Britains Debt Time Bomb

Check out this video highlighting the debt issues of the UK'S Finances. The video explains how the welfare state has damaged our financial system, and also how previous governments have caused the UK to be in huge amounts of debt.

Virtual portfolio update week 3

Since the last update my virtual portfolio has greatly improved , from a 0.90% profit last week, to a 1.43% this week, my positions in companies such as Bet-fair and Vodafone continue to increase in value. The graph below shows how portfolio has changed in value over the previous week.

The graph shows that my portfolio has recovered from the lows that it experienced in the month of June. As there was a lot of poor financial news in June it sent my portfolio down  but as the financial markets are starting to settle my portfolio has started to grow again. In the coming weeks I will look to purchase large stakes in under valued companies to hopefully reap the returns.


Daniel Butler

UK Manufacturing sector growth at two year high

The BBC reported on June 1st that the UK Manufacturing sector growth is at a  two year high. This is very promising news for the UK economy , this is because the UK used to have huge manufacturing power but with the rise of globalisation many other countries across the world such as Japan and China are now the main powers in manufacturing.

The UK has predominantly become a services based economy and this makes up most of the national output (see graph). what can also be seen from this graph is that the manufacturing sector of the UK has slumped massively since the 1970s.

BBC

The graph above tells a massive story of how the UK's economy has transformed from a manufacturing based economy to a services and finance economy. In the 1970's manufacturing accounted for more than 30% of the UK's national output and the services sector only accounted for just over 15%. Fast forward 30 years and the two sectors have flipped as manufacturing only accounts for just over 10% where as services has increased up to nearly 40%.

The UK Manufacturing sector has declined so much in recent years because many of the companies have moved their operations to other countries in pursuit of higher profits from lower production costs. This is because in many other countries the minimum wage is a lot lower so companies can pay their workers less, also premises are a lot cheaper in other countries. Many big companies have moved out of the UK for cheaper production costs elsewhere as they will ensure higher profits in the future for shareholders.

With many companies pulling out of the UK this caused employment in the manufacturing sector to plummet. This is because all of the companies had to lay-off workers before they transferred their operations to countries such as Japan and China. This left many skilled people out of work , this is one of the reasons why there is higher unemployment in the north of England. This is because many of the factories where in the north and after the workers got laid off there was no where they could go.

In order to solve this problems in the manufacturing sector, there needs to be massive investment from the government or easier credit from the banks. This is because the investment will allow more manufacturing companies to grow and employ more people thus lower the unemployment rate. The investment will also help many manufacturing companies to produce more which will equal more exports for the UK. I believe that the increase in investment to this sector will help to grow the entire UK economy and put many people back into work.

The UK's trade deficit now stands at £2.5 Billion this means that the UK is importing much more goods than we are exporting. The UK has also been running a trade deficit for more than 20 years in fact the last trade surplus where the country actually exported more than it imported was in March 1981. The graph below shows the balance of Trade of the UK from 1970 to 2013.

In order to improve the UK Economy the manufacturing sector will need much more investment. It has already started to grow but there is still more work to be done and if there is more investment it will greatly help to improve growth prospects in the future.


Daniel Butler

Sources : Trading Economics , BBC

Financial History: Zimbabwe Economic Collapse 2000-2008

For political motives in 2000 the Zimbabwean government started the destruction of the commercial farming sector. In a country where most of its exports came from farming and agriculture this caused a disastrous impact to the Zimbabwean economy.

After the destruction of the farming sector the GDP of Zimbabwe quickly began to tumble from 6.86B USD in 2000 to 4.42B USD in 2008. Exports massively declined and Zimbabwe recorded a trade deficit for ever year after the destruction of the commercial farming sector. This happened because Zimbabwe's exports where mostly agricultural or farming based in fact its biggest before the destruction was Tobacco. The graphs below show the balance of trade for Zimbabwe between 2000 to 2008 and also the GDP from the year 2000 to 2008.

