Thursday, September 20, 2012

Mervyn wants to be remembered in Economic History lessons

Mervyn King gives green light for George Osborne to miss UK debt target

"The Governor of the Bank of England suggested that it would acceptable for George Osborne to break his pledge on debt reduction due to the state of the world economy". Note: In his first Budget, Mr Osborne set himself two targets by which he wanted the markets to judge the Government’s commitment to stronger public finances. The first was to eliminate the structural deficit on a rolling basis over five years, and the second was to have overall national debt falling as a proportion of GDP by the 2015/2016 financial year. He said at the time that the second goal was needed “to place our fiscal credibility beyond doubt”. The Treasury is surely preparing to concede that it will miss the debt target when the Office for Budget Responsibility updates its official forecasts on December 5?

Posted by alan @ 10:32 PM (2336 views)
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18 thoughts on “Mervyn wants to be remembered in Economic History lessons

  • But he’s going to miss the target anyway, he doesn’t need permission…what a misleading presentation by the Telegraph.

    A more honest article would be King attempts damage limitation exercise as UK fails to control borrowing and government debt spiral continues. Also misleading to suggest that China’s economy is -currently- slow when so many pundits are of the opinion that China faces an incoming brutally hard landing, or to ignore the implied costs of state provision when unemployment is required both to control inflation and also to moderate the continuing trade deficit. Of course it would be totally unnecessary for Mervyn to suggest that either China or Japan dumping US treasuries would affect the UK through changing global real rates. Or the fact that UK financial system currently misallocates capital to avoid taking losses, so the funds for expansion are limited, or the swathes of bad debt generally in the UK. Or even that politically that we get ever closer to a an election with a possible Labour recovery with politicians who openly declare that the deficit is too low and must be increased to create “recover” ! Or the tipping point of Europe, unless Mervyn realises that the European debt crisis is solved and everybody else is making a fuss over nothing.

    The mountain is still ahead and the plane is still flying merrily on.

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  • Thecountofnowhere says:

    As a voter…I don’t give him permission.

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  • someone needs to be really brutal with spending and get us living within our means

    it will mean a big reduction in our life expectations,but what these people forget is that people can deal with this if they feel we’re all in this together(war spirit)

    roof over your head,job,pay bills bit of cash to socialise with family and friends

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  • taffee

    local councils need a massive haircut they are still spending like it is 1999 new years eve

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  • @2 Taffee
    What a dream !!!!! I would also like to see that. What happened to the concept of self sufficiency ?

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  • What Stillthinking says.

    Taff, but it doesn’t need “brutal” spending cuts, does it? That’s the whole point. Current tax receipts are what they are, and if we were merely to re-set the spending clock to 2003-04 and add on 3% per year inflation, then the annual deficit would be completely reduced to precisely zero. And I am sure that there was plenty of waste in the system even in 2003-04.

    Simple fact is, the entire increase in spending since before the ‘financial crisis’ and hence the entire current deficit is spent on corporate cronies, quangos, waste etc. The much vaunted increase in welfare spending was no such thing, it’s up a couple of billion perhaps, but it’s not like that couldn’t be covered by simplifying welfare and rooting out fraud (mainly in housing benefit and child tax credits).

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  • Mark, in 1999, govt spending was relatively small, it was less than 40% of GDP, it’s now over 50%.

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  • @5 house – self sufficiency lol.. No chance the population has been so dumbed down that it cannot make it own decisions in life or think for itself let alone be self sufficient! People need to know how to think, not what to think..

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  • The uk, both public and private are over leveraged. We need to go through a deleveraging process, which will be depressive to the economy, GDP will drop, a lot. The government is attempting to avoid this by releveraging the economy by blowing the next bubble in money itself, and thereby implementing a massive transfer of wealth through inflation. I doubt it will work, as the balancing act will be extremely hard to avoid un-intended concequences.

    however either way, the living standards of people in the uk will drop. All this gum flapping by the pols and merv is just to obfuscate that their best and only plan is the age old idea of printing of money, which although provides short term relief, has worked over the medium/long term approimately zero times.

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  • Guy’s can someone explain to me, How spending cuts work, when they print money “Lots of” to put out in the market to be lent as debt or fill the empty bank coffers..?? Am i missing something!

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  • MW it is a saying party like it is 1999 lol

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  • Mark, I was taking what you said literally, LOL

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  • Merv will be remembered as the BOE Governor who presided over the biggest boom and bust ever, who oversaw the collapse of the British banking system, who missed inflation target after inflation target and who aided and abetted government indebtedness of biblical bankrupting proportions…..and who never even had the human decency to resign.

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  • n2g
    That’s exactly what has happened: GDP has dropped a lot. So you want more cuts and further GDP drop?

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  • stillthinking, mw

    Plenty of funds are available for expansion; it’s just that the govt chooses not to use them, and the banks prefer to boost their balance sheets and buy assets with the proceeds of QE. As for “living with our means”, that is an expression (cliche) that applies to individuals, not necessarily to govts (except over long timescales, influenced by growth and inflation). One thing this country has a suplus in is hyperbole.

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  • LTF, I don’t do hyperbole, I was merely stating the facts – all that extra government spending is not on genuine public services or welfare or infrastructure or anything which is in any way of any sort of benefit to the general population, it is just money being stolen by mates of the government (Labour or Tory alike).

    As it happens, the waste theft/overspend is approx. equal to the amount of the deficit. I’m not too fussed about the deficit in the short term, we know that they don’t matter that much, what really winds me up is the blatant theft and misuse of taxpayers’ money.

    If – by contrast – they had kept spending at pre-crisis levels and simply cut taxes by £100 billion a year (halve VAT and halve National Insurance, for example), then the deficit would be just as big but at least those tax cuts are of enormous benefit to real people in the real economy.

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  • MW
    My accusation of hyperbole wasn’t aimed at you actually; should have put a semi-colon between the two last sentences perhaps.

    But you often refer to waste but never offer any real examples. As I’ve said before, I don’t doubt there is – but across all society, not just in public spending. It’s all very well talking about spending cuts, but we see the affects, often on the people who have the least – disabled claimants, for example. The magical component called waste never seems to change. It’s like saying, If only we could be perfect.

    The real waste in my view is the money overseas, the tax havens, the Jimmy Carrs, the “legal” tax avoidance, the Barclays tax dept (dismantled now by the new boss).

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  • MW if you cut back spending then tax receipts will be reduced and the deficit will be increased.

    This notion that there is some magical scheme to fix things is not true. The economy of this country has been shafted by bad government central planning. There are only painful options left. All further can kicking will result in more pain in the long term.

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