Wednesday, January 04, 2012

How to solve the sovereign debt crisis? And the future

There should be a plan how the sovereign crisis can be solved and I think to do that the big economies must stop borrowing from the other economies of the world and start developing their own industries to improve the government's balance sheets.
Currently the countries like Italy, Spain, Portugal, Greece, and even France, Germany, UK & USA only pay the interest on the loans they have taken from the other economies of the world. When the times comes for the next instalment, the payment amount increases and this leads the governments to cut in local spending. We then see tax increases, decrease in pensions, decreases in free services given by the governments, etc etc etc. So the best thing to have done in the first case was to borrow less, but now we need to increase your country's manufacturing and try to create more jobs. Easier said than done though.
I think Europe should do this:
  1. Increase manufacturing in Germany, France & United Kingdom. Chip manufacturing? Electric cars? electric batteries for cars? Some new innovation? Finland was the home of mobile phone manufacturing; a country again has to become the trend setter.
  2. Bring the call centres back. The basic simple jobs should go to the local people.
  3. Improve rail network, add 4 carriages to every train that runs in Britain; and please give contracts to local firms, where local banks fund the projects.
  4. European Union has to break away from very weak economies like Greece & Ireland. I think Italy & Spain are too big to fail and they can be part of European Union with some new rules. The following countries should be part of EU - UK, Germany, France, Spain, Italy, Netherlands, Austria, Belgium, Sweden, Finland and Luxembourg. Rest can join later.
  5. We have the ISA in UK where people can save up to £5300 every year. FSA must increase ISA limit from £5300 to £10000. This will change the mentality of people in UK, from spend spend spend to save save save and the banks will see their cash reserves increase. This money can then be given to the businesses and this will help boost the economy.
  6. Ask people to spend where it is necessary & not spend on useless items - we actually don't need 2 laptops, iPads, 2 iPhones, XBOX & 3 holidays every year.
  7. Above all the governments should believe in themselves and bring the manufacturing back to Europe, especially Britain (because I live here). I cannot believe the country that started the industrial revolution is now not manufacturing enough and believes that the service industry can help it survive. How can the government be happy to see that the manufacturing has been moved to Asia and all we do here is buy gadgets.
Our government must invest in innovation (which cannot be bloody copied) and must help to develop the entrepreneurial mentality of the youngsters. Enough of everyone wanting to become Accountants, Doctors and Bankers. We need people to become Engineers and develop this country's industries.
The future of Europe & America doesn't look great if they think that only services can help support the economy. Asia will be a big competitor for the next few decades; the West needs to find ways (and not just a way) to make themselves stronger manufacturing and innovation bases.


Bubblegum.... 1:01 PM, January 09, 2012  

Long time? For a tiny creature who doesnt understand economics, the post was indeed very useful. Thanks!

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