These problems with trade also started to impact the people of Zimbabwe. As the GDP started to decline also did the GDP per capita, in 2004 the GDP per capita was 406 USD and in 2008 it had fallen to just 280 USD. As I stated previously exports also started to massively decline and Zimbabwe reported a trade deficit for every year between 2001 and 2008.

However the worst problem was the Hyperinflation. In order to fund this massive deficit the Zimbabwean government had to borrow massive amounts of money from the bond markets. In fact the Zimbabwe government borrowed so much that in 2008 the country's debt was equal to 131% of its GDP. The graph below shows how much the country's debt to GDP increase from 2000 to 2008.

After all of this borrowing Zimbabwe's creditors eventually started to come calling. However Zimbabwe didn’t have the necessary capital to pay back this huge amount of money they borrowed. They couldn’t borrow more money as it would only add to the pool of debt and they also couldn’t raise the money from tax revenues as their economy was contracting. The only thing they could do is print the money and that’s what they did.

However what they might not have realised is that with every note they print their currency was worth less as the currency began to depreciate. This had disastrous effects to Zimbabwean economy has it eroded the little savings which its citizens had and also it caused prices of basic goods such as bread to go sky high.

This excessive increase in the money supply caused massive Hyper inflation. In 2008 the inflation rate spiked hitting a high of 66,212 percent. The prices of basic goods increased daily, in 2004 the price of a loaf of bread was Z$35,000 and by 2006 the price had risen to Z$80,000. The graph below shows the inflation rate of Zimbabwe from 2000 to present day.

  

Due to the devaluing currency the Zimbabwe government also had to print larger and larger notes to accommodate for the devaluation.  The biggest note they printed was the bearer cheque which was Z$ 50,000 which wasn’t even enough to purchase a loaf of bread. In fact the bearer check was also only worth 49 US cents.

These economic problems also had large impacts to the people of Zimbabwe. They stopped using banks, they stopped paying they taxes and they also stopped using the national currency as a form of trading.

This harsh economic environment lasted until 2009 when the Zimbabwean government declared bankruptcy and adopted the US currency as a means of Exchange.

Thankfully after this the Zimbabwean economy started to rebuild itself and the GDP has started to increase ever since this change (see graph).

 

This Article has shown how quickly an economy can collapse and how printing excessive amounts of money can destroy a currency. It is important that future and present governments take note of this economic disaster as it could very well happen again if the wrong decisions are made.

Daniel Butler

Sources: Trading Economics, http://www.thezimbabwean.co/comment/opinion/64699/the-economic-collapse-of-zimbabwe.html, http://www.cato.org/sites/cato.org/files/pubs/pdf/dpa5.pdf

Payday Loans Putting Customers Into Debt Spirals

Pay-day loans are now being widely used across the UK, in fact 2 Million people across the UK were using pay-day loans in 2011. Most of these businesses promote themselves as helpful organisations which are there to lend a hand when their customers are in need. The truth is that most of the companies issue loans which have interest rates of more than 1000% APR, this is causing many customers to go into debt spirals as they cannot afford to payback these huge interest rates.


Due to the current economic conditions in Britain such as the high unemployment and increasing inflation, it has left many citizens "cash strapped". The CPI index has increased massively since 2011 and unemployment has also increased. This is causing many people to not have sufficient funds to pay for house bills and also basic goods.

In a recession these type of businesses thrive, as they are preying on the cash strapped citizens who need money quick in order to pay for bills. These companies also prey on uneducated citizens who don’t understand the basic principles of interest rate loans. Even if the company's show the interest rate in plain view many people over look that as they might not be educated or they are too caught up in their own economic problems. These companies may promote a "cuddly" corporate image as caring companies but they are only after the profits they can gain from unsuspecting customers.

The pay-day loans industry has expanded massively during the years of the recession and is now worth a staggering £2.2B. These companies may boast big profits to their shareholders but it is only by charging hideous interest rates to the uneducated people of this country that they are able to create such high profits.

