Duncan’s Economic Blog

An interesting graph & some quick thoughts on the economy

Posted in Uncategorized by duncanseconomicblog on June 30, 2011

Proper blogging will resume at the weekend but today I just wanted to post another graph – one I find especially striking – and try to bring together what these four graphs (posted this week) show us.

Mortgage Equity Withdrawal as a percentage of household post-tax income since 1971, the clearest way to see the UK credit cycle in operation.

Put it all together and we can see that the UK has serious problems – even leaving aside the government’s fiscal tightening. We have a Labour market which isn’t expected to recover to pre-recession levels until post 2016, we have private business investment that is still nearly 20% below pre-recession levels and seems to be stagnating and we have real wages that have been falling for almost 18 months.

Now of course the government’s plans will merely compound this – putting more people out of work, adding to the squeeze in living standards & doing very little (other than cutting corporation tax and crossing their fingers) to deal with the shortage of business investment.

But today’s chart reminds us of something else – that the problems of theUKeconomy pre-date 2008.

10 Responses

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  1. Dave Holden said, on June 30, 2011 at 10:03 am

    So you mean Ball’s and Brown didn’t eliminate “boom and bust”😉

  2. David said, on June 30, 2011 at 1:10 pm

    Any chance you can post the sources/links to the data you’ve used here and on the investment chart?

    • duncanseconomicblog said, on June 30, 2011 at 1:17 pm

      Sure – MEW is from the Bank of England – you can find the series on their interactive database.

      Private business investment is from the ONS release of the same name, rebased to 100 by me.

  3. jomiku said, on June 30, 2011 at 5:11 pm

    In the US, without MEW, personal income in the US actually dropped in the decade up to and not including the financial crisis / recession for all but the very top group – and within that, the gain was almost entirely at the very top of the very top, meaning the top 1% and the top .1%.

    Looks like something similar happened in the UK.

    This goes a long way toward explaining the personal / private / household debt problem: it was a substitute for income growth. No individual could see that.

  4. yorksranter said, on July 4, 2011 at 10:17 am

    I remember that the enormously high level of MEW was quite widely discussed on left-leaning political blogs as far back as 2004, as was the “pig in a python” wave of option ARMs beginning to reset/recast at the end of 2006, with peaks between 2008-2010…

  5. Paul Newman said, on July 4, 2011 at 11:47 pm

    I `m rather interested in your recent posts Duncan but to be honest its a little over my head . You seem to be backing off your old position ( That we are seriously under borrowed ) and yet you continue to implicitly criticise what you call austerity
    I would like to know what it is exactly you are now saying . Are you going to let on?

    • duncanseconomicblog said, on July 5, 2011 at 9:28 am

      I will let on. I’ve been doind so – it just takes a lot of posts.

  6. john said, on July 5, 2011 at 12:10 pm

    Which weekend did you mean when you said propper bloggin would resume at it?


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