (AEDT), climbing back up to more than 104 US cents before dropping again to 103.94 at 11.43 (AEDT). By 11.55 (AEDT) it was at 104.04

"The other shining light you can read in that was a fall in the unemployment rate," Mr Waterer said of the ABS figures.

He said he expected to see the Australian dollar recover throughout the afternoon.

Link -
http://www.heraldsun.com.au/business/jobs-market-still-weak-economists-say/story...
=================================
Anyone notice a small problem?

Baltic Dry Index Is The Most Alarming Chart Of The Week

It’s Friday in the Wall Street Daily Nation. If you’re a newbie, that means I’m skipping the long-winded analysis. Instead, I’ll let some carefully selected graphics do most of the talking for me. This week, I’m dishing on an alarming development for the obscure yet instructive Baltic Dry Index.

Houston, We Have a Problem

While almost everyone finally agrees that the United States has avoided a nasty double-dip recession, a slowdown’s still brewing elsewhere in the world. All I have to do to be sure is look at the latest chart for the Baltic Dry Index.



The Baltic Dry Index tracks the cost of shipping major raw materials (iron ore, coal, grain, cement, copper, sand and gravel, fertilizer and even plastic granules). Or, more simply, it tracks the precursors of economic output.

As such, the Index provides a measurement of the volume of global trade at the earliest possible stage.

When I last reported on the Baltic Dry Index in October 2011, it was coming off an impressive two-month, 50% rally. That rally’s come to an end. As you can see in the chart above, the Index is down 48.4% in the last month, and 54.4% in the last three months.

The culprit is Europe, of course. You’ll recall that European sovereign debt fears spiked (again) last October. And that’s precisely when the Baltic Dry Index also began its descent. Coincidence? I think not. And the World Bank and International Monetary Fund (IMF) have my back. On Wednesday, the World Bank cut its world economic growth forecast explicitly because of Europe’s never-ending debt crisis. Meanwhile, as Europe’s debt crisis persists, Bloomberg reports that the IMF plans to cut its global growth forecasts, too.

The obvious takeaway from today’s chart? Steer clear of companies that sell cyclical products exclusively in European markets. A recession there is afoot, if not already underway. And the less obvious takeaway? As I reported yesterday, avoid U.S. stocks with heavy European exposure.

Link -
http://seekingalpha.com/article/320939-baltic-dry-index-is-the-most-alarming-cha...
=================================
It seems the chart in the above article is slightly out of date, so let me update the chart to Thursday of this week (see following) and confirm that Friday saw another fall of 31, to finish the week at 862.


That said, let me make it clear that declines of the magnitude currently under way are Global, which means that the Economies of all of the big players such as Europe, the USA & China are trending down and that all other countries are following that trend!

The author of the article suggests that the USA has avoided a nasty double-dip recession, but I do not agree and it will become apparent that the US is up to its neck in strife, as are many countries already, with more to follow the trend, including OZ! 

Economic activity tipped to slow

The Australian economy is expected to slip below the projected long-term growth trend, according to a leading index of economic activity.

The Westpac-Melbourne Institute leading index, which predicts the growth rate of the Australian economy three to nine months into the future, was 1.6 per cent in November, below its long-term trend of 2.9 per cent.

The annualised rate of 1.6 per cent in November represents a fall from 2.3 per cent in October.

The annual coincident index, which gives a pulse of current activity, was three per cent, close to its long term trend of 3.1 per cent.

"The growth rate in the Index has slowed from the 4.5 per cent, which was reported for August and is now well below trend," Westpac chief economist Bill Evans said.

"It appears that the boost to above trend growth we saw in July and August has quickly faded and the outlook has evolved into a 'below trend' story."

"This message is consistent with Westpac's own forecasts for 2012. We are currently forecasting growth in 2012 of three per cent which is slightly below trend growth for the economy."

The Reserve Bank of Australia cut the official interest rate by 25 basis points in November and, by the same amount, in December in response to a worsening global economic outlook.

Mr Evans said the latest index added to the case for a third 25 basis point cut in February.

"Since the last (RBA) board meeting in December we have seen ongoing deterioration in the labour market while financial and economic conditions in Europe remain fragile," he said.

"We expect the board to cut the overnight cash rate by a further 0.25 percentage point to four per cent completing three consecutive meetings when the overnight cash rate has been reduced."

Link -
http://www.businessspectator.com.au/bs.nsf/Article/Economic-activity-slows-below...
================================
Whilst the statement, "Economic activity tipped to slow", is likely to be a gross understatement, it is still correct that Global Economic Activity has started to slip below the long term trend lines, of the modern era.

That slowing trend will strengthen and accelerate, for various reasons, in the years ahead.

At the core of this trend is a slowing in Demand for Products & Services, which is guaranteed to happen as Population Growth rates grind lower, before finally going into actual decline, probably sometime prior to 2030, Globally

This process is being aided & abetted, by the current retirement of the largest single Global Population generation in history, the Baby Boomers, before they start to leave us in ever increasing numbers, over the next 20 years or so!

