Thinking the Unthinkable

Generali

or Might There be no Way Out for Britain?

Written by Tulletts via the FT

Warning: Do not read if feeling down in the dumps

The conduct of the economy under ‘Team Brown’ was a tale of grotesque incompetence which began in hubris and ended in blame-shifting.

Just as pertinently, where the future outlook is concerned, New Labour peddled a spurious moral absolutism and created an almost surreal sense of individual and collective entitlement, and it is this blend of moralism and entitlement which is the largest single stumbling-block on any road to economic viability.

Both the government and its opponents seem to believe that the
delivery of recovery requires nothing more than the selection of the right blend of macroeconomic policies.

This report seeks to demonstrate that no such magic formula exists.
The Coalition’s deficit reduction plan, though laudable in its intent, is set to fail because it is predicated upon levels of growth which cannot be delivered by the economy as currently configured. The opposition’s calls for a ‘plan b’ based on a more gradual approach to deficit reduction amount to nothing more than a recipe for more denial and an accelerated lurch into crisis.

The reality is that the cupboard is bare where macroeconomic policy is concerned. Massive stimulus, totalling £590bn and equivalent to 40% of GDP, has been tried, and has failed to deliver any growth at all [my emphasis]. Interest rates are already at rock-bottom. Fiscal stimulus looks impossible with Britain boxed in to a high-debt, low-growth trap.

The rest of the report makes for grim reading too. I hope they're wrong but I suspect they're not.

Blacklight

Generali wrote: »

The Coalition’s deficit reduction plan, though laudable in its intent, is set to fail because it is predicated upon levels of growth which cannot be delivered by the economy as currently configured.

Wasn't the point to reconfigure it?

That's like saying the governments carbon reduction policy is set to fail because they have invested a load of money in wind turbines that can't work because of the way we are currently configured to rely heavily on coal fired plants.

Generali

Blacklight wrote: »

Wasn't the point to reconfigure it?

The point of the economic plan is to reconfigure the economy. The point of the 34 page study (to which my quote comes nowhere close to doing justice) is that any policy path currently being pursued or offered is highly unlikely to bring the debts of the UK Government and consumers under control.

Blacklight wrote: »

That's like saying the governments carbon reduction policy is set to fail because they have invested a load of money in wind turbines that can't work because of the way we are currently configured to rely heavily on coal fired plants.

It's more like saying we closed all the coal fired plants to replace with wind turbines and if we don't open the coal generators up again then the lights will go out when the wind stops blowing.

Graham_Devon

Sounds like something I have written!

Closer to reality than anything else you will see.

Really2

Reiwxib wrote: »

Dare I say the "S" word................

Sausages? Sprouts? Sailors?

wotsthat

I'm not anywhere near as pessimistic as the report author.

It's just going to be a long old drag to get from here to somewhere better. The consumer is slowly but surely reducing debt even in today's economy - if we can get our governments to be a little more thrifty that would help as well.

ruggedtoast

Well that was a happy read.

As long as house prices keep going up everything should be fine anyway.

kabayiri

It's unrealistic to blame the current administration for all our ills.

However, it's very realistic to blame them for not giving the electorate an honest assessment of the challenge we face.

I don't think they go nearly far enough. There needs to be significant cultural change.

Why should we assume that a 2 car family will always be the norm? Why can't we pay additional money for routine GP visits and more for prescriptions?

It's like we know that a future Britain will be one with reduced living standards, but we don't discuss what form this reduction will take.

The politicians just string us along.

Generali

Graham_Devon wrote: »

Sounds like something I have written!

Closer to reality than anything else you will see.

Maybe. It's a very interesting piece, all 34 pages of it.

Reiwxib wrote: »

So if things really are that bad, what do you see in a few years Gen?

It's an interesting question. The thing with fiat currency is that it exists by Government diktat. There are many, many examples of fiat currencies failing and being replaced by other fiat currencies. That may well be an option. I don't see a return to a silver or gold standard though.

Another is to sort of muddle through; default a bit, devalue a bit.

Really2 wrote: »

Sausages? Sprouts? Sailors?

I'm not putting anything in a sailor. Mrs Generali would never forgive me.

The_White_Horse

all the problems we face around the world are the fault of lefties, public sector and benefit spongers.

why has the US got 15trillion of unfunded debts? paying public sector salaries, pensions and benefits.

we need to get off this "bankers caused the problem". it was lefties.

one of the main problem was the lefties forcing banks to lend to "low income" families who were not really viable customers. that drove the banks to repackage and sell on the debt to others. they, unlike the lefties, weren't that stupid. although eventually it caught up with them and lehman's was a prime example of the banks falling in love with their own argument a bit too much.

blame the lefties and public sectors of the world. they produce nothing and cost BILLIONS AND BILLIONS each year.

Conrad

Generali wrote: »

any policy path currently being pursued or offered is highly unlikely to bring the debts of the UK Government and consumers under control.

Consumers are paying down debt and as a result Banks are amassing more capital than was projected. I'd say one reason for lower savings is this propensity to reduce debt now.