According to a recent report by the Centre for Economics and Business Research (CEBR) UK house prices are liable to rise by about a fifth in the next four years. The forces that will push property prices up are increased lending levels by the banks and interest rates remaining at a low level.

Home values will rise 6.5 percent in 2010 and will have gained around 20 percent by the end of 2013, according to CEBR radically altering their forecast of October 2009, which house prices would increase by only 2.6 percent this year.

CEBR’s announcement strengthens reports from the Nationwide Building Society that showed house prices have begun rising again after the economy returned to growth. However their optimism was dashed by news that potential UK house buyers could soon face a chronic shortage of credit that will see mortgages ‘rationed’.

According to the Council of Mortgage Lenders (COML) as government schemes to keep mortgage lending afloat are due to dry up in 2014, their fears that a funding gap to the tune of £300 billion will open up. COML predicted in their recent report that the UK is at risk of a chronic under-supply of credit, bringing with it the rationing of mortgages for customers that will continue for many years. Before the financial crisis, the funding gap, meaning the difference between what banks took in savers’ deposits and what they lent out, was always covered by the wholesale market in mortgage debt.

As a result of lower oil and gas prices, oil giant BP have reported a 45% drop in annual profit Its replacement cost profit for 2009 was £8.75 billion, compared with £15.39 billion in 2008. The company said that its oil and gas production increased more than 4% in 2009 and its reserves had grown for the 17th year in a row. Profits during the final three months of 2009 were up 33% from the same period a year ago.

However, the fourth quarter results fell short of analysts’ expectations, causing BP shares to fall more than 4% in early trading.

Shares in Northumbrian Water surged 12 percent after press reports that the Ontario Teachers’ Pension Plan may bid £1.7 billion ($2.7 billion) for the company. The water utilities market in the UK is liable to benefit if the speculation on Northumbrian Water is confirmed as it will establish a higher trading range for the other water stocks. On the news, Northumbrian Water rose by 12 percent to close on 289 pence. The Ontario pension fund already owns 27 percent of the U.K. water company and wants to buy the remaining stake.

Severn Trent caught the wave and added 4 percent to 1,170 pence while United Utilities gained 2.8 percent to 551.5 pence.

South Korea’s National Pension Service, the world’s fifth biggest pension fund, will next week take a 12 per cent stake in Gatwick airport, stressing that investment in Britain will play a significant role in quadrupling its international exposure. The NPS, which is aiming to expand its overall portfolio, came to the attention of Britain’s financial community last year when it bought the headquarters of HSBC in Canary Wharf for £773 million. Gatwick airport was sold late last year to Global Infrastructure Partners, an infrastructure fund backed by Credit Suisse and General Electric, for £1.51 billion.

The longest running saga in recent UK takeover history drew to a happy close as US firm Kraft Foods sealed their takeover of Cadbury after shareholders in the UK chocolate maker voted in favour of the deal.

Cadbury said it had received valid acceptances of the offer from investors representing 71.7% of the firm. Kraft chief executive Irene Rosenfeld celebrated the takeover by announcing: "I warmly welcome Cadbury employees into the Kraft Foods family." Despite the warm welcome, Cadbury employees staged protests in London calling for government support to guarantee jobs

Budget airline Ryanair has raised its full-year profit forecast as passenger numbers continue to rise. The company announced that it said it expects full-year net profits of about 275 million Euros, whilst reporting a 10.9 million Euro; (£9.5 million) loss in fourth quarter of 2009, a considerable improvement on the 101.5 million Euro losses for the same period in 2008.

Ryanair said the result had been helped by a 37% fall in fuel costs and passenger numbers increased by 14%, which had offset a 12% drop in fares.

Europe’s second- largest tobacco company Imperial Tobacco Group Plc have announced a “good start” to the year with business “in line” with company expectations, despite the weak economic climate. Despite the news, their shares declined 1.2 percent, to 2,002 pence. The Royal Bank of Scotland Group Plc are to allow its top performing employees to convert a large portion of bonuses given in shares into cash within 12 weeks of receiving them, according to a letter sent to investors yesterday. On the day RBS shares rose 7.9 percent, to 34.86 pence.