These Population issues can not be reversed, by another massive new wave of births, as we are also bumping into other glass ceilings such as shortages in Energy (Peak Oil & Coal) & a myriad of other natural Resources, which is also causing a myriad of Global Political moves, but also Climate related issues including Food shortages & too much or too little water and finally we have already reached Peak Debt, Globally! 

Lowering interest rates, WILL NOT WORK, as has already been demonstrated, in the US & Europe!

Introducing AUS-terity, WILL NOT WORK, as is already been demonstrated, in Europe!

Introducing Government bailouts of the big end of town, Keynesian inspired increased Government spending & outright printing of money in the Trillions (FED Reserve), WILL NOT WORK, as is already been demonstrated, in the USA!

So, hold on tight, get your Debt under control, get yourself a better understanding of what's ahead and brace for impact or possibly just the continued tightening of the biggest Boa Constrictor in history!

For every action OR inaction, there are consequences!

However, consequences are like the Climate, they are in a never ending state of flux or change!

What some may regard as Economics 101, will now cause a massive collapse, on a scale of the 1930's Great Depression, as is already showing up in the UK & elsewhere.
================================   


Yep. This many months after the start of the Great Depression, the British economy was rapidly converging back to its pre-depression level of production under Chancellor of the Exchequer Neville Chamberlain's policy of using stimulative policies to restore the price level to its pre-Great Depression trajectory.

By contrast, the Cameron-Osborne policies of expansion-through-austerity have produced a flatline for real GDP, and the odds are high that British real GDP is headed down again.

In less than a year, if current forecasts come true, the Cameron-Osborne Depression will not be the worst depression in Britain since the Great Depression, but the worst depression in Britain… probably ever.

That is quite an accomplishment.

As Phillip Inman of the Guardian puts it:

        the UK's plan for recovery from the financial crisis was based on a full-throttle recovery in 2012... consumer confidence, business investment and general spending would converge to send the economy on a trajectory of above-average growth... the lack of investment will perplex ministers. They have done what the right-wing economists told them to do and moved out of the way – the theory being that public sector spending and investment was ‘crowding out’ the private sector...

It did not work: “Spain is showing the way with its austerity-driven recession. Where the weak tread, we [in Britain] look keen to follow...”

That expansionary austerity is not working in Britain should give all of its advocates great pause, and lead to a great rethinking. Britain is a highly open economy with a flexible exchange rate. Britain has some room for further monetary ease. There is no risk or default premium baked into British interest rates to indicate that fear of future political-economic chaos down the road is discouraging investment. There was an argument--I’m not saying that it was true, but there was an argument--that the Blair-Brown governments had overshot Britain’s long-term sustainable government-spending share of GDP (in contrast to those countries that had reduced their debt-to-GDP levels in the 2000s, where there was no such argument, and in contrast to the United States where the problem was not spending overshoot but taxation undershoot under the Bush administration) and that spending cutbacks were advisable in the long run.

Yet with a 10-year nominal interest rate in Britain of 2.098% per year, if low long-term Treasury interest rates were the key to recovery, Britain would be in a boom. If there was ever a place where expansionary austerity would work well--where private investment and exports would stand up as government purchases stood down--if its advocates’ view of the world was reality rather than fantasy, it would be Britain today.

But it is not working.

And the lesson is general.

If it is not working in Britain, how well can it possibly work elsewhere in countries that are less open, that don’t have the exchange-rate channel to boost exports, that don’t have the degree of long-term confidence that investors and businesses have in Britain?

Liberal Party leader Nick Clegg ought to end this farce today. He ought to tell Queen Elizabeth II Windsor that his party has no confidence in her government, and that his humble suggestion is that she ask Labour Party leader Ed Milliband to form a government.

It is true that if he does this his political career and his party’s electoral future are dog vomit. But his political career and his party’s political future is dog vomit anyway. At least defection from the ill-advised Conservative-Liberal coalition now would benefit his country.

Policy makers elsewhere in the world take note: starving yourself is no road to health, and pushing unemployment higher now is no road to market confidence.

Link -
http://seekingalpha.com/article/322469-the-british-economy-is-now-doing-worse-th...
============================
There are already Global Macro factors pushing Demand down, including Demographic & Energy issues and that will not change.

The introduction of general goverment driven AUS-terity programs, will serve to further exacerbate an inevitable Economic slowdown/collapse.

Regrettably, many governments, around the world, already find themselves in a massive Debt overhang and as a result, those governments, includung the USA & much of Europe, find themselves in an Economic Dilemma, equivalent to "Damocles sword".

The thing is, we over-indulged, for far too long and Politicians did not act in the best, long term interests for all of their constituents and now the Damocles sword hovers over us, ready to drop without notice.

These Economies can not take the usual Keynesian remedy, as they have racked up far too much Debt already!

