Tuesday, March 22, 2011

Economic forecast - the end of Capitalism?

The budget deficit of Japan's economy was more than twice the country's GDP (as of June 2010) before the current tsunami/nuclear crisis.

Most of the major European economies are struggling with massive debt.

The United States, UK, Europe, Japan...and so it goes...announcing that things can only get worse if austerity measures aren't introduced right away.

What conclusions can be drawn from what has been widespread and collective economic mismanagement? Could this be the end of Capitalism or is that Doomsday talk?

Economics experts predict conflicting views, but then most 'experts' disagree with each other anyway. However, austerity measures being pursued throughout the world will surely have a recessionary effect.

Less spending power in people's pockets = less to spend on goods and services = businesses and business turnover will suffer = tax revenues will fall and unemployment payments rise.

Japanese governments have been borrowing heavily since their economic bubble burst 20 years ago. Ongoing deficits have been shored up by issuing long-term government bonds which are now unsustainable. It is the same for the United States, UK, Europe etc.

So many countries in financial turmoil...why?
The problem seems to be not a failure of Capitalism as a philosophy, but more a failure of the reporting mechanisms that support governments with their collection and interpretation of economic data. That and poor decisions...buy now, pay later.

The impact of the economic news coming out of Japan, the UK and EU are a threat to economic and political stability. So far, we've seen very few civil protests by disaffected workers forced to accept cuts in their incomes. So far that is.

It may be that the airplane called Capitalism has been flying off course for so long that the collision no-one thought possible...running out of fuel and ditching in failure.