Ending the recession
Discussion
Now, before I ask my question, bare in mind that my knowledge of macro-economics is limited. I was wondering...
1) Is it actually possible to stop a recession? So many politicians are promising they will do their best to.
2) Why haven't previous recessions being stopped (why don't governments learn from their mistakes and stop a downturn even happening?) and thus should we not be in a recession now?
From what I have heard, nobody can stop a recession; thus any politician who claims to is ignorant and plainly lying to the populace.
Educate me.
1) Is it actually possible to stop a recession? So many politicians are promising they will do their best to.
2) Why haven't previous recessions being stopped (why don't governments learn from their mistakes and stop a downturn even happening?) and thus should we not be in a recession now?
From what I have heard, nobody can stop a recession; thus any politician who claims to is ignorant and plainly lying to the populace.
Educate me.
Politicians are largely powerless to influence what are, in reality, natural economic cycles. All they can do is try and alleviate the worst effects of downturns. This is precisely what F D Roosevelt did with his New Deal in the 1930s and is similar to what is going on now. The economy will recover in its own time. Of course, whichever politicians are in power at the time the pick-up starts will want to claim credit for it - it was ever thus.
Any steps that the governments / banks etc etc take will take a while to have any effect. It's a bit like steering a ship, you can turn the rudder a few degrees now and expect to see a change of direction slightly later. If you leave it too late and get too close to the rocks you can steer all you like but you are gonna hit them! Drivers of Ford Granadas will know what I am on about...
Some say that the drastic cut in rates was a bit like big rudder input thats come later than it should have done, they should have made smaller cuts and more of them earlier and throughout 2008.
Of course the reason they didn't cut rates earlier is because they were so worried about the high inflation figures (something they are not concerned about now)... Even Mervin King admitted in writing that the high inflation was down to the 30% rise in Fuel prices.....
Some say that the drastic cut in rates was a bit like big rudder input thats come later than it should have done, they should have made smaller cuts and more of them earlier and throughout 2008.
Of course the reason they didn't cut rates earlier is because they were so worried about the high inflation figures (something they are not concerned about now)... Even Mervin King admitted in writing that the high inflation was down to the 30% rise in Fuel prices.....
davidd said:
I think that one of the issues is that things are very bad and whatever the governments do will take time to make a positive impact, during which time things will get worse.
Hopefully the % drop in interest and the prospect of lower taxes will protect a lot of people.
D
Lower taxes? I wish, Gordons spend spend spend and a bit more spend policy is going to mean only one thing for taxes...they are going up! Hopefully the % drop in interest and the prospect of lower taxes will protect a lot of people.
D
skymaster said:
Any steps that the governments / banks etc etc take will take a while to have any effect. It's a bit like steering a ship, you can turn the rudder a few degrees now and expect to see a change of direction slightly later. If you leave it too late and get too close to the rocks you can steer all you like but you are gonna hit them! Drivers of Ford Granadas will know what I am on about...
Some say that the drastic cut in rates was a bit like big rudder input thats come later than it should have done, they should have made smaller cuts and more of them earlier and throughout 2008.
Of course the reason they didn't cut rates earlier is because they were so worried about the high inflation figures (something they are not concerned about now)... Even Mervin King admitted in writing that the high inflation was down to the 30% rise in Fuel prices.....
I do not think this is down to the high price of fuel, it may have lowered now, but within weeks it will be on the rise again, we know they have reduced the flow of how much oil is produced. Those that think we are not in a recession are deluded and those that think it will not have some form of impact on them are also. Things are going to get worse and the above cut by BofE will give some people a false sense of security. More redundancies loom from manufacturing, high level management positions will go along with those on the production floor. America thought they had come through the worse, even they admit this being incorrect. This alone has an effect on us, the sterling at present is plummeting, we laughed when it was 2 dollars to the £GB what is it now six months on, this alone will have devastating effects. Could the gubberment have stopped this, never, it beggars belief that Northern Rock alone are making so many repossessions since being owned by Brown, these people still need to be homed when becoming homeless and by who, the councils and who pays for it we do. Catch 22. For me, my weekly shop has gone up around 20% but we are cutting back on extravagancies.Some say that the drastic cut in rates was a bit like big rudder input thats come later than it should have done, they should have made smaller cuts and more of them earlier and throughout 2008.
Of course the reason they didn't cut rates earlier is because they were so worried about the high inflation figures (something they are not concerned about now)... Even Mervin King admitted in writing that the high inflation was down to the 30% rise in Fuel prices.....
jamesbrown said:
skymaster said:
Any steps that the governments / banks etc etc take will take a while to have any effect. It's a bit like steering a ship, you can turn the rudder a few degrees now and expect to see a change of direction slightly later. If you leave it too late and get too close to the rocks you can steer all you like but you are gonna hit them! Drivers of Ford Granadas will know what I am on about...
