Recession Hits US Jobs Hard

| January 9, 2009 | 0 Comments

Evidence of the recession hitting hard in the US was seen through the latest unemployment figures which show the biggest loss in jobs since the end of the Second World War, some 2.6 million jobs in 2008

Obama’s response is a Keynesian one: operating contrary to the downward market; the new US government will borrow and invest in the infrastructure to limit unemployment, welfare payments and try and create real growth in the economy. The other side of this approach is the need to reduce public spending, repay government debt through a higher tax income through the good years.

In the in the 1990s in the UK Gordon Brown as Chancellor started off on this route by reducing debt as a percentage of national income from 45% down to 40% with the intention of reducing the level to 36.5% based on Gordon’s sustainable investment rule. As the table below shows below he allowed debt to grow in now what looks like the good years of 2003 through 2006 when he should have been retaining the level of UK debt well under 40%

1997 : 413,2 £ billion, i. e. 49,8 % of GDP (ONS)
1998 : 410,2 £ billion, i. e. 46,7 % of GDP (ONS)
1999 : 405,7 £ billion, i. e. 43,7 % of GDP (ONS)
2000 : 400,6 £ billion, i. e. 41,0 % of GDP (ONS)
2001 : 385,5 £ billion, i. e. 37,7 % of GDP (ONS)
2002 : 402,9 £ billion, i. e. 37,5 % of GDP (ONS)
2003 : 441,1 £ billion, i. e. 38,7 % of GDP (ONS)
2004 : 487,9 £ billion, i. e. 40,4 % of GDP (ONS)
2005 : 529,4 £ billion, i. e. 42,1 % of GDP (ONS)
2006 : 573,3 £ billion, i. e. 43,1 % of GDP (ONS)
2007 : 618,8 £ billion, i. e. 43,8 % of GDP (ONS)

Source: http://cluaran.free.fr/debt.html

Now in the depth of recession the UK has depleted coffers when we need to spend our way out of the recession. The additional borrowing or printing of sterling that may ensue will result in GBP staying at a lower level, below or around the level of the Euro. Transition to the Euro in the UK would be so much easier at parity however the UK does not look anywhere near meeting the 5 economic tests

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