Thursday, 18 December 2008

We are one step closer to a fiscal crisis

There are days when I find it a struggle to read the financial times. I dread what might read there. I just had a look at their website, and it reported a fearful collection of UK fiscal numbers.

"Britain’s public finances slid further into the red in November, with a drop in tax receipts – principally on income – contributing to a current budget deficit of £13bn against a shortfall of £8.1bn the year before. Total current receipts from taxes, social security and other categories slipped to £35.1bn in November from £37.1bn in November 2007.

Tax receipts were also below those of 2007 in October, marking the first time that receipts have been below those of the year before for two back-to-back months since 2003."

Brown and Darling think they can pull the UK economy out of recession by running an 8.5 percent government deficit next year. The UK fiscal position is already deteriorating at an alarming rate. They are not going to get away with 8.5 percent. The fiscal stimulus is not going to work. They will fail.

How can we be so sure? All deficits need to be financed. New labour's budgetary plans require such a huge borrowing requirement that long term yields on government paper will have to rise. As they do, all long term rates will rise and push the rest of the economy further into recession.

This scam has been tried before. It has always failed, and it will fail again.


Mitch said...

There is a small difference and that is gordon brown a man of such breath taking arrogance that he believes more borrowing is the cure for huge borrowing.

K T Cat said...

The tax receipt drops are just starting. That 8.5% deficit is a gross underestimation.

Anonymous said...

The thing you have to remember here is that Gordon is not a typical politician; he's your typical second-in-command material and unlike John Major (another natural 2ic) when Gordon foolishly inveigled himself into the top spot, he didn't turn into a natural if somewhat grey leader, he simply showed himself up as a dithering nitwit.

The Gordon we see now isn't the Gordon we have had for the last decade. All the time he was Chancellor, he was an arrogant ignoramus, bereft of talent but at least capable of functioning because he had someone else with the ability to front out a crisis.

The Gordon we see now is a much weaker, more damaged man, since although his instinct is always to hide when the shit hits the fan, he simply cannot do so as he's the boss, the alpha male who has to front out the trouble and face down the media.

What this new ditherer extraordinaire is doing is taking the coward's solution: rather than make the cuts now and stare down the inevitable screaming horde, he's borrowing now and deferring the shitstorm to the future. This is the action of a profoundly cowardly, broken man and as such he needs to be gotten rid of pronto before such weakness and refusal to face reality lands us deeper into trouble.