Monday, Sep 21, 2009

Anatole - very good at getting it very wrong

Times: Economic policymakers should sit tight until 2011

Some great comments at the foot of the page.

Posted by hpwatcher @ 08:55 AM (861 views)
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5 Comments

1. uncle tom said...

Anatole seems to think that economic growth will magically appear, without anyone actually doing anything to change the status quo.

Try to work a way through the dilemma of QE vs cuts in public spending, and the full horror of the predicament begins to emerge.

The BoE is devaluing the currency by over 1% per month to cover the budget deficit and the flight from Gilt ownership. That may not emerge as inflation today, but it presents an inflationary pressure that will emerge eventually.

Cutting public expenditure means propelling unemployment (although the procurement of foreign made goods and services could be cut with minimal pain). More unemployment means more benefit payments and lower tax receipts. The number of potential job losses that would arise from balancing the budget overnight is colossal.

The only way forward is to let interest rates rise, to create a genuine appetite for Gilts; so that borrowing can be tapered down in an orderly fashion; whilst preserving the integrity of the currency, and taking radical steps to create new employment.

Kaletsky's idea that the best solution is keep rates down and hope that things will get better would be disastrous.

The headwind of inflationary pressures caused by continued and unmitigated QE, would see both foreign and domestic owners of Gilts dump them in ever increasing quantities; thereby forcing even more QE. The currency would collapse and we would find ourselves with runaway inflation.

Monday, September 21, 2009 09:45AM Report Comment
 

2. tyrellcorporation said...

UT this is what happens when you get a 'democracy' which lives on short term lifecycles and can act like a dictatorship during those terms. I think the Swedes have a bi-partisan steering group/upper house which oversees elected governments and makes sure they don't over-burden future generations with excessive risk or debt. Gordon simply wants a mandate (he's not really PM without it) and he's gonna do anything to get it even if it means the economy will be shattered beyond recognition.

Monday, September 21, 2009 10:02AM Report Comment
 

3. icarus said...

er, Analtoe, what's the difference between Paulson's 'catastrophic' $700 billion bank bailout and Brown's ("to his enormous credit") getting European governments to "recapitalise banks and effectively guaranteeing all bank liabilities with the full faith and credit of their nations".??

Monday, September 21, 2009 10:22AM Report Comment
 

4. The Baldman said...

Does Analtoe exist or is he a ghost writer for our great leader?

Monday, September 21, 2009 10:29AM Report Comment
 

5. enuii said...

Me thinks Anatole should pack his bags a go back to Russia, mind you if he dished out his economic advice over there he may find himself wearing concrete overshoes!

Monday, September 21, 2009 11:16PM Report Comment
 

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