Thursday, Sep 27, 2007
How the economy has been ruined by cheap credit.
Guardian: That hissing? It's the sound of bubblenomics deflating.
The US and UK economies have been ruined by over-reliance on cheap credit and an a housing-led boom. Economic performance has, by virtually every standard indicator - output, investment, employment and wages - deteriorated, decade by decade, business cycle by business cycle, since the early 70s.
In the US a reduction of real short-term interest rates since 2001 has led to an explosion of household borrowing, contibributing to and feeding on rocketing house prices. Inflated household wealth enabled increased consumer spending that, in turn, drove the expansion. Personal consumption plus residential investment accounted for 90-100% of the growth of GDP! The UK is in a similar position.
Posted by koala bear @ 08:27 AM (581 views) Add Comment
1 Comment
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1. fahrenheit451 said...
The next step is a return to a healthy rate of inflation ... say 4% CPI.
2% only creates more trouble.
1) It will erode the debt mountain, provided the interest is paid off.
- This is not in the interest of the Government or the Banks, who use the Debt Burden in the same way as old fashioned Loan Sharks.
2) Bad workers - will not get a pay rise, therefore will gradually return to their correct level of pay.
3) Good workers - will get a pay rise and feel appreciated.
4) Improving workers - get a pay rise and "moved up a grade" or equivalent, eg new nameplate on desk, change in title, change in job description, (its just office politics & PR really).
But it's all shades of grey really and it all hinges on good quality management, which is joke.
www.lyrics007.comI'm So Happy I Can't Stop Crying
And of course this wil be backed-up by some reasoning to do with Higher Interest Rates, being a more stable economic model, better for savers, pensions (but too late for anyone over 40), and foreign investors, etc, blahh