So, we have a Fiscal Charter that sets out a promise that this government plans to shrink the UK economy in perpetuity.
And which promises that however good an investment will be for the UK the government will never undertake it if it involves borrowing.
I noticed my friend Danny Blanchflower calling on George Osborne to list all those serious economists who think these are good ideas last night.
I think this would the first of the serious challenges George Osborne faces with this Charter, although I suspect he will not deliver to Danny.
The second, more serious challenge will be in trying to deliver the surplus the Charter demands.
Much more worrying still us the damage Osborne will cause when trying to do so, most especially if the UK does face an economic crisis between now and 2020.
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If aurplus is achieved, then at least in part some of it will be done by tricky!
Let’s look a Canada:-
http://www.reuters.com/article/2015/09/14/canada-election-budget-
idUSL1N11K0PC20150914
http://www.bloomberg.com/news/articles/2015-04-06/canada-to-sell-final-73-4-million-shares-of-gm-from-bailout
Now which of our National assets will Mr Osborne sell off to try and achieve this goal?
To be honest I think that this future failure is being set up in order to justify more planned cuts to social spending for the 1000 year Tory Reich on the basis that we ‘cannot afford it’.
So here’s a big question: How can ordinary citizens organise themselves in self defence from the actions of such an aggressive Government who is actually causing them harm?
A government whose representatives tell them that they do not work as hard as the Chinese (which is true in one sense since the Chinese have now got all the jobs that we no longer have!!).
It’s their monopoly (duopoly?) of money which gives them this power. So, don’t use their money. Create local currencies, alternative ones, and use them instead. Use scrip, grow food locally. Become independent of government and the banks as much as is possible so when money is withdrawn the effects won’t be so severe.
What will you pay your taxes in, Bill? VAT on your transactions? Council Tax? TV License? Income tax?
What do you think you’ll be paying them in anyway when the money supply’s cut off? We used to live off the land and from centuries ago that’s denied us to enforce the use of money, generally available through work. Now work’s being increasingly denied and so is payment for work actually done. Also Osborne’s proposing to endlessly shrink the money supply itself, leaving us unable to support ourselves from the land, unable to support ourselves through work, unable to support ourselves with money in the form of UK pounds at all in fact as we’ll have none. And you’re worried about taxes?
What a country where national economic policy appears to be based on the dumb adage “never a lender or borrower be!”
The only way Osbourne has managed to cut anything from the deficit is by selling off public assets.
It is a policy of insanity. Osbourne sells off income producing assets, ensuring much less money in the economy in the future and guaranteeing more deflation. If there is no borrowing undertaken, they will be forced into more sell-offs, public sector cuts or tax rises to raise the money. The resultant cuts will mean more redundancies, meaning less income tax paid, resulting in less money coming in, resulting in a balance of payments crisis, resulting in more cuts, more sell-offs…..and on and on it goes.
This policy is insane and Osbourne must surely know this. The only way he got out of the economic mess he created was to borrow in order to be able to balance the books.
Without full employment or strong investment for the economy to fall back on, committing the to a surplus, or zero deficit, is suicide.
There is a reason surpluses can’t be maintained. It is because it is impossible to keep them going in a country that needs debt to create nearly 100% of its money supply.
“This policy is insane and Osbourne must surely know this.”
I doubt it. In any case its manifestly not insane from a rentier perspective. 90% on treadmill while rest syphon without production.
@RichardMurphy – Richard, do you have any inside scoop on why jeremy corbyn was voting FOR the fiscal charter. Isn’t his panel advising him that its that the charter is a macroeconomic shot in your own foot? And why is John Mcdonnell’s decision so controversial?
Is Corbyn’s politics that Cameron will try to deliver the surplus but will not be able to because of the UK economic situation, which he can then use to gain political power in the next election, because the UK people right now think that surplus good, deficit bad? But if that’s true, Corbyn’s willing to make people suffer till the next election?! So confused :S
I have to make clear I have no way of answering that question
I am not advising the Labour team or Jeremy Corbyn on these issues
I did not advise on this issue
Jeremy Corbyn used a lot of my ideas in the summer
I like the fact he has an economuc advisory panel
I suspect they share my broad economic view
As I understand it John McDonnell’s decions were on political tactics, not economics
I really can’t add much to that
I’ve said it before: George is a POLITICAL chancellor.
As long as the policy is good [to the chancellor and, maybe, the tories] it will be done.
Bearing in mind that the general publics knowledge of economics only runs to household economics, and that the [not much]newspapers are certainly playing music george likes to hear…
This is now a closed country for news…
So one may ask how come after 5 or more years of this type of economics the BBC never challenges it on their news or economic analysis; unless you can get the public broadcaster addressing these issues you are doomed to be over run by a Tory Party and Press Hegemony. To me its as if the debate has never reached the BBC agenda – this is no small matter because Labour lost the election on two issues: the unpopularity of Ed Miliband and its economic competence. For the vast majority of us not spending beyond on our means is what our tabloids and BBC are telling us. The BBC seems to tell us that day in , day out.
Are there not 375 billion in QE bonds (407 billion market value at Q1 2015 – http://www.dmo.gov.uk/documentview.aspx?docname=publications/quarterly/apr-jun15.pdf&page=Quarterly_Review) owned by the DMO subsidiary of the BoE. The coupon payments of which have already been paid back to the treasury. Of which 21.9% are Ultra-short (0-3 years) with another 21.7% 3-7 years. Should be at least 100 billion maturing over the next 5 years. As they mature, rather then purchasing more bonds as they currently are (and actually extending the effects of QE), maybe they’ll just pay the money back to the treasury/Gov (it does own them after all) allowing them to produce a surplus as well as paying down the national debt – double whammy – smoke and mirrors.
Not quite sure about the accounting implications are of this!!! i.e. the 375 billion was printed/created as central bank reserves.
The policy so far has been to roll over QE by using the funds paid on redemption by the BoE to buy new gilts
I would rather that money was used to capitalise a National Investment Bank
So Richard does this mean in general terms that the Govt will never borrow to invest. In ‘household economic analogy speak’ a young married couple must never borrow money to buy a house, they should have the money up front?
The moronic charter only applies in normal times, does it not?
But that is ridiculously defined
Interesting, from a historical view…
http://fabiusmaximus.com/2009/01/30/stimulus/
This needs a careful read…….and even more thought!
https://radicaleconomicthought.wordpress.com/2015/10/07/economics-of-the-bullingdon-boys-wealth-funds/
The next stage of wealth extraction…using public service pension funds as feedstock for the financially inept and foolishly ignorant?
There is no reason why returns cannot be paid, as on gilts
But the logic needs to be worked through