Monday, Jan 12, 2009
Borrowing difficulties
Times Online: We may want to borrow but will anyone lend?
This article contains the interesting question first proposed by the "brilliant" keynesian Richard Khan in 1937, "is it an increase or a decrease of saving which would stave the crisis off?”
Apparently there is no answer. My own admittedly simplistic view is that spending creates jobs so anything that increases spending should be able to do the trick, which leads me to conclude increase disposable income. As far as the original question, either an increase -or- a decrease should do the trick. The status quo is the killer. Ideally both an increase and decrease at the same time from different elements of the population. That money has to keep swirling around. Of course that doesn't help the UK if we don't make desirable goods and have a trade deficit.
3 Comments
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1. stillthinking said...
Also making the point that the UK is faced with borrowing in Sterling, as nobody funds a declining currency.
2. plato said...
Increase spending,Yup...... Allow house prices to drop by 2/3rds........... Raise interest rates......... Lower taxes (will happen anyway with HPC)...........Encourage manufacturing and local agriculture and markets............Develop alternative energy sources........
3. Denzil said...
"My own admittedly simplistic view is that spending creates jobs "
Agreed! That is why the govt, at the taxpayers expense should have considered an economic stimulus, either via tax cuts or direct investment that would have resulted in jobs. Instead, they pumped billions into the banks to prop up the banks balance sheets.