Monday, Oct 20, 2008
Darling's wrong: we can't spend our way out of recession
MoneyWeek: Darling's wrong: we can't spend our way out of recession
The government wants to borrow billions to spend on big projects to get us through the recession. Nice idea in theory, says John Stepek, but too much borrowing is what got us into this mess in the first place.
Posted by damien @ 11:16 AM (524 views) Add Comment
13 Comments
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1. nooneo said...
No but they can spend this country into a right fine old mess. They will try, but they have already borrowed so much money that their ability to start many major projects will be limited by an already massive public spending budget and silly little things like the Olympics. Remember this shower brought in Home Information Packs at almost the same time as the bust started. They are bereft of real ideas. They should've built a few hundred thousand council houses but then they wouldn't have been able to milk every penny outta the proprty boom, but then they would only fill up with people on benefits, like the road building projects simply fill up with traffic. They are not socialists, they are charlatans and racketeers.
The Labour party are running out of ideas simply because there is no further room on the fag-packet !
I bet Cameron and the old etonians are dreading having to take over in 2010. By that time the tories get in I reckon the blubbermint will have resorted to using Buckingham Palace as a brothel and Princess Michael of Kent will be giving lap dances.
2. mountain goat said...
It was always a certainty that they would try spend their way out of this. Modern economics and all that, keep people spending, discourage saving... They will only change their minds if it all falls apart badly. This crunch might be the big one that changes the world but it will take some time yet. They will try their best to avoid this, the only way they know, spend money we don't have.
3. Rimmer said...
As if the UK has any money left ( naturally crash Gordon didnt put any aside - prudance my Ar*e ), NULabour is just like OLDLabour borrow and spend and just hope somehow it gets repaid, i just hope the UK PLC Mortgage he has arranges is at good rates
4. Chilli said...
Great article.
Keynes point about mass public spending is really about re-liquidating the markets. Makes sense in 1929 when currency implosion removed so much from the market. However in today's economy, liquidity has given us the illusion of profit for a long time. When everything is properly valued, we might find that the UK enconomy is has been degrading for years. Its makes sense when you consider how many people are engaged in doing things that are utterly pointless. There are 3 estate agents within 10 minutes walk from where I live, in the Isle of Dogs, I might add. Hardly a happin'n spot. Industry has decreased for years. Government spending is up. My point is that liquidating this market is perhaps just fueling (or prolonging) the illusion.
5. nooneo said...
The blubbermint are a bit like all those adverts promising to cure baldness, give you a 10 inch wanger, or allow you to "please thew ladies all night long".
Instead of protecting us against the Sh!t hitting the fan, they are simply producing more and more of it by the day.
I think it's called policy making, but I'm not sure.
Remember Ed Balls and Yvette Cooper have just convinced a commons investigation that their London home is their second home so that they can claim more in expenses for their expensive London pad. These people are just bottom feeders.
6. stillthinking said...
Aren't the 'bond vigilantes' meant to put a stop to all this by refusing to buy government debt?
7. maddison said...
I certainly second the comment about the govt spending so much on non productive bureaucrats.... They will be easy to trim then!
8. ontheotherhand said...
Good article. I'd add to his argument to wonder how exacly the private sector will come back? Private sector growth needs entrepreneurs to build businesses confident that if their efforts pay off, they get to keep most of the proceeds. Why would anyone want to start a business now knowing that the government is going to be in such enormous debt they will windfall tax anything successful at the same time as letting the pound slide further and inflation go up to erode their debt?
9. Andyh said...
Hahahaha
Borrow and spend lots of money to make us feel richer but devalue the pound, push up inflation and make us poorer instead. The only people who win from this scenario are those with massive debts.
Their other policy of stopping repossessions won’t work either. Stop repossessions and the financial risk to banks increases. Banks price risk so they increase borrowing costs and ask for even bigger deposits. Doh.
10. str 2007 said...
This article has it spot on. They've overspent in the good times and having nothing but more debt to offer.,
We are already struggling with the weight of interest on our current debt levels.
UK are about to become the worlds tenants.
We'll have trapped ourselves in a lifetime of debt with no prospect of owning anything as we've pawned the lot off never to be reclaimed.
11. Crashwatcher said...
If its a choice between borrowing money to pay for millions of unemployed or borrow money to bring forward capital projects a) that would be built later anyway, b) keep the building industry from complete collapse c) employ lots of people who would otherwise be drawing money on the dole.
Surely this is a no brainer,
12. baroo said...
I agree with all of the above, but isn't national debt historically quite low at the moment? (see page six of this doc: http://www.ifs.org.uk/bns/bn26.pdf)....or is it.... (http://www.thisismoney.co.uk/news/article.html?in_article_id=415067&in_page_id=2).
13. str 2007 said...
baroo
I think the figures get so fiddled that no-ones quite sure what we're working to as a measure.
Is the measure of debt against GDP the same as it was in the fifties or have NuLabour managed to move a chunk of the debt 'off the balance sheets' so what we are now camparing looks good on a chart but doesn't reveal the truth ?