Tuesday, September 28, 2010

GDP growth-something to hang your hat on or a load of old cobblers?

The average man in the street used to have no idea what GDP was let alone what effect it had on an economy. It was only when recession hit that it was fully explained to us in plain mans language what it truly meant. Just in case it is all a distant blur I will recap - the qualification for officially being in a recession is that the economy has stopped growing 2-3 consecutive quarter's in a row. At its most basic level it means that people have stopped spending money.This whilst undoubtably true became a self fulfilling prophecy though because the more the analysts and journalists wrote that people were scared to spend money the more we started to believe them and really stopped spending money.
Eighteen months later and everyone is now trying to be positive and the analysts are blithely announcing that GDP is up, confidence has returned to the world and we can all put a smile on our faces and get back to business as usual. What a lot of boloney! Whilst I  have no doubt that statistically everything is on an upward trend I think we have to be cautious with this information.Whilst I think the world most definitely needs to have analysts I think the world is in even more need of people who actually get out of their office and step into the big world for real and comment on progress.
One look at the CEE up close and despite all the positive numbers and lots of charts pointing in an upwards direction it is very plain to see that things have not returned to normal, whatever that might be! People are still scared to make long term commitments and are still worried about keeping their jobs . Cash is still King and yes, I will have my shoes re- heeled rather than just buy a new pair! What these analysts are very shy to tell you is that these numbers are all relative because they are based in comparison to last years figures. Last year in certain property markets we saw absolutely no movement whatsoever so anything is better than nothing! Doesn't sound so impressive now does it?

So what needs to happen to get things back on track? 

  •  Banks need to stop hoarding money and start re-lending. Am not talking the silly loans and mortgages that caused all this but sensible 'lets get this show on the road' type of lending. Lip service is being paid to this but at interest rates of 5% + who is interested in that?
  •  Don't stop going on holiday, just do it at home - stay-cations as we call it in the UK. Keep your money in your own economy!
  •  Support your local businesses and buy products at  farmers markets etc. Tesco and the big guns can afford to lose your business for a while but the small independents need our support.
  •  Pay your bills in a timely fashion- if your local tradesman does a job for you then pay him on time. One of the biggest blights in Central Europe is bad payment moral. Its like traffic lights - if everybody was to run a red light then pretty soon the whole traffic system will grind to a halt. Without paying your bill the tradesman cannot pay his suppliers and the suppliers cannot pay the manufacturer - vicious circle.

Can these things really help? The short answer is yes. Talk to your grandparents and ask them how things were after World War II. Everyone will tell you that things were hard back then but everybody pulled together and bit by bit things came together. Will it ever go back to where it was? I certainly hope not ! One thing is for sure though, we all need to take responsibility and do our part . Its all too easy to blame the politicians and bankers  for everything but ultimately we all need to become responsible citizens. Only then will we have a chance to prove the analysts and their GDP growth figures correct.

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