The pound closed down at 1.5977 against the dollar, while the Euro traded at 1.1438

The FTSE 100 dropped 4.1 percent in January as the U.S. government called for limits on risk-taking by banks and China moved to restrict lending and cool economic growth. The gauge is still 49 percent higher than in March after governments and central banks around the world sought to encourage growth by maintaining low interest rates and committing more than $12 trillion to stimulate the economy.

The benchmark FTSE 100 Index added 35.9 points to reach 5,283.31 at the close of trading in London.

US President Barack Obama has announced a $3.8 trillion (£2.4 trillion) budget plan for 2011, which includes increased spending for job creation, but cuts in other areas.

He also forecast the US deficit would rise to a record $1.56 trillion this year.

He scrapped plans to send astronauts back to the Moon and will seek to save $250 billion by capping a range of domestic spending programmes for three years.

Congress must approve the budget for the financial year starting on 1 October for it to take effect.

Mr Obama blamed the huge deficit on the decisions of President George W Bush, previous Congresses and his administration’s moves to prevent an economic collapse.

Stocks continued to extend gains after reports showing the U.S. manufacturing sector expanded more than forecast. The Institute for Supply Management’s factory index showed U.S. manufacturing expanded in January at the fastest pace since August 2004, spearheading the recovery from the worst recession since the nineteen-thirties.

On the news, the Dow Jones rose sharply, to close on 10284.91, while the NASDAQ rose 38 points, to finish on 2185.32

Gold lost some of the previous day’s sharp gains, dropping 0.1 per cent to $1,105. Oil rose 0.5 per cent to $74.81 a barrel.

financial

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Tags: Banking, Barack Obama, British Economy, Cadbury, Centre for Economics and Business Research, Council of Mortgage Lenders, Credit Suisse, Dow Jones, Economy, Employment, Financial News, FTSE, Gatwick Airport, General Electric, George W. Bush, Global Infrastructure Partners, HSBC, Imperial Tobacco Group Plc, Kraft Foods, Money, NASDAQ, Nationwide Building Society, Northumbrian Water, Oil, Ontario Teachers’ Pension Plan, Property Prices, Recession, Retail, Royal Bank of Scotland, Ryanair, Severn Trent, Stock Markets, Stocks and shares, UK Banks, UK Economy, UK government, UK Recession

Is the global financial crisis a conspiracy?—or just a case of too many people who should have stopped the rot looking the other way.

When more talented and experienced writers than I sit down to write the history of the first global depression of the 21st century, the chances are that they will say that it all began with the collapse of the Bear Stearns Bank of Manhattan, New York, and attach much of the blame on the crash on the role of mortgage-backed securities that brought the global banking system to its knees.

In its prime Bear Stearns were the fifth-largest investment bank in all of the US, and had survived and even profited during every financial upset since their foundation in 1923. What symbolized the bank and attracted investors was their conservative management policy. However when money supply became easier in the early years of the third millennium, some new generation financial wizards saw the golden opportunity to earn some fairly massive paper profits for the bank, and some really fat bonuses for themselves as a result. In the space of a few years, Bear Stearns shed their conservative image and became the leader in securing loans against asset-backed securities. Other banks followed suit, however Bear Stearns exposed themselves very heavily, and enjoyed tremendous profits for the initial few years. However during 2006 and 2007, as interest rates began to rise and the public found it difficult to make payments, losses became to mount. Instead of curtailing their activities, the bank’s executives chased their losses by increasing their exposure, with similar disastrous results. In March 2008, the whistle was blown on their activities when the Bear Stearns’s board were forced to approach the Federal Reserve Bank of New York asking for an emergency bail- out. When no help was forthcoming, the bank was sold off at a bargain price of $10.00 a share, $120.00 a share less than the bank had been valued at just twelve months before. With the collapse of Bear Stearns, alarm bells and sirens began to sound along the entire length of Wall Street and eventually reverberated around the World.

In the UK, the first cry for help came from the Northern Rock Building Society, and later most of the major high street banks were also found to be in very shaky financial positions many of them due to excessive and indiscriminate lending. The UK public found themselves exposed to the sum of one trillion pounds, which at the time seemed like a colossal sum of money, but now fades into significance when compared to some of the figures being bandied about during the many global conferences being held to discuss the situation, how it happened, how is to blame for it and where did all the money go?

