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Sunday, October 28, 2012

Colonel Nathan Jessup was right - “You can’t handle the truth!”

Thoughts for new week ahead. On Saturday I read a brilliant article in the FT that was published on 24th Oct. I am no longer bothering with the links because it is behind a paywall. 

The writer, Satyajit Das, is the author of Extreme Money and Traders, Guns and Money

This is important stuff but nothing that is directly connected with the older consumers -  although the implications affect them as much if not more than anybody.

I keep hearing politicians and economists and dare I say business people who appear to be living in a parallel universe with regard to the state and future of the economy.

Satyajit Das sums up the situation perfectly. No doubt I am about to break lots of copyright rules but this is a small section of what he said.

In the film A Few Good Men, Colonel Nathan Jessup (Jack Nicholson) famously tells the military court: “You can’t handle the truth!” Today, politicians and policy makers seem unable to handle the truth – the prospect of little or no economic growth for a prolonged period. They refuse to acknowledge that expansionary fiscal and monetary policies may only provide temporary palliative relief, but cannot restore the health of the real economy.

Between 2001 and 2008, borrowing against the rising value of houses contributed to around half the recorded economic growth in the US. But ever increasing borrowings are needed to sustain growth. By 2008, $4 to $5 of debt was required to create $1 of US growth, up from $1 to $2 in the 1950s. China now needs $6 to $8 of credit to generate $1 of growth; an increase from around $1 to $2 15-20 years ago.

The economy of the US and Europe is not going to recover to anything like the levels of economic growth that we have experienced for the past two decades.

All of the talk about 'growth' versus 'austerity' is nonsense. Yes, there will be growth but it will be anaemic and not equally spread throughout the economy.

The future provides lots and lots of opportunities for new companies and for bright marketers but these will occur in an economy that is very different to the one of the past couple of decades. 

I hope to hell that when you are talking about your long-term marketing plans you realise the type of world that will exist. Dick Stroud



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