Economics cycles

A wonderful graphic from the New York Times can be used to show what happens to growth in two dimensions:

x-axis: growth over the past 6 months (extremes show sharp swings in output, or sudden drops).
y-axis: annual growth - long term trend (actual rate of decline in the economy).

Looking at that version of things, everything will be fine.

However, and this point was missed by the Economist's Free Exchange, this graphic suffers the same flaw as did the option-pricing model of Long Term Capital Management. That flaw, is that it only takes into account recent recessions, and so is unable to correctly predict the current, more serious one.

In other news, the markets have lost their shine (perhaps I'll post again on them, but not today).

Christian Lacroix goes bankrupt

The famous fashion house files for bankruptcy.

What will Joanna Lumley make of this?

A solution

El Pais has the solution:

"I'll count to three, and when you wake up, you won't remember anything that's happened, and you'll go back to buying houses and investing in the stock markets." (Own translation).

ECB still throwing stones

Imagine this crisis as a plane bombing the global village (which here is represented by an actual village). It approached the US first (I guess their house overlooks the town from the side from which the bomber approached, but that isn't important), and they threw everything they could at the situation, starting with dramatic cuts in interest rates (from 4.75% in September 2007 to 0-0.25% in December 2008, where it has remained ever since). It is not zero precisely due to technical difficulties with maintaining rates at that value (what they set is a target rate). They have since bailed out the banks (TARP, TALF and various other programs) culminating (or perhaps not) with the stress tests that most of the leading banks passed, according to reports today. They also had a massive stimulus bill in their budget, acting as a boost the economy. This, in my metaphor, amounts to firing every available anti-aircraft weaponry at the plane.

In Britain, we were slower to acknowledge the threat. In July 2007 rates were raised to 5.75% and only started dropping in December 2007, finally reaching 0.5% in March 2009. We lead the way on "saving the world........'s banks" and also had a "stimulative" budget, running a whopping 12% deficit for two years. This amounts to using all available anti-aircraft weaponry, except starting with lower stocks. Consider also that Gordon Brown did much of the shouting about the peril we were all in.

In Europe, they are still throwing stones. The ECB started cutting rates in October 2008 from 4.25% and are STILL cutting, and in a position to cut rates. Today they went from 1.25% to 1%. Given that European economies are suffering every bit as much as British and American ones, it beggars belief that the ECB hasn't done more, sooner. Euro-zone governments have been less forthcoming in their stimulus packages too, although in Ireland's case it is because potential lenders won't give them any money. They must be assuming that the Americans, Brits or possibly the Japanese, Chinese or others will shoot this plane down for them. Put simply, they aren't doing their bit to help defend us all from a decade of penury.

Why printing money doesn't necessarily cause inflation

Paul Krugman, most recent Nobel laureate for Economics, shows on his blog a lesson from Japan on how increasing the money supply, even by very large amounts WILL NOT CAUSE INFLATION IN A LIQUIDITY TRAP. The key graph I'll include below.

Whilst during a period of inflation, such a monetary expansion would have made things much worse, in a situation like Japan's since 1990, or the Western world's since last summer, it is all you can do to prevent massive, destructive deflation.

As ever, the Onion knows the way forward

Nation Ready To Be Lied To About Economy Again

Includes such gems as:

"[A]n overwhelming majority of citizens said they believe that, during these
extremely uncertain times, our leaders have a responsibility to come
together,
sit the American people down, and lie through their teeth about
everything from
misappropriations of taxpayer dollars to the severity of the
credit crisis."

Or,

""Please, treat me like a child. Treat me like a five-year-old," Sacramento
resident David Cooke, 64, wrote in a letter to Congress."

This will almost certainly be quoted by other, more respected Economist bloggers. I'll edit this post to link to them, then.

Why banks might need further support

In 2006, and more so in 2007 (until "the bubble burst") houses were being bought and sold at unprecedented prices. Many other assets were similarly "overvalued", simultaneously. How is this possible?

Firstly, let's start with the money supply. It has formed a bit-part of political vocabulary since the days of Reagan and Thatcher, and in Economics a little longer. Many laymen would first think of the money supply as what exists in coins and notes.

In reality this amounts to a tiny proportion of total money. To this can be added all money that is instantly accesible, in the form of current account deposits, and overdraft allowances (you have this money, since you can spend it instantly at no great cost to yourself). A precise definition of what should and shouldn't be counted as money isn't available, instead we have several measures, which reflect things you can trade with differing degrees of ease.

