Here\’s a cheery thought

So what if the worst does happen?

Fear of what lies ahead seems almost as debilitating as whatever financial Armageddon finally occurs. Given the limited understanding we have of the implications of a more-likely-than-not Greek default – what it would mean for the companies we work for and the incomes we depend on – then behaviour which at other times would appear merely quaint takes on an era-defining edge.

So, what do we think the effect of economic Armaggeddon would be?

How about a rerun of the worst economic slump of modern times in the UK? Perhaps a 10% fall in GDP? (And we\’ll use real GDP per capita just because).

Blimey, that takes us all the way back to 2002 in living standards.

OK, how about the worst that has happened outside of war in modern times? The US\’ 25% slump in the early 30s?

We\’re back to 1995 now.

Hell, let\’s really go for it. 50% of all economic activity stops dead in its tracks. This is like the effects of losing a war (although not as bad as happened to Germany in \’45 etc).

1981.

No, I\’m not saying it would be pretty or nice. That it wouldn\’t cause huge suffering and anguish. As Mr. Dillow points out, what actually happens is not that everyone loses 50%, but that 50% lose everything.

However, unless you think the crumbling of the euro really is going to be like Germany in 1945, Russia after the Civil War in 1921/22, then absolutely the worst that could possibly happen would be that living standards return to what they were the year I left school.

I\’m quite looking forward to it actually. I have this vague sense that I\’ll be able to get the birds again if it happens…..or doesn\’t it work that way?

8 comments on “Here\’s a cheery thought

  1. There’s an art to getting more action as an older married man. It’s called swinging. Dangle your wife out as bait and swap with another chap doing the same. Great fun all round, if you can get the Mrs to agree.

    1981… I believe I was learning to walk.

  2. irefeurope has an interesting short essay out.
    Things have got so bad that conventional economic levers have the reverse effect of that expected. Inflation higher than interest rates? We hoard money. Incentives for new hires? Fewer new hires.
    Meanwhile a mass of displacement activity – the agency workers directive, rules on the length of tent pegs for scout trips and the straightness of bananas – loads risk on but does not increase security.
    here:
    http://www.irefeurope.org/content/les-anticipations-rationnelles-des-contribuables
    (you can get an english version on the home page, I think)

  3. Haven’t you said before what matters is growth in living standards not the living standards per se?

    Tim adds: As a factor in what makes us happy, yes.

  4. GDP per capita would be a better measure of living standards, no? …and the population has increased significantly.

  5. Not that easy Tim

    We now have a large underclass who do not work, do not have either the skills or desire to work, do have a history of violence and a large sense of entitlement. The British working class of the 30’s worked, were much more used to hardship, and did not have high expectations even if they were working. Today’s lot will not react well to real hardship.

    2-We have a large public sector who do work but at very little that is useful. We can’t afford their activities any more. Most of them will struggle to shift to the private sector as individuals or en masse.

    3-The private sector is hamstrung with laws/taxes etc. It would be nice to think that the powers that be might have the gumption to “let my people go” and let the market work but I doubt it. It would be even nicer if the productive people in the UK told the state to fuck off and freed themselves. However, a sizeable chunk of the ” public sector” are the states enforcers so that is problematic also. The market will not save us because political/bureaucratic scum will prevent it from so doing.

    4-When things go pear-shaped (even as little as only 50% pear-shaped) most of the disgusting species that inhabits this planet will be begging for some tin god big daddy to make it all go away for them (usually millions then find that it DOES all go away for them, just not in the way they intended).

    Blase is no more helpful than panic.

  6. “As Mr. Dillow points out, what actually happens is not that everyone loses 50%, but that 50% lose everything.”

    I am not sure it works that way. More likely that 100% of people will have somewhere between 0 and 100% of their money taken away. In a process that looks more or less random. Which will provoke enormous resentment and anger because it does not appear to be rational – and it will hurt people who played by the rules as much as it those who did not. This will cause uncertainty and an eroding of moral standards. With luck we might get away with a military dictatorship.

    “I’m quite looking forward to it actually. I have this vague sense that I’ll be able to get the birds again if it happens…..or doesn’t it work that way?”

    Well it may work that way but don’t you have a missus now? Who might not be too happy with this idea? Wouldn’t that be a bugger – you find yourself attractive to women once more and there’s nothing you can do about it? Worse than being a teenager again.

  7. @Mr Ecks

    One can only hope that some pivotal moment in the future might actually force the hand of government to roll back the regulation, size of the public sector and amount of handouts to the unproductive.

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