Osborne tries to sweeten pill for austerity in Britain

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DeanMJackson wrote:

The article reads, “A darker economic outlook means Osborne is likely to commit to further spending cuts years into the future to save his flagship deficit reduction plan, though he also plans some new investment to sweeten the pill in the short term.”

Firstly, governments don’t “invest”. An economic investment is the attainment of future greater goods with private savings, hence interest rates need to be increased to their market-level numbers.

With low interest rates, naturally there is little real investment taking place. People, however, will restrict present consumption for the greater consumption that real investment produces in the future, but first interest rates must be raised to encourage greater saving.

Not a terribly difficult concept to understand. In fact, economics is easy, it’s politicians and their hack economists that makes the so-called “dismal science” such a seemingly arbitrary and illogical science.

Secondly, austerity is code for economic “stall mode”, not to mention the pain caused by the public budget cuts. There’s no need for austerity. Cutting the deficit has nothing to do with the revival of an economy, since there won’t be a revival without higher interest rates that encourages investment!

Dec 05, 2012 5:36pm EST  --  Report as abuse
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