re 1st para, quite right.
cf John Redwood's blog on Ms Truss's radio interview this morning for more.
comma is in the wrong place - should be after "merry".
Would they recognise our altruism if we stay in?
It's a ratchet.
It's a racket.
The public finances are now too constrained to sustain any "Growth Strategy" other than via longer-term supply side considerations. For "growth" to alleviate the deficit it has to reduce the spare capacity in the economy, i.e. come from the short-term demand side. But, quite obviously, this cannot come from the public finances because government expenditures and revenues are both being driven in the wrong direction in an attempt to close the deficit. So the stimulus to (short term) growth must come from the monetary side of the economy, i.e. the Bank's programme of "quantitative easing". QE could work through wealth effects on consumer spending, or through stimulating private investment, or through a weakening of the sterling exchange rate. The last of these three channels seems the likeliest prospect, though it has a flavour of the beggar-thy-neighbour policies deplored by the finance ministers in Seoul yesterday. Had we ditched sterling for the euro we'd now be with the piigs, deep in it.
Asset sales may reduce the debt but they don't affect the deficit - the primary deficit, that is. Sure, the reduced debt means reduced interest payments, but the big problem is ongoing government current spending and transfers. Your blog sometimes reads as if you are happy that it is set to rise in nominal terms throughout this parliament.
Reply: I am just trying to describe what is actually happening, instead of all the misleading spin in the media. I have identified various areas where I want less governemnt and less spending.
Hard budget constraints are a good thing. They encourage efficiencies and innovation in all areas of life. That helps longer-run growth. But there is the difficult temporary side effect of unused or underused resources, i.e. unemployment, to overcome. We need imaginative policies to oil the creaking labour and capital markets, housing included. Spray-hosing QE money around will either just loosen the constraints which force us to work better, or create inflation. It may even do both.
re NickM: The inflation target is a point, 2%, not a range (0 - 2%). The BoE says "inflation below the target of 2% is judged to be just as bad as inflation above the target".
I understand “systemic risk” to be the chance of a run on the banks arising from customers’ loss of confidence in fractional banking - what we glimpsed in 2007 with Northern Rock - and the likelihood of contagion throughout the banking system. In the UK we don’t have a statutory cash reserve ratio, so our banks are free to choose (prudentially) how much cash to keep to meet requests for withdrawals. Do you think a statutory minimum cash reserve ratio should be brought back in?
Agreed - it's a forty (plus) year old scam against consumers and taxpayers.
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