The Guardian has reported that Eurozone car sales were down 16% in December.
Now that is possibly because there were two fewer trading days, but that seems unlikely.
What seems likely to me is that people are saving.
Economic recovery is dependent upon four things. One is increased consumer spending. Another is increased net business investment. A third is increased net exports. The last is increased government spending. Those are the four variables in the equation.
What is clear is that consumers are not spending here or abroad.
That means business is not investing and exports are not rising.
So it's all down to government spending. And George isn't playing.
That's why we're still in recession. And why we'll stay that way too, and the deficit won't clear and the debt will rise. It's all rather obvious.
As is the solution. Unless you're George.
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Maybe they’re saving, but consumer debt is also high and they’re busy paying off debts. As are a lot of companies. But otherwise yes.
And this is not within George’s power to change. So George misdirects attention to problems he can at least influence and brags about that influence. All the while making the real problem worse.
In economics and finance, extinguishing debt=saving, they just call it saving to make it sound like some virtuous nest egg building.
The problem is that consumer and bank debt was engineered to grow too high.
Either way, saving= not spending, which is one of the consequent problems. As individuals ridding themselves of the yoke of debt is no bad thing, its up to public spending to make up the shortfall in demand.
Exports have never emerged without an industrial policy, so don’t expect any help there.
On your second point, I completely agree.
I agree. Places like South Korea have high levels of savings but the money is returned to circulation as investment. I came across a writer, Michael Hudson, who talks about ‘debt deflation.’ People are paying off debt. As you say sensible for an individual or company but not for the whole as it reduces demand.
I think Keynes called it the paradox of thrift. It’s why the Right wing economists are wrong to push for cuts and balanced budgets now. And why Richard is right.
Michael is good on this
Thanks for the clarification re savings and debt paydown.
But weren’t UK car sales up 5.3% or some such? (Quite how, I don’t know).
Yes
But EU is much, much bigger
I’m not sure about the last quarter of 2012, Richard, but I seem to remember seeing figures that showed the UK as the only EU country where car sales actually grew last year. I have 12% in my head, but that may be wrong. That said, that was massively cancelled out by the fall in sales across the EU: witness Honda’s recent announcement. Of course, when we’re no longer in the EU our enhanced access to that market will disappear – as, no doubt will Honda, Nissan, and Toyota, as that’s the reason they’re here.
Ivan
I agree: if there was a chance of UK consumer growth EU sales decline will crush the impact
These things have to be looked at broadly
R
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Our ConDem government keep shooting us in the foot. In the pipeline is the transfer from Disability Living Allowance (an in work benefit, and hard to apply for and get) to Personal Independence Payment, which has even tighter limitations.
Qualifying for enhanced mobility, which enables thousands of chronic sick and disabled to get around independently in a Motability adapted vehicle, will be almost impossible under the new PIP regulations.
This change is estimated to remove some 5,692 jobs from Motability-related industries plus a£544 million contribution to GDP and £126 million in tax receipts. You can read more about it in ‘Emergency Stop’, a new report from the We Are Spartacus group. http://wearespartacus.org.uk/emergency-stop/
Not only will this change further depress the economy directly, costs to the health service and social care will increase, when disabled people no longer have the cash to access mobility and care for themselves.
I think we need some properly considered and targeted “Keynesian” medicine. If the government has to borrow more to kick start the process (because unfortunately “Big Business” is not stepping up to the plate) then so be it!
Of course this needs careful consideration, because of the worry that bond market/sterling currency collapse and all that will bring hyper inflation. Leadership from government is required at this time. It is not good enough that to just sit on yourt hands and do virtually nothing.
The lack of UK patents in relation to the uses of Graphene is just one example of where the UK is going wrong. The few million GO has lobbed in the direction of R & D is a derisory sum. There needs to be an industrial policy to ensure that UK is rebalancing its economy away from the FIRE sectors, which do not produce real economic growth.
This situation is cause to celebrate. For years the people have been fighting back against the growth-mongers of neoliberalism. This will assist in producing a more sustainable set of economic choices, all at the local/micro level.
Anyone seeking growth is seeking to further neoliberal dogma, either at a fast speed or slow.
We’re still in recession, and will remains so forever more, unless we fundamentally change our thinking on what it means to be a contributing member of society. Workplace efficiencies are only going to shrink the need for human labour, and whilst neoliberals drone on about new industries creating even more jobs, the reality is they don’t. Relative to their markets caps massive companies like Apple, Microsoft, Google and Facebook employ very few people, and nothing like what the car industry used to prior to increasing factory automation.
We have an economy based upon consumerism, but we have a production dynamic which is providing fewer and fewer opportunities to earn the means to consume. We need a citizen’s wage, and we need a society that understands that people can be productive in far more meaningful and complex ways than putting in their 8 hours a day at the local widget factory.