Sunday, 6 January 2013

Unleashing the dogs of recovery

Gavyn Davies used the chart below to explain how The US, now using a similar strategy to the UK (spend cuts and quantitative easing) may do better than us.  Mainly because private individuals and business are starting to relax their financial balances in favour of more debt (this will help stimulate growth)


With some stimulus to encourage businesses to spend their and cash surpluses the UK could get on a similar path to the US.  Perhaps the problem is one of productivity - given this weakness in the UK why would British businesses invest at home rather than in emerging markets. 
Similarly if we are hoping the working middle classes will start spending to help us out of this mess the government needs to change their approach to this group who have been heavily penalised by the tax changes and spending cuts.

I have been blogging about the need to encourage business to start spending the cash surpluses for some time - I'm now going on the offensive for the squeezed middle - they could also be the engine for recovery.

As always thanks Gavyn

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