The economists who object to George Osborne’s policy are both right and wrong. Annoying and perhaps inevitable as this is usually the case in matters of practical economics. I appreciate it requires explanation.
So the economy does need to be “rebalanced”. The Question is how. We have a choice; a fiscal squeeze or a monetary squeeze. The government have chosen a fiscal squeeze and allowed the Bank of England to leave interest rates at historically low levels. If we now slowed the pace and allowed the deficit to continue it would mean higher interest rates. The markets would not tolerate such loosening of will power. We would not have “Greek style crisis” but we would have rather higher interest rates and perhaps an even weaker pound than we do today. But we would still be squeezed this time by higher mortgage bills and businesses finding it even harder to fund investments. It is a little like choosing between being run over by a lorry or a train.
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That does not mean that the choice is in some sense “neutral”. A fiscal squeeze,
pandora necklaces sale, as we see now, tends to hurt those classes and parts of the country that are more reliant on the public sector. So where are jobs depend on the state and local govt, where welfare payments are high,
pandora charms sale, and where crime rates are too high,
http://www.httyzx.gov.cn/Review.asp?NewsID=362, those are the places that will be most adversely affected by the cuts. The North and the Midlands, in other words.
The big truth is that when Britain entered the financial crisis – and one reason why she did so – was because as a nation the British were consuming more than they produced. We saved too little to sustain investment and consumption at the levels we enjoyed. So we borrowed too much as a result, in both the public sector (hence the structural budget deficit) and in the private sector. Hence the recession.
So,
http://demo.brodev.com/16/user/cjonsasd/blogs, as I say,
http://mochizuki.la.coocan.jp/mochiz....html#comments, it is a matter of choice. It may be no accident that the Conservatives and Liberal Democrats, whose political base is among the more prosperous middle classes in the South, have chosen this course. It may also be of little surprise that they are now hinting at future trade union reform as well as a much more immediate desire to bear down on so called red tape on companies. In 2015, if not sooner,
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When the chancellor,
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Conversely a monetary squeeze would hit the rich disproportionately, especially in the south. That’s because they have expensive houses purchased with big mortgages and because that part of the country is not so dependent on public spending to sustain its economy. It the fullness of time a revival of manufacturing may benefit the traditional industrial heartlands of the nation but this has yet to be completed.
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