60 Economists support delaying cuts.....

StevieJ

stueyhants wrote: »

I was referring to the scrapage car and boiler schemes, VAT and employing extra PS workers last year. This money will not be returned later and I'm arguing it has been a wasted opportunity and could have been used to promote long term growth rather than postpone pain to a retail/consumer sector which is based on a ‘boom’ level of spending. Do you think otherwise?

You could get cars cheaper before the scrappage scheme VAT was a major player though, it was a technical injection of funds into the economy.

kabayiri

Isn't it weird how we have 2 camps of economists saying how making cuts now / later will send the right/wrong message to the markets.

Key words here ..the markets.

Where are the spokespeople for 'the markets' saying what they would/would not support? If we choose not to make any real cuts until 2011, and mid-way through 2010 confidence from 'the markets' collapses then so much for our plan.

chucky

Wookster wrote: »

I haven't read the letter, though I would be surprised if it mentions the crowding out effect.

Its all well and good to run huge deficits while QE is under way as it does not reduce the funds available to corporates (and individuals) to borrow but after QE is suspended the government will be competing directly with corporates and individuals for the limited funds available to borrow.

Quite how individuals and corporates can compete without a significant increase to the rate, I don't know. I suspect that huge amounts of government borrowing will make it much harder for corporates to borrow, invest and undertake productive activities.

experts are thinking otherwise - they're probably a bit better qualified

Fears that the the government may soon be unable to fund its record budget deficit are probably overdone because of new rules obliging banks to hold more gilts and sterling's status as a reserve currency.

"If we bypass the political risk, gilts look decent value: bank regulations, pensions regulations, a higher saving rate and lower growth during the transition to a better fiscal position are all positives for the UK market," said Ian Pizer, an investment director at Standard Life (LSE: SL.L - news) which manages around 15 billion pounds of gilts.

Having its own widely traded reserve currency will also help to attract overseas investors, not least because the pound's weakness has made UK assets much cheaper to buy while a gloomy economic outlook should help underpin safe-haven flows.

http://uk.finance.yahoo.com/news/fears-of-gilt-market-blowout-are-overdone-reuters_molt-bde075434d48.html?x=0

abaxas

chucky wrote: »

experts are thinking otherwise - they're probably a bit better qualified
http://uk.finance.yahoo.com/news/fears-of-gilt-market-blowout-are-overdone-reuters_molt-bde075434d48.html?x=0

Qualifications are useless in any field, practical experience always trumps it. All we have proven is that having more bit of paper makes you potentially just a right or wrong as the next.

As proven over and over again in this crisis, the experts have zero idea what is going on.

chucky

abaxas wrote: »

Qualifications are useless in any field, practical experience always trumps it. All we have proven is that having more bit of paper makes you potentially just a right or wrong as the next.

As proven over and over again in this crisis, the experts have zero idea what is going on.

these are the guys looking to buy the gilts - they're a bit more than experts.
they see value in them.

StevieJ

stueyhants wrote: »

The VAT cost of 12bn could have built 000s of new homes, power stations etc. When you think of the lost opportunity its quite sad.

Interesting, a great deal of the 12bn went into the pockets of UK businesses in reduced taxes handed over to the Govt, probably saved some from bankruptcy. Never had you down as a Keynsian maybe we could have not bothered with the VAT and done the opposite or increased corporation tax and built even more homes and power stations.

abaxas

StevieJ wrote: »

Interesting, a great deal of the 12bn went into the pockets of UK businesses in reduced taxes handed over to the Govt, probably saved some from bankruptcy. Never had you down as a Keynsian maybe we could have not bothered with the VAT and done the opposite or increased corporation tax and built even more homes and power stations.

Exactly!

I was a good year to make a loss!

aelitaman

StevieJ wrote: »

Interesting, a great deal of the 12bn went into the pockets of UK businesses in reduced taxes handed over to the Govt, probably saved some from bankruptcy. Never had you down as a Keynsian maybe we could have not bothered with the VAT and done the opposite or increased corporation tax and built even more homes and power stations.

The VAT cut only went to UK businesses if they did notcut thier prices. The whole point of the VAT cut was to reduce prices so people would buy things by having money in thier pocket so to speak. So you agree that it was just a massive waste of time then because prices did not get lowered and just added 12.5billion to the debt pile, good, glad you are seeing the light at the end of the tunnel.

chucky

aelitaman wrote: »

The VAT cut only went to UK businesses if they did notcut thier prices. The whole point of the VAT cut was to reduce prices so people would buy things by having money in thier pocket so to speak. So you agree that it was just a massive waste of time then because prices did not get lowered and just added 12.5billion to the debt pile, good, glad you are seeing the light at the end of the tunnel.

why did inflation rise? did it have anything to do with the VAT increase?

if prices didn't get lowered why would inflation increase?

StevieJ

aelitaman wrote: »

The VAT cut only went to UK businesses if they did notcut thier prices. The whole point of the VAT cut was to reduce prices so people would buy things by having money in thier pocket so to speak. So you agree that it was just a massive waste of time then because prices did not get lowered and just added 12.5billion to the debt pile, good, glad you are seeing the light at the end of the tunnel.

It financed the part of the cuts that business would have to make anyway, as most people know the end consumer is not bothered where price cuts come from. This was a subsidy for under pressure British business and future British jobs.