Ultimately, lots of money can be created through leveraging. A bank receives a £10000 deposit, and is permitted by law to lend £9000 out. This £9000 is spent, and the recipients then deposit it. £8100 of this £9000 is lent out in the same manner as the £9000 originally. This process repeats until £100k has been deposited. This is how much can be created with leverage ratios of 10%.

In a boom, it is essential for banks (from a competitive sense) to lend as much as possible, and so they extend their leverage, keeping, say 5% in house, so that £10k can become £200k instead of £100k. As leverage increases, so does the money supply.

A similar procedure occurs with houses. Where a minimum deposit of 20% prevails, prices are low, because fewer people can afford the house, reducing demand. When this requirement is reduced to 5%, people with only a quarter of the means can suddenly afford the house. This naturally increases the price, and so encourages banks to reduce their requirements (if prices are rising, defaults are rare, so deposits are less necessary).

However, when "the bubble bursts" or faith is lost, the required deposit surges cutting the number of people who can afford a house, and therefore house's value. Now the owner can't sell, even if they wanted to, simply because the leverage requirement/limit changed.

As banks deleverage, it is important to increase their "capital base" artificially, since moving from 5-20% whilst maintaining the same money supply (important to keep the economy going) requires a QUADRUPLING of the banks stocks. And a 20% holding is required in crisis periods, because people are more likely than usual to withdraw their money at short notice.

That is why the banks needed the support they've had so far, and will possibly continue needing more. I don't have their balance sheets, and am uncertain as to how "de-levereaged" they want to become, so I can't be sure HOW MUCH money they'll need. It is also why we use the credit crunch term to describe the cause, rahter than just the nature, of the crisis.

On the crisis

New design for Rejkavik toilets.
Steve Bell on, well figure it out for yourself.
Chris Riddell on the response to the budget.

Budget 2009

Budget day and there are some key headlines:

1. Top rate of income tax to be 50%
2. £2000 incentive to scrap 10 year old cars
3. Borrowing to hit £175bn
4. Return of the fuel escalator
5. Changes to ISAs and pensions
6. Lots of other changes

I'll address each in turn below:

50% income tax - In 1988, Nigel Lawson (now Lord Lawson) cut the top rate of income tax to 40%. New Labour have always mentioned in campaigns that they wouldn't increase the top rate of tax. Last November, however, Alistair Darling announced a new top rate of tax for people earning over £150k per annum. This was to be 45% and to take effect in April 2011. It is this tax that has risen, and been brought forward. Now it will be 50% from April 2010. Several other adjustments, to minimise deductions for high earners mean that anyone earning in 6 figures will lose (however this is not many people).

Scrapping incentive - This is not a £2000 subsidy, as implied. Nor should it be confused with the £5000 incentive to buy green cars from 2011, that was announced last week. The government will only put up £1000, with the rest coming from the automobile industry, and will only apply to new cars. So not as generous as it sounded.

Borrowing - The largest peacetime deficit ever, even as a percentage of GDP. In fact only the Second World War sent the budget deficit higher. What is more, 2010/11 will be almost as bad as 2009/10. Over the 5 years whose deficits were announced a whopping £703bn. Which is more than a few. Realistically, the interest on that debt (given yields of 4% over the long term) amounts to £28bn per year forever, unless of course surpluses are run for the forseeable future (recent events have shown that period to be nil, but I speak figuratively). I still think this is the right thing to do, although I'd plan for lesser deficits in 2012-15 than Darling does. Having said that, it won't realistically be Labour in charge by then, so it is someone else's decsion to make.

Fuel escalator - 2p per litre come September, then 1p per litre ABOVE INFLATION every April for the next 5 years, subject to "keeping an eye on fuel prices". Empty promise of green policy, in other words.

ISAs - currently the allowance is £7,200, of which only £3,600 can go into a cash ISA (cash ISAs are lower-risk and lower-reward, except when things go like they have recently). These limits will be increased to £10,200 and £5,100 from next year (unless you are aged over 50, in which case they increase come October - if you turn 50 this winter, your allowance increases on your birthday). This will encourage saving, at a time when people were increasing their savings anyway. At some point I may explain in detail my view on taxing savings interest, but in principle I oppose it, so welcome this increased allowance.

Pensions - For the so-called super-rich, pension credits have been cut. If you earn over £100k you will face a higher marginal tax rate, until your average pension credit drops to 20%, where it remains (rather than the 40% it used to be, and remains for incomes in the £40-100k range).

