Perhaps it is the winter and the dark, gloomy days, but reading and listening about the economy makes me rather worried. I’m more worried about the state of the economy and the future than this time a year ago or two years ago. There is a huge amount of uncertainty at the moment, and the future projections are ever bleaker. No one seems to know what is going to happen next, but everyone is apprehensive about what is going to happen next. Is the euro going to collapse? Will countries default? Will be there be another bout of credit crunch? Is economic growth slowing down in India and China, and if so what are the repercussions?
Confidence is one of those things that can’t be measured accurately, yet vitally important for economies that rely on consumer spending. We’re in the midst of the Christmas shopping season, and there is seasonal cheerfulness around, but it feels like a veneer, hiding something ugly and sinister underneath. Shops are advertising sales and price reductions everywhere, and central London feels a bit emptier than in previous years. More widely, economy is not growing and unemployment is rising. It feels like no one can do anything. The governments are more or less powerless, with room for manoeuvre limited, and there are limits to what central banks can do.
If anything, it feels like deflation is around the corner.