It's been a fascinating few days (in between the continually depressing news) to monitor the language being used about the economy.
I have an impression for the first time - and I stress, it's an impression and I'm not saying anything more than - that the narrative used by some business commentators with regard to the economy is changing.
last night on the BBC News there was a UBS banker saying that we had to now think about the period of inflation (an idea I have expressed for some time, to the almost universal horror on the part of commentators). More than that though, he expressed the view that the only criteria for assessment of government economic policy was now whether or not it would create employment.
The on Radio 4 this morning a business commentator (and I did not catch his name) said that there now had to be a frank recognition that the government's economic policy was inevitably leading towards low or no growth. What he also made implicitly clear was this was a choice, which is, of course, true.
Now, two swallows do not make a summer; far from it in fact. But, these are not narratives that we have heard from these sources before. It has been heretical, the preserve of people like me, to make such observation on the radio or television and yet here were two business commentators making it clear that the government has opted for low or no growth, that this is a choice, that there are alternatives, and that those alternatives must now be considered.
To date many on the left have been, unsurprisingly, perturbed by the difficulty of progressing an alternative narrative on the economy. The cuts narrative has prevailed for eighteen months or more now ( it seems so much longer). There is no doubt that it has been successful in persuading people of virtue of the government's policies, which anyone who opposes them can tell you has been mighty frustrating when it was always so glaringly obvious that they would lead to an economic catastrophe.
Well maybe, just maybe that narrative is changing now and it is business and bankers realising that the sheer cowardice of governments that want to simply say they're walking away from the problem, shutting up shop and letting the world get on with things by themselves - which is the right wing agenda - is not good enough.
Government is an economic agent. Democratic governments are elected to effect change. And perhaps, just perhaps, the realisation that business expects them to deliver that change - albeit for the benefit of business but incidentally for the population at large on whom business is dependent - is beginning to dawn.
If it does the case is altered - the economic narrative will have changed. It's overdue to happen, as recent events make more than clear.
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I spoke to my broker yesterday. He has done pretty well for me this year, my portfolio is flat for the year to date. His view was that the markets had lost confidence in the leadership of the major economies. The only exception was Bernanke, who he felt the jury was still out on and who might eventually do the right thing. The rise in the price of gold signifies exactly the same thing: a loss of faith in the ability of governments to sort things out. In short, the markets are voting against the current crop of leaders and their policies.
I would have thought from that governments would reach the assumption fairly quickly that they need to do thing differently. From a UK perspective, however, I think the government is taking the view that the global problems are based around the US credit rating and the problems with the Euro. One only hopes that is their public view and that in private they do have a plan B.
We agree
Note, I said that!
Hi Richard
I wonder what your advice to (early in life) pension savers would be at the moment…do you think the whole structure of pensions in this country is broken and that only the state can deliver the changes we need? Or do you think there are options available for people wanting to invest a small amount each month ethically and profitably?
Or should we just all say “sod it” and pin our hopes on house prices rising meteorically?
Not that I can even afford a house, of course
Well, that house is number 1
Let the pension wait
Sod the future – try the best for now
The narrative changed from the moment a large part of the economic and financial establishment realised that they could not depend on demand from the so-called emerging markets to carry the day.
Sounds stupid, but now they KNOW that the U.S. market matters, that the UK market matters…..yes,we are in the right direction.