More than 5 years after a downturn and we are still not back to where we were in 2008 shows that most economists are struggling to make sense of this all. This is a debt problem and trying to push more debt onto over extended borrowers at the same time as trying to re-inflate a housing bubble is only going to end in disaster one day.
While our banks have a more capital than before they are still grossly unprepared for a return to real values for assets. If this were to happen then they would all be clearly insolvent, then the government could not cover deposit guarantees, and big depositors will lose significant slices of their assets. Britain is following Japan but we do not have the savers to bail out the banks or government like Japan had. They have been suffering deflation for decades and it is still not over. While I do think we will be facing a two decade slump it will not be as extreme as the Japanese as our property bubble was not as extreme.
Households are doing the right thing in trying to pay down debt. Though the governments plan to inflate away its debt burden is only masking the reality that deflationary pressure is everywhere but simply not being shown yet in statistics. All around where I live there are dozens of new homes being built. On one development of 8 luxury town houses only one has sold. There are others that are simply sitting in estate agents windows gathering dust because they are over priced. Two of the local agents are selling properties but at prices substantially lower than the two big chains are asking. When the sellers decide to take a lower price will they start a crash? In the US there are concerns over US retail property as an investment and that is now being watched as a sign of problems there.
Also without demand from the public why would companies invest to expand if they cannot sell all that they make now? Look at the struggling retail sector. Sales before Christmas, that never happened years ago. Much of the increased production did not sell and simply boosted inventories.
Why? When they talk about exiting the EU why would a company want to invest outside the worlds biggest trading block? Bringing production back is good even if all it does is replace imports.
He is right on this point. The productivity problem is another sign that employers are hoarding workers rather than getting left without key skills when the upturn comes. That is why productivity is stalling. Until there is an increase in demand for jobs that there is any chance for productivity gains and then eventually wage increases. Though if the stagnant economy continues will they feel the same and could we see unemployment rise? There are also hundreds of thousands who want decent jobs but are stuck with part time work or zero hours contracts but do not count as unemployed. Across the EU periphery countries are reporting falling unemployment such as Spain and Greece, but the numbers of jobs are still falling, what has happened is that thousands have simply left the country. They do not count as unemployed but have not found work they are simply not counted any more. This is exactly the same as the falls in the US unemployment figures. Latvia is losing 5000 a month as they
emigrate.So even if unemployment falls below 7% we will still not have a thriving economy so interest rates will not be raised by the Bank of England until there is a risk of much higher inflation, or some other crisis hits. It could take years for the slack in the employment figures to disappear. At that point the economy will be on a much better footing.
_________________Do concentrate, 007...
"You are gifted. Mine is bordering on seven seconds."
https://www.dropbox.com/referrals/NTg5MzczNTkhttp://astore.amazon.co.uk/wwwx404couk-21
