paintybollox : back from Firenze nah...an it all still crap!
lamont : ..."Before the Government adopts full-blown Keynesian policies, it should examine their effect on Japan after the bursting of its “property bubble”. Between 1991 and 1998, Japan spent 100 trillion yen on new railway lines and other public works. Little good did it do. Its economy stagnated. Since 1991, Japan’s government debt as a proportion of GDP rose from 64 per cent of GDP in 1991 to 171 per cent this year. Japan is in a debt trap it can’t escape.
Gordon Brown’s policies would take Britain down the Japanese route — with one important difference. Japan runs large trade surpluses and can fund its borrowing from domestic savers. The British Government depends on international capital markets to finance its borrowing. Deficits and excessive borrowing may not have mattered when the world was awash with money. That has changed. Confidence is all.
Today’s bust was inevitable. But recovery will follow. The economy adjusts. Prices fall, buyers come back into the market, confidence slowly returns. It is mistaken government action that turns recessions into depressions .
Adding higher government borrowing to private sector borrowing does not improve the performance of the economy. If consumption has grown too fast, increasing government spending is the equivalent of driving through a red light.
Gordon Brown is like a gambler on a losing streak, doubling up by spending. More huge tax increases lie ahead. Because he has already exhausted the scope for stealth taxes, his policies mean we could see VAT raised to 20 per cent or the basic rate of income tax heading back towards 30p. One thing we can be sure of: it will be horrible. But once the consequences of Gordon Brown’s fiscal management are plain, it will take a generation before the voters trust Labour again. Times