ultranomics

Here in the UK on Friday, the Council of Mortgage Lenders revealed that the number of properties repossessed rose by 12% to 11,300 in the third quarter of 2008. The number of borrowers in arrears went up by 8% compared with the previous quarter, to 168,000. Watch out readers, those of you with cash in your pockets and iron-clad hearts will have ever increasing casualties of the crunch to pick over in the coming months. We expect a yet larger wave of repos in the next few months, as the earliest defaulters (those who went backrupt a year ago) come to the end of their 12 month grace period which they were given if they had a wife or kids (or both). A Charles Dickens christmas is forecast across much of the country.

In the US on Thursday, Detroit car makers went up Capitol Hill to fetch a pail of money. Unfortunately they came tumbling down without a crown! Boo hoo. The silly sods went with begging cap in hand, yet when asked by congressional leaders how much they wanted and what for, they sat there scratching their heads like Stan Laurel (you remember Laurel & Hardy don’t you??). The Californian Democrat, Nancy Pelosi, who is the Speaker of the House of Representatives, said that the 3 Amigos, the bosses of General Motors, Ford Motor and Chrysler LLC have 12 days in which to come back with a viable plan of what they need and how they’re gonna spend it. Can you imagine going to see your bank manager and asking for a loan, then telling him he can give you as much as possible although you’re not sure what you want to spend it on yet. What a hoot!

As well as record levels of idiocy and farce, it seems the US is setting records daily across the board. The share price of General Motors hit $1.27, the lowest since 1938 ( a year before The Wizard of Oz). The US unemployment claims have hit 4 million – the highest since 1982 and factory output is now the lowest since 1990. Oil closed at $49.62 (the first time its been below $50 since 2003). Furthermore it seems that the cost of living in the US is falling at its fastest rate since records began in 1947. That might be much worse than it sounds. The same thing happened in Japan in the 1990s where the domino effect of dropping prices meant consumers wouldn’t buy large items since they’d be able to get them cheaper if they waited, leading to catastrophic demand slump and hence further price falls. Already in the US, retailers have begun to go out of business literally overnight. The double-edged sword of deflation might appear great for the consumer, but is in fact a guillotine to the neck of the economy. More detailed commentary on the deflation issue is promised for a future Ultraletter…..