The danger with addictions is they tend to become increasingly complusive. That might be one moral of this week’s events. A few days ago, expectations were sky-high that the Federal Reserve was about to reduce its current $85bn monthly bond purchases. But then the Fed blinked, partly because it is worried that markets have already over-reacted to the mere thought of a policy shift. Faced with a choice of curbing the addiction or providing more hits of the QE drug, in other words, it chose the latter.
In many ways this is understandable; the real economic data is still soft. But as investors try to fathom what the Fed will (not) do next, it is worth pondering a timely speech made recently by former UK regulator Lord Turner. As he told Swedish economists last week, and repeated to central bankers and economists in London this week, the real story behind the recent dramatic financial sagas – be that the market dance around QE or the crisis at Lehman Brothers five years ago – is that western economies have become hooked on ever-expanding levels of debt.
Daily Archives: September 19, 2013
Why aren’t young people buying cars?
Possibly the greatest cinematic celebration of cars and youth, American Graffiti, celebrates its 40th anniversary this month.
The story of California teenagers’ lives revolving around their cars rang true once but would seem hopelessly contrived if made today. Nowadays, increasing numbers of teenagers across the developed world don’t even bother getting a driving licence, let alone a car.
Car manufacturers are starting to fret that young people – the car buyers of tomorrow – are falling out of love with their products. Given the ageing populations of developed countries, car companies are desperate to woo as many young buyers as possible, and the thought that the crucial youth market might dry up is giving bosses sleepless nights.
To see how bad things could get, just look at Japan, where the pheno menon was first noted. A stagnant economy for the past 20 years, serious congestion and a youth market focused on products with plugs, not petrol, has led to a collapse in the Japanese car market. It peaked in 1990 at 7.7 million, and then fell steadily to a low of 4.2 million in 2011, before recovering slightly to 5.0 million in 2012 (mainly because of government incentives).