These are troubling times for the UK chancellor, this week growth figures suggested that the country is teetering on negative growth yet again. The alarming prospect of a triple dip recession has added to the call that perhaps he was cutting the deficit a little bit too quickly. Oliver Blanchard the IMF’s chief economist has added his voice to the call to slow down the cuts.
Most analysts have been rather surprised to the extent that austerity has hit the economies of countries like the United Kingdom. The austerity and debt reduction policy was largely supported as the best solution to the debt crisis. However the huge impact it seems to be having on economic growth suggests that perhaps the policy needs modification.
David Cameron has been quick to defend his chancellor, pointing out that the deficit has already been reduced by 25% and corporation tax has been cut to the lowest level of any G8 country. However the IMF economists maintain that the policy should be adapted if results aren’t improving. Growth has been impacted by a factor of 2-3 times more than expected. Many countries like Spain and Greece have no alternative due to the pressure from financial markets. The UK however does have the option to slow down the debt reduction measures.
The interview with Oliver Blanchard was conducted by the BBC. It was conducted by the Economics editor Stephanie Flanders and is available on the BBC Iplayer application. For non UK residents this post might be useful – http://www.anonymous-proxies.org/2009/07/can-i-watch-uk-tv-abroad.html, basically explains the options for changing your IP address or other technology options.
After the Christmas holidays many of us take a long hard look at our household budgets. Particularly during the past few years of recession, the amount of debt being taken on by consumers in Europe at least has been falling dramatically. It may have taken a decade or so but in Europe people are beginning to realise that large amounts of debt are an unsustainable way to live your life.
It looks like South African consumers however are making the very same mistake that we did – shopping on credit, treating themselves on luxury goods finance by bank loans and credit sources. It doesn’t help that a lot of South Africans are just very bad savers, preferring to spend now and worry about the future later. But as anyone who has experienced a hiccup in life – savings usually make it a lot more manageable than none.
Many financial journalists are pointing the finger at the many available sources of easy credit in the country. Just like in Europe over the past few years, getting credit is a simple tasks whether through loans, mortgages or other financial instruments. But it’s beginning to look like a problems in South Africa, figures like over 75% household debt of an average salary are extremely high. South Africans spend something like 7% of their incomes simply servicing these debts.
The world is opening up to South Africans and they have ready access to luxury goods and items that were often in short supply during periods of isolation. Many South Africans watch TV and adverts in the UK and the USA to select their purchases. Using technology like VPNs and proxies as illustrated here, they can utilise the internet to watch british tv anywhere, they have a European lifestyle to some extent and are walking into the same debt trap. Of course the cynical would also suggest that President Zuma’s extravagant lifestyle doesn’t really help set a very good example either of course!