Archive for the ‘Economics’ Category

Exporting out of a Recession

July 5, 2010

One of the big things that currently confuses me is the government’s belief that by increasing exports we will get growth. Now I’m not going to argue against increasing exports having a positive affect on growth, but what I will talk about is how hard it will be for the UK economy to get this increase.

The UK economy relies heavily on the eurozone for its market in exports ( around 50% give or take ) , so we rely quite heavily on how well Europe is doing. However the Europe showed no growth in the last 3 months of 2009 so where is this demand going to come from? Which leads me on to my second point about the global economy

Every country sees exporting as their way out of the slump in growth ( see the recent G20 summit ) but if everyone is doing this who is going to buy the goods?

Crowding Out

July 3, 2010

Its been a long time since I’ve blogged. I’m going to aim to start at least writing something once a day even if it is nonsensical crap…not that anyone is reading this in the first place.

I was watching This Week on Thursday and Michael Portillo mentioned crowding out ( This is when an increase in public spending, reduces private investment/consumption – effectively public spending is ‘crowding out’ private spending ) as a valid reason for reducing the huge budget deficit that the UK currently has. Now I’m no expert ( apart from the bachelors degree in economics that I hold ), but to me this is an absolutely absurd argument. I do believe that crowding out is a legitimate reason for reducing public spending, but only when the economy is at full capacity, and the UK is currently nowhere near this. If you look at these figures from the office of national statistics, we have an unemployment rate of 7.9% and a growth rate in the first quarter of just 0.3%. The current government hopes that by reducing public spending private investment will rush in and fill the void….but why would they? The future of the economy is still unclear and we still have huge debts to pay off, more likely they will hoard cash to pay of those debts rather then invest.

The government also hopes that Britain’s exports will carry us through…in a future blog I’ll explain why this makes no sense too!