The economics of bond markets and stimulus - or why George Osborne isn't stupid...

LauraW10

tomterm8 wrote: »

I guess I didn't actually get the same thing from your post as I got from the article. What I read in the article seemed to imply that George Osbourne had talked himself into a corner, and the economy needs stimulus, so we need to find a way to have stimulus that minimizes the bad effects of an about turn.

That's how I read it too.

LauraW10

IronWolf wrote: »

Laura

I think you missed the entire point of the article, but no surprises there.

Sorry, I think you missed the entire point.

This economist thinks the UK economy needs more spending/stimulus and he sets out to show how he would do that without spooking the bond markets.

His plan A+ = what the Tories are doing now PLUS increased spending.

So how does this article provide evidence that GO isn't stupid, as the OP stated, since GO doesn't want any increased spending, or tax cuts or anything?

This article is just further evdence of another economist who thinks the UK economy needs a stimulus, so I don't see how that proves GO isn't stupid.

Wookster

Still singing the labour spend song laura?

Bored at home?

Perhaps you could invest in one of these: http://www.amazon.co.uk/Economics-Dummies-Sean-Masaki-Flynn/dp/0764557262

blueboy43

nickmason wrote: »

http://www.ft.com/cms/s/0/a0928838-2fcd-11e0-91f8-00144feabdc0.html#axzz1D0Rh91wZ

It's a fascinating article. I'd be interested to hear people's responses - both in terms of economic reality and social acceptability - on the points raised - a few of which:
1) Suggestions that the government should change direction are facile (and so effectively purely political)
2) Government needs to do unpopular things to be credible
3) Stimulus Investment on economic infrastructure not social
4) "Sack nurses, build nuclear power stations".

I guess this Oxford economics professor votes Tory....

An interesting article and I certainly think that for all the last Labour government's budget, forecasting cuts, that they would not have had the will to carry them out. The problem I have is this -

The tory government is taking the easiest path when it comes to cuts. They are cutting investment spending by more than anything else, while protecting transfer payments to fairly wealthy groups. The winter fuel payment is the perfect example of this.

They are also attempting to push the political fallout onto local councils by slashing their budgets while suggesting they can keep the level of service as it is now - it is fundamentally dishonest.

I'd agree entirely with the prof. on economic grounds, if he votes Tory he will surely be disappointed - they have managed to do item 1 so far and about a quarter of item 2.

They have ducked 3 & 4 completely.

Mr_Mumble

Intriguing and provocative article. I agree with the econ prof on the popular vs unpopular spending aspect.

Britain's Public Sector Net Worth never rose above its 2001-02 level (as a percentage of GDP) despite large increases in government spending through the rest of the decade (1). The money was going straight to public sector workers and benefit claimants while infrastructure projects were financed via PFI.

The future cost of recurrent spending mentioned in the article is a time-bomb for this and future governments. One example: the annual cost of filling unfunded public sector pensions is rising from £3.1bn, in 2009-2010, to £10.3bn in 2015-16 based on current projections (2). That's a compound annual growth rate of 18.7%!

Notes:
1. Pages 105-106 of the emergency budget report show public sector net worth and total managed (government) expenditure as a % of GDP

2. Ibid, page 102.

Loughton_Monkey

Thrugelmir wrote: »

Labour should have frozen public sector pay. Rather than create an artificial boom with a temporary VAT reduction.

Partly agreed. If anything, they should actually be reduced when they have gone up above a defined 'modicum' value.

So many salaries in the Public Sector are absolutely obscene.

It surprises me to see so much general acceptance that 'putting more money into schools... or health service... etc.' actually improves education (or health). When the majority of it goes into pay rises and recruitment of 'assistants' to do the work, then that's no improvement at all.

If BA shareholders heard that £2bn was being slapped onto payrises all round, I don't think they would believe this to fall into the category of 'investment'.

LauraW10

Wookster wrote: »

Still singing the labour spend song laura?

Bored at home?

Perhaps you could invest in one of these: http://www.amazon.co.uk/Economics-Dummies-Sean-Masaki-Flynn/dp/0764557262

You seem to have very little to do yourself. Maybe you should try reading this . I am assuming that you are a free reader and are not still on a reading scheme. If that's not the case then I apologise and next time I'll find you a book at your level.