Is it the end of everything?

I am intrigued by the dismal science that is economics, sadly I don't understand most of the esoteric theories that abound in this area of intellectual endeavour however I realise that economics or at least the economy has a profound impact on all our lives. "It's the economy stupid" was a tagline from the successful election campaign of Bill Clinton nearly 20 years ago, now more than then this is true.

Over the past twenty years something quite extraordinary has happened in developed Western Economies, total wealth has mushroomed due to an increasingly consumerist society, the growth of technology and the emergence of the BRIC economies (Brazil, Russia, India and China) whose industries have increased demand for limited raw materials whilst at the same time spawning their own aspirational consumer classes.

However whilst the World has gotten richer that wealth has not been shared out proportionately, bizarrely a very small proportion of the population have seen their wealth explode whilst the majority have been left behind.

Income Distribution in America provides a staggering Infographic on how income is distributed disproportionately in America with the top 0.01% (1 in 10,000) earning 4.6% of total income in America, which equates to an annual income of $24Million whilst 90% of the population share 52.1% of income getting by on an average $30,000 per annum.

Perversely policy in America, or at least that favoured by Republican candidates, seeks to entrench this disparity rather than reduce it. Whilst there has always been a disadvantaged segment of society it has tended to be a small minority and as such has been expedient which is a callous way to regard any of the disadvantaged. However their numbers are growing and all the indicators are that this is a long term trend. Social welfare is meagre, affordable Healthcare is becoming more and more scarce. What does the future look like for a society where there are a small number of haves and a large number of have nots? Those with fabulous wealth still need a functioning society to provide them with goods and services or have they forgotten this?

Aspiration is a powerful motivator, it has been the driver for the growth of Western Consumer Societies and Democracies for the best part of 100 years. Aspiration however assumes certain things and rests upon certainties. Uncertainty is the new constant, price shocks, job insecurity, political and social upheaval all undermine certainty.

Wages have failed to keep pace with inflation, anyone with any sense will tell you that whilst official inflation figures are tolerable the reality is significantly different. Energy prices have soared, food prices are more prone to fluctuations although we do spend proportionately a lot less of our income on food than we used to 60 years ago.

A job for life and a pension at the end was the certainty for a lot of people who are now enjoying their retirement, they live much better lives than their own parents and have the same aspirations for their own children and grandchildren. Today's senior citizens are a blessed generation, too young to be combatants in World War 2 they grew up and spent their working lives in a society of boundless opportunity and seemingly irreversible affluence. Rampant house price inflation has seen this generations net worth explode. They are however likely to be the high water mark for such widely distributed affluence.

Current and future generations will not enjoy the same level of affluence as our current senior citizens do for a variety of reasons. Housing and the aspiration to being a home owner is a real conundrum, first time buyers, the traditional engine of the housing market are becoming fewer in number through both demographics and financial factors. 20 to 25% deposits are expected of first time buyers at a time when their income is constrained and their cost of living hamstrung in part by the high level of income they need to pay in rent. In  future years this demographic will have further constraints on their disposable income or discretionary spending - student loans are one drag, another will be compulsory pension contributions an inevitable factor as our governments of whatever political hue are confronted by an ever increasing social welfare bill.

At present house prices are massively out of line with incomes, housing has become an asset class rather than  a simple need. Prices at present are being kept artificially high due to high demand being driven by a growing population, immigration being a contributor to this. The financial system itself is complicit in maintaining the disproportionate price of housing as it has huge liabilities in the form of mortgages secured against "values" that the market has set. Most commentators concur that long term house prices need to drop significantly to make home ownership affordable to the masses, however this would have a huge impact on indebted borrowers and the banks that provide mortgage finance. This game of charades will have to come to a stop at some point although at present I have no idea as to what may provoke such an outcome.

Perhaps the baby boomers are the answer. There is a significant bulge in the population that is nearing retirement. For a sizeable proportion their home is their pension as they have been unable to afford to fund pension policies out of their disposable income. So what happens when a large proportion of the population  elect to sell their assets and "downsize", could this be the corrective trigger? If it is then there are going to be a lot of disillusioned seniors whose expectations of a comfortable retirement will not be realised. As seniors tend to be more politically engaged what does this mean for society - will there be a "Grey Party" or will the established parties adopt policies to favour them over other elements of society in yet another example of short termism so beloved of our political lords and masters?

So what does all this mean? I am not arguing from a position of envy or espousing radical redistribution of wealth, no group or individual has a right to preferential treatment however this growing inequity in society is likely to have some significant consequences.

Welcome to the new uncertainty, one thing is for sure it is not going to be pretty.

F1 motor racing has been a passion of mine since childhood, I saw my first GP @ Silverstone in 1973 at the age of 11. My next GP was @ Zandvoort, Holland in 1980, since then I have managed to get to quite a few Grands Prix and this year hope to be at two rounds of the FIA F1 World Championship.

Take a look at the Calendar and see if you can guess which rounds I will be going to.

Directions: To navigate the 2013 Formula 1 Calendar, please hover your mouse over the right or left hand side of the top portion of the calendar. Navigation arrows will appear and you can click on them to guide you through to the next date (the right arrow moves you forward, left moves you back).


Formula One Timeline 2013 - A timeline by the team at The Plate Market

So, what's it going to be then eh? If that opening sentence is familiar then we could be on the same wavelength, if however you need some enlightenment don't fret my droog all will become clear in due course.

I have decided to embark on a Blog very late in the day, both literally and figuratively. I spend a lot of time in Hotel rooms and travelling around due to work so have ample time to update my Web Log. At present I am holed up in "The Suites" Hotel - a bizarre Liverpudlian concept where every room in the hotel is a suite. According to my taxi driver there is more than one of them in the home of the Beatles. Whilst searching for hotels in this fair city I also discovered two floating hotels, "The Titanic" and "Yellow Submarine" - I managed to restrain myself and booked a more traditional place to rest my bones on my next visit.

Talking of Droogs I was recently contacted on the dreaded FB by an old acquaintance of the same name although she was not given to Moloko plus knives.

I have spent some of this evening checking Google Analytics on our website, traffic levels are on a gradual upward trajectory however I think I need some serious SEO input to help improve the site and attract more visits.