| Topic: | Re:Re:Re:Re:Re:It's official: back in recession | |
| Posted by: | Sam Hearn Cllr | |
| Date/Time: | 24/05/12 14:41:00 |
| Thanks for your long and very interesting exposition (several posts back) of how "we" got into the mess that we are currently in. By and large I agree with your analysis - in many countries the original problem was huge unregulated private debt. In the UK of course as in Greece our problems were compounded by a structural budget deficit that Gordon Bronw decided to run. In most countries the private debt has however magically become public debt - this can be seen most obviously in the case of bankrupt banks being nationalised. There are other more sophisticated routes to the same end - private debt transmuted into public debt. However, you have missed the point of what I wrote - my contention is that your suggestions for how we get out of this mess do not "hold water". How we got into this mess and how we get out of it are two very different matters. You still have not adequately answered my key question, which is how do you deal with the structural budget deficit? Just how much growth will be required to make any difference and would this by any chance be growth in the public sector which would of course be funded by more taxes or more debt (growth by definition could only fund a small part of it and the only in arrears. One thing is for sure this Government has not dealt with the deficit, indeed the state debt and the annual deficit will increase this year - but then it was part of the five year plan! But maybe you think that this deficit budgeting is a good thing because it increases/sustains aggregate demand? Strangely it would appear not. You believe that a "dash for growth" funded by even larger deficit budgeting would somehow reduce the deficit to such any extent that we could begin repaying debt. I am sorry I just do not buy that one. In reality, any additional government spending or tax cuts after the initial impact are simply lost to increased imports, repayment of private debt and default private saving. Yes, these are frustrating times but I do not think that we should delude ourselves into thinking that there are easy answers or that we are "masters of our own destiny". Some French people may swallow that one but are we really that simple. If there is any misleading going on it is coming from the likes of the French President and other believers in Santa Claus. Who knows maybe Frau Merkel will oblige ... |