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IMF backs coalition spending cuts Watch

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    (Original post by invictus_veritas)
    Look into intragenerational debt if you're interested in why we're not going far enough. Basically by some new measures, which have been endorsed by some top economics schools and top economists, British debt is actually 505% of GDP and America is in a worse financial state than Greece.
    Is this the measure that includes private debt also?
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    (Original post by invictus_veritas)
    The problem is that we're actually in the midst of an ongoing economic crisis in which the global financial crisis was one, relatively minor part.

    The major problem is that government spending is out of control.

    It's not that I'm advocating small government here. I'm not. The problem is that taxes in the USA would have to rise by 60% in order to run a balanced budget. This is according to John Taylor who is a leading Stanford Economist and will probably win a nobel prize at some point.

    Seeing as a 60% rise in taxes is deemed completely unrealistic by most economists and even if it wasn't, it is by the vast majority of the public, the only prudent course of action is to cut spending significantly.

    Alan Greenspan, who is one of the most conservative economists around recently said that the choice we face is between terrible and catastrophic and advocated letting all tax cuts - not just the Bush tax cuts expire - and then cutting spending significantly.

    The IMF for once isn't advocating spending cuts as part of some dark, decadent capitalist ideology with little academic grounding like shock therapy appeared to be. It's advocating spending cuts because government spending has gotten so out of control that if left unchecked it will without any doubt destabilise the entire global economy and probably lead to America, Britain and much of the EU resembling third world countries.

    The situation is dire: one trillion dollars (around 1/14 of the US economy) is added to US debt every year alone at current rates. The interest alone on the current debt is phenomenal and the same can be said of Britain, Greece and many other European countries.

    Up against all of this the global financial crisis was a tiny, relatively insignificant event.
    I guess it all depends on what kind of analysis you accept. I'm pretty much in support of David Harvey's analysis as set out in his book The Enigma of Capital. The 'major problem' in my view is that for some time now too much accumulated capital has been chasing too little in the way of realisable profitable investment, the 'surplus capital absorbtion problem' as Harvey describes it. Of course Harvey also - in my view quite rightly - recognises that in capitalist societies the casually made distinction between state and capitalism is not an unproblematic one to make, they are indeed easily charactersied as mutually constituting.
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    Now people understand why the Coalition is making major spending cuts in the defence budget.
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    (Original post by yoyo462001)
    Is this the measure that includes private debt also?
    No purely government debt, that's why it's so staggering.
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    (Original post by Oswy)
    I guess it all depends on what kind of analysis you accept. I'm pretty much in support of David Harvey's analysis as set out in his book The Enigma of Capital. The 'major problem' in my view is that for some time now too much accumulated capital has been chasing too little in the way of realisable profitable investment, the 'surplus capital absorbtion problem' as Harvey describes it. Of course Harvey also - in my view quite rightly - recognises that in capitalist societies the casually made distinction between state and capitalism is not an unproblematic one to make, they are indeed easily charactersied as mutually constituting.
    I agree with this: it's nonsense to think of free markets because they generally lead to monopolies. However the question is whether the state should be a facilitator of competition, something that provides a basic safety net and creator of demand of last resort. Or if it should play a very active role in the economy as is the case now in every country in the world, not just including Britain and America, but especially Britain and America.
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    (Original post by invictus_veritas)
    No purely government debt, that's why it's so staggering.
    Not really, what would the figure have been in the 60s?

    It has an assumption that current policy will be maintained. You can kill that debt in a heartbeat by a policy shift to abolish state pensions.
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    (Original post by Quady)
    Not really, what would the figure have been in the 60s?

    It has an assumption that current policy will be maintained. You can kill that debt in a heartbeat by a policy shift to abolish state pensions.
    You can kill the rest of it in a heartbeat by a policