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The Masked Tulip

How Could The Deficit Reduction Plan 'work'?

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No answers. Just an observation. All the projections and opinions in that blog can be knocked sideways by how people feel about the future.

I've noticed in past recessions that the fear stage lasts about a year. After that people get fed up with worrying and just carry on as normal. I think that's pretty much what is happening now.

I'm not any more worried about losing work than I was before the Spending Review. I've got used to the idea that there is no point worrying about the future, you might as well just get on with the present.

In terms of staying sane, and maintaining a balanced view of life and the world, this site is not a healthy place to hang around. Compulsive though.

Edited by Let's get it right

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It certainly is brain-aching, but the last paragraph is the most interesting bit, I think.

"It leaves me asking the question - to make the austerity work the way it's intended to, will they have to adopt a vigorous modern form of protectionism, aggressively promoting trade, tanking the currency, printing money and manipulating the cross-border labour supply?"

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Sounds like he is trying to be clever, in a not to subtle attempt to criticise the government's spending plans. Rambling poorly presented and barely readable. I am very glad I am not a license fee payer after reading this article.

This interested me in particular:

"A 1% fiscal tightening brings 1% cut in demand plus a 0.3% rise in unemployment"

This seem to be contradicted completely on another BBC blog using real data from the last 12 months.

http://www.bbc.co.uk/blogs/thereporters/stephanieflanders/2010/10/working_the_numbers.html'>http://www.bbc.co.uk/blogs/thereporters/stephanieflanders/2010/10/working_the_numbers.html

Also

http://www.bbc.co.uk/blogs/thereporters/stephanieflanders/

"The honest answer is that we don't know. But, on the government's side, remember that the primary government deficit - the gap between spending and revenues, before debt interest, has fallen by more than 3% of GDP in the past 12 months (see my post of 13 October for the precise details). By that measure, fiscal policy has tightened more in the past 12 months than in any single year of the government's plan. But somehow, the economy has managed to grow by 2.8%, roughly its long-term trend rate."

The assumptions about the effect of public spending on growth, jobs from the IMF are nonsense. They do not seem to take in to account the size of the deficit or the % of the economy made up by government expenditure at the start point. The rest seems to be rambling.

The spending cuts are a con. Spending is increasing every year. They are not cuts to total expenditure.

(http://www.ukpublicspending.co.uk/)

They have not saved Britain from bankruptcy, they are not even radical. Had labour been in power they would have been nearly identical.

We would be hearing the Tories criticising labour for their irresponsible spending plans no doubt.

At least I would not have to read such utter tosh though.

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I remember in 1993/1994 there was similar doom and gloom when the deficit was 8% of GDP. Virtually everyone was prediciting that the rebalancing of the economy towards exports needed to give sufficient growth to reduce the deficit was impossible. Then by 1997 we were doing well.

Is there any reason why this can't happen this time?

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No,

Wait and see - we can have internal growth as well as export growth.

Let's see what happens to the euro/dollar/yen/yuan.

and then ultimately it doesn't matter because personal experience will distort everyone's experience of the recession and the aftermath.

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I remember in 1993/1994 there was similar doom and gloom when the deficit was 8% of GDP. Virtually everyone was prediciting that the rebalancing of the economy towards exports needed to give sufficient growth to reduce the deficit was impossible. Then by 1997 we were doing well.

Is there any reason why this can't happen this time?

Completely different points in the credit cycle.

http://en.wikipedia.org/wiki/Kondratiev_wave

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I remember in 1993/1994 there was similar doom and gloom when the deficit was 8% of GDP. Virtually everyone was prediciting that the rebalancing of the economy towards exports needed to give sufficient growth to reduce the deficit was impossible. Then by 1997 we were doing well.

Is there any reason why this can't happen this time?

The US is in at least as bad a situation as the UK now whereas the tech boom that supercharged the west was just about to kick off there in 1994. Unless you sell to China, and even that is precarious, it will be many many years of deleveraging and below average growth.

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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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