These companies have caused many customers to get into huge debt spirals, where they owe sums of money sometimes up to £10,000 for only taking out a small amount. The reason why this is occurring is because when unexpected customers take out these loans there are not understanding how much they will have to pay back, this causes a shock to the customers and as they probably cant afford the repayments they have to take out another loan. Before too long this puts customers into serious debt problems which causes many people to lose their possessions or even in some cases commit suicide

These companies have been allowed to be set up as there is actually no restriction on the interest rates which these companies can charge. As long as they show how much the interest is on the loan then its okay for them to charge it.

Sadly these are the types of companies which sprite up in these harsh economic times. I believe that the only way forward is more financial education for both adults and also children. This will mean that future generations will be more aware of these companies and will think twice before taking out pay day loans in the future.

I also believe that if these companies continue to operate there should be more transparency across the whole industry. As all customers should be told the exact amount they will have to pay back including the interest.


Daniel Butler

References : Guardian, Trading Economics, BBC ,sqmagazine

Workers leave Spain as unemployment continues to increase and recession worsens

Worsening Economic conditions in Spain is causing many people to leave the country in the pursuit of work somewhere else. Many of the country's population is now unemployed and many businesses are going bankrupt everyday.

There are some staggering data coming out of Spain with more than 50% Youth unemployment and also total unemployment is at 24%. This is causing many people to worry about Spain's Economic future because if half of the young population is unemployed they are not gaining the skills which will be necessary if the country does recover.

Bloomberg reported earlier today (25th June) that Spain’s population has fallen from last year, this is the first time the population has fallen since 1971. This has been caused by the harsh economic conditions has many people are leaving the country to look for work somewhere else.

The graph above shows the GDP growth rate of Spain and it shows that Spain has seen six consecutive quarters of negative growth.With the worsening Economic conditions I do not see these statistics improving within the near future.

Spain’s economy has been another victim of a property boom, in the years leading up to 2008 Spain’s GDP continued to grow, however this was underpinned by a housing bubble which was financed through cheap loans too risky clients all across the country.

Housing prices increased 44% from 2004 to 2008 but since the underpinning of the property boom they have tumbled more than a third. Due to the long periods of growth Spain actually had very little debt but because of the harsh economic problems they are experiencing they have had to borrow a large amount of money from the bond markets.

However all of this borrowing has put Spain into even more trouble I believe, this is because eventually Spain will have to pay this money back, but with a declining economy and large unemployment, where are they going to get the tax revenue to pay back the loans?

I believe that without a radical solution from the Spanish government, Spain will default on its loans in the coming years. This because with a declining economy and huge unemployment Spain will find it very difficult to repairs its debts.


Daniel Butler

Sources: Yahoo Finance , BBC news , Bloomberg , Trading Economics

Virtual Stock Portfolio Update Week 2

My YAHOO fantasy trader account is currently running a 0.90% profit which is much lower than my targets. This has generally been caused by the recent news from China where they are now ending their era of cheap credit. Due to this news, markets world wide where triggered and began to fall, this is because investors are less optimistic about their Chinese stocks as there is less credit available in the economy which may impact growth.

The graph above shows the Shanghai Composite SSE over the past 5 days, it can be seen that when the news broke on Monday it sent this index down all the way past the 1900 point mark.


Before the news of Monday my portfolio was on a steady curve upwards, this is due to the previous week where I purchased small stakes in companies which where trading low.

The graph above is of my portfolio, it can be seen that due to the Chinese Market news which broke on Monday my portfolio has been effected and is now down to a similar level displayed last week. However currently (24.06.13) The FTSE 100 is seeing gains of 0.98% and is up 59.28 points which is helping some of my positions to recover.

In the coming weeks I will look to see whether the markets will shake off this bad news and start stabilising. This is because with all this bad news breaking most stocks are very volatile especially for the short term.



Daniel Butler


Sources : Yahoo Finance

UK Government Continues to borrow despite the huge deficit

It has been reported by the BBC that the UK government has increased its borrowing from the bond markets even further in 2013. Despite the UK's huge government debt which is now equal to 75% of GDP.