To try and discover the reasons and attach the blame we first have to acknowledge that the World is going through a situation of major change.

First of all global population is on a constant increase, and due to that fact the World’s natural resources are being exhausted. The great industrial nations of the Western World seem neither interested nor capable of finding viable alternatives. Secondly, the governments of the Western World have to come to terms with the fact that there will not be nearly enough jobs for everybody if they do not embark on some of form of protectionism. Not so much against each other, but against the emerging economies of India and China. It may be unpalatable for many to think that way, but the uneven flow of capital to these nations must be curtailed before further and deeper rooted financial disaster falls.

The UK taxpayer, as well as all their friends in the Western World, is both the biggest losers in the situation as well as one of its principal causes. The increasing dependency on the consumer on credit was allowed to reach epidemic proportions. Whilst the banks were allowed to make windfall profits on the back of Joe public’s impatience, naivety or stupidity, the government looked on.

And why not, as long as this irresponsible behaviour was allowed to continue and the economy was ostensibly booming, the UK treasury was earning unprecedented fortunes in the form of tax incomes. Now that the bubble has burst, the taxpayer of the Western World is being asked to mortgage his future yet again to prop up the banks and insurance companies, who have become vulnerable, yet cannot be allowed to fail.

When the history books are written, it will be difficult not to point a finger at those people who were at the helm before and during this crisis. First of all US President George W. Bush and our own PMs Tony Blair and Gordon Brown.

Tony Blair had either the good sense or the good fortune to abdicate his throne and left Gordon Brown to carry the blame for the mess that is now the UK economy. However he cannot come out of it with clear hands entirely, because you wouldn’t need to be a financial genius to see the writing on the wall at least two years before everything went belly up.

So when we take a look at the picture as it stands now, it is obvious that the worst is over, at least because we now know what to expect for the World economy in general and the UK economy in particular. A period of recession, of austerity, hopefully followed by a longer period of restraint, reconciliation and prudent financial management for the public and private sectors as well as the public at large.

There is only one question in my mind that for the UK public remains unanswered, and that is the most significant question of them all. Yet nobody wants to address the question and provide the answer.

Where did the money go!

People seem to have forgotten that during a period running from 2005 to 2008, the price of crude oil doubled and for a while even trebled and almost quadrupled.

It also may not be a coincidence that since the global financial collapse has reached it full force the price of crude oil has fallen to levels that were consistent for almost the previous ten years. Which means that the OPEC member nations simply pushed the prices through the roof, knowing that the World was in a state of false euphoria and would pay any price for a barrel of oil? Oil that began 2005 at $40 a barrel reached a peak of $150 in late 2008.

Just to consider some of the statistics that these facts generate is mind boggling. Current global consumption is around 85 million barrels of oil a day, making for an annual global demand for 31,000,000 barrels. If we take into account that the OPEC member countries are breaking even at $40 a barrel, that means that over the five year period from 2004 to 2008 inclusive, their overheads for producing the 150 million barrels of oil comes out to a staggering six trillion dollars. What is even more staggering is the fact that at a conservative estimate the OPEC countries sold us that oil for an average of $80 a barrel, which means that they made a 100% profit or six trillion dollars.

$6,000,000,000

That’s a lot nothings by anyone’s standards as well as being almost exactly the sum of money that the global economy is hanging out their tongue looking for.

While these figures are rough estimates, the numbers that generated them are accurate and even if they are out by five or even ten percent, they still make some pretty cruel reading.

So if there is a conspiracy behind the global financial crisis, there it may lie.

The question has to be why the leader of the World’s most powerful nation allowed that massive amount of capital flow through his government’s hands.

As readily as Bush and Blair formed an alliance to invade Iraq they could just have easily done so to put a stop to the Western dependency and by doing so forced the price of crude oil down. Their actions will have certainly caused a recession, but one that would surely have been nowhere as severe and painful as that which currently is upon us.

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Tags: Bear Stearns, conspiracy theory, Credit Crunch, Financial News, George W. Bush, Global Credit Crisis, Gordon Brown, Interest Rates, Tony Blair, UK Banks, UK Recession, UK taxpayer, UK treasury