Friday, 29 March 2013

Supply Creates Its Own Demand

It is not a slippery slope argument to say, “Developing the capacity to X makes X much more likely.” Beyond the tautology that you cannot do X if you cannot do X, we find that humans are more likely to pursue options that are readily available. Once you have the ability to do something, you start finding occasions for it. This is a driver of progress and source of anguish.

You bought the cell phone “just for emergencies,” but it quickly became easy to say you would be five minutes late or to ask whether you should also pick up eggs while you are at the grocery. The snow blower was for your driveway, but Mrs. What’s-her-name across the road just broke her hip, and then another neighbour wanted to borrow it after the big storm. My last job transitioned from mostly project management to mostly data analysis when they realized that I could translate databases to English. You never needed it before, but now that the option exists, why not?

Today's balance of payments figures show Britain's current account deficit last year was an eye-popping £58bn, up from £20bn in 2011. It means the gap between what we earned in the global economy last year, and what we spent, was 3.7% of GDP. That's the highest since 1989 and only the fourth time since 1948 that our current account deficit has been greater than 3% of GDP. So our investment earnings have simply caught up with our declining net asset position - the fact that our claims on the rest of the world are now worth less than the world's claims on us, and when investors see what is happening in Cyprus today, where are they going to place their investment capital in the future?

No comments:

Post a Comment