The governments debt to the bond markets has been heavily increasing in the past five years (see graph). I believe that the UK government should definitely ease off the borrowing as the deficit is now becoming too large to comprehend, according Trading Economics the UK ranks 13th in the world for total to debt to GDP.

The UK's credit rating has already been downgraded this year as many investors and rating agencies are now fearing that the UK will have trouble paying back its debts in the future. This fear is starting to become apparent as the UK's growth has been almost stagnant for a number of quarters in the previous years, this means that there is little growth, with less growing businesses there will be less revenue for the government unless they increase the tax rate. But an increase in taxes will mean businesses will be less likely to grow anyway, so the government is almost "clutching at straws" with what to do with the economy.

The unemployment rate has decreased this year but it is still very high, and this is causing the government to spend even more supporting the jobless and this is causing higher tax rates for businesses.

The UK government also have to be wary of inflation, mainly the CPI index which has increased even further in the past year (see graph). The CPI index now stands at 126 points and has increased largely in the previous year, this is causing consumer confidence to decrease as less people are spending and this in turn is creating a ripple effect which is effecting many businesses.

More borrowing is a bad sign for the UK economy but if the government wants to continue funding the welfare state they will need to either borrow or increase taxes further. But they cannot increase taxes as the economy is not growing enough to accommodate it. The truth is with this stagnating economy the government can longer support the welfare state and also spend money on improving the economy without borrowing.

The public sector net debt now stands at £1.19 trillion which is the total of how much the country owes. The UK's economic outlook is not looking promising as the government will likely have to start paying higher interest on their loans, whilst still trying to fund the welfare state with an economy which is running at a trade deficit.

With increasing rates the government will likely stop borrowing and look for other sources of funding, this could be either more monetary policy or higher taxes. This is because the government can no longer the lower the bank of England's interest rate in order to inspire growth as its already at its lowest for more than 30 years.

The truth is in order to keep the welfare state running the UK will either continue borrowing or start introducing heavier taxes on business's across the UK despite the Economic impact that may cause.



Daniel Butler


References : BBC and Trading Economics :/http://www.tradingeconomics.com/


  

Can the US Economy survive without the Quantitative Easing ?

The United states media have been reporting for a few weeks now that the fed will begin to tapper its bond purchasing programme and stop trying to stimulate the markets with short term growth. The question is has Quantitative Easing gone on for too long and has the US become reliant on market stimulation from the fed ?

Ever since 2010 the Federal Reserve has been increasing its bond purchasing programme up to £85 Billion per month in order to quickly get cheap money into the system and lend it out to business so they can grow. Quantitative Easing seems a relatively good plan at a first glance as it quickly makes markets happy as everyone is more optimistic, but what many people haven’t noticed in the past is that QE can cause many problems for an economy (see article of germany QE :click here).

  

As this monetary instrument has been executed for so long and at a massive rate (see graph ), many investors and economists are starting to state that the markets are becoming to over-reliant on this stimulation in order to grow. Without this constant intervention of the federal reserve investors believe that many stocks will depreciate in value as everyone is less optimistic due to lack of stimulation by the fed.

However this may not be bad thing , this is because Quantitative Easing has in many cases caused the stock market to be over-valued and prices are much greater than they should be. when the Fed does start to tapper its purchasing programme we will likely see the markets correct themselves and stocks will return to moderate prices.

Already the plans of the federal reserve have started to effect the markets with the DJIA finishing down the day the news broke. Many investors are fearing that the stock market will correct itself and send stocks down to their correct values if there was no stimulus. Due to this many investors have probably adjusted their portfolios away from the US and looked for defensive investments such as the government bonds which finished high on that day.

Dow Jones Industrial Average June 19th 2013

The stock market has seen some bad news in recent weeks with emerging markets and the federal reserve. but I believe that tapering Quantitative Easing now is the best decision as the US Economy according to low unemployment and increasing growth has started to recover. I believe that it is important for the economy to survive and grow without the Feds constant stimulus which only inflates stock prices creating an illusion of growth.