Other - ask the Beeb. It has a personal budget calculator. Apparently I'll be slightly better off, although that comes mostly from increases in the allowances in line with inflation.


Market response: FTSE up 1%, pound down 1.1% against the dollar and 1.7% against the Euro. That implies that "the markets" believe Darling is doing the right thing, but that those debts must be paid for somehow (hence the drop in the £s value). Most importantly those changes are no greater in scale than usual daily changes, so the Budget was in line with expectations.


Final note: This blog will now focus on Economics. All new F1 related posts can be found on my new blog, the power of 15000 horses.

Markets this week 14-17 April

Another short week, in that Easter Monday reduced the available time for trading on either side of the Atlantic. No major changes in any of the measures I follow, details below:

FTSE: 4092.8 (up 109.09 or 2.74%)

DOW: 8131.33 (up 47.95 or 0.59%)
£: $1.4797 (up 1.36¢ or 0.93%)

£: €1.1345 (up 2.17¢ or 1.95%)

Oil: $53.3 (down 76¢), £36.02 (down 85p) or €40.87 (down 16¢) per barrel of Brent Crude

Gold: $870.5 (down $9.50), £588.29 (down £11.94) or €667.42 (down 54¢) per Troy oz.

Below is a graph showing trends in the value of oil and gold. The methodology for my indexing is as follows:

(1) The weekend price of each commodity is calculated in each currency by dividing the dollar price by the appropriate exchange rate.

(2) These commodity prices are then indexed, such that the mean value over the recorded period is 100.

(3) The weekly value for each commodity is calculated by a simple average of the three index values for that week (the value for $, £ and €).

Two main points to note:

1) From December through to February, the gold price was consistently rising, whilst the oil price was much more volatile, with a slight upward trend interrupted by big falls. This reflected a general lack of confidence in the world economy, and in the currencies, too.

2) The highest value gold achieved was in the same week as a trough for oil. This correlation is more than mere coincidence. The timing doesn't coincide with any *particular* announcement (it happened before the G20 summit, for instance) but Obama's mortgage bailout plan was annouced the following week, and one of the UK's bank support schemes was also announced around that time. Neither seems to have "turning point" power to it, so perhaps I'm forgetting something. Nonetheless, ever since, oil has been rising and gold falling - both sure signs of confidence increasing.

Thoughts on the week: no news is good news.

Google hits count: "because of the credit crunch" scores 237,000 whilst "despite the credit crunch" manages 305,000. Take that, pessimism.

Irish cancel Christmas

The Irish budget was annoucned yesterday, and as usual for Irish budgets, it got little coverage in the British news. Compared, say, to a UK budget. This is entirely reasonable.

It is generally very contractionary, which makes sense only if Ireland believes itself to be near bankruptcy. One feature I found less than friendly was in the social welfare expenditure section. A €171m saving is being made by:

Removal of provision for a Christmas bonus payment in 2009.

Which, to me, amounts to cancelling Christmas.

Half a US Great Depression, every bit a world one

The first half of the title comes from Paul Krugman, in his comparison of this recession against the Great Depression, finding it half as bad (how big does something have to be to acquire capital letters?). It should be noted that the peak date presaged a long slow decline, which is important for comparing the implications with those below).

The second half of the title comes from this report, hat tip to the Economist's Free Exchange blog.
In summary, for the world as a whole, industrial output is falling in just the same way that it did in 1929-30, the stockmarkets are falling FASTER as is the volume of world trade (albeit from a higher base, but without the help of protectionism). They also assess the policy responses of leading economies and find that central banks were equally slow (6 months after peak industrial production) to cut rates, but that they have cut them further, despite starting from a lower base (this uses the Fed, Bank of England, ECB and the central banks of Japan, Sweden and Poland, and although it doesn't explicitly say it, I must assume Germany and France for the earlier response details - it says 7 countries). It predicts that policymakers won't repeat the 1931-2 error of hiking rates to maintain gold parity (or these days, dollar parity). It shows also that the money supply (this time across 19 countries, I assume this disparity is due to data availability) had risen far faster over the period 2004-08 than in 1925-1929. They believe that the money supply has continued to rise (despite quantitative easing, this is not automatic, since most money is created through lending, not printing) which it didn't in 1929 (before catastrophically collapsing in 1931). Finally, they show that fiscal stimuli offered by governments have been much greater than they were.

