Concise Economic Up date

Just listening to radio 4 re the economy being discussed by economists and lay people not Poiticains.

Apparenly the USA has gone for a slower path to debt reduction and making cuts and has enjoyed significantly better growth and increased productivity than the euro Zone while being on target to hit its monetary targets for debt reduction by 2014.This sounds like Gordon Brown's strategy at the last election.

The eurozone has cut more quickly and seen low growth and shrinking productivity. The UK economy is 2% which may not sound allot but is about a years average net growth behind the coalition governments forcast.

So rapid measures of austerity have led to low growth or recession and falling productivity compared to the less severe US strategy maybe possibly etc.

If Coalition economic policy does prove to be over zealous some people will lose their jobs their homes perhaps even their families in the process for no reason. I very much doubt any of these poeple will be close friends fo David Cameron and his old etonian cronies.

Are the economies that comparable?

The countries are by no means comparable and therefore the strategies aren't.
France under Hollande will be much more instructive if that comes into being.

Of course, the growth in GDP in the USA came at a massive cost.
To paraphrase my earlier posts, it is possible to borrow money, spend it, and thus increase GDP as the USA did.
In the case of America, this entailed spending $3,598 billion last year, against receipts of $2,303bn.
They'd need one heck of a lot of growth to close that gap!

As for productivity, the USA has quite flexible labour laws and, importantly, a mobile workforce.
Increased Government spending is not normally associated with increased productivity, although maybe that's what the Labour government were trying to achieve with their £12m pa payment to the unions for 'modernisation'?

Also, our biggest export market is Ireland [edit]are not doing well.
The USA's is Canada, which being resource led is doing rather well.
Much of the rest of our international trading is with the rest of the EU and they haven't been doing great, being they massively overspent also and are not (unlike the USA) the reserve currency for the world.

Austerity is not a way to get growth, but it is a way to bring spending down to a sustainable level...the USA may not be in that position, and if the US$ loses its position as defacto reserve currency their fall will be spectacular.

If Coalition economic policy proves to be under zealous many people will lose their jobs their homes perhaps even their families in the process for the sake of political expediency - it's always harder to 'sell' cuts than spending.

One could also say that the USA has kept its Long-term Capital Gain Tax rate (the one entrepreneurs pay) at 15% and they have had growth.
In fact, they were going to increase it in 2008 but decided not to as it might hurt growth.

Whereas in the UK, it went from 10% to 18% to a current 28%.
Maybe that's the reason

Originally Posted by Kneerly Down

If Coalition economic policy proves to be under zealous many people will lose their jobs their homes perhaps even their families in the process for the sake of political expediency - it's always harder to 'sell' cuts than spending.

Well they have promised cuts and growth and have deliverd half of that.

Productivity is a fuction of invetment in technology among others who is going to invest when the government announces it is going to depress the economy through austerity measures.

As to Ireland being our biggest EXPORT CUSTOMER IS IRELAND?

UK export and import in 2011: top products and trading partners | News | guardian.co.uk

Are you having a giraffe old boy, I hope you have not been advising the governemnt

Originally Posted by Yarbles

Well they have promised cuts and growth and have deliverd half of that.

Productivity is a fuction of invetment in technology among others who is going to invest when the government announces it is going to depress the economy through austerity measures.

As to Ireland being our biggest EXPORT CUSTOMER IS IRELAND?

UK export and import in 2011: top products and trading partners | News | guardian.co.uk

Are you having a giraffe old boy, I hope you have not been advising the governemnt

Now edited! I heard it on the Beeb yesterday. Didn't sound right but then it's the Beeb so how could it not be!

Anyway, as for productivity, where I live you'd be nuts to work (locally) in the private sector as the pay and conditions in the public sector are much better than could be sustained in the private sector.
So to start a business, it is most important that you understand the grants that distort the market rather than what makes a good, sustainable, competitive business.
This doesn't lead to productivity gains.

Increased R&D credits, which have been put in place, are good for encouraging investment in technology.
Investment incentives (EIS, SEIS, etc) are good also, and have been improved lately.

And as for your main point, of course we could spend more and thus get 'growth'. We'd also have a higher debt load and more than likely head toward France's level of debt interest, or worse, which would put an additional £10bn plus a year of interest costs, and that would do your family, my family, and the country in general no favours.

Oh, and regarding a market for our productive industries, try taking some from the fundamentally growing markets. e.g. the £110bn or so of current infrastructure spending available in India.
Even if we arrange the finance for that current spend (something the UK is very good at), we could add £5-10bn to the economy this year!

Originally Posted by Yarbles

Just listening to radio 4 re the economy being discussed by economists and lay people not Poiticains.

Apparenly the USA has gone for a slower path to debt reduction and making cuts and has enjoyed significantly better growth and increased productivity than the euro Zone while being on target to hit its monetary targets for debt reduction by 2014.This sounds like Gordon Brown's strategy at the last election.

The eurozone has cut more quickly and seen low growth and shrinking productivity. The UK economy is 2% which may not sound allot but is about a years average net growth behind the coalition governments forcast.

So rapid measures of austerity have led to low growth or recession and falling productivity compared to the less severe US strategy maybe possibly etc.

If Coalition economic policy does prove to be over zealous some people will lose their jobs their homes perhaps even their families in the process for no reason. I very much doubt any of these poeple will be close friends fo David Cameron and his old etonian cronies.

Did you stop listening before the end? They did go on to discuss why the USA situation might be worse, over some timescales.

Was this he one with Warsi and the host getting debt and deficit mixed up?

Originally Posted by ink ink

Did you stop listening before the end? They did go on to discuss why the USA situation might be worse, over some timescales.

I missed that what did they say?

Originally Posted by Kneerly Down

One could also say that the USA has kept its Long-term Capital Gain Tax rate (the one entrepreneurs pay) at 15% and they have had growth.
In fact, they were going to increase it in 2008 but decided not to as it might hurt growth.

Whereas in the UK, it went from 10% to 18% to a current 28%.
Maybe that's the reason

I heard a very good explanation from Paul Krugman, a Nobel laureate, as to why this is not where long term growth and healthy economies comes from. And some pretty wealthy and well respected entrepreneurs have agreed it is not. The argument is that a healthy economy comes from a strong middle class.

He also made a point that the US is one economy where as the EU is a dozen or so economies trying to operate under a single policy. Not an easy thing to do but for the sake of a peaceful democracy in Europe it is necessary given the increase in Nationalism across Europe.

He illustrated how the US economy could grow much faster than it currently is by poking holes in some of the current fallacies about the fiscal policies of our political parties. He virtually picked a fight with the Republicans and the Obama administration at the same time. He was an adviser to Obama for a while but trashed his timidity to make the right moves in no uncertain terms. Clearly he's not looking for a job in politics.

I'm currently trying to figure out how to link the Charlie Rose program where this took place.

Charlie Rose - Paul Krugman

Charlie Rose - Paul Krugman

Originally Posted by murcan

The argument is that a healthy economy comes from a strong middle class.

The lines are blurred. Define 'middle class'. Krugmann's definition or your own.

Originally Posted by 1913

Was this he one with Warsi and the host getting debt and deficit mixed up?

They were quoting that one.

Originally Posted by Yarbles

I missed that what did they say?

I've forgotten, because I didn't understand it. It'll be on Listen Again.

Originally Posted by moth

The lines are blurred. Define 'middle class'. Krugmann's definition or your own.

Forget that reference. I confused two programs. I link the other program when I get the chance. I have to ride my motorcycle now. Priorities.