Sunday, Sep 20, 2009

Deeper recession in the offing?

Observer: The Tories are wrong to talk about cuts in public spending

A warning that deep cuts will deepen the recession

Posted by letthemfall @ 12:13 PM (1907 views)
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21 Comments

1. drewster said...

The Tories have a political need to slash-and-burn as soon as they enter office. Six months of swingeing cuts followed by four and a half years of regrowth gives them better chances of re-election than five years of drip-drip cuts.

I find it interesting how the left (mainly the Guardian) constantly emphasise the need to carry on spending. If we spend constantly then nobody will want to buy UK govt bonds or even Sterling, and the currency will plummet yet again. Conversely though, unemployment would remain low under such a scenario. If you are poor, you care more about having a job than the value of the pound. If you are wealthy though, you care more about maintaining that wealth. This seems to explain the Left/Right divide when it comes to spending/cuts in the present situation.

Sunday, September 20, 2009 12:44PM Report Comment
 

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3. taffee said...

everytime you go to an underperforming department you rip it to shreds then take the credit as it begins to grow again

unless you are stupid...david cameron may as well cut for england blame it on blair/brown then take credit for the turnasround which will follow

Sunday, September 20, 2009 01:44PM Report Comment
 

4. letthemfall said...

drewster
Fair summary, and really a precis of the Tory outlook. For a better and fairer society the low unemployment emphasis would seem the one to follow. Recall 1979 to 1982 and the result of public spending cuts. In my view there will need to be some cuts and some tax rises, the latter in particular for the higher paid, as indeed is going to happen.

The notion that the private sector pays for the public is ingrained in this country, yet is a curious misrepresentation. Wealth is not directly about tax revenues or public deficits but the work done by the population. If one contrasts certain public and private activities, say education and health on the public side, and clothing production and restaurants on the private, where might there be too much economic activity and too much money spent? I don't think many would argue there is an oversupply of health care or teaching. One could argue there is too much clothing produced, and that restaurants are overabundant, however. I would never claim that some money is not ill-spent in the public sector, but I would argue that much activity in the private sector produces little of value. The public sector is very expensive, and nothing will change that unless we put up with lousy public services, from which the poorest suffer the most. We have a public sector because its activities are considered too valuable to be left to the private sector to provide to only those who can afford them. The public sector will always be expensive because it produces great value. The young, healthy and rich may not see that so clearly.

Sunday, September 20, 2009 02:35PM Report Comment
 

5. paul said...

Cuts in public spending (it should be remembered that one of the major ways of injecting money into the economy is through public sector projects outsourced to the private sector) would undoubtedly make the recession much much deeper.

The real crime of the government here is not failing to cut spending now but failing to save when times were good.

Sunday, September 20, 2009 02:39PM Report Comment
 

6. Superruss said...

Lets get one thing clear: we cannot extract any more tax from the private sector. Everyone seems to have forgotten that there is only so much you can tax a population before market forces kick in and people go elsewhere.... Cuts are part of every recession and to pretend we are better off without them this time round is the same kind of pretense that got us here in the first place.

Sunday, September 20, 2009 02:45PM Report Comment
 

7. taffee said...

my shareclub has debated this very point for months now,and despite ben bernanke saying he studied the great depression etc etc...the fact is the only solution is for it not to happen in the first place

Becasue it was not stopped and no pain taken,there really is now no solution

Sunday, September 20, 2009 04:04PM Report Comment
 

8. clockslinger said...

lethemfall...bang on. The real wealth of a country is the sum total of value added by labour in the widest sense, and as per John Ruskin, such a measure of added value is meaningless unless it takes into account the human effect..ie, amount of happiness, fulfillment and social "good" produced by any given amount of money or effort. Unto This Last ought to be mandatory reading right after Adam Smith on any economics course.

Sunday, September 20, 2009 04:34PM Report Comment
 

9. uncle tom said...

The markets know that the present government is dead in the water, and that little will change between now and the election.

However, once the election is won, the incoming government has to present a convincing agenda for pulling the economy back into balance; one that does not involve inflating our debts away. If they fail to act convincingly, confidence in Sterling will plummet.

The notion that we can build off the back of stimulus packages and a colossal debt build is now pie in the sky. The only thing bigger than the govt's deficit is the rate at which the BoE is printing cash.

Spending has to be cut, and dramatically so. However, the consequences of doing so are going to be a big problem..

..Cameron will be damned whatever he does..!

Sunday, September 20, 2009 04:44PM Report Comment
 

10. Mehani said...

With all this money that BoE is printing spare a thought for all the trees that need to be sacrificed. If anything, this is adding to global worming. An Earth IR satellite picture from above will show how hot BoE is getting!

Sunday, September 20, 2009 05:33PM Report Comment
 

11. mander said...

