With economic growth flat, sterling crashing and import prices rising, you would think that UK households would hold back a little on spending. I am afraid not; the UK ran up yet another huge current account deficit.Some commentators will probably point to higher oil prices as the main underlying cause. However, I don't find that explanation all that convincing. If the price of something goes up, and incomes are stagnant, the sensible thing would be to cut back expenditure.
That isn't how we do things here in the UK. If we want something, we must have it now.
Isn't that what debt is for?
5 comments:
It's a long time since balance of payments gaps dominated the evening news. Then we had to wait to find out how invisible earnings had covered the gap.
Now we save Northern Rock and sell MG Rover to China.
Shame we didn't keep MG Rover and give them Northern Rock.
Alice,
When you are facing financial failure, perhaps spending more actually makes sense.
I thought that the u.k is doing good. I guess I was wrong.
I found an interesting relevant article for those who don't understand what the deficit numbers mean:
http://www.bankofengland.co.uk/publications/speeches/2006/speech271.pdf
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