Gary's views

TROUBLED TIMES

I suppose we will look back on the past decade as a time of plenty. Looking forward, it is hard not to simply see troubled waters, and we cannot even pour oil on them, for it is too expensive!

There has always been an ebb and a flow to all economies and those who think we have somehow overcome this natural cycle have failed to grasp the lessons of history. The British economy, as a trading nation, has always been impacted by what happens in the USA and Europe, now we can add the rest of the world to that list – the global economy as truly arrived.

The main driver of these troubled times is, I think, no longer the credit crunch, but two other crucial factors. First, the sharply rising price of oil, which impacts all of our lives, whether in increased fuel costs or the price of the transportation of goods. The last time we suffered such major increases of this most important commodity was in the early 1970’s just after the Arab/Israel war and it led to a decade of inflation and economic hardship in the UK. In a world where China and India are demanding more and more oil to fuel their surging economies and in a world where oil is obviously a finite resource (maybe 30 years left) – it is hard to see the price of crude coming down again.  Expect $100 per barrel plus until the oil runs out.

Second, we are coming to the inevitable end of a period of too many of us, as well as the government, living beyond our means fuelled by cheap borrowing. The bubble has now burst. We can expect to see house prices falling for quite a while, a necessary correction in the market where prices have become disconnected from ability to pay. It won’t all be bad, in that falling prices will in time put the price of houses within reach of ordinary families once again, but sadly, much pain will be endured along that corrective journey.

Is it all the current government’s fault? Of course not. These are largely global circumstances beyond the control of any one administration. But when will we learn to store up some reserves in times of plenty so that we can help the vulnerable in times of need? Joseph cottoned onto this 3,500 years ago, but unfortunately we come to these troubled times with empty barns.