I also believe we may see this happen in other countries in the future especially emerging markets where central banks have stimulated their economies to attract investors, the banks will then have to taper their QE in order to keep the currency at a good level which causes their markets to correct themselves.

Daniel Butler


Sources : Marketwatch, Yahoo Finance , http://theeconomiccollapseblog.com/archives/quantitative-easing-did-not-work-for-the-weimar-republic-either

Financial History : Germany Quantitative Easing 1920s

Quantitative Easing can be a very dangerous monetary instrument when used excessively, there have been many cases where Quantitative Easing has brought an economy to its knees but today I will be writing about Germany’s Quantitative Easing of the 1920s.

Burdened by huge World War 1 Debts and a poor economy the German Government decided to print massive amounts of money in order to repay debts and to hopefully revive the economy. It all sounds very well until the government started printing excessively and increased the money supply to astronomical levels (see graph). Due to this massive money supply the currency quickly started to depreciate and the consumers had to offer up more and more notes for every day goods such as bread and milk.

http://2012books.lardbucket.org/books/economics-theory-through-applications/section_30_02.htm

In 1922 Hyperinflation started to kick in and Germany's inflation increased massively as the currency was worth so little. Citizens had to offer up large amounts of notes in order to purchase everyday goods. By the following year inflation was up to 433 percent this is unprecedented by today’s standards, along with the increasing inflation rate the money supply continued to increase up to 52 percent on the previous year.

In 1923 Germany's inflation rate reached its peak at over 6,800 percent, this happened because the German government would not stop increasing the money supply despite the inflation rate. At this point the money supply and also the inflation rate was doubling day on day and the prices of basic goods would increase every day due to the decreasing value of the German mark.

In December of 1923 the value of the German mark decreased to the point that 4 trillion German marks was equal to 1 US dollar. This is compared to April 1919 where just 12 German marks was equal to 1 US dollar. Quantitative Easing had wrecked the German Economy in just 4 years , inflation was massive, the currency was worth nothing more than the paper it was printed on and this brought the way for massive unemployment in the coming years, in fact by 1932 5.1 Million people where unemployed in Germany which was over 30% of all the workforce.

Quantitative Easing is now being used regularly by many central banks across the world economy in order to hopefully put growth back into the system. The federal reserve in the US has continued its policy of massive quantitative easing for a number of quarters. This is having bad effects of the US dollar and in fact the dollar has already depreciated a massive amount since the 1900's and this was without QE (see graph below).

http://www.comparegoldandsilverprices.com/dollar-devaluation-since-1913/

Considering what happened in Germany the federal reserve should be very wary of their QE plans. As they have already stepped up the gear and have added over 1 trillion new US dollars into the system and with every dollar that is added the currency is worth less. This could cause a large depreciation to the US dollar in the coming years unless the fed starts to hold back on its monetary policy.

http://theeconomiccollapseblog.com/archives/quantitative-easing-did-not-work-for-the-weimar-republic-either

The graph above shows just how much money the federal reserve has started to pump into the economy in an attempt to revive it. I believe this will cause the dollar to depreciate even further.

Daniel Butler

sources

http://2012books.lardbucket.org/books/economics-theory-through-applications/section_30_02.html

http://theeconomiccollapseblog.com/archives/quantitative-easing-did-not-work-for-the-weimar-republic-either

http://www.comparegoldandsilverprices.com/dollar-devaluation-since-1913/

Smith and Wesson sales hit all time high but gun crime continues to decrease ?

On April 29th 2012 Smith and Wesson reported a 20.3% increase in revenue from $342M in 2011 to 411M in 2012. The Guardian and other newspapers are also reporting that Smith and Wesson this year saw their revenue for the financial year already increase to $588M. See the graph below which shows the revenue for Smith and Wesson over the past 4 years.

source : Google Finance

However increasing gun sales in the US does not mean an increase in gun crime, when you take a look at the statistics they show that deaths caused by gun crime is actually decreasing year on year. Even though some of the mainstream media are calling for a partial gun ban in the US and also reporting on the disasters of Colorado and Sandy Hook, however they do not add as much coverage to the decreasing gun crime numbers.

