Why there is
No Growth.

Obviously everyone has their own ideas as to why a lack of growth means we’re heading into a triple dip recession. But in my view, the matter is quite straightforward.

Politicians might be praying for growth and manipulating aspects of the economy to try and encourage business investment, but most good CEOs are more interested in the security and safety of the company they run. Consequently, since the crash, they’ve been doing their best to stabilise their situation, unload their risky positions and get some cash behind them to make sure they can weather any future storm.

Now is clearly not the time for any form of expansion where risk is involved because the future is just too uncertain. Interest rates may be half of one percent but these are artificially low and could change tomorrow - so it is impossible to make plans and budget on the expectation that interest rates will remain at these artificially low rates.

For sensible CEOs, the best option is surely to just sit tight, see how things progress and try to keep their options open. They know they’d be unwise to start expanding at the moment and in consequence, we are in a national situation of no growth.

Personally I think that artificially low interest rates of half a percent is one of the biggest causes of no growth. It’s terrifying the life out of those who would start businesses. It may be great for those who already owe money but it does send a message to investors saying that the government is very, very worried about the present situation. Things, with these low interest rates, are clearly bad and so only the hardy or the foolish would risk trying to expand just now.

Perhaps the government should raise interest rates to a more reasonable two percent or so and by doing so indicate to the world that although they know things are difficult, they don’t think they’re that bad.

---January 27, 2013---

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