Martin Wolf in the FT, today:
To eliminate the fiscal deficit, without another recession, prolonged economic weakness, or both, the UK must generate a surge in net exports and in corporate investment. To my amazement, conventional forecasters believe such huge shifts are even probable. Yes, they are possible. But why would one expect an investment surge in an economy currently some 13 per cent below its pre-crisis trend?
Well worth reading.
As he makes clear, the chance that Osborne has got things right is the square root of something very close to zero.
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I think it is closer to the square root of -1
The royal wedding will keep such nasty views out of the limelight for a few days, Richard, but Wolf, Larry Summers and you are right: ‘expansionary fiscal contraction’ is not just oxymoronic – it is the policy of morons. Still, we should know by now that the suffering caused by the adoption of economic experiments of this kind never much (if at all) worries the economists who promote them – or the academics who promote this kind of guff to people such as Osborne, Cameron, Balls and co while at Oxbridge. They will all go on to lucrative careers after their time in politics ends, respected by their peers for ‘making tough decisions’, while the majority of us pay the price for years to come. Ah, Britain – land of increasing priviledge and inequality, all dressed up in a brightly coloured flag.
Agreed
Wholeheartedly
A few reasons could be rock-bottom interest rates, a huge (though decreasing) budget deficit, and a 25% reduction in the value of sterling. We shall see, soon enough.
And we’ll impose chaos on the NHS as a result – when actually as Martin Wolf has argued today our capacity to borrow to spend to get out of this is unlimited?
You’d rather people died for Obsorne’s desire to destroy the NHS when it’s very obvious the cuts aren’t needed. Is that what you’re saying?
You asked me aquestion. Why have you deleted my reply?
Because you convincingly proved your comments aren’t worth publishing or answering
Note comments policy
There is zero chance of an export-led recovery in my view – we simply can’t compete with the likes of China and India. Regarding corporate investment, I would have thought there was little point in stimulating corporate investment directly when the real problem is lack of demand in the economy. Surely it would be more sensible to loosen fiscal policy so that people on average incomes – who are the majority – have a little more spending money? Millions of people each spending a little more into the economy should give quite a strong economic stimulus, really, which would increase GDP and reduce the deficit. Much more effective than direct investment in business or public sector in my view.
I would also point out that the pre-crisis economic trend was built on a credit bubble that has burst. We should be very wary of rebuilding the credit bubble. Economic growth founded on debt – public or private – is not real.