The zombies, and why we can't grow until their demise

Graham_Devon

Peston has an interesting piece today on HMV. Half of the article looks at why the demise of HMV may actually be good for all of us (though obviously, not the workers!).

His reasoning is that in this financial crisis, the emphasis has been on keeping these business's on life support, creating zombie retaliers, sucking jobs and growth away from other business. They then fail 2-3 years later, costing us all, not only in lost goods, but in taxpayer cash and jobs.

Peston states:

The evidence of past recessions is that economic growth doesn't resume at any great velocity until unviable and inefficient businesses are put of their misery and excess capacity in various industries is eliminated.

As you will know (don't yawn) if you read this column, this economic malaise has been characterised by many weak businesses being put on life support and turned into the living dead, or (to use what is now a cliche, so sorry) zombies.

As the comments suggest, you can look at Japan and find the exact same scenario on a country wide basis. As another comment states, you can look at our welfare system and see the exact same scenario, with it sucking more and more in, the more you beef up the life support. (This is true, considering just a decade ago, things like tax credits didn't exist....now 60% (if I recall correctly) of households get top ups to their wages via tax credits).

So....let the argument commence.....

Does this also apply to the housing market? Pestons comments makes perfect sense. And while we have SMI, low interest rates, a policy of not reposessing, buying stimulus, and massive banking forebearance and now funding for lending pumping a tiny bit of life back in....not to mention QE to help the banks along....

....can the housing market ever recover on it's own steam, without the zombies being wiped out?

America has wiped their zombies out in the housing market....they now appear to have a growing housing market, but not just in the sense of prices, also turnover and buyers.

History would suggest the housing market can't recover without first failing. Maybe some of the wise members from the club HPI association opposite me could inform me as to why it can?

Wookster

He is correct. In a normal cycle you'd have households and businesses declaring bankruptcy and the more efficient gaining market share.

It seems however that households being bankrupted is politically unacceptable no matter the consequences.

We're well on the way to becoming Japanese.

ruggedtoast

We're turning into a zombie country.

Ever greater numbers of people are chasing an ever dwindling number of service sector jobs, so that they can afford to buy things from the service sector they work in, that are made by workers overseas and sold to us by foreign companies who pay no tax at all.

Meanwhile a succession of venal politicians representing the 5% of people who own 90% of everything, wag their fingers and say its all too complicated for the common man to understand and the only way out is to keep shovelling barrow loads of our money into the pockets of those who are already rich.

These people will suck us all dry and then move onto the next host.

Generali

ruggedtoast wrote: »

We're turning into a zombie country.

Ever greater numbers of people are chasing an ever dwindling number of service sector jobs, so that they can afford to buy things from the service sector they work in, that are made by workers overseas and sold to us by foreign companies who pay no tax at all.

Meanwhile a succession of venal politicians representing the 5% of people who own 90% of everything, wag their fingers and say its all too complicated for the common man to understand and the only way out is to keep shovelling barrow loads of our money into the pockets of those who are already rich.

These people will suck us all dry and then move onto the next host.

There isn't an every dwindling number of service sector jobs though. Employment is at an all time high.

The problem is that each private sector worker is going to have to support increasing numbers of non-workers, especially old people. The UK isn't alone in that.

ukcarper

I'd like to know where all these Jobs I suppose the 6 or 7 thousand people who have just lost or are about to lose their jobs will just walk into another job.

CLAPTON

we need unsuccessful businesses to go bust even if each time people always ask where the new jobs are coming from


they rarely reflect on the past and lament the lose of all those awful jobs that used to keep 95% of the population in poverty but that is life.

chewmylegoff

ukcarper wrote: »

I'd like to know where all these Jobs I suppose the 6 or 7 thousand people who have just lost or are about to lose their jobs will just walk into another job.

HMV sold tat to people. People will still want to buy tat.

Other shops will therefore sell more tat to people and need more retail space and staff to achieve that.

Obviously HMV went bust so it didn't sell enough tat to pay its costs. So the slack picked up by other retailers will not replace all of the jobs lost at HMV, but some of those jobs will just pop up somewhere else.

The rest of them will have to wait until people start buying more tat, or labour get in and magic 1 million public sector jobs out of thin air again.

ukcarper

chewmylegoff wrote: »

HMV sold tat to people. People will still want to buy tat.

Other shops will therefore sell more tat to people and need more retail space and staff to achieve that.

Obviously HMV went bust so it didn't sell enough tat to pay its costs. So the slack picked up by other retailers will not replace all of the jobs lost at HMV, but some of those jobs will just pop up somewhere else.

The rest of them will have to wait until people start buying more tat, or labour get in and magic 1 million public sector jobs out of thin air again.[/QUOTE

Not all the jobs that HMV have sucked up.

Graham_Devon

Graham_Devon wrote: »

History would suggest the housing market can't recover without first failing. Maybe some of the wise members from the club HPI association opposite me could inform me as to why it can?

wotsthat

I thought the housing market had fallen and, in real terms, continues to fall.

Transactions up, more FTB's getting deposits together, and lending up.

Maybe the market has fallen as much as it's going to and is now recovering?

sheffield_lad

zombie nation for next 10yrs with 1% growth at best but thats pretty good compared with Ireland and the southern European countries who are never ever going to compete with Germany export wise and as a result will see their living standards plummet over the same 10-15yr time line.

We ain't perfect in blighty but its a dam site better than other the Chanel.