Economies - Should We Really Be That Surprised?

When we got into office, the thing that surprised me most was to find that things were just as bad as we'd been saying they were. 
                                                                    (John F. Kennedy)

An "interesting" past week as world markets tumble, America just avoids defaulting on its debts, the economies of Spain and Italy look fragile (yawn!), one of the rating agencies (you remember them don't you - the same people that rated all those rubbishy bonds as AAA and got away with it?) downgrades America's credit rating, and inflation continues to hit the headlines. China says what others could echo and basically accuses America of over-spending. European finance ministers rush around and will undoubtedly be looking to Germany to provide more answers and money. And as an aside, the mega rich have merely become super rich and East Africa continues to have absolutely nothing at all - particularly food and water.

But why are some people expressing surprise at all this?

How long has the acronym PIGS - or PIIGs been around? (Portugal, Italy, Ireland, Greece, Spain). Having dealt with Portugal, Ireland and - in part although unsuccessfully, Greece - did we suddenly think that Italy and Spain had become invisible or immune?

Markets rallied on Friday as the monthly US job figures looked better. How convenient. But then we have been here before. One month good and then one month bad. Look, have you ever tried to lose weight? When you do so, don't they say do NOT stand on the scales daily? Why do they do that? Because they know that weight fluctuates, and they want to avoid you getting disheartened when even after a heavy workout your weight has not decreased as you think it should have. So it is with jobs. There are swings monthly, but they have to start showing consistency of direction over a period of months to mean anything. Month to month comparisons on employment numbers, like day to day comparisons of weight, are not particularly meaningful.

In our current world of immediate gratification, instant statistics, and "in-depth" on the spot analysis, we have become besotted with analysing the heck out of everything and trying to be the first with the future projections. How often do we review the "expert" forecasts made a year or two earlier, only to discover if we did so that those projections were a load of codswallop! But as you all know, the more dramatic the pronouncements, the greater the media impact and with a public prone to panic, that impact on behaviour is one of sadly predictable overreaction.

What I am attempting to portray here is that while I believe the situation today is serious and needs to be dealt with - we should not be surprised that we have reached this point. But there is no doubt that we should have been better prepared. Indeed maybe we could have been, although I worry that political expediency might have had a hand in our current predicament. A desire to ensure that bad news was kept to a minimum; although the UK's hugely unpopular moves to reign in the economy are looking more and more as if for once they grasped the idea (and the nettle) early in the game.

There is no easy or quick solution to this, especially with a public that is already spooked. Indeed I was listening to a UK radio station yesterday where the popular views of callers in to the programme almost without exception were, simply, let the poor economies fail. The heck with the consequences.

And by the way, the callers all said that the blame for this current state of affairs should be laid at the door of the banks who had been irresponsible, profligate, saved by Governments, and were now making money out of taxpayer bailouts. (Looking at the recent UK banking results they are certainly not making too much money!)

The debt crisis aside, we have had Governments overspending, and inflation beginning to become the problem we had earlier predicted it would be. We have been tackling issues on a piece-meal basis; trying to shut the stable door on an already bolted horse, and we now need to take a more coordinated approach where countries come clean about the state of their economies. Where spending is trimmed to a level of affordability. Where inflationary pressures are mitigated, and I put my hand up here and say as I have done before, I am no economist and I do not have the necessary solutions - but I know there are plenty of people who do - if only they could agree. But whatever decisions are taken - politics need to be put to one side.

Job creation is also an issue. There are too many people and not enough jobs to go round. It is another problem that is not going to get easier to solve. I am looking at present, for example, at banks - particularly following recent announcements of job reductions - in the light of technology and how services will be delivered in future to generations of technically comfortable consumers. (More job losses I fear!)

Has the teetering recovery, the "good news" we have been fed selectively by various governments who didn't dare mention the bad, finally got to the point where the feared "double dip" recession is going to take hold and plunge us all into the darkest of days, months and years? Where the solutions are going to take years to re-pay?

I actually remain relatively optimistic. Hopeful that the crisis can be solved by strong leadership (if we have any), and by common sense and openness. A doctor can only stand a chance of diagnosing your ailing condition - and suggesting a remedy - if you are totally open about the symptoms. And if there is a later problem or relapse, don't hide it.

There should be no-one surprised by this latest turn of events. It has been staring us in the face all along, waiting to happen. The medicine will be unpleasant, but unless we want the problem to become hereditary we will have to take it.

Comments

[rc helicopter]

Impressive blog! -Arron

[hans]

only cutting expenses and no new revenue will not cut the dice either...i remember in the 90s the dutch government added 25ct on each liter of gasoline to cater towards the deficit...against a lot of protest..but the political will was there...if the usa would do that...plus the abolishing of the bish era tax cuts incl cutting down on certain programs...( 2 wars??) it would be step in the right direction...