9 reasons Keynesians (and Hamish) aren't winning the argument

Kennyboy66

Generali wrote: »

There is, however, a problem with this. There is a finite amount of money available to be borrowed. If Governments borrow beyond a certain amount, there is little or nothing left for companies and individuals to borrow. That means that no matter how much or little demand there is, I remains low. This is exactly what we have seen in the housing market. Have people wanted to stop buying houses? I believe not. So why aren't they buying? IMHO it's because the Government is borrowing all that is available to be borrowed, especially as they've coupled this with demands for banks to lend less by requiring them to rebuild their reserves.

Surely you are contradicting yourself.
There can't be a finite amount of money to borrow and demands for banks to lend less.

The amount that could be borrowed could be increased by changing reserve requirements - however this is not the problem.

The banks are awash with cash to lend to home owners and businesses.

We (as a business) can currently borrow at 3.45 above base and while this spread is higher than say 2006 against base rates, it is significantly less when compared with best estimates of inflation then and now.

The lack of business investment is nothing to do with lack of capacity to borrow, it is down to a lack of confidence & lack of perceived growth opportunities.

How do we know ?

Well share buy backs in the US are at an all time high - much of it using cheaply borrowed money (and this ignores Apple who have their own tax ring fenced cash mountain to try and get to shareholders).
I appreciate that there are tax advantages peculiar to the US in buybacks, but the same trend is apparent in the UK.

In 2012 FTSE listed companies returned twice as much in share buybacks as they raised in new capital.

Hardly much evidence of a funding drought.

There are plenty of risks with Keynesian stimulus, from bridges to nowhere to Ed Balls hair brained VAT cut which would do as much to stimulate external economies as the domestic.

The obvious stimulus would be to spend £30 billion over 3 years on a mix of repairing roads (in many areas in an appalling state) and completing the DoT list of best value by-passes & road widening projects.

The problem is that is doesn't appeal to politicians vanity like Boris Island or High Speed rail 2.

Hey, we could even fund a third of this simply by not increasing overseas aid as rapidly as planned.

Conrad

HAMISH_MCTAVISH wrote: »

Now that we're dealing with the omnishambles that austerity has wrought on the UK, and watching with envy the roaring success that the US economy

The US wasn't nearly as unbalanced nor uncompetitive as Europe with our greedy job killing worker entitlement agendas.

The US also has a vast indebtedness to hand on, I'm not sure it really is a roaring success.

Personally I quite like the fairly steady course we appear to be on.

The left I've always found to be lacking in street smarts - you hear this in the way they talk about poor needy welfare folk living rookery like existences - it's all so damned quaint and misaligned.