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  1. #1

    Downsizing: the new growth paradigm?

    Just how long will this recession/downturn/non-growth scenario actually last?

    With the incomprehensible amounts of government debt, corporate/banking debt in greater Europe, austerity measures and reductions in spending programmes how can anything but recession be the outcome?

    Can the creation of 489 bn Euros by the ECB actually stems the 'contagion' or will much more be needed? Has the US and UK's quantative easing programmes started a 'currency war' against the Euro which will ultimately have no winners?

    And what would be the effect on commercial property values (those assets supporting some of these debts) if this situation should prevail? Would all those expensive corporate office rents/values in London be ripe for 'downsizing' and office mobility towards smaller units?

    Will austerity hit the City of London?

  2. #2
    Perhaps a useful clue might come from the experience of Japan which has seen almost two decades of zero interest rates and asset and property deflation.

  3. #3
    Following on from the previous comment concerning Japan's experience, it seems singularly appropriate to add that this happened despite the fact that the Shin Bullet Train was operating throughout the "lost decades". Can someone please explain how the high speed rail link with Birmingham is expected to galvanise our economy.

  4. #4
    The Japanese experience is not one to copy but it appears in principle that we could be heading for much the same.

    Japan had suffered from high property valuations, and also like the UK is a small island with a relatively large population - thus very high land values. At one point the property asset values of greater Tokyo were greater than the whole of the USA.

    So it is still 'unwinding' from these 'valuations' but will London go the same way? Are rising rents and property values sustainable amidst a tightening of credit? Waht happens to banking security if values slide? Is this the unthinkable?

  5. #5
    London is still seen as a desirable location for international financial services businesses despite banker bashing and the 50p marginal income tax rate. How long it will remain so if the political climate is so hostile to economic development and any attempt at growth is moot.

    Japan's problems were all self made. The UK today faces a world in which Europe, as well as the UK itself, are determined to create mass unemployment and social upheaval on a scale not seen since the 1930s. We can only hope that the lunatics misgoverning us are returned to the asylum before another war breaks out.


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