Basically, they summarise that the situation is FAR worse than 1929-31, but that our collective response has been much better, so things might end up worse, or not quite as bad as the 1930s.

My view: we're doomed (but then I'm not very good at prediction).

Updated baseline scenario

Tired of partial explanations of what's gone wrong and what is being done to fix it?

Baseline Scenario have updated their description of the "baseline scenario" that forms the basis of their analysis of what is occuring.

Key points: Situation a little worse than they suspected it to be last time, Obama policies well-meaning, internally consistent but misguided, and that the US situation is more significant than any other.

This would be perfect, to me, except for the last point (see next post).

Psychology of a crisis

An article in yesterday's New York Times gives a very interesting account of the importance of understanding mood and psychology, and particularly their role in creating crises such as this one.

Robert Schiller writes about a paper delivered by Larry Summers in 1989 about a fictional crisis set in 1991, where a stock market boom had led people to believe that recessions would never return.

Euphoria gripped the investors of his fictional universe. “The notion that
recessions were a thing of the past took hold,” Mr. Summers said. He added that
over a 15-year period through 1990 — a time that included the 1987 crash —
investors earned an average real return of 11 percent. The popular view was that
“with a reduced cyclical element, the future would be even brighter.”

Much of the story mirrors what has happened in the past 2 years in reality. Handily, the paper's author is now director of the White House's National Economic Council, so is well placed to treat the patient, but, of course, that requires the agreement of many politicians, with differing worldviews and motives.

Here's hoping.

The markets this week

Whilst daily updates on the state of the stock markets, and currency and commodity markets can be useful, they can often mask trends.

Therefore, every week (when I remember) I will publish here the change from Friday close to Friday close of the following: FTSE, DOW, $/£ rate, €/£ rate, Oil price, Gold price (using offical $ rates and unofficial translations into £ and €).

FTSE: up 56 points or 1.46%
DOW: up 497.8 points or 6.84%
£: down 1.39 US cents or 0.96%
£: up 1.19 Euro cents or 1.12%
Oil: up 11 US cents, 42 pence or 88 Euro cents
Gold: down $30, £14.55 or €7.81

My view: FTSE flat, DOW up (mostly thakns to $1.2tn toxic asset purchase scheme) are both news of increased optimism on the markets. The falling £ is a bad sign (as I think economic recovery globally would lead to a recovery of the £) - but having said that, the € fell by more, which might imply great market confidence in the US recovery plans.

Oil rising and gold falling are both signs of increased optimism.

Why are AIG workers quitting?

For those who are angry at those earning "excessive" amounts at nationalised companies, I suggest reading the following resignation letter, from an AIG employee, published (here: http://www.nytimes.com/2009/03/25/opinion/25desantis.html?_r=1) in today's New York Times:

I am proud of everything I have done for the commodity and equity divisions
of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit
default swap transactions that have hamstrung A.I.G. Nor were more than a
handful of the 400 current employees of A.I.G.-F.P. Most of those responsible
have left the company and have conspicuously escaped the public outrage.

I suggest reading the whole letter, which puts clearly the point of view of those who feel betrayed by the lack of defence the bosses of these firms are offering.

I must say that it is still easy for him to say, given that he can afford to "give up" $700k. But I still believe such views should be widely heard.

Did the Kinks predict this mess?

Well, clearly, no. But I was listening to some of their music today, and it reminded me of current news. 20th century man (particularly the middle of it) reminded me of complaints over civil liberties. http://www.youtube.com/watch?v=mrmQB38aT5U
The Money Go Round explains in greater detail than a Robert Peston blog how credit derivatives work. http://www.youtube.com/watch?v=HCkmbD75a6U
Low budget would be another song to remind of the shift away from M&S towards Aldi and Lidl (and of course, the demise of Woolworths) http://www.youtube.com/watch?v=0HEW5bXqKbU

Fundamental problems

Axiom 1: Never depend on someone who won't be able (or willing) to help you out in a crisis.
Axiom 2: Fool me once, shame on you. Fool me twice, shame on me.
Axiom 3: There is no such thing as a free lunch.

These clearly aren't all simultaneously true axioms (held as self-evident) as people believed that they could get a free lunch (house prices continuing to rise inexorably) or that if they failed, that someone would be able to help them out (AIG, perhaps?) Finally, the government bailout of banks (some of them are asking for a third dose) which doesn't require change in management (or even fundamental strategy).

