We may not be able to return to healthy growth without a real change in how the economy operates. We're heading towards ever less labour participation and an increasingly automated economy that rewards investors rather than labour - not a sustainable model. Helicopter drops or guaranteed minimal income don't address the fact that the economy is moving away from human input and no longer provides a means of sustenance for all
So says Felix Drost about Martin Wolf 's Financial Times article, Helicopter drops might not be far away, in which the author pondered the way forward now that negative interest rates have failed to have us rushing out to spend the EU economies into growth.
He reminded me of a family-run school my son attended in leafy Berkshire. The parents were a motley collection of salary men like me, professional folk, and local entrepreneurs. To the latter it was a concern that the family did not cash in on the site of several buildings, dwellings, and spacious lawns which in their mind was ripe for redevelopment: a “mini-me” to the nearby Wentworth Estate.
The school supported four generations of the family: one end long retired, the other including those too young to work. The headmaster, as one would hope for the person to whom one had entrusted a child’s future, did not take the bait. Had he sold he would have had to buy and develop another school to employ those of the family who taught, and to provide income for the rest because schooling was the trade he and his family knew.
I could join Mr Drost by commenting in the FT that grand economic gestures will not work but he has done that more eloquently and concisely than I. We need to start thinking like that headmaster and worry about where our incomes, and those of our progeny will come from. Cheap money, whether by QE or zero deposit rates, will not bring about that change which has only served to ramp up the obsession with asset prices - the delusion for the unit of labour, the person, that one’s home is a tradeable asset.
And so to corporate treasury: we in the corporate world know so well that the 0% deposit becomes the 2.5% + loan even for the most creditworthy because so much is lost in the regulatory systems to buy dead capital. That is all that government debt created to replace the non-existent asset values we collectively discovered in 2008.
What we do need is an education system which trains us to do the work we do have, accepting that there is no environmental value from siting manufacturing on the other wide of the world to ship it back in diesel burning ships, and that islands do need to worry more about security of food and energy supply and less about the theoretical value of their houses.
And to the broader EU: we have M Callet to thank for his stance on bank lending [2] reported in The Telegraph and elsewhere, which leads me to wonder what his success would have been if he had asked for a loan to buy an apartment instead of one to expand his business?
[1] http://www.ft.com/cms/s/2/9b3c71f8-d97f-11e5-a72f-1e7744c66818.html#axzz...
[2] http://www.telegraph.co.uk/news/worldnews/europe/france/12162858/French-...
