May 16, come and debate how to fix the recession

30 03 2009

On May 16 there will be a conference in London to debate the recession and how to fix it. I would urge you to attend. We need the fullest public discussion on what can be done to make the UK in particular recover from the economic problems we have got into.



One response

23 09 2009

recession to depression

All statistics and past and present information indicate that the recession has a long way to go. A whole decade or two. From recession to depression….it can happen….why…….

Borrowing money now to fix the current state of economy (short term goal as everything else in politics will only make further future debts even higher then they should be especially the way the western international banks charge interests, rates never stay low…for long periods unless we become a nation that conforms to the Islamic way of banking where interest are not allowed hence their economies have low interest for life….which I highly doubt the big banks in the our part of the world will ever allow that.
This huge debt burden will be passed down to a future generation who are yet to finish the primarily school. We have to think how is this future generation is going to make all this money up and if the state of the economy at that period will allow or facilitate them to do just that, they will have make very large contribution in tax from their wages, assuming that highly paid private sector jobs will be available to them in this country in huge numbers, which I will explain a later stage.
The new generation that we will be relying on or passing on the debt burden will be fewer in numbers in terms of total working population, as we no the current lifestyle in the UK has been for a while is to have one or two kids some leaving it to their 40s to have kids and when they do they are not having kids like so called baby bloomers who are currently going into the retirement stage….which as you should of guessed by now that their pensions are paid by the present working population through tax and national insurance contribution for the state pension, and private company pension is paid by the present earnings of the present pension fund that is invested in stocks and shares, hence when money is whipped off the stock market where all these company have locked the employees pensions, you create what is a pension black hole!!.
On top of that as the baby bloomers are now expected to live longer which will means the total payout will be much higher then any forecast made by the NHS or any government health agency/ treasury, as they will have to payout for longer time period on the other hand medical treatment cost or NHS costs will sky rocket as older people get they tend to have more medical treatment needs and the fact the current population trend suggest that there will be 3 pensioners per one adult working assuming that in the future all adults will be employed and pay their tax and is enough to pay for public services and the NHS bill. I guess someone somewhere has been working on a balance…between pension costs and medical costs. ie I have no doubts that the smoking band and other such policy is probably worked out with above two ratios in mind. For each one has such I high costs related to it, probably cost levels are as high current debt levels…which very alarming.

the next major factor that can push us further into a depression is our position as a property/ mortgage lead economy and its consequences for the nation. Many have cashed their pensions or transferred most of the saving to property at the height of the property boom, hoping that it will be a nice little nest egg for them to spend from when retired, thinking that the property price will keep going up at a fast rate, however like all things, it is much dependent on the state of economy, prices can co go down to any value they were in the past, depending on the state of the economy a recession like this with such high debt levels going back to levels of the1950 depression debt levels. A house once thought to be security can now be a huge burden on the taker of the mortgage, interest rates will never stay low as they are at some point they will rise and with the rise those that are still employed and paying the mortgage will suddenly find themselves paying much higher mortgage payments which will either leave them with very little of amount of disposable income, intern affecting other parts of the economy such as retail sales etc….or losing their houses all together. This will affect millions. Like the millions already affected in the property market in the so called stabilisation of the property market we have seen in last two years 2008-2009, those that are still hanging or depending on the property market as a livelihood are in for a big surprise and soon add further numbers on unemployment counter.