Markets, over 20 year cycles certainly can get fooled again (credit crunch, dot-com, LTCM, etc all valued products above any rational analysis).


Some people are now questioning the ability even of governments to pay up. http://money.cnn.com/2009/03/23/news/economy/us_aaa/index.htm Ultimately, sovereign bonds (loans to countries of various durations) are the safest loans you can make. They even offer "index-linked" loans, so that you can guarantee your final payment in current prices (as the face value of the bond increases with inflation).

If people are now doubting the ability of the USA to pay its debt, then who can you trust? CDS (credit-default swaps) on US bonds currently charge 16 basis points (1.6%, which "usually" is typical of a company, not THE most trusted borrower in the world, ever). Who is buying these products? If the US defaults, do they seriously expect to be bailed out for the fact that their counterparty (the guy/firm/crook) who sold them the insurance (for that is what a CDS is, although it needn't be tied to possession of an asset at risk) to be able to pay out?! Would the dollars they receive be worth anything in a situation as bleak as one in which the US government reneged on its promises to pay? No. So, why buy them? Answers on a postcard (or carrier pigeon, if the postal service collapsed, too).

Dominic on bonuses

Another imported Facebook note, also written in early February. I only wrote two of the planned "mini-blog" notes, which augurs badly for this actual blog, but hey, here it is.

Sorry, another note that fails to include 25 things about me. I'm sure you're all/both devastated. Anyhoo, I'm now going to unleash the second of my "a few" notes in this series. Topic, as in the title is bonuses.

Why bonuses?
Simple, they've been in the news lately.
Bonuses, in my view are a valid tool for persuading people to do their job properly. Not in all situations, but certainly in some. Ultimately, in many jobs, once you're in there's little making you work hard, except the hope of promotion or the desire for a good reference. From an employer's point of view, neither is a great way of making a large workforce work hard. Promotion can only be offered to so many people, and references are what you give to employees who have just left. This is why they offer performance-related pay.

How should they be?
Well, in a situation where your job has a very simple "success" measure (sport: winning trophies, most businesses: making money) then a logical pay scheme would offer you enough money to get by, plus a (hopefully) generous bonus for the profits you bring into the company. So far, so good. The trouble is, that company profits aren't straightforwardly £1 per transaction or £1m per transaction. They take into account costs for which an individual employee isn't responsible. Also, some work is more profitable than others and so forth. Also, not all companies make profits, even if some of their departments do. How do you even define the profits generated by the accounts department?
Therefore, some companies offer bonuses based on the firms performance, whilst others do so more on the basis of individual results. The first case is barely an improvement on basic pay (it has the advantage of being cheaper when times are tough). The latter case will encourage departments to be as profitable as possible (but perhaps at the expense of others). This is where the current situation comes in.

Current situation:
About a month ago, Northern Rock hit the headlines (again) when it offered staff approximately £9m in bonuses. This caused outrage, given the huge debt the bank owes to HM Treasury. It amounted, however, to about 10% of annual earnings for most staff, well down on the 60% that might have been available, according to documents in the public domain 4 months ago. The bonuses were paid because staff were exceding expectations in repaying the debt (allegedly by foreclosing on record numbers of houses, more on that in a minute) and so were rewarded for doing their job well.
Northern Rock famously had a bad set of loans on its books when it was nationalised, so it is only natural that many properties were due for foreclosure. I'm willing to believe that the bank was foreclosing on a lower proportion than usual of "underperforming" loans. Even in the current crisis, debt is debt, and must be paid. Eventually, and to someone.RBS has now raised further ire by offering its (much larger) staff up to £1bn in bonuses. In some cases, its staff are contracted to "minimum 100% bonus" - this I don't understand (why not just increase basic pay?) In other cases, its staff work in highly profitable departments (RBS is a VERY large firm) and in some cases, well, expectations must be met.
Basically, I feel that only some of these can be justified, but even those that can, shouldn't receive their bonus. Ultimately, if the best footballer played for a poor team, they wouldn't win, he wouldn't get his bonus. The team (RBS now, metaphor almost over) is failing, don't give the stars their bonuses.
Having said that, about 100,000 to 150,000 of the 177,000 staff son't actually earn all that much, and who am I to begrudge them an extra £1000 to £3000. An unemployed person, dammit, so begrudge them I shall.

Moral of the story:
Signing contracts you can't fulfill is idiotic. Gettting paid to lose money sounds like a nice job, if you can get it. And, if you get it - won't you tell me how?

