Economic woes continue to dominate the headlines here in Europe (as in the US). Solutions to the problems are less forthcoming. One thing is certain, once the dust settles, the implications arising from the problems will be far reaching. The European Union is under significant stress (especially the members of the common currency) and it conceivable that some members will soon be forced to leave the Euro. How it will all play out is impossible to figure out, but the likely scenarios mean that profound change is likely and uncertainty abounds. On the ground it is equating to reduced demand (as people squirrel savings away – despite historically low rates), increasing unemployment and nervous financial markets.
As if this was not bad enough, a leading Swiss bank UBS has recently announced losses of $2.3bn following the actions of a ‘rogue trader’. This loss raises serious questions about the risk management capability of large financial institutions, as well as the incentive structures for staff who are motivated to take large gambles with other people’s money. Of more pressing concern is the fact that bank losses from reckless trading continue to happen (losses sustained by Anglo Irish Bank are the main reason that Ireland is in such trouble).
The problems run deeper however, spanning all parts of society, as the widespread looting and rioting in the UK last month illustrate. Two articles in the London Evening Standard newspaper give some insight into the background of the rioters and offer a contrasting light on what goods are desirable for this group.
“On the worst night of London rioting almost every shop in Clapham Junction (London, UK) was ransacked – except one. The bookshop. In one of the most telling images of the summer, looters stole TVs, hair products and iPods, but the Waterstone’s branch was left untouched. What this free-for-all revealed better than any consumer behaviour poll could, is that many young people have no desire for books. Not even when they are apparently free. Source: Evening Standard
This short anecdote is highly instructive, suggesting as it does that the current generation of 18-30 year olds (the main group charged) have little interest in reading. (Of course there may be another simple explanation such as enhanced security at Waterstone’s -although I feel the above deduction is solid and the most plausible one).
On the opposite side of the street as it were, JD Sports Fashion, a sports apparel retailer was one of the favourite targets of ‘Britain’s rogue shoppers’ as it revealed that $1.1M of stock was looted in last month’s riots. Chairman Peter Cowgill declared that “The riots were a bit disturbing in some respects,” he says. “But I guess they demonstrate the desirability of our merchandise.” Source: Evening Standard
At the moment the outlook in Europe is pretty bleak and business plans are being updated to reflect this uncertainty, or to put it another way; they are being ‘downgraded’ to reflect more modest growth projections.