Archive for the ‘public spending’ Category

Osborne’s puppet-masters: Société Générale.

15th January, 2009.

Patient readers this blog is triggered by Jeff Randall’s column in the Daily Telegraph today.

In it he inadvertently discloses the identity of the puppet-masters dictating the Tory political agenda around public spending cuts.

In a somewhat histrionic column in which he describes the public deficit as a ‘disaster’ ( he should mind his language: Haiti’s earthquake is a disaster) Randall quotes a piece of ‘research’ by the French bank, Société Générale.  The paper is titled “Popular Delusions” and its authors explain some simple facts about government spending cuts to Telegraph readers:

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Green New Deal – ‘The Cuts won’t work’ report is published.

7th December, 2009

This is the press release from the new economics foundation:

“Two days ahead of the pre-budget report, and as the UN climate change talks open in Copenhagen – the second report from the authors of the original Green New Deal argues that the British Chancellor is likely to miss a historic opportunity to tackle public debt, create thousands of new green jobs and kick-start the transformation to a low-carbon economy.

The cuts won’t work, the Green New Deal Group’s second report shows how, contrary to the policy of all the major political parties, cutting public spending now will tip the nation into a deeper recession by increasing unemployment, reducing the tax received and limiting government funding available to kick-start the Green New Deal.

Instead a bold new programme of ‘green quantitative easing,’ rather than simply propping up failing banks, could help reduce the public debt and kick-start the transformation of the UK’s energy supply while creating thousands of new green-collar jobs.

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Debts and deficits: stocks and flows

6th December, 2009.

Most economists (who should know better) confuse the government’s budget deficit with total government debt.

The distinction really is important.

Mixing them up is a little like confusing stocks and flows.  Or confusing your outstanding mortgage – say £200,000 – with your monthly debt repayments. They are quite different things, and if you were to lose your job, the flows (paid with your salary) come to a halt, and then it’s the stock – the £200,000 – that really matters.

Furthermore it is quite possible to increase your mortgage – and lower your monthly payments.  Many did this in the boom years of mortgage re-financing. Or even to decrease your mortgage and increase your monthly payments.

So, just as the movements in regular mortgage payments tell us little about the outstanding stock of debt, so government deficits tell us little about the stock of debt invested and the stock of debt outstanding.

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