Manufacuring in a "shock" fall

Generali

grizzly1911 wrote: »

I agree I really don't see that more of either will do much good.

What next, just allow the continued further decline? How do we stop it accelerating?

Well it depends what you think caused the problems.

If, like Ben Bernanke and pretty much all of the politicians, you think the problem is one of a lack of aggregate demand then more of the same is in order despite its utter lack of success.

If, like me, you think the problem is one of too much debt, then we need to get rid of some of the debt. That can be done through repudiation or repayment and will take time to do. The other way of getting rid of the debt is simply to earn more and pay it down that way. I have some optimism that is happening in the US and hopefully that will drag the UK out of the mire.

The Government has to stop borrowing so much to allow funds to be freed up for productive investment. What is happening now is a classic case (IMHO) of crowding out. Crowding out is the idea that each pound can only be lent to the Government or to the private sector, not to both.

I am very pessimistic about the EU however. I have a terrible feeling that schoolkids will learn about what is happening in Europe at the moment in a hundred years time. The downside for the UK is that it is suffocated by the mess that is the EU.

michaels

You don't think they are seeing the great depression and thinking that a competitive devaluation is the way to escape by generating external demand with the 'positive' side effect that debt is effectively 'repudiated' by deflating the nominal amount via negative real interest rates.

Thrugelmir

grizzly1911 wrote: »

Should it be politicians making those decisions?

In the absence of political decisions. The central banks have been making policy on the hoof. To stop the entire collapse of the banking system. .

Politicians appear moribund.

Europe was in a dire state after WW1. Remember what that led to. As thats when the seeds of disillusionment were first sown.

Thrugelmir

michaels wrote: »

You don't think they are seeing the great depression and thinking that a competitive devaluation is the way to escape by generating external demand with the 'positive' side effect that debt is effectively 'repudiated' by deflating the nominal amount via negative real interest rates.

Great Depression was exasperated by runs on the banks. That's the sole purpose of keeping them afloat today. While the banks trade back their asset books in an orderly fashion.

kabayiri

Our consumption model in the UK does not support high cost manufacturing, which would typify a lot of UK manufacturing.

We would struggle to produce any blu-ray player for £50; smart phone for £100; television, washing machine, laptop and tablets, etc etc.

It has been proven that when price is not the discriminator, products manufactured here are well respected and showing renewed investment. JLR have opened up new shifts recently, and luxury marques like Bentley are also doing well. A single sale of a Bentley will generate significant service and repair income over several decades easily.

Would you pay £600-£800 for a washing machine if you were reassured it could be locally serviced and repaired at reasonable cost to last 10 or 15 years? If the answer is No, you probably know where the bulk of manufacturing is going to remain.

Generali

michaels wrote: »

You don't think they are seeing the great depression and thinking that a competitive devaluation is the way to escape by generating external demand with the 'positive' side effect that debt is effectively 'repudiated' by deflating the nominal amount via negative real interest rates.

This isn't the Great Depression. I know that Bernanke thinks it is but IMO that's his obsession and his great error.

External imbalances should start to wind down now that Germany (one of the 2 big surplus nations) seems to be deciding that they no longer wish to fund their surplus; Merkel losing the next election should accelerate that process if ti happens, either way Germans don't want to pay Greeks to buy their cars. The USA moving into balance with Government spending this morning will remove the largest part of how China funds her surplus.

Clearly we can't live in a world where 2 countries run huge surpluses indefinitely and if something isn't sustainable it won't be sustained.