Its the young that are paying the price

The budget review is going to hit everyone pretty hard but it seems that there is one group being hit hardest, the young!

So far we have had confirmed that child benefit will be withdrawn from top earners, this is no bad thing in the sense that is moves towards a progressive tax/benefit system but it is just the first line of the policy targeting the young.

Secondly we have reforms EMA that could see many students loosing out. What ever your thoughts on EMA its not likely to go down well with those students loosing it.

Education slashes loom, if not in this review but in the near future. Again the true losers in this are the students, the NUT predicts the loss of specialist staff first, those that deal with behavioral and special needs.

The tally of cuts won't just affect those in education what about those just left education, those trying to buy their first house. Th Government reforms to the housing budget are going to make it, you guessed it, harder than before. 30,000 new 'affordable' homes were build in the south east and London last year and the latest prediction shows that in the next 5 years the government is unlikely to fund more than 250 new homes. The only hope is that the housing market will come down. While prediction are pointing the market that way the draw back is it normally a signal of a looming recession.

"The total number of 18 to 24-year-olds out of work for two years or more rose to 72,000 in the three months to June, up 11pc on the previous quarter, according to the Office for National Statistics (ONS)." -Telegraph

Youth unemployment as a result of the recession is clear to see and t it will only get worse if we going into a double-dip recession. I know that many of my peers find it hard to get work, I've found my self struggling to get work as a direct result of budget cuts to the police.

Majourty of students expenditor is on a small luxary items (video games) or cloths and a lot on books as well. The VAT increase will proportionally hit the young harder, especially with talk of it being applied to books and clothes now.

Then there is the big one, the hit that will take money directly out of the pockets of students and laden them with debt, Tuition fees. It’s looking like tuitions fees will be raised from £3,225 to £7000, over doubling! This means over double the debt, it seems the deficit is being shifted from the government balance to the accounts of students.

Its those that did not cause the credit crunch or rack up the debt that are now having to pay for it and the Conservative party will have to be careful, the young are the voters of the future, something Labour are exploiting given the circumstances stated above. Perhaps also Mr. Cameron should also be wary of students, student unions can be quite militant and in France we've seen their student unions joining mass strikes, the often fiery youth could come back to give the Prime Minister a nasty burn.

The Historian

"A historian is a profit in reverse"

Always a favourite quote of mine and now it seems to be more relevant than ever.

Were we are now
With the spending review just around the corner questions are being raised as to what it will mean for the UK economy.The UK has a national debt of around 950 billion (that's: 950,000,000,000!!), this staggering figure is the problem now facing Chancellor George Osborne but what is he going to do about? This is the question on the mind of many, will raising tuition fees be part of repaying the debt, cancelling child befit is certainly one part of it.
The front line services such as police have already begun making cut backs and other areas of the public sector cringes in the knowledge its almost certain to see heavy job loses.
George Osborne may be cutting back to reduce the budget deficit but what will happen to the Macro economic objectives? Government spending (G) is a key part of Aggregate demand (AD), plotting a reduction in G and thus AD on a Long Run Aggregate Supply (LRAS) has the effect shown bellow:
Output falls from O to O1 and thus GDP falls.. the economy goes into recession! Surely George Osborne knows this? Well a major part of the conservatives plan on keep the economy afloat release a theory called crowed out, as explained in full by a fantastic article written by Joe RS: Joe's Article. Basically the Government expects the private sector to fill in the gap as they deplete the public sector, a valid theory. However this only possible if businesses have money to expand, something which is about to get a whole lot harder if the Monetary Policy Commity decides to raise interest rates!
Has George Osborn factored this into his theory? It certainly raises questions as to how qualified he is to run the economy, lets find out:

The Man in charge
Name: George Gideon Oliver Osborne
Age: 39
Born: Paddington UK
Degree: Modern History.
Job History:
NHS: recording deaths
Selfridge's: Tidying towels
The Conservative Party
Experience in Economics (including GCSE ):
NONE

Anyone else shiver at the sight of that résumé, Well the city of London for a start! On the positive side every single one of you now reading this probably can say: "I have more experience in economics than the man in charge of the UK economy!" So how did he get the job.. well another Quote springs to mind, this time by Benjamin Franklin exasperated by politics:
"Democracy is two wolves and one lamb voting on what to have for lunch"
Alas more fitted for the present times would be:
"Two politicians and an economist voting on what to do with the economy"
At least there is one good thing, if he studied modern history he should be able to tell us about the 1930s.

The Past
During the period of 1930s the world economy was in a state of depression, in the US this was know as the great depression lasting from 1929 to around 1939 while the UK's problems started in 1918 but were not quite as bad by the late 1939s.
Economic growth was negative, between 1918 and 1921 there was a fall of 25% in output in the UK! The Government debt was large and the government was pressured to lower the deficit, this didn't help the economy!

Many nations were pinned down by something known as the gold standard that fixed their currencies so they could not export effectively.
As a result of the economic depression extremism increased, the Nazi party rose up in Germany and to a lesser extent in the UK, the KKK became stronger in the US and in Italy and Spain far right dictatorships rose up. Eventually Adolph Hitler rose to power in Germany and consumed Europe in war.

The future? (The apocalyptic edition)
World war 1 = war on terror
The Gold standard = The Euro
Economic down turn = Credit crunch
Right extremism = Tea Party Movement, BNP etc..
Government cut back? = Spending review?
World war 3 anyone?

OK so that's the extremest prediction possible (unless we look back the fall of Rome), but there some merit in looking back at the past to judge the future, there are many similarities to then and now and Keynesian models suggest these cut backs will lead to bad times ahead. We have to learn the lessons of the past, lets hope George Osborne did in his history classes. A final quote to consider:
"History repeats itself because no one was listening the first time"

Sinking Economy

The Credit Crunch has had its casualties, around 2.5 million unemployed (Labour force survey) but here is a quick case study of an industry hit hard.
The kitchen industry saw quite large growth during the resent boom of the 2000s, being an luxury product the consumption of designer kitchens is linked with peoples incomes, high income elasticity. As as soon as the economy goes into decline peoples confidence falls and as a result they cut back on luxuries. One of the first industries to bit hit hard by this was the of course the kitchen industry, it easy to cut back on the new kitchen you were planning.
I happen to know a kitchen fitter who was made redundant from three kitchen firms then finally ended up long term unemployed. GDP has now moved up to 1.1% thus the UK is in recovery. low and behold as basic economic theory suggest, he now has his job back.
A clear sign that things are picking up, although as a possible double dip looms it could be worst times ahead for luxury industries.



Bonus fact: "A zero income elasticity (or inelastic) demand occurs when an increase in income is not associated with a change in the demand of a good. These would be sticky goods." - wikipedia