Some say that the drastic cut in rates was a bit like big rudder input thats come later than it should have done, they should have made smaller cuts and more of them earlier and throughout 2008.
Of course the reason they didn't cut rates earlier is because they were so worried about the high inflation figures (something they are not concerned about now)... Even Mervin King admitted in writing that the high inflation was down to the 30% rise in Fuel prices.....
I do not think this is down to the high price of fuel, it may have lowered now, but within weeks it will be on the rise again, we know they have reduced the flow of how much oil is produced. Those that think we are not in a recession are deluded and those that think it will not have some form of impact on them are also. Things are going to get worse and the above cut by BofE will give some people a false sense of security. More redundancies loom from manufacturing, high level management positions will go along with those on the production floor. America thought they had come through the worse, even they admit this being incorrect. This alone has an effect on us, the sterling at present is plummeting, we laughed when it was 2 dollars to the £GB what is it now six months on, this alone will have devastating effects. Could the gubberment have stopped this, never, it beggars belief that Northern Rock alone are making so many repossessions since being owned by Brown, these people still need to be homed when becoming homeless and by who, the councils and who pays for it we do. Catch 22. For me, my weekly shop has gone up around 20% but we are cutting back on extravagancies.Some say that the drastic cut in rates was a bit like big rudder input thats come later than it should have done, they should have made smaller cuts and more of them earlier and throughout 2008.
Of course the reason they didn't cut rates earlier is because they were so worried about the high inflation figures (something they are not concerned about now)... Even Mervin King admitted in writing that the high inflation was down to the 30% rise in Fuel prices.....
The fact that the economy has receeded so much now means that inflation will certainly be lower, maybe even too low. The BoE did acknowledge in their letter to Alistaire Darling what the causes of the high inflation here, Cost of fuel, domestic energy and food. Food being directly affected by the fuel.
It was stupid of the government to allow fuel prices to rise so much (30%), it was obvious it would have a drastic effect on the economy but they just saw £££s in the form of the extra billions from the VAT & profits from Shell and the like.....
I do think that Labour have squeezed us all very tightly with too much taxation, which was fine in the good years but it's going to cause real problems now.
My understanding: (A-level Economics)
Technically a recession is two consecutive Q's of negative GDP growth. So the country is producing less final output than the previous 3 months (Both exports and domestic - the value of all goods made on UK soil)
Obviously Gross domestic product can only grow to meet demand, thus consumer demand controls growth.
IMO the actual recession fears only started when the media hyped it all up around July/August/Sept time and spending near enough halted and still is very slow now.
Consumers aren't spending due to two main factors,
- Job Security
-Mortgage payments/House Value
Businesses lay people off, due to less demand, so people feel less willing to spend, bit of a catch twenty-two.. and then mortgage payments eat into more disposable income its obviously not very confidence boosting.
I think we'll see growth for the next few months building up to christmas, then a fallback into the last fiscal Q - I reckon normal GDP toward mid next year.
As far as the Govt. controlling things, it never tends to work. Governments can't play with fiscal policy too much as it also effects the countries debt, which could become much more serious in the longer term. We were in a deficit of £52b around Q3 '07 and no doubt that's escalated since the bank nationalization(s). Monetary policy never really seems to have a huge impact, and often has a big time delay attached.
People needs to become more confident, only then will the economy recover, there needs to be a demand.
Technically a recession is two consecutive Q's of negative GDP growth. So the country is producing less final output than the previous 3 months (Both exports and domestic - the value of all goods made on UK soil)
Obviously Gross domestic product can only grow to meet demand, thus consumer demand controls growth.
IMO the actual recession fears only started when the media hyped it all up around July/August/Sept time and spending near enough halted and still is very slow now.
Consumers aren't spending due to two main factors,
- Job Security
-Mortgage payments/House Value
Businesses lay people off, due to less demand, so people feel less willing to spend, bit of a catch twenty-two.. and then mortgage payments eat into more disposable income its obviously not very confidence boosting.
I think we'll see growth for the next few months building up to christmas, then a fallback into the last fiscal Q - I reckon normal GDP toward mid next year.
As far as the Govt. controlling things, it never tends to work. Governments can't play with fiscal policy too much as it also effects the countries debt, which could become much more serious in the longer term. We were in a deficit of £52b around Q3 '07 and no doubt that's escalated since the bank nationalization(s). Monetary policy never really seems to have a huge impact, and often has a big time delay attached.
People needs to become more confident, only then will the economy recover, there needs to be a demand.
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