However, neither can they take the usual AUS-terity remedy, as Demand is already shrinking because of a slowing Demographic & from higher Energy costs! 

The result is that those countries that drove Demand in the Global Economy now find themselves between a rock & a hard place.

What we currently have is a dilemma, where neither Central Bankers nor Politicians have any real solutions.

What they absolutely can not do, is put the USA, Europe & the Global Economy, back on a REAL GDP GROWTH TREND, by simply relying on Trillions of thin air invented $'s, but nor can they increase Consumer Demand by introducing AUS-terity programs.

In an environment where Demand is shrinking, due to Demographic growth decline, where REAL COSTS ARE INCREASING, due Energy cost pressures and where the stables of FOOD & WATER are coming under increasing stress, due to Climate Change, at some point, the FLOOD OF THIN AIR INVENTED $'s will overwhelm the system, the DAM WILL BURST and the REAL CONSEQUENCES will surface!

John Mauldin: It's Time to Make the Hard Decisions

Back in the 1930's, Irving Fisher introduced a concept called the 'debt supercycle.' Simply put, it posits that when there is a buildup of too much debt within an economy, there reaches a point where there simply is no other available solution but to let it rewind.

We are at that point in our economy, as are most other major economies around the world, claims John Maudlin, author of the popular Thoughts from the Frontline newsletter and the recent bestselling book Endgame: The End of the Debt Supercycle and How It Changes Everything.

For the past several decades, excessive and increasing amounts of credit in the system have allowed us to live above our means as both individuals and nations. We've been able to have our cake and eat it, too. Now that the supercycle has ended and the inevitable de-leveraging cycle is staring us in the face, we will be forced to set priorities in a way that has been foreign to our society for over a generation.

On The Debt Supercycle
     You can’t look to monetary policy for help (which will try to stimulate businesses to get more debt) because debt is the problem. If you are drunk and you need to cure yourself; another fifth of the whiskey is not the answer. So when debt becomes the problem, when it gets to be too much, more debt is not the issue. You've just simply got to work it off. There’s no easy way out of it. And, it takes years to work through it. It takes a long time, generally -- 60 to 70 years, in the US's case -- for these debt cycles to build up. It’s when you can no longer adequately service your debt and the market loses confidence in your ability to service the debt at a price that it finds adequate.

On the Slow-to-No-Growth Future
    The problem is, there are only really two ways that you can deal with the debt. You can grow your way out of it, which is what you can do in normal business cycles. For most times in most places, we can grow our way out of debt problems, which is what the central bank is coming in and trying to do. The problem is, when you’re at the end of the debt supercycle, when you’re running up against your ability to borrow money, that liquidity no longer works.

    As Fisher pointed out, the time to solve the debt bubble is before it becomes a bubble. He was wanting separation of commercial banks and lending. He wanted a much less fractional-reserve-based banking because he wanted the debt to keep from building up past levels that we saw in the 1920’s. He saw that as something that was so bad that it created the Depression.

    So you can either repudiate the debt, you can default on it, you can monetize it, you can try to grow your way out of it; but you’re going have to deal with it.  And there’s no easy way, when you’re at the end of the debt supercycle, when debt has become too much. Printing money doesn’t work.

    Now, upon reflection and thinking about it, we’ve gone too far. And, this is where they are in Europe. Japan is getting very, very close to that moment. I keep saying, I think Japan is a bug in search of a windshield. I think they’re going to collapse. Quite frankly, the credit crisis that Japan is going to have is going to be far more serious than Greece. Japan makes a difference. They’re a big country. Greece is an ant hill.

    We in the US can solve our problems, but not without paying a large price. We’re going to be locking in a slow-growth economy. It’s going to be very frustrating for politicians, because they are going to want to come in and sprinkle pixie dust on the economy and make something happen. And the reality is, we can’t.  And, that’s a frustrating position. It’s five or six years of slow-growth economy.

On Confidence (or Lack Thereof) in Our Leadership
    There's a great line that people do not accept change until they see the necessity, and they only see the necessity in moments of crisis. 

    Now, sadly, simultaneously we’re seeing that much of the developed world is going to have this crisis all at the same time, you know within three to four years of each other. That’s not good for world growth. It’s not good for globalization. We’re at a place where we have to make hard decisions.

    And when you get politicians with a crisis, it’s hard to say what they’re going to do. When you read the stories of how decisions are made by politicians in the middle of a crisis, it’s not comforting. I mean, they’re picking up the phone to each other and saying, "What do you think we should do?" They are working it out as they go along. There’s no master plan here. There’s nobody with a playbook.



Link -
http://www.chrismartenson.com/blog/john-mauldin-its-time-make-hard-decisions/705...
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As raised by John Mauldin, it is usual that Economies Grow their way out of Debt supercycles.

Whilst Mauldin puts some good points and the video is well worth a listen, as is often the case he is not viewing the "whole picture", which includes some once in history Demographic & Energy related issues.

However, he is correct in saying, "there are no good solutions here"!