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Disconnected thoughts on the economy


Some very interesting comments by Michael Reddell

croaking cassandra

I wrote a post a month or so go about some comparisons between the drop in business confidence after the previous Labour government took office at the end of 1999 and the current fall.   At the end of that post, I concluded that the current situation should probably be more concerning than the earlier episode which, intense as it was at the time, blew over fairly quickly.  Perhaps the biggest difference, I suggested, was around the exchange rate:

The current level is about 30 per cent higher than it was in 2000, and it had fallen a long way to get to those 2000 levels (and not on heightened risk concerns etc).  Those falls created a credible prospect of new business investment in the tradables sectors.  There is nothing comparable now, and we’ve probably exhausted the limits of domestic demand (especially residential investment) as a support for headline GDP…

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