This is another chart from this morning's Bank of England Inflation Report:
The Bank seems to want to see upward growth here. And it is true, there has been. But then look at the trend at the right hand end. It is downward.
I strongly suspect that is the direction of travel. It is marked. It is downward. It is bad news.
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“I strongly suspect that is the direction of travel. It is marked. It is downward. It is bad news.”
it’s a year on year number. Which doesn’t mean investment is falling, it means it is growing at a slower rate than the previous year. Given the 2013 rate was very high the base effect is likely to cause this.
And that’s bad news for the economy
Do you seriously expect the rate of growth to continually increase year after year….??
historically it has
If we are to build a sustainable economy right now GDP would rise
Maybe you should look take another look at the graph above and decide whether historically GDP has continually risen….
Until the banks crashed the economy it did
You gave a remarkably short view of history
GDP IS rising.
The rate is declining
That was my point
NO NO NO
Growth under Labour was DEBT!!!!!!!!!! Debt from people, debt from companies. Mortgage debt. credit card debt. We borrowed growth from now, from the next generation.
Why cant anyone see that.
We now need to rebalance a economy that is heavily in debt.
Debt is also an asset
And the only thing we borrowed from was the environment
The rest is just money
That old canard that we are storing up debt for the next generation! It always gets wheeled out! If that was the case how come America has NEVER paid off its national debt since 1791?–because it doesn’t need to.
The only thing we ARE creating for the next generation is:
1) Environmental despoilation
2) Generational unemployment and skill deficiency
3) Impossible housing costs that wreck lives and destroy futures.
4) Widening inequality and the risk of social unrest.
This is what we should address and it can be – as Chris Cook has pointed out in these blogs, national Debt is a Misnomer -it should rather be viewed as National credit.
The economy needs to grow in the short-to-medium term if we are to reduce unemployment, and that must be the priority. Nevertheless, the ‘inconvenient truth’ is more right than you in this, instinctively. For far too long economists have lived in a dream world where they have believed that economies could keep on growing year after year _ad infinitum_. This is simply not sustainable. We live on a finite planet, with finite resources. Much of our modern technology relies on extremely rare metals (many of which, incidentally, are mined exclusively in China!), which are not recycled. Our oil, natural gas and coal are running out, and should, in any event, be left in the ground, if we are to prevent catastrophic global warming. Our pollution is wrecking our environment, and harming our own health.
In sum, we desperately need a zero-growth model of the economy that can provide full employment of labour and full and efficient use of capital assets, which does not generate large quantities of waste and pollution, and which recycles and re-uses as much as possible. This model will not be capitalist, because capitalism depends on the generation of profits, whereas this model will be a strictly ‘not-for-profit enterprise’.
“Debt is also an asset
…
The rest is just money”
Great, we can just continue to build an economy based on debt, it can’t go wrong, it won’t cause inflation, it won’t be unsustainable because when the bubble bursts we can just flood the economy with more QE, QE cannot possible cause inflation, and then we repeat the cycle ad infinitum. That is the way to run an economy.
That’s basically your economic policy.
Of course the 2000s boom was caused by cheap finance. Any fule know that.
As far as I know I’m not a fule
“Of course the 200os boom was caused by cheap finance”
Up to a point thats correct.
As has been pointed out elsewhere, the emasculation of the unions plus globalisation resulted in an alarming change whereby the proportion of profit taken by labour in the Us & UK fell dramatically.
I think it was Henry Ford who defended paying his workers a living wage by saying “otherwise, who’d buy the cars?”
The post Reagan/Thatcher paradigm was that the capitalists didn’t need to pay a living wage, they could keep consumerism bubbling by just lending out the money they’d (essentially) stolen. Hence getting it all back in the end.
Why the banks decided it would be a good idea to slice that debt into slivers & make big, fat, debt sausages from it, & then start passing the sausages between themselves & then, knowing the sausages were worthless, use them as collateral to raise yet larger & larger loans, ….
Why they did that, the good Lord only knows…
“Why they did that, the good Lord only knows…”
It’s far from being a mystery, nor has it any supernatural associations. There’s been a spectacular increase in the proportion and amount of total profits going to financial operations as opposed to non-financial businesses over the neo-lib epoch.
If a bank sells the debt it’s created to someone else, it gets its money back quicker than if it waits for the full mortgage term, for instance. Rinse and repeat with the cash it gets from the sale. When the wind changes in the economy and the music slows the mortgages get paid back at a lower rate and the ones left holding the income stream entitlement papers take a kicking, as does the price of all paper linked to the transactions. And everybody not on the plus side screams “Foul!”. And everybody who made off with their handsome gains smirks and keeps shtum.
So far nobody’s been able to put poor old Humpty Dumpty back together again.