| February 18 1:09pm |The economy's been fuelled for the last 30 years by easy credit and the associated debt, plus the mass transfer of women into the labour force (as shown in this graphic - I have no doubt the US and British experiences are similar). We're running out of women to transfer (and those we import prefer raising children), and the debt expansion, shock horror, couldn't be sustained indefinitely. Sterling's devalued 30% and wages are static.
The BofE will surely have to come up with a better excuse for another dose of QE. They can't say "we're doing more QE because the Government has to borrow so much money", although perhaps that might be more honest...
| February 18 1:18pm
No, they'll say "the recovery is faltering and the economic situation worse than we thought, so more QE is required to safeguard recovery".
What they won't say is "we used QE to defer enormous amounts of economic pain and it also helpfully assisted the government in financing the deficit, but the trade-off is that all that deferred pain will descend like the wrath of god if we stop, because none of our structural problems, such as an unaffordable public sector and levels of household leverage, have been tackled, so we'll keep trying to defer the pain in the hope things get better on their own somehow. But they won't."
At least Japan had/has household savings to finance themselves, even if it is horrendously circular, and an export-led economy. We're stuffed.
Yet apparently it's an absolute disaster that there's no growth. Why aren't we getting "back to normal" ?
Because the "normal" of the last 30 years = debt-fuelled ? And the only people interested in taking on more debt are those who can borrow at 0.5% from the BoE (i.e not me or thee ?).
The crunch could have been very deep, unpleasant, and short - as in Iceland. Instead, it's going to be drawn out over a decade or more, inflationary, and living standards will be continually squeezed.
1 comment:
Interesting, the notion that Japan is an export led economy. Japan's exports are something like 10% of their GDP, ours are something like 30% of ours. And household debt is declining, even if it's still horrendously high.
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