How would you get the UK economy moving again?

dtsazza

MrRee wrote: »

Instead of printing money and giving it to the Banks to hoard .... give £20,000 to each household this Xmas.

This will be in the form of shopping vouchers, house purchase vouchers, car purchase vouchers - doubled up if the item was made in the UK (exept house, of course!).

No saving of this money - and an expiry date of end March 2012.

Asides from the inflationary aspect of that (if it were real money) - why on earth would a business accept the vouchers instead of cash?

What is the business going to spend it on? Can they pay their employees in these vouchers? Can they buy new equipment with these vouchers (and if so why would the equipment manufacturer take them, etc.)?

Since they're going to effectively disappear at the end of March, anyone who was holding the vouchers at that point will lose that much money. They'd be like a hot potato; no-one would want to hold them, and the best way of doing this would be to not ever accept them.

If the government were to mandate that companies accept them, this would be massively illogical and condemning companies to suffer crippling losses by effectively giving their products away for worthless paper*. Ironically this would likely hit smaller companies harder due to having less facility to absorb any imbalance of vouchers vs cash, and especially if there's a surge of "patriotic" local spending.

If the government allows them to be exchanged for GBP at the end of the period, then they are GBP, to all intents and purposes.

Either way it won't solve the fundamental problem; money is simply a medium of exchange, a method of deferred barter. If we want consumers to be able to buy more, they must produce more to "sell" (e.g. their labour) first. The denomination in bits of paper is more or less arbitrary, apart from the impact it has on those that defer spending or live off fixed incomes.


*Let's not get into the fiat currency debate; this paper will actually cease to be legal tender at the end of March

dtsazza

howee wrote: »

Print more money! It sounds daft but deflation is currently a bigger worry than inflation. Remember around 1% comes off the inflation figures post Jan due to VAT being the same as last Jan so no yoy increase. If we dont print more £ we could be below 2% by next Nov!

What's wrong with deflation?

It sounds like you want higher inflation to act as a solution to spend now regardless of affordability, rather than saving up for what you need beforehand.

I thought it was generally accepted that an overindulgence of debt and imprudence is what has led to this perilous economic situation; thus policies that promote further spending in the short term instead of balanced spending over the longer term are completely missing the point.

And yes, that does mean that we need several years of negative growth; but that's mostly because we're taking an overinflated point as the 0% baseline. Reversion to mean will/must happen in the long run, and some period of low/mild negative growth is part and parcel of that. I feel that the sooner people accept this, the sooner we can get it over with in a controlled manner instead of trying to wheel out the crash cart and zap the economy even further out of balance.

richdeniro

Decent inheritance tax system that would tax the richest 5% of the country, i.e. ancestors of barons who essentially stole 50% of the countries wealth hundreds of years ago and who's families still control that wealth.

Then use the trillions raised from that to pay off the deficit and invest in public services.

dtsazza

MacMickster wrote: »

We need a new type of bank set up and supported by the government (well they have supported the current banks without much success) where people can become investors rather than savers, with returns based upon the success of those new businesses.

We already have that, it's the AIM market on the LSE - or I suppose, venture capital funds. VC funds in particular invest in start-ups and already attract tax breaks, but the issues with making them useful to smaller investors are mainly those of liquidity and diversity.

Investing in any company's equity means that you can't get your money out unless you can find a willing buyer. It's not too hard to sell a Vodafone share, but very small companies typically have terrible liquidity, meaning that you have to eat a comparatively huge spread if you want to sell your stake in most cases. That's bad if you think you might want access to the money in the short/medium term.

And I think very few people beyond what you might call the "rich" have non-trivial funds that they'd be prepared to put away for multiple years minimum.

Secondly, many (most?) small companies do fail. Diversity in investments is always important, and it gets even more so at this end of the spectrum. It would be important to invest in multiple companies, which means increased monetary and research commitments. Again, the "rich" can afford this as they have the capital to make meaningful investments in these companies, and hence it's worth their while investigating them properly, but I can't see someone sticking £5/month into ten different companies and spending dozens of hours reading their business reports and analysing the investment case, for that kind of potential return.


