Zombie Economy

First there was the insane decision to cancel a loan to Sheffield Forgemasters (deferring it may have been justified, cancelling was not), then another to favour Siemens over a British consortium for the Thameslink trains contract; now comes news of 3,000 job cuts in aerospace engineering at BAE Systems, the defence contractor.

The UK economy is supposed to be moving away from debt-fuelled consumption to export led growth, a formula for recovery virtually all economists and politicians agree is the only way to rebuild. Most of the news however seems to be a grim mix of retrenchment and continued deindustrialisation, a process which has been going on sinceMargaret Thatcher’s destruction of the traditional industries in the 1980s

True enough, immediately after the Great Contraction of 2008 industrial production appeared to recover quite swiftly. With the pound once more trading at levels low enough to give British factories a competitive edge, there was even talk of …

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Conflicting Views On The Economic Recovery

Nobody seems to know what is going on in the global economy. Take these two articles on the state of the recovery:

UK Economy Records Fastest Growth In Nine Years (The Guardian)

The British economy grew at the fastest pace in nearly a decade in the second quarter, higher than initially estimated, thanks to a pick-up in the construction industry and strong consumer spending.

The Office for National Statistics’ second estimate for the second quarter showed GDP rose 1.2% between April and June, the fastest growth since …

On the other hand:

Stock Markets Face A Bloodbath (Daily Telegraph)
Investors should brace themselves for an equities “bloodbath” and a further fall in bond yields when the current excessive optimism propping up the market seeps away, Albert Edwards, a strategist at Société Générale, has warned.
Mr Edwards said there was too much hope among investors, with excessive valuations in the US, but predicted it would come to an end in the coming months as economic data increasingly pointed to a double-dip recession.

“Equity investors are in for a rude shock. The global economy is sliding back into recession and they are still not even aware that these events will trigger …

The optimism of the left which credits the Labour government with saving the economy thanks to their wise and far sighted fiscal management is a little overstated. Do not forget that Labour printed money equivalent to 10% of GDP and pumped it into the economy to secure growth of just 1.5%.

It is true the economy is growing now but people had to start spending again sometime. We should also remember that although the economy is grpwing is is running behond inflation so in real terms is still contracting.

On the other hand reports that the global economy is sliding back into recession are based on evidence that the US economy is heading for a double dip recession.

Though the American economy is big it is not the global driving force it once was so perhaps we should focus less on what is happening across the pond or maybe direst our attention to the Canadian and southern banks and leave the USA to reap the biter harvest of their unbridled consumerism and sense of entitlement.

The party is over, the good times are gone. We must learn to put aside wants and focus on needs.

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