1 post tagged “vat”
I was pleased to be a panellist on Saturday's Radio 4 programme, 'The Bottom Line'. Following on from my exhortations for balanced businesses & economies, I think this deserves further examination, but on a Macro scale.
What has happened in the last two months world-wide is essentially a 'vomiting' up of 15-20 years worth of 'binge credit'. In the same way people 'binge drink' or eat a one sided (high in fat, cholestorol) food, so, sooner or later, the body that has to contain this imbalance reacts violently. Most often by the body rejecting the imbalance, through a bout of sickness, expungement of body killing rubbish.
Looking at the world as the body, what we've had is 20 years of people always expecting to get richer, always expecting to be in work, always expecting to be in credit. Essentially, not once has the intelligent human being said 'this can't continue, I have to get back to balance, I have to wean myself off this shit'.
Not once. As with herd mentalities, everyone followed the same old path, "my house will be worth more, i will always earn more, i won't have to go backwards". And, now, going backwards we most certainly are. I thought it was mildly ironic that Citigroup's logo is an Umbrella, a device to protect you from getting wet, to shield you from a rainy day, yet they made over 50,000 people redundant yesterday. Goodness knows what was going on in that bank, but you can bet your bottom dollar that 'make more, get more bonus' emanated out from the 85th floor from executives who even if they got it wrong, would still make their bonus.
Not any longer. Good riddance to bad rubbish.
Despite everyone looking at a Glooming 2009, if you manage to stay in a job (and let's face it, the vast majority of the population will), things might not be as bad as painted. Lower prices. More value on the high street. Cheaper holidays. The ability to get on the housling ladder again (if anyone wants to) once banks having rebuilt their devastated imbalanced sheets start to lend. Even (temporarily) lower taxes... But, if you're in a part of the industry that relied on 'more, ever more' then there is a problem. But this in itself should lead to the development of improved, refined industries. Take cars for example - manufacturers will hopefully start making genuinely good electric cars. People will get out on their bikes more - for exercise as well as looking for the proverbial job. And looking further afield, on a macro basis (ie BIG) then things, within a year, won't be as bad as everyone thinks.
Why - well, despite excessive spending being one of the problems, spending must continue. The cycle of make money - spend money should be a balanced cycle, after all, we all need to buy things when we use them up, they wear out. We just won't be buying them as irrationally and frequently, which will lead to more manageable manufacture and demand.
Plus, the Far East savers (especially in Japan) absolutely need spendthrift Westerners to continue to consume. Japan, for over 15 years has been unable to break out of a hyper low interest, neutral/deflationary cycle, due to its own consumers simply not spending enough to require interest rates to rise, and keep on top of inflation. But, now Japan has a whole World of consumers it must exhort to spend money on its products. Toyota's, Sony's Toshiba's, Honda's. For Japan to survive and thrive, it NEEDS the rest of the world to buy stuff. Hence the 'Ying & Yang' analogy - not just in the UK ("we need more savers") but from a global perspective, the world's economy will balance if the west consumes more, saves slightly less and the east saves more, consumes slightly less). That is, Japanese Savers save Western Spenders. Japan - use your country's savings to get the West spending again, and provide money for you to save - after all, you have 15 years of banked savings, that must be trillions and trillions of yen.
It's a closed system. For every action, there's an equal and opposite reaction. What this requires is for a global rebalance of 'spend and save' in a co-ordinated fashion by a Global Economic Council (or something) that manages the World's body on a balanced basis.
Surely, in these times, we can manage this? Or at least someone, somewhere, can start the ripple that will lead to this long overdue balance.
Then, all we'll have to solve is the Israeli/Palestine issue and the sadness of Africa.
Bring on the balanced Visionaries, whoever and wherever you are.
PS - I'm still sticking by my prediction that VAT should drop by 7.5% to provoke consumer spending. The whole VAT regime should be overhauled anyway, and this will go a long way to removing from businesses like mine the drag of paying & reclaiming VAT - entirely and absolutely pointless.