These statistics probe the question that does more guns mean less gun crime?, This is because in a society where there is more guns, criminals are less likely to commit gun crime as ordinary citizens can arm and protect themselves against the criminals.

Smith and Wesson also saw a sales spike when the shooting in Colorado was reported, this suggests that more people are buying guns in order to protect themselves if a similar disaster where to happen again. Another spike was also seen when President Obama was re-elected as buyers feared that the president was going to clampdown on firearms.

The graph below shows that homicides caused by firearms has decreased massively since 1993. This graph also shows that all firearm deaths are decreasing and the slight increase in the past five years is probably due to the increase in suicides caused by firearms. 

In order to truly factor in the massive surge in gun sales, next year's crime statistics will be vital and they will show truly whether more guns means less gun homicides. I don’t believe that having more guns will stop incidents such as Sandy hook from happening again but I do believe more guns will decrease gun crime overall. I think that the answer lies in education and America needs to introduce new programmes and educate its citizens on gun safety and how dangerous guns can be in the wrong hands.

Education is needed because guns don’t kill people its people that kill people, a gun is just an inanimate object and it takes an uneducated person to use it in the wrong way.


Daniel Butler

Sources: Yahoo Finance , Google Finance , Guardian and CDC's National Certificate for injury prevention and control web-based injury statistics.

Virtual Stock Portfolio Update Week 1

I currently manage a virtual stock portfolio on Yahoo Finance, I will be posting weekly updates on how my portfolio has fared against the markets.

Currently my portfolio is composed of manily FTSE100 companies which are market leaders in their field. I focus mainly on defensive stocks which tend to grow whatever the economic conditions, that is why my portfolio is composed of consumer stables which customers will still purchase their products even in a downward economy.

In the first week of July my portfolio is currently under performing, but generally this isn’t a surprise as most stocks are not performing well. This mainly due to the weak data coming out of Japan and also a strengthening yen (see graph below). This news is causing problems for my portfolio because many of the companies that are in my portfolio rely on cheap Japan exports. But if the Yen continues to rise my companies will have to offer up more capital in return for their purchases.

In order to hedge my portfolio against this I have taken up positions in stocks that are not exposed to Japan and focus solely on the UK Economy.


Stay tuned for more updates in the coming weeks.




References : Yahoo Finance 44SGTHFJRDWQ

Is Quantitative Easing the solution ?

IS Quantitative Easing the Solution ?

When considering the UK economy  I would suggest that Quantitative Easing may not be the right solution for the economy. I believe this because it may cause more problems for the economy than we already have for example the increase in monetary policy could cause the currency to depreciate this would mean the government would have to offer up more currency when paying back their loans to the bond markets.

This will lead to less spending by the government to benefit businesses and other causes which may increase growth and help the problem. The main thing the central bank has to worry about is the currency depreciating and inflation increasing because if things get too out of hand it could be a similar problem to Zimbabwe.

Quantitative Easing has already caused many problems for different countries across the globe and it is important that UK doesn’t make the same mistake. I would suggest that it will be important for the UK government to think of other ways of increasing growth. Instead of looking for “quick fixes” such as Quantitative Easing look for sustainable methods of creating growth. 

This could be to invest more in manufacturing in the UK so that we have more exports and focus more money into education programmes that offer real practical skills. The UK government needs to look at the bigger picture and learn from other countries such as Germany or China that have massive manufacturing power and are now reaping the benefits of increasing growth.

Another way for the UK to inspire growth is to improve the real productivity of the country this could be done in many ways. The first way could be to invest more in research and development this is because tomorrow’s products and tomorrows growth will depend on a large amount of research today. More investment in research and development will mean more products for the country in the future which will mean more exports. Another way to increase productivity would be to invest in education this is because the more educated people are the more they will be able to earn and the more they will earn for companies or as entrepreneurs, this will create growth for the entire country.