These are the economic realities, and I don't think it's possible to massage them away. It's possible to transfer them - so that a bank guarantees, say, 8% returns while investing the money into these companies - but I don't see why a private company would expose itself to greater risk for less returns than banks can currently get now on deposits.

Or the government could, say, guarantee peoples' capital. However then you're just transferring the risk of failure to an entity that doesn't even get to vet the choices. By making investment a "no-lose" scenario, people lose exposure to the downside and may as well make ridiculous gambles which bear no relation to the economic reality. (Not to mention a business owner who funds himself entirely through this scheme.) Worse, they get to keep the gains but don't suffer the losses. It's classic moral hazard, and a terrible use of the country's resources.

Fundamentally I don't think there's a way to change the illiquid and risky nature of start-ups to make them friendly to the everyday saver (which is why such a scheme doesn't already exist).

dtsazza

For my part, I agree with the previous posters that the best way to sustainably promote growth is to lower taxes (both corporation and income), and offset that by reducing benefits of various types - especially including the minimum wage, which distorts the job market in favour of unemployment at the lower end.

This gives the economically productive a larger share of their earnings to spend/invest, and gives a greater incentive to be economically productive by reducing what you're given by the state "just because", and encouraging you to get out what you put in.

sheffield_lad

dtsazza wrote: »

What's wrong with deflation?

It sounds like you want higher inflation to act as a solution to spend now regardless of affordability, rather than saving up for what you need beforehand.

No prefer to keep inflation slightly high as the debt (1 trillion and growing), reduces with med/high inflation.

2% being the target, with the state of public and personal finances a rate of around 4% would help clear the debts.

tillycat123

I was sent this round robin email today -

Dear Mr. Cameron,

Please find below our suggestion for fixing the UK 's economy.

Instead of giving billions of pounds to banks that will squander the money on lavish parties and unearned bonuses, use the following plan.

You can call it the Patriotic Retirement Plan:

There are about 10 million people over 50 in the work force.

Pay them £1 million each severance for early retirement with the following stipulations:

1) They MUST retire.
Ten million job openings - unemployment fixed

2) They MUST buy a new British car.
Ten million cars ordered - Car Industry fixed

3) They MUST either buy a house or pay off their mortgage -
Housing Crisis fixed

4) They MUST send their kids to school/college/university -
Crime rate fixed

5) They MUST buy £100 WORTH of alcohol/tobacco a week .....
And there's your money back in duty/tax etc

It can't get any easier than that!

P.S. If more money is needed, have all members of parliament pay back their falsely claimed expenses and second home allowances

If you think this would work, please forward to everyone you know.

Also.....
Let's put the pensioners in jail and the criminals in a nursing home.

This way the pensioners would have access to showers, hobbies and walks.

They'd receive unlimited free prescriptions, dental and medical treatment, wheel chairs etc. and they'd receive money instead of paying it out.

They would have constant video monitoring, so they could be helped instantly, if they fell, or needed assistance.

Bedding would be washed twice a week, and all clothing would be ironed and returned to them.

A guard would check on them every 20 minutes and bring their meals and snacks to their cell.

They would have family visits in a suite built for that purpose.

They would have access to a library, weight room, spiritual counselling, pool and education.

Simple clothing, shoes, slippers, PJ's and legal aid would be free, on request.

Private, secure rooms for all, with an exercise outdoor yard, with gardens.

Each senior could have a PC a TV radio and daily phone calls.

There would be a board of directors to hear complaints, and the guards would have a code of conduct that would be strictly adhered to.

The criminals would get cold food, be left all alone and unsupervised. Lights off at 8pm, and showers once a week. Live in a tiny room and pay £600.00 per week and have no hope of ever getting out.

Think about this (more points of contention):

COWS

Is it just me, or does anyone else find it amazing that during the mad cow epidemic our government could track a single cow, born in Appleby almost three years ago, right to the stall where she slept in the county of Cumbria? The government are probably behind the spread of this.

And, they even tracked her calves to their stalls. But they are unable to locate 125,000 illegal immigrants wandering around our country. Maybe we should give each of them a cow.

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Also - Think about this ... If you don't want to forward this for fear of offending someone -- YOU ARE PART OF THE PROBLEM! It is time for us grumpy old folk of Britain to speak up!