The other major factor intertwined with the above two factors I already mentioned is in the job creation areas. We need more private sector jobs to be created then public sector jobs and theses jobs need replace many of the jobs that we have lost and may never get those types of jobs again. Public sector jobs is funded by tax collected from the private sectors, many jobs in the past 5 years were created by government or local governments which are not sustainable, and we see the affects of that phiscally in the economy in the next few years as especially after the general election. This massive stimulus package has been great for the economy but only in the short term by keeping jobs for bit longer, but because they were short term solutions based politics, and not addressing the real problems, like the sensational news that we have now without much depth of analysis then it reasonable to believe we have bought year of good statistics for the price of ten years of bad statistics, if only politicians stop to think about themselves and really put the country first. As the stimulus package runs out and the economy will face the same problems it had before the stimulus package, unless new wave of stimulus is available and if we can afford to have them and not because on a whim of politician who wants to keep their seats. More we borrow more we have to pay back, the further in red we go and the only out is to pay it all back starting from now, hence the jobs creation is the only vital thing that will enable us out of this financial meltdown. We need really seriously look into this the creation of jobs and business development especially as we are now in a global world, we cannot afford to think locally, nationally without taking into context that we are competeting globally for business and jobs. Radical rethinking must be applied if we are going to be competitive in a world platform where technology is rapidly increasing reducing the barriers of protectionism and driving competition to extent that those that embrace the technology through people intellect and technology infrastructure and lowering costs maybe win the hearts of big multinationals, conglomerates…(meaning jobs)
Just looking in the past history of UK, from the close down of coal mines and heavy industrial business that once thrived in the UK and employed many people and to its demise which probably lead to increase of a manufacturing sector rising and in the late eighties as we all now to well that came crashing down due international competition from overseas who were producing faster and cheaper, this however lead to rethinking of the UK job market, where UK then found it self becoming a service sector economy where most people were employed in what is now as tertiary and quaternary economy, people working in offices and retail which lead to us becoming a nation of shopper holics and shopping over our means leading as to a position we now as a nation, a mortgage lead/ debt based economy. Where the rise in our property value is actually our so called wealth and not the actual property. The affects of this model we adopted we are now feeling the wrath of it and will always feel it as it as become a business cycle of boom and bust, majority of society will always get busted and lose everything, as they say in gambling, ‘the house always wins’.

In the UK we have enjoyed what could described as a world leader in finance and banking, where many countries have relish the UK model and expertise that could found here, many of the world biggest companies had many advantages of locating to the UK for that reason which intend gave the UK great boost especially in job creation we had in city of London. However with the recent crisis due to the financial institutions of UK and America…this may have been hampered….will the growing economies of India and china want a financial model like us or any other countries want model their systems on our systems…with that in mind we have to look at the pace of technology and its effects to national economies. There’s is a huge potential that we may be facing yet another crisis of jobs that we are losing now may never come back to the UK due to this digital technological revolution, as internet and software now play a integral part in companies operations and a source of economies of scale to be reached many of the jobs that once was not feasible to be outsourced overseas can be done so, from back office jobs, customer services, accountants, law to teaching jobs. Majority of theses can now be outsourced overseas for much lower costs, ie accountants and law jobs that require much of their time going through paper and analysing documents can be sent digitally to anywhere in the world and sent back for to countries they originated from to be signed of by one main accountant, lawyer etc.

Going back to my earlier point of a lost generation. the future does look bleak unless we have radical rethinking about education, job creation and attracting business to the UK, we need more then a Peter Mandelson to save our economy, maybe we should put all the top university economics and business professors together in one room to find solutions for the future of UK.

In my opinion the recession (depression) will last 8 –12 years with unemployment reaching 6– 7 million around 2012-2014. the lost generation that I refer is a generation who are will be unemployed for long periods time first of them will be educated and not find jobs and the later will be a fall out from schools that are under funded and whose parents will be unemployed growing up with poverty which will lead a social breakdown in communities and crime rates soaring all over the country. In cities This cause the neglect of housing estates as founding are cut back from redevelopment, the problem will be expiated as recent city redevelopments during the boom in housing market where space was of great value, many extra dwelling were created very close proximity to each other at the expense of social areas, where you get an area clustered in many people it only takes a few grieved teenagers and drug related activities taken up by a few to wreck an entire neighbourhood. Making some areas no go zone, as depicted in many of the late 80s movies.

For my opinion on the solutions on the above scenarios and a way out of this cataclysmic mess please watch this space and more writings from the ‘Economist Dude’

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