Wednesday, June 11, 2008

unemployment: when things really start to go wrong

For me, the main indication of an economy in trouble, apart from having a Labour government, is when unemployment starts to rise. It's toxic in the way it damages everything surrounding it with the exception of a greater knowledge of daytime TV. If people don't have a regular, substantial income then they can't pay their mortgage and their bills, they can buy less, they can't invest and the government has to give them money which all takes away from the national income. Indeed, the opportunity cost of unemployment is significant. The unemployed are a non productive asset in the economy which still needs to be maintained by the economy.

So whilst the OECD report damning the state of the nation's finances should cause alarm bells to ring in the ears of the government and their treasury bods, it shouldn't really be a surprise given how badly they have handled the economy over the last 11 years.

The Growth and Stability pact is of course meaningless and toothless since Britain is, thankfully, not part of the euro-zone. The sheer nonsense of fining a country which is in trouble for not having enough money is clearly straight from the European Commission; the people who didn't understand that when you threw fish back into the sea after a period of time out of the water they would be dead. I happen to think that borrowing should be used in slow or negative growth times to flatten out the economic cycle and we really don't need Trichet interfering in our economy. I'd rather not have Gordon Brown interfering in it either but the point with him is that I and my fellow voters can sack him.

Unemployment takes a while for its effects to hit but once the damage has reached jobs, it's very hard to halt it. The spiralling effects are significant and I hope will prove to be the downfall of this very dangerous administration.

And I can also buy a house.

2 comments:

Little Black Sambo said...

Nice to read one commenter for whom the fall in house prices is not an unmitigated evil. I have been waiting for years for them to come down, and at last it is happening. Good.

Mark Wadsworth said...

Amen to that last thought!