In a word - No.
They are like somebody going to the doctors with breathing problems and chest pains. So the doctor prescribes some pain killers and cough medicine as that will make them feel better. Instead of telling them the tough medicine they need; to quit smoking and stop the full English breakfast in the morning cooked in beef fat, the beacon sandwich for lunch and the burger or sausages for tea.
The only way to kick start the economy is to cut public spending and taxes, where since 1991 government spending has gone from 32% of GDP to 52% in 2008, it has now fallen back very slightly. Once the private sector is growing with an increasing government tax take, this will take care of the deficit. Personally I would be quite brutal on this where public sector pay is typically 10 to 20% higher than the equivalent private sector jobs, so would target this, which is what Ireland has done and as a result they look like the only one of the PIIGS likely to escape the fate of Greece, Spain, Portugal and maybe Italy.
To make it more likely that the money from the tax cuts would be spent, rather than saved or used to pay down debt, I would target tax thresholds, which I think should be raised towards £12,000 so those of the minimum wage would pay minimal tax. That way every employed person gets a pay rise, outside of the public sector and with their tax bill going down a bit it would soften the blow for them. I would also taper these pay cuts, so those at the top got the biggest percentage cuts. Many civil servants, GPs and top managers at local councils are on £100 to 200k a year. With the 7% drop in real wages since 2008, most extra money from tax cuts would be spend by necessity.
All these clever ideas are bit like get rich schemes all very clever, but the don't work. Flooding the economy with money just produces inflation if there is not a corresponding rise in demand and output increases from manufacturing or services.
Without these changes I can't see anything other at best than stagflation, stagflation and stagflation as the country coasts into a major Sterling crisis. The PM and Chancellor have ruled out, spending and tax cuts, so we know it is not going to happen. The sooner the Chancellor goes back to his previous career of refolding towels the better for the country as he has no interest or grasp of economics and by accounts prefers to leave this to treasury officials, while he plays, Napoleon, plotting the 2015 Conservative election victory.
The BOE are coming up with all these crazy ideas where they have had a very bad recession and pulled many wrong financial levers and have run out of ideas. With less talking of the pound down and too much QE we would now have much lower inflation and a much smaller fall in real wages.
The BBC does not mention, public spending cuts at all as this would be against their mantra 'all public spending is good however wasteful it is'.
It is interesting that they mention a housing bubble and yes the multipliers have gone up due to a housing shortage, but where I live in an expensive London commuter belt area. A small 3 bedroom 1970's semi or end-terrace house is about £200k. Now these days a couple need 25% deposit and this is normally the biggest sticking point as they want their good times and holidays etc, etc, so don't want to save it. So, say the bank of mum and dad provides it, that leaves £150k to find, so for a couple £75k each the mortgage has to cover, now divide that by 3.5 and they need a salary of £21,500 each. Perfectly possible for most skilled jobs and a UK average wage of £27,000 which in this area due to the London effect and very low unemployment is not difficult to get. For a flat at around £150k, even easier.
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Topic: Rods2 (Read 2469 times)