Britain faces deflation !!!

WTF?_2

posh*spice wrote: »

I think it's panning out alot better than expected. Many commentators expected the dollar and sterling to have collapsed by now and this has not happened. The government can easily afford to spend some money to get us through this dip. If I have a worry - it's what happens when economies all start to grow again and we are back to rising oil prices again " Peak Oil - The Dress Rehearsal" was a pretty horrible experience IMHO.

I have to admit that I would have expected the dollar to be trashed.

However, what seems to have happened is that people are looking for safe havens for their cash and the bigger the GDP of a country, the better their government bonds look.

Stay tuned to see what happens to Sterling though ... if we start seeing unsold bonds then it gets interesting.

Sir_Humphrey

baby_boomer wrote: »

40% of the education budget goes on administration.

A government which was prepared to trust the professionals could save money AND improve education.

I am in favour of allowing schools some more freedom over curricula and the suchlike, but allowing them complete budgetary freedom is rather naive to put it politely.

Bureaucratic controls are there for a reason (to stop people getting their fingers in the till).

I do not know where you get the 40% figure from. What is unquestionably true is that bureaucratic costs in the public sector are lower than for charities (they have to spend more to raise money) or the private sector (look at American healthcare, or the railways).

EDIT: Re money. Even Dr Bubb over on GEI has said that cash is king now.

baby_boomer

Daily Mail - Deflation is a real issue

Good for the DM for tackling a serious issue of concern to us all. Worth a read in full IMHO, for comparisons between UKlate00s and JapanEarly90s

"....We think the government's plan to inject capital into banks is sensible and there is some scope for additional fiscal stimulus. But the UK needs to be careful not to raise concerns about its ability to pay off its debt. A rise in government bond yields would undermine the recovery. This means monetary policy will need to work alongside fiscal policy to avoid a Japanese-style outcome.

While deflation should be avoided, a period of weak UK growth now seems inevitable. Household wealth has suffered a significant decline following the collapse in house prices and stock markets. This is likely to trigger a rise in saving...."

worldwheeler

There is lots of talk of government borrowing? Where does the government borrow these billions from? At what interest rate are these billions charged at? Anyone know?

baby_boomer

A combination of its own citizens and foreigners.

Both can buy government gilts.

If the £ starts to drop because national prospects aren't bright, it gets difficult to attract johnny foreigner except with exortionately high interest rates.

That's the same interest rates we're cutting to stimulate growth

worldwheeler

A combination of its own citizens and foreigners.

Both can buy government gilts.

If the £ starts to drop because national prospects aren't bright, it gets difficult to attract johnny foreigner except with exortionately high interest rates.

That's the same interest rates we're cutting to stimulate growth [/quote]

So, from this the UK public and/or foreign investors have bought government gilts to the tune of nearly £40billion in the last six months. So with a world wide lack of liquidity I still do not see where these trunk loads of money have come from?
Is our system similar to the US federal system?

baby_boomer

China, Asia and the Middle East have pots of money when they're not investing it our Footie clubs or gambling it on match fixes.

UK pension funds might also be after gilts.

The US has depended on foreigners bailing them out of a ballooning federal government deficit. To some extent that has depended on confidence in the $ as an international currency.

In the sense that the £ & the $ might be sold, I can see some comparisons.

neverdespairgirl

Sir_Humphrey wrote: »

If you have neither high govt debt and no personal debt, then the general populace live in poverty until the age of fifty in wattle-and-daub huts.

There was little or no govt. debt during the 18th and 19th centuries - the industrial revolution, where people didn't tend to live in wattle-and-daub. Govt debt such as there was tended to be for wars, not social spending.

neverdespairgirl

Sir_Humphrey wrote: »

Bureaucratic controls are there for a reason (to stop people getting their fingers in the till).

Doesn't seem to work!

http://news.bbc.co.uk/1/hi/england/london/3068271.stm

baby_boomer

neverdespairgirl wrote: »

There was little or no govt. debt during the 18th and 19th centuries - the industrial revolution, where people didn't tend to live in wattle-and-daub. Govt debt such as there was tended to be for wars, not social spending.

The 7 years war v France was a good war because we gained control of the seas and it was the foundation of the British Empire. That more than paid for itself. With the boot on the other foot, it was a cause of the French Revolution.

The Napoleonic Wars created a debt we couldn't quite get rid of.

Gladstone proposed an end to income tax in the 1874 election.

But he lost and Disraeli's foreign adventures cast it - and the debt - in stone.

Then we made the daft decision to enter WW1. Big mistake. Hello America.