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Halligan Again Urging Action On The Deficit

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http://www.telegraph.co.uk/finance/comment/liamhalligan/7728768/Welcome-History-Boys-but-now-show-courage-to-face-deficit-cuts.html

The Tories' pre-coalition plans, such as they are, imply a tightening of 4.7pc of GDP by 2015-16 according to the Institute for Fiscal Studies. But even if these proposals end up halving the UK's huge annual deficit over the next five years, the overall stock of national debt still doubles from around £750bn to £1,500bn, resulting in ever-rising sums of taxpayers' money being wasted on interest payments. Coupled with that, of course, there's more than £1,000bn of additional liabilities parked off-balance sheet, related to public sector pensions and the grotesque private finance initiative.

I'm not saying fiscal consolidation is easy. I'm not saying that both Cameron and Clegg aren't going to have a tough job keeping their respective Parliamentary parties on side. But that's why both men, and their various lieutenants in Parliament, need to stand up and, rather than just hinting, actually explain just how serious this situation is. If the Con-Lib coalition does so, in the flush of current approval, the vast majority of the public will stiffen their resolve and back them – helping to keep unruly party members in check.

Yes, public sector unions will scream blue murder at spending cuts. Certain factions will take to the streets. But that will make most voters even more certain the painful course of action is right. The British people are not fantasists – but that's how our politicians treat us. The UK's deficit – the amount we borrow in a single year – will be around £160bn in 2010/11 and for each of the next three years. Spending reductions of £6bn amount to rounding errors – and even those savings are now being diluted, before they've been achieved.

Those at the top of this "historic coalition" need to stop playing political parlour games and display the courage and determination to take tough, decisive action. The five-year agreement is hopefully a precursor to this. Much rests on the shoulders of the Business Secretary, Vince Cable, and Chief Secretary to the Treasury, David Laws – two of the Lib Dems now in the Cabinet. Both men of genuine integrity and intellect, I'm pleased they're in government. The reality is, though, that the party they represent is still spouting Keynesian tosh.

During the election campaign, Brown used one line more than any other. "We need to maintain government support, or we will threaten the recovery," our then Prime Minister endlessly repeated. Yet "keeping the money in", as the Labour campaign crib sheet instructed, simply amounts to taking on even more state debt – at a time when extra borrowing could tip the UK's finances over the edge, sparking a sovereign default.

Such an outcome is far from impossible. It's where we're heading unless we take radical steps. The result would be spiralling interest rates and a fully-blown economic collapse – an outcome involving not only higher economy-wide borrowing costs for a decade and huge loss of national prestige, but also a great deal of human misery and dangers of serious social unrest.

Do smart Lib Dems really believe that the very marginal benefits of extra "government support" out-weigh the dangers posed by borrowing even more? I know they must keep party activists happy until they "seal the deal" but the reality is that the audience that really matters are now the faceless ranks of the UK government's creditors. So profligate have our elected politicians been in the past decade, and so parlous our current position, that democracy has been undermined.

The economic warnings signs are flashing red. With Europe in danger of Greek sovereign debt "contagion", eurozone leaders are now warning monetary union could break-up in a desperate attempt to weaken their currency and keep European exporters afloat. Gold reached an all-time high last week, surging through $1,230 an ounce before hitting Eu1,000 – a clear sign of inflation and serious turmoil ahead. The UK has printed more money and taken on debt faster than any other major economy on earth. With the British election now over, sterling is in currency traders' cross-hairs.

Against this backdrop, the "History Boys" have a choice. If this coalition's leadership displays courage, and articulates a coherent strategy, then if could work both economically and electorally. Tory dominance will reassure the all-important financial markets. Yet drawing on the deep and honourable tradition of "British Liberalism", the Lib Dems could provide political "cover" and keep the Tories in check – reassuring the public that reining-in the state isn't an ideological exercise, but an act of absolute practical necessity.

If this coalition instead follows the Blairite model of refusing to do anything before convening focus groups, while relying on endless committees and inquiries to kick difficult decisions into the long grass, then it will fail. Dismally. Were that to happen, this country's entire economic and financial trajectory would deteriorate very significantly. Future historians would wince.

Another decent piece from Halligan.

A fiscal crisis seems an odds on certainty for the banana republic UK economy.

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There may well come a tıme ın the not too dıstant future where any asset other than paper ıs better.

Gold, anyone? :unsure:

The fear is being turned up that is all; when some stability returns to the euro, gold AND usd will selloff. Then all of the old theories will be revisited and tweaked, only for the macro picture to change again.

Write off the euro and be long usd forever? err wait until goldman et al change their targets. Games and more games until one day some politician has enough courage to tell it like it is, or rather enough people start to listen.

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Yawn. There is going to be an emergency budget within 50 days and also a review over the next 3 months to figure our which areas the cuts can fall. How can the conservatives do anything faster than this? Interesting comments by Cameron this morning about the BBC. The top brass must be bricking it.

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Another decent piece from Halligan.

A fiscal crisis seems an odds on certainty for the banana republic UK economy.

Yes, Halligan is good, knows his fundamentals, and were not brainwashed by the pseudo-Keynesianism of the past few years.

( Yes, "pseudo", as the original Keynes recommended government budget surpluses/savings, in the good times, and deficits/stimulus in the bad times. He never recommended deficits during the good times, and even deeper deficits in the bad times! )

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Yes, Halligan is good, knows his fundamentals, and were not brainwashed by the pseudo-Keynesianism of the past few years.

( Yes, "pseudo", as the original Keynes recommended government budget surpluses/savings, in the good times, and deficits/stimulus in the bad times. He never recommended deficits during the good times, and even deeper deficits in the bad times! )

he changed his tune all the time

he was a salesman for government intervention and a master of spin - reminds me of Mandelson

and how can the government have savings it has no money

Halligan should have wiped the floor with that Keynesian fan on Newsnight last year - but he didnt

anyway they havent got a cat in hells chance of getting the necessary cuts through until that is the market forces it

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Yes, Halligan is good, knows his fundamentals, and were not brainwashed by the pseudo-Keynesianism of the past few years.

( Yes, "pseudo", as the original Keynes recommended government budget surpluses/savings, in the good times, and deficits/stimulus in the bad times. He never recommended deficits during the good times, and even deeper deficits in the bad times! )

I always like his articles. Straight talking, some might even say simplistic.

I remember a few months ago a video of him and Hugh Hendry mocking him was posted.

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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