Dear Wizard Learner

A major concern at the moment is the economy and the issues that many of us are facing as individuals and businesses particularly with soaring prices on essential commodities, goods and services.

As detailed in our monthly CPD, some economists are calling for an end to the Government’s 2% HCIP inflation target. Indeed if it was lifted in order to stimulate growth in the economy, one would imagine the first people to breath a sigh of relief, would be the Monetary Policy Committee before they are made to look utterly foolish. If they keep inflation at around 2% over the coming months, they will be hailed as miracle workers (or liars). Some estimates are being made of inflation soon moving towards high single figures.

Managing the economy has appeared straight forward until recently. Whilst in the midst of the steady upswing in the economic cycle we have experienced over the last few years (with some blips along the way), managing growth by inflationary controls such as interest rates seemed simple and effective. The Government and the Bank of England enjoyed the applause from commentators of a well-run economy.

The problem now is although we have an inflation problem, growth is coughing and spluttering downwards. Fortunately it is not currently negative but there are few signs of improvement. The credit crunch, and commodity prices have all had a part to play recently. As lending has become tighter, business profits have reduced and people have naturally become more cautious in watching the pennies. With house prices falling significantly as transactions dwindle, many are watching a major percentage of their asset base evaporating before their eyes.

So are our glorious leaders doing all they can to revitalize UK plc? Is there a quick fix?

It may be that we have to batten down the hatches for the next few years and wait for the financial storms to subside. In many respects the Government can introduce various incentives to stimulate the national economy if needed. It has limited power however, in controlling areas like the global oil supply, world food prices (particularly as ever increasing stretches of land are being used for bio fuel crops) or management of other country’s economies.

I hope that the politicians in charge of both the UK and elsewhere hold their nerve. We have ridden on the crest of an economic wave. I fear we may now be in for a worldwide bumpy ride!


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Kind regards

Wizard Learning
www.wizardlearning.com

Wizard Learning is run by Chartered Financial Planners Mike Goldsmith and Cris Glascow to assist finance professionals pass industry exams and help meet their CPD requirements. Contact us if you have any comments or questions.