As the Guardian has reported this morning:
UK consumers' credit card debt fell in annual terms for the first time since the Bank of England started tracking the data in 1987 in March, as lockdown froze spending but job guarantees kept millions in work.
The annual growth rate of credit card lending fell to -0.3%, the first negative annual growth since the series began.
British households repaid £3.8bn of consumer credit, which also includes personal loans, during the month - the largest on record.
Three thoughts. First. that's good news: credit cards are a massive contributor to the mountain of personal debt that is the real debt problem in this world.
Second, expect this trend to continue during lockdown, for obvious reasons.
Third, expect it to continue afterwards as well. As I have explained a number of times, the quite rational expectation that people have after a crisis is to save. Keynes called it the 'paradox of thrift' that exacerbates economic downturns when describing its consequences in the 1930s. There is little or no chance that once lockdown is over people are going to rush out to buy cars, kitchens and other big-ticket items. They will continue to pay down debt instead, fearing another crisis will not be far off (and they will probably be right about that).
What does that mean? It suggests a very slow economic recovery when gauged in conventional terms.
Alternatively, it means that a wise government would plan an unconventional recovery, delivering something like a Green New Deal.
The question is, do we have a wise government?
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No we do not have a wise government but I don’t think they need to be wise to realise it is time for a green revolution.
They just need not be blind. So I still have some hope.
KenM says:
“….. time for a green revolution.”
They just need not be blind. So I still have some hope. ” ??
I’m not very optimistic. I see little sign of the type of wisdom required. 2008 was a perfect opportunity to do some serious restructuring and what happened was we doubled down on doing it wrong…… pretending to have made swingeing reforms to financial regulation when the reality was some pettifogging, irritating regulations. I’m expecting more of the same in the wake of coronavirus and I think we’re probably going to have to wait for the financial collapse before we see any real change of thinking.
Maybe, just maybe a critical mass of the population will have come to see thing differently, but media management is, so far, keeping the government afloat in the affections of its supporters despite its abject mismanagement of the current crisis. Quite why and how we have a population that sees Colonel Tom as an endorsement of the government rather than a damning indictment is beyond me. So overall I’m not expecting the changes we need any time soon.
Agreed.
I do not think that this Government started off wise – but there is a chance (albeit a small one) that it may become so.
I really hope I am wrong but my view is that this government will act in the same way that they did when they came to power in 2010 and impose austerity. They know no other way – to do so would admit they have got it wrong.
Hope I’m wrong.
Craig
I was surprised Richard even asked, until I came to realise maybe the question wasn’t really a serious one. Think Craig has it about right, personally speaking. Unlikely to have a change of course any time soon. I stomached Question Time for as long as I could last night, and while the chorus for austerity ‘because of the deficit’ brayed in unison, I couldn’t detect much of any worth in what Annelise Dodds had to say, or much that gave any voice to any other than the existing orthodoxy. I assume this is because she is the product of a similar (in an elite sense) educational background as those also on the panel: https://en.wikipedia.org/wiki/Anneliese_Dodds
This could be a beginning of a good thing – consumer debt has huge impacts on many people and especially those at the bottom of the ladder. Certainly it will slow the economy , but longer term it could be a plus in terms of levels of poverty and also in being less consumerist and wasteful.
The downside is the likes of e.g. Indian sub continent etc will continue to suffer a lack of market for cheap clothes.
Will the government do the right thing? No, not until they have wasted every opportunity.
Would agree this is a watershed moment for global society. The economic collapse is going to unprecedented. One thing for sure is the private sector is going to be of no help in getting us out of this on its own, of course we will still need them but they cannot even begin to address how to recover from such a gargantuan situation. It is a once in a lifetime opportunity. It’s almost as if we have a clean slate.
The only worry we have is that the private sector lobby group is extremely powerful,well organised,well funded and efficient, not to mention the outright bribery of political party funding and lucrative jobs on executive boards.
We need to get civil society,social reform groups,trade unions and consumer groups into politicians and law makers ears …fast …before we roll back to business as usual.
On a related point, I noted a story in the ‘In the City’ section of a recent Private Eye that by the end of last year global corporate debt had grown to $13.5 trillion, half of it in the US. That’s twice the level it was in 2008. As “Slicker” went on to note, ‘More than $1.3 trillion is in the fast-growing form of leveraged loans, which come with far less security or recourse – many effectively low quality junk bonds. It’s part of a global debt of $253 trillion, or a record 322 percent of gross domestic product.’
“Slicker” goes on to point out that a recesssion half as severe as in 2008-09 would result in companies owing $19 trillion being unable to service that debt, according to the IMF.
Well, it’s now obvious that we’re certainly in for a recession far more severe than in 2008-09 so we’re already in a far, far worse situation than anything the IMF modelled.
Finally, ‘Slicker’ notes that, ‘Much corporate and leveraged loan debt has been created as a result of the boom in private equity buyout deals since 2008. The private equity sector has more than doubled to an estimated $5 trillion in assets, which include more than 3000 companies in the UK…Overleveraged private equity-owned companies can quickly be unable to meet interest or debt repayments. There are already a large number of these “zombie companies” kept alive, some since the last crisis, by regular refinancing. But that was then . This is now.’
Indeed it is. But given the source of much of the funding of the Tory Party, and indeed the interests of many of its MPs, I seriously doubt whether private equity groups, or indeed the ethically dubious aquisition model they so often deploy, will suffer much as a consequence of the current crises (ditto 2008-09). Such is the reward for investing heavily in the people and party that control the levers of government in the UK.
Hence why so much money is being poured out now Ivan
The know how messed up we really are
The ‘Question of the Day’ series is an interesting discussion, and useful for imagining the type of future we’d like to aspire to, however, sadly, I expect there will be no chance of seeing any desired changes so long as a Tory government holds power. I’m starting to feel the problem might go deeper than just politics and neo-liberalism, and be an issue of society and humanity. In The Fall, Camus intimates that there exists in every intelligent person a desire to dominate by force alone, and that desire sees its political expression in the support of the most cruel party. He describes this as ‘sweet dreams of oppression’.
I’ve seen glimpses of this in answers to simple ‘what if’ questions put to apparently sane, and caring colleagues. I found myself horrified and in frank terror of the dystopian vision of society imagined when provided with the answers to a simple, “what three things would you change in the UK if you could be dictator for a day?” questions.
Maybe the problem is the very idea of power. Models of positive power relations, where power is not built on domination, but on collaboration, and where power does not impose but rather support, are maybe harder to find. As a result, is power then imagined in only its most visible, and also primal form? Could this explain or help understand, for instance why voters turned up their noses at a Corbyn Labour Party offering a compassionate, caring vision of society and deemed them unelectable.
At a deeper level, beyond the place where discussions of policy and politics plays out, is there an emotive, intuitive sensation that a person unwilling to impose his will fails in modeling power as it is understood and imagined. And, ultimately, could those ‘sweet dreams of oppression’ at the heart of our shared humanity be the primary obstacle to overcome in the attempt to recreate a more just and compassionate society?
If I had time I’d like to respond to this – bizarrely, I have not right now
I hope others do