Monday, February 20, 2012
Pension payments have been hit hard. This directly takes demand out of the economy, which is supposedly demand deficit. The restrictions are deliberate, as this fairly clued up pensioner points out, there are double the returns out there. So I wonder if as a policy tool pensions are now explicitly considered an inflation control, and are used as a demand control similar to interest rates i.e. lower pensions==higher interest rates. In which case government announcements of demand deficiency are purely propaganda, and we currently have no output gap possibly due to lack of investment in the means of production. Also by implication, there can be no stimulus now which is not ineffective and inflationary, so any stimulus argument is moot. So the only path out is tight belts and investment.