The final idea for the UK government could be to invest heavily in the infrastructure of the country this could be to build more roads or to improve connectivity such as broadband. This will quicken the country and make it easier to move goods around and easier to communicate which hopefully increase growth and businesses will find it easier to operate.

If the UK doesn’t look at sustainable ways to increase growth they could be faced with big problems such as higher inflation and a depreciating currency. This could cause the UK to have problems paying back its loans as there is no growing business to pay more tax, if the UK can’t pay back its loans it may be stripped of its credit rating which will make it even more difficult to obtain credit.

What will happen in the future?

Considering the current UK Economy with the GDP staying stagnant and barely increasing and inflation also increasing the UK Economy is looking in a very bad state. The UK’s credit rating has also been downgraded which will make it difficult for the UK to borrow money to revive its economy. The graph below shows the UK GDP (Gross Domestic Product) and how much it has changed in the last 4 years in terms of percentage.

As there isn’t much sign of growth in the UK Economy the government will need to look into ways of stimulating the economy. This could be the use of a monetary instrument such as Quantitative Easing or an alternative. I believe that if the UK continues to apply Quantitative Easing the economy will eventually get worse and the currency may depreciate beyond repair this will make it more difficult for the UK pay back loans which will decrease the credit rating even further.

An increasing inflation rate will make it harder for businesses to survive as they will have to pay more for stock and other expenses as the price of goods increases rent will increase in order to satisfy the real estate owners. This will create larger expenses for businesses and with a decrease in consumer spending it will make it very difficult for many businesses to stay afloat. We are already seeing many large and small businesses go into administration due to the changing economy and decreases in consumer spending. Businesses such as HMV, Blockbuster and Jessops have become victims of changes in consumer spending and with the UK economy worsening it may cause many other businesses to go into administration.

An increase in business bankruptcy will seriously hamper the UK’s growth and cause it to go into further financial trouble, the graph below shows that bankruptcies in the UK are still increasing and almost 4000 businesses go into bankruptcy every financial quarter since 2010. This is a staggering statistic which shows how difficult the current economic climate is for businesses to survive and pay their creditors.

This could result in a total collapse of the UK Economy and all company will move out to somewhere that is more economically stable. If the UK wants to revive the economy they need to act quickly and think different ways to revive the economy as Quantitative easing hasn’t worked for many countries.

What alternatives are there to Quantitative Easing?

There are a large amount of alternatives to Quantitative Easing which could inspire growth. One of the alternatives would be to decrease taxes this will lead to increase in consumer spending as customers will have more money. More money being spent will mean higher profits for companies which will mean more growth.

Another option would be to increase subsidies for farmers and start up business this will help their business to grow and to increase profits as the manufacturing costs of the business will be subsidised. This will mean that farmers will be making more profit and they will be able to pay their workers more money. The disadvantage to subsidies however is that the government will have to find this large amount of money to subsidies these farmers and the government may not be able to sacrifice that amount of money.

The third alternative would be to directly invest money into start up businesses, instead of going through the banks the government could cut the middle man out and directly invest capital to start-up businesses. The increase in investment will lead to more companies being created which could help to increase growth because the more companies there are the more competition there is. The more competition will hopefully inspire more growth as companies look to compete for customers.

Overall I believe that direct investment into companies will be the best way to inspire growth. This is because lending money through banks increases the time it takes for businesses to get the funding they need. This is not ideal as the UK government is quickly running out of time to revive the economy. The direct investment will allow more companies to start up successfully rather than the banks taking the money and being really strict in the way they lend it out.

An example of how this could help the UK to revive the economy would be if they directly invest into rail companies this could lead to a decrease in ticket prices which will increase mobility. An increase in mobility will mean more people will look for high paying jobs in the city, higher paying jobs will mean an increase in consumer spending which will hopefully increase growth.