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  1. #1

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    Angry gobsmacked

    In the middle of the credit crisis / perfect financial storm etc. etc. Gordo comes up with this gem ...

    http://www.independent.co.uk/news/uk...pm-974796.html


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    Saw similar headline on the Evening Standard boards... at the risk of sounding dim, isn't spending 100 billion ... er ... a bit mad?

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    It's only money...

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    Ironically he might be right in a way that with official rates coming down and investors abandoning risky assets to get something less risky he might be able to sell a lot of Govt paper while paying low interest, however as soon as crisis is turned around the interest payable will increase greatly so in a long run it might be wrong decision - the correct one would have been to safe up a lot of cash during boom years (or repay a lot of debt), and now either cut taxes or borrow more.

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    According to Keynesian theory and past economic history it's absolutely the right thing to do.
    Thing is that presupposes that you've stashed away cash in the good times.
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    Now was the wrong time to slash investment in areas like education, training, energy efficiency or tax cuts for hard-pressed families, the premier said.

    Well maybe, but he could slash stupid government projects that will do nothing but waste cash.

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    As much as it pains me to say this

    Gordon Browns policy on spending is actually one of the BEST things he can do now. It's merely Keynesian Economics - and it is clear that someone in the team actually understands economics like it really is. It sounds totally silly - but there is immene logic behind in and in the current market it is the RIGHT thing to do.

    EDIT - Just see SAS post so yup.

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    Quote Originally Posted by sasguru View Post
    According to Keynesian theory and past economic history it's absolutely the right thing to do.
    Thing is that presupposes that you've stashed away cash in the good times.
    Yes, which is why what Brown does is not Keynesian theory as it lacks the most important part - save money for the rainy day.


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    Quote Originally Posted by sasguru View Post
    According to Keynesian theory and past economic history it's absolutely the right thing to do.
    Thing is that presupposes that you've stashed away cash in the good times.
    Quote Originally Posted by Liability View Post
    As much as it pains me to say this

    Gordon Browns policy on spending is actually one of the BEST things he can do now. It's merely Keynesian Economics - and it is clear that someone in the team actually understands economics like it really is. It sounds totally silly - but there is immene logic behind in and in the current market it is the RIGHT thing to do.

    EDIT - Just see SAS post so yup.
    These guys don't agree in this letter to the Sunday Telegraph.

    Keynesian over-spending won't rescue the economy

    Further to your interview with Alistair Darling, we would like to dissent from the attempt to use a public works programme to spend the country's way out of recession.

    It is misguided for the Government to believe that it knows how much specific sectors of the economy need to shrink and which will shrink "too rapidly" in a recession.

    Thus the Government cannot know how to use an expansion in expenditure that would not risk seriously misallocating resources.

    Furthermore, public expenditure has already risen very rapidly in recent years, and a further large rise would take the role of the state in many parts of the economy to such a dominant position that it would stunt the private sector's recovery once recession is past.

    Occasional slowdowns are natural and necessary features of a market economy.

    Insofar as they are to be managed at all, the best tools are monetary and not fiscal ones. It is inevitable that government expenditure and debt naturally rise in a recession but planned rises in government spending are misguided and discredited as a tool of economic management.

    If this recession has features that demand more active fiscal policy, which is highly disputable, taxes should be cut. This would allow the market to determine which parts of the economy shrink and which flourish to replace them.

    Dr Andrew Lilico, Europe Economics; John Greenwood, Chief Economist, Invesco; Richard Jeffrey, Cazenove Capital Management; Dr Ruth Lea, Economic Adviser, Arbuthnot Banking Group; Trevor Williams, Chief Economist, Lloyds TSB Corporate Markets; Dr Nigel Allington, University of Cambridge; Prof Philip Booth, Institute of Economic Affairs; Prof Tim Congdon, Author, Keynes, the Keynesians and Monetarism; Prof Laurence Copeland, Cardiff Business School; Prof Kevin Dowd, University of Nottingham; Prof Kent Matthews, Cardiff Business School; Prof Alan Morrison, Said Business School; Prof Sir Alan Peacock, Former Chief Economic Adviser, Dept of Trade and Industry; Dr Mark Pennington, Queen Mary College, London; Prof David B. Smith, University of Derby; Prof Peter Spencer, University of York.
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    Quote Originally Posted by Liability View Post
    As much as it pains me to say this

    Gordon Browns policy on spending is actually one of the BEST things he can do now. It's merely Keynesian Economics - and it is clear that someone in the team actually understands economics like it really is. It sounds totally silly - but there is immene logic behind in and in the current market it is the RIGHT thing to do.

    EDIT - Just see SAS post so yup.
    Actually it isn't Keynesian Economics, since that idea is you can smooth out boom and bust by stashing money during the boom (tax and save) and releasing it during the bust (reduce tax and spend).

    What we have is Labour, tax and spend. There's nothing to show for the boom except record levels of debt.

    Spending money you don't have is not a good idea. If you don't believe me, try it.
    I was miserable and depressed, but CUK turned it all around. Now I'm depressed and miserable.

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