Hi,
Found this post over on housepricecrash.co.uk's forum. An interesting perspective...
'We're now in a similar position to the markets in 1930. After the Crash of
1929, the stock market rebounded by 73% but the worst was yet to come. As with the Roaring 20s, the Roaring 90s has seen a great deal of debt build up as we all enjoyed the dot-com boom. Companies 'invested' sometimes unwisely for future gains which have not emerged. Whereas, the radio and automobile were the objects of desire in the 20s. We've splashed out on computers, mobile phones.The difference this time is that Brown has extended the borrowing into houses so that debt is now far worse than it was during the Great Depression.
Unlike the 1930s banks have not gone bust. This time round the insurance industry has been passed the buck and had to have its solvency rules relaxed seven times before the nadir of the market in 1993. Equitable Life and now Standard Life, Europe's largest, have been found to be insolvent. Compulsory insurance for companies has gone ballistic.
Another difference is the introduction of new players such as China and India. These were supposed to prolong the boom but instead have provided additional competition. So as commodity prices for oil and steel have been driven up by China's demand, goods prices have been driven down by their produce. Whereas China is showing some demand for western goods such as cars and mobile phones, it's own production capacity is being ramped up so that Chinese cars for example will only add to the competition in an already over-supplied market. This is similar to the agricultural ramp-up of the Great Depression when Europe ceased to be dependent on the US for wheat imports.
Brown has adopted Keynesianism which most economists would agree was tripe. He's even adopted the New Deal (about as new as New Labour) which economists recognise as prolonging the 1930s recession into the Great Depression. What a berk! As a sop to fiscal responsibility, Keynsians claim a balanced budget over the economic cycle rather than paying back their credit cards at regular intervals. The reason is to allow for fiscal irresponsibility by borrowing to tide the economy over. In reality, this is a political motive to keep the troops happy by artificially lowering the unemployment rate. Longer term it is far worse to employ Labour voters in wealth destroying bogus jobs than it is to use the dole queue safety net. Not only is there interest to pay on loans but imbalance is created as Labour voters go on a spending spree during a slow down, the public sector competes with the private sector just when the private sector doesn't need it and taxes are increased to pay for the public sector spending spree.
As a result, company profitability has dropped by a third under Brown. The UK's trade deficit has hit record after record in recent years as Brown goes on the biggest ever peace-time spending spree and the resultant consumers continue to attempt to spend our way out of debt when they should actually be getting more productive to pay them off. UK companies flee the high tax and red-tape whilst foreign direct investment has halved. UK competitiveness hits a decade low and made worse by the continuing transport strikes. All this is clearly unsustainable but like the Chinese Finger Trap, Brown keeps pulling like the clown that he is.'