Saturday, Nov 14, 2009

Euro recovery

Independant: Britain the economic 'sick man of Europe'

Germany and France recovering. It will be very interesting to see what happens with Spain and particularly Ireland, as we are faced with similar situations but Ireland has taken the hard decision to cut state costs dramatically and face deflationary forces full on. Which IMO is a better long term plan that ours. To a certain extent, a recovery in Ireland will be a warning sign of a disastrous UK policy response.

Posted by stillthinking @ 11:20 AM (842 views)
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1. dude said...

Well it's not rocket science!

The UK is a mature economy that doesn't heavily rely on exports as some commodities-based economies do. But the service side of our economy has become so heavily reliant on financial services. From a GNP perspective it is a not insignificant component of our earnings. That also has the effect of making us feel important in the global market. I mean, FFS, we *are* Britian; we must be important.

But unfortunately the bottom has fallen out of this global financial market, which is based on debt. The UK has much larger levels of personal debt than elsewhere. Why? Well, houses of course. So our economy issues come back to the housing market. Reduce that in importance and you will help improve the economy. That means making renting much much cheaper, so the idea of buying your own home is not thought about as much. If you reduced rental levels to a quarter of what they are now, we could spend a lot more money on other things which would help the wider economy.

But such high levels of rent attract BTLers; your rent is buying their houses. They have borrowed that money from our financial services sector, and it has all gone tits-up.

Like I said, it's not rocket science.

Saturday, November 14, 2009 02:08PM Report Comment

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