The Great Austerity Swindle
I have learnt so much about macro economics in the last year! Yesterday I was spouting off that austerity was a bitter pill no electorate was going to swallow. Well except for the Irish may be.
Today. on the radio, there was a guy who was touted as a bonds trader in London. He pointed out that so far the Government of the UK hadn't really started to cut spending but had just raised taxes instead. He recognised that governments had to cut their borrowing but the markets wanted to see growth too. His suggestion was that there should be deregulation and tax cuts now with a medium term outlook to cut spending.
Which is just about what I have said all along. Mind you I pinched the idea from the IMF website!
The point is that the markets, when buying bonds look not only to the spending of the government concerned but also to the growth of the economy. They are likely to see more profit if the economy borrowed against is on the up.
It would seem that the coalition has decided to be neither one thing or another. Neither a tax slasher or a spending slasher. Just raising taxes cools the economy. The government need to get the GDP back to 2008 levels and beyond if it is to ever start to get to grips with its borrowing.
So what is to come from our coalition? I have no great confidence that the conservative side has any great desire to change much. It has a built in excuse, if it all goes pear shaped then they blame their partners the Lib Dems. I reckon they are on a hiding to nothing. Sure they have at last got themselves into government albeit by the back door, but come the next general election I think they will find they are going to be not only cast adrift by the Conservatives but by the electorate also. The ~Conservative side will say their hand was stayed by those awful Lib Dems etc etc.
So another 3 years of no growth are on the cards unless it happens all by itself. This is possible of course. Industry in this country however has not been a go getting, advancing, strident achiever since Victorian times. Blame unions if you like. You could blame a rather stilted banking system (there is no such thing as venture capital in the UK). New ideas get bogged down in a catch 22 of not getting money because the product is not tried and tested and not getting itself tried and tested because they can't get any development money.
My other suspicion about the character of private industry in this country is that it is too interested in the "bottom line". We seem to be traders first and foremost. Profit and loss is king.
We all know that in terms of cost the far east can comfortably out cheap the whole world. The only way we can make it work in the UK is if we can be seen to add value. The products we make should have "added value" i.e. be innovative or highly engineered. improve our technology. It is after all one of our strengths. For now. The Chinese are working on that too!
Invest in new and innovative technologies. Support our ideas people. Our uni's, our thinkers.
Getting venture capital is a problem, always has been in my memory. Step in the government? providing a nurturing environment that will enable technology to thrive. they could start to throw some venture capital around. I am guessing of course but 1 billion pounds buys a lot of development and is only a drop in the nations ocean of finance
Here is an example for you.
these people are not asking for mind boggling sums either - well not for a government anyways
the development of the plane part would not be so difficult. We have probably carried out a large chunk of the research into faster than sound aircraft with the development of Concord. So come on, lets get with the program
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