Thursday, April 02, 2009

They think it's all over ..... it's not.

The media are applauding the G20 rescue plan even before it's been announced - heralding the "sheer scale" of the stimulus which amounts to less than one trillion dollars.

The big surprise today will instead be the sheer scale of the extra sums made available in new loans and other liquidity boosts, particularly to kickstart growth in the emerging markets of China and Latin America.

Like China has a big problem! Sure their growth has been cut by half, but they are still growing - unlike Europe or the USA. I have to admit that one trillion dollars sounds like a lot of money - but it isn't in the context of this financial crisis. It is the merest drop in the ocean of debt - it amounts to roughly one third of the debt owed by the UK alone. When you consider it in the context of global debt it amounts to sticking a plaster over a gaping bullet wound.

This isn't going to rescue anything - it might stave off the inevitable for a few more months, but it will not prevent the world slipping into depression and it is a depression that will hurt Britain more than most - because we no longer make enough of anything to sell to ourselves or the world.

Only one thing will work to revive our economy - protectionism. Nothing else will stop us becoming an economic basket case and remaining one for some years until we start to produce something ourselves. The trouble is, we've become so used to our ever improving living standards that we can not conceive the possibility of them declining significantly - but they will.

I really don't think many people actually understand the potential decline that we're going to suffer, but it will be massive. There will be 4-5 million unemployed (on top of the 4-5 million already not working for various reasons) and average incomes will halve unless we start now to take steps to prevent it.


bernard said...

Well, Stan old bean, with your last paragraph you've nailed your colours to the mast, that's for sure!

Putin remarked at Davos some while back, that the the downturn was generated in the "English speaking West". He's right of course, and his words were a tacit acceptance that those blue-eyed whites hold all the cards when it comes to trade and buying power.
My own feeling is that Brown & the UK economy is a bit of an irrelevance now; the biggest trader in the world is the American consumer, and they have simply shut-up shop. The UK will just mirror whatever happens over there, and Brown dipping into the IMF for funds will only serve to convince those 'emerging markets' of the far east that we're a bigger busted flush than the USA, and call time...

Stan said...

I think I nailed my colours to the mast some time ago Bernard. It's not just the UK which is becoming an irrelevance - the whole of Europe is. As you point out, the USA is the world's biggest consumer - and the world's biggest producer is Asia. By the time the global economic rebalancing has taken place both Britain and Europe will be out on the fringes of the "global trade" system. The irony being that we will have been authors of our demise.

Anonymous said...

More dosh for the IMF to handout...the way our economy is going Gordoom will be first in the queue, cap in hand.

Letters From A Tory said...

Large amounts of money = large increases in the UK debt as we contribute to all these pointless commitments.

I'm not happy about it and when Brown actually releases ANY details on the agreements then we'll soon see them falling apart.

Stan said...

It sounds like a lot of money, Henry - but $1 trillion dollars isn't enough to even rescue Lithuania let alone anyone else!

LFAT - the debt is nothing compared to what else is coming down the line, but it's worth remembering that the last time we had debt like this was at the end of WW2. Only this time there is no "Marshall Plan" to pump money into our economy (the British government was the biggest recipient of Marshall Plan aid money - not Germany or Japan - it's just that we spent it all on building a bloated welfare state). Not only is there no "Marshall Plan", there is no Marshall Plan donor nation - the US can't do it - China could but won't.