But its not quite that simple is it because is the economy contracts the government will collect less tax and if the economy expands it will collect more tax.

But if we have to borrow money to expand the economy then we not only have the debt to deal with at a later date but we have the interest on top of it to compound (scuse the pun) the problem in the future.

If the government were borrowing the cash to invest in huge infrastructure projects then there might be a case for it but they seem to be just trying to keep the engine running at the moment. We have to have the pain at some point. Now is as good a time as any.

TandemJeremy – Member
House prices are too high – a different debate

House prices have been a major part of the miracle economy of the last decade, a lot of people have borrowed too much money and speculated it on housing rather than investing in productive parts of the economy.

If we as a nation paid less for housing (either buying or renting) we could spend more in the real economy. Getting ourselves into more debt so we can buy more stuff won’t help anyone in the medium to long term.

I think it’s all part of the same debate.

torminalis – because it increases economic activity overall – the shopkeeper earns more as does the publican. So if you put public sector people out of jobs private sector suffers as well – reducing the taxes they pay and even going out of business.

reign in the lending that caused the problem in the first place and therefore the public sector must shrink.

One does not follow the other – the economy needs to be rebalanced. A delay would not matter greatly and this could be done by increasing tax revenue especially direct taxation. Plenty of room to do this as we are a low tax country and our deficit whilst high is not unprecedented.

No other country is taking the course camerons government wants to do

OP – poor troll

because it increases economic activity overall

Which would be perfectly true, if the government weren’t having to borrow the money to fuel the increased spending. As it is, we are re-re-re-mortgaging our futures in the hope that growth can be sustained indefinitely, which by virtue of the limitations of our little planet, it cannot. Our entire economic model is based on never ending growth, it has to be or we will eventualy default on our debts as all money is intrisically created from debt. Borrowing more just perpetuates the problem. There really is no other way our of it other than to shrink the economy to a point where it’s value is based on the material wealth we can create. Everyhting else is just delaying the inevitable.

But if we have to borrow money to expand the economy then we not only have the debt to deal with at a later date but we have the interest on top of it to compound (scuse the pun) the problem in the future.

If the government were borrowing the cash to invest in huge infrastructure projects then there might be a case for it but they seem to be just trying to keep the engine running at the moment. We have to have the pain at some point. Now is as good a time as any.

I’m not disagreeing with this Im just saying its not as simple as we must always live with in our means and never borrow money.

The creation of banking in renaissance Italy and the ability to borrow money in the hope of increasing future revenue is one of the main reasons Europe managed to economically pull ahead of civilisations.

The creation of banking in renaissance Italy and the ability to borrow money in the hope of increasing future revenue is one of the main reasons Europe managed to economically pull ahead of civilisations.

If you ask me the Medici’s have a lot to answer for.

growth can not be sustained indefinitely, which by virtue of the limitations of our little planet

But resources dont have to be physical that can be knowledge based as advances in technology are made hopefully we can do more with less.

There might well be a point in the future were technological advances fail to support human populations levels but we cant be sure when this will be.

Our entire economic model is based on never ending growth, it has to be or we will eventualy default on our debts as all money is intrisically created from debt. Borrowing more just perpetuates the problem. There really is no other way our of it other than to shrink the economy to a point where it’s value is based on the material wealth we can create. Everyhting else is just delaying the inevitable

Ah – the no growth society – I can buy into that but from the green point of view ( how many more cars and washing machines do we need?)- however that is a radical realignment of the economy far beyond what is being done here.

scu98rkr – I think we are thinking along the same lines here, I just believe that inevitably we are going to have to suffer a huge readjustment, and the longer we wait, the worse it is going to be. We can mortgage our futures to the hilt if we like but we no longer have the option of enslaving half of the world to ensure that our books balance. We are going to have to get used to being a much poorer, much smaller and much less thrusting little country.

From what I understand until fairly recently banking was backed by something – gold, silver, etc. With the introduction of fractional reserve banking those clever people in the city have been able to leverage more and more, as a result a lot of their balance sheets are based on debt. A tipping point has to be reached where the debt can never be repaid. IMO we are at or close to that point, which is when large scale defaults occur, perhaps at a sovereign level (see Greece, Portugal etc).

I think that’s what Cameron’s govt are trying to address.

But resources dont have to be physical that can be knowledge based as advances in technology are made hopefully we can do more with less.

I agree, but the bottom line is you can’t eat ideas and food is rapidly becoming one of the major issues we have to deal with.

Sorry I am so argumentative at the moment. It must be my time of the month.

Natural part of the housing bubble cycle I’m afraid. Nothing to get too worked up about really.

Take a look here

TandemJeremy – Member
Double Dip is certainly the fault of the Condems – no doubt at all. (If it happens – not that its here yet)
Under Labour the recovery had started but was clearly fragile…

There’s an iceberg sized hole in the Titanic that’s our economy. Changing the government was never going to make any difference.

Hopefully this govt or the next Labour govt will fix it.

By the way, there’s a shortage of lifeboats analogy too. Sorry.