Dominic on Economics

Another note imported from Facebook. Written in early February.

I'll probably be writing a few of these over the next week or two, and they'll probably be about as interesting as each other (ie yes to me, and maybe to some of you). In other words, a blog-lite.

Anyhoo, what with economic crisis affecting much of the world (and providing my first retort to "why are you unemployed") the profession/science/study/field of economics has come under some criticism.

1) Why wasn't the crisis predicted?
Well, it was. There's an old line, that economists have predicted 87 out of the last 5 recessions. This is inevitable in any field of prediction: I personally like to compare it to meteorology. After all, we've had snow predicted for us many times and it doesn't always end up happening. Also, the 1- or 2- day forecasts are usually accurate, whilst the 10-day forecast is only a little better than saying it'll be the same as today's weather forever. In economics, the predictions go slightly longer, but are just as reliable. Not long ago, the predictions for 2009 indicated solid growth. Now they predict a long recession. 2008 was worse than predicted, some years end up better.

2) Internecine fighting.
Forgive me, I wanted to use a long word. Many economists have been suggesting a large "stimulus" package to boost demand across the economy. Others say that the resulting debt will cause more uncertainty and undermine the effort, rendering the stimulus impotent. Unfortunately, media organisations feel the need to report both sides of disagreements (global warming, anyone?) so those advocating little action, or criticising actions are given much media spotlight, regardless of the merits of their case.
Of course, that is not to say that I am in complete support of every action undertaken by the UK (and US, German, French, Japanese, etc.) government(s). However, the question: "was this the right thing to do?" is a tough one to answer. Firstly, as time goes by, more information is uncovered about quite how bad the situation is. Secondly, the counterfactual "what if we hadn't done it?" can never be shown. Imagine, if you choose, that the government had (as suggested by Vince Cable of the Liberal Democrats) nationalised Northern Rock at the first sign of customers queuing outside the building. This would have shown decisiveness, and might have helped. But ultimately, that can never be proven.

3) Economics is not a proper science.
This last point is important to consider when evaluating economics' claim to be a science. No double blind test can responsibly be run on any macroeconomic question*. Microeconomic questions can be studied, using techniques from psychology and so called "natural experiments". Policies can be partially implemented, trialled in certain regions, and the effects of the policy can be controlled against the area or group who felt none of the effects of the policy.
For how to deal with an economic crisis worse than anything in the past 75 years (at latest estimate) how can anyone expect a double-blind proven response? The study of rare medical conditions is probably an appropriate simile here. There are only so many countries, and so many recessions. In all cases, the causes of recession are different (even if similar - high commodity prices, collapse of an industry, war, famine, hyperinflation can happen too).
Ultimately, nobody knows what will happen next, nor do they know the consequences of certain policies in a situation where most banks are crippled by bad debts and Knightian uncertainty (Donald Runsfeld's unknown unknowns). However, some people are in a better positon than others to make "best guesses". These are the experts, the Nobel-prize winners, the professors of economics at the top universities and the chief economists/economic advisors of major organisations (OECD, governments, UN, World Bank, IMF, etc).
Their opinion should be given a stronger weight than that of generic backbench opposition MP. Not the other way around.

4. Study it at university?
I did. Which is why this note reads as it does (I've tried to avoid jargon, and probably failed) and probably why it is being written at all.
I thoroughly recommend it to anyone with the vaguest interest. The current crisis doesn't render all that has ever been learned before meaningless. It does, however offer a chance for more to be learned (and revisited - Keynes et al).
However, having studied it hasn't helped me as much as some other subjects might. Such is life. Given the information I had at the time, I made the right decision. However, I won't† study a Masters. This is because I think a specific professional qualification would be more useful to me now.

Final thoughts:
Like I said, the subject has come under attack of late. That is to be expected (Biology would come under similar attack if millions were mutating, instead of becoming unemployed). Bringers of bad news are seldom welcome, so those predicting disaster aren't usually welcomed (the phrase "don't shoot the messenger" exists for a reason). Discussion and debate are common in any field of study (especially in those so immature as economcs) but these facts do not render the answers brought forth worthless.

As I said at the beginning, there will probably be several of these, addressing fields vaguely related to my "expertise". Read at own risk, no responsibility is claimed for your wasted time, if you so feel. Correspondence will, however, be entered into, so feel free to comment.

* That I can think of, off the top of my head.
†Probably