Thursday, 7 March 2013

Vince Cable

Has written an article in the New Statesman called “When the facts change, should I change my mind? ”

The media have summed it up as the Business Secretary's dramatic suggestion that the government should borrow for growth, the media of course will try and show that he and the PM are at odds, but as they are interviewed today, they will both probably just smooth things over.

However, is he right?

Stock markets have continued to take off in recent weeks. The UK and US markets are now back where they were before the 2008 crisis, having risen more than 9% since the start of the year. The record level of the Dow Jones industrial index, and the very close-to-record level of the much more important S&P 500 index, are partly a reflection of the good news that has been coming out of the US economy.

The UK markets are at a similar level only the pound is suffering at the moment, with a million new jobs being created in the last four years and albeit stagnant growth, most of this has been achieved because of base interest rates being held at 0.5%. This situation cannot last, as about two-thirds of the earnings of the companies in the FTSE come from outside the UK.

Sooner or later we do need the real economy to start to catch up with all these enthusiastic investors, otherwise those stock prices might very well come back down to earth.

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