Recovery in the housing market is not needed. It is wrong to talk about recovery and think of housing recovery. May God give some brains to Cameron to realise how uncompetitive we are in the global economy because we are speculating in the housing market too much and loose focus in the real economy.

Sunday, September 20, 2009 05:37PM Report Comment
 

12. The Equalizer said...

Taffee was very close when he said there is no solution, there is a solution but it will be painfull for everyone .....the good an the bad.

Both the public sector and the private sector create wealth, teachers in educating our children and the NHS in making us well when we fall sick. Business make money to grow the economy ..

The problem as I see it are that there are may who do not create wealth of any sort. they are inefficient and wasteful and probably well paid. These people exist in both the Public and Private sector.

The Crunch / Recession has started to remove many of these from the private sector. Many are still there and many good "value adding " people have lost their jobs and their ability to contribute as well.

I believe we now, need to look beyong Keynes and seek also, to remove the those that don't contribute from the Public sector. This is the only way we can hit the bottom and start to build our economy again.

Can any of our political parties achieve this ?

This isnt going to easy or fair and it will create the second inevitable stage of the depression but is it not the only way the economy can start to build ?

Sunday, September 20, 2009 06:03PM Report Comment
 

13. japanese uncle said...

Home Office staff were officially warned not to eat in front of their fasting Muslim colleagues during Ramadan – in case it made them feel hungry.

Read more: http://www.dailymail.co.uk/news/article-1214691/Dont-eat-near-Ramadan-fasters-Home-Office-staff-told.html#ixzz0Rfb47mU9
------------------------------

They should cut the payroll for the bean counters doing non-job like this first. But in reality teachers at the front will be sacked instead.

Sunday, September 20, 2009 06:47PM Report Comment
 

14. dbc reed said...

Its hard to understand why the recession is so bad: there are loads of people with variable rate mortgages who have been gifted hundreds of pounds extra per month thanks to lower interest rates.Why are n't they out keeping shops open with a bit of a spree? But they prefer to pay down their mortgages instead, or something equally anally retentive.If this goes on much longer it may be time for paying people with neo-Gesellian cashpoint cards which lose all their remaining value if not spent by the end of the month.
Also why is quantitative easing money being channeled to the banks only?They only hoard it.It would be exactly the same in principle and practice if the government created credit out of nothing and used it to pay for the public sector.No more inflationary.
I don't want to be governed economically by a chancellor who was ritually dropped on the head by other members of the Bullingdon Club in his youth.

Sunday, September 20, 2009 07:58PM Report Comment
 

15. Spanish Nick said...

I never ever thought I would see the country bought back to pre margaret thatcher and dennis healey days, just pray to god the electorate to do brown what they did to Major.

My business would most defo benefit from an increase in sterlings value

Sunday, September 20, 2009 08:10PM Report Comment
 

16. rumble said...

Lol @ JU! If that isn't an example of the nanny state...

Sunday, September 20, 2009 09:09PM Report Comment
 

17. mystie010 said...

Well JU Post 13 - Well I don't think it is fair that they should get to have a lovely sun tan all year round when I can't have one cos of the lousy weather we are having in this country at the mo!

I was really cross at this article because I worked with a lovely Muslim lady who always observed her fast and I told her I felt awful eating in front of her and she told me that it wasn't a problem at all and to stop worrying. My comment above was not designed to be offensive in any way it was designed to show how stupid the legislation and rules have become and sadly I don't think the people who make these silly rules really care about how Muslims feel I think they just want to wind everyone up to believe that there is a problem when there isn't one at all! Thanks for pointing that one out JU it is just another reminder to me how crazy this country has gone! We are all being played for mugs!

Sunday, September 20, 2009 11:15PM Report Comment
 

18. uncle tom said...

Mehani,

Aside from the fact that the money 'printed' is almost all in electronic form, have you ever wondered how many trees have been used to create our banknotes?

It's a good quiz question, as the answer is none.

- All British banknotes are 100% cotton !

Sunday, September 20, 2009 11:33PM Report Comment
 

19. drewster said...

dbc reed,

The newly-minted money isn't just going to the banks. The BoE has been buying gilts - i.e. printing money and lending it to the government - since last February. Details here:
Telegraph: Bank of England will buy gilts to boost economy [12 Feb 2009]

Sunday, September 20, 2009 11:40PM Report Comment
 

20. japanese uncle said...

mystie010

These (unwanted/uninvited) self-appointed representative of the Muslims indicates how much redundant resources really exist within the government. They have nothing more worthwhile to do, unless they intend to willingly create hatred against the Muslims, as pointed out by some of the readers.

Monday, September 21, 2009 12:09AM Report Comment
 

21. This comment has been removed as it was found to be in breach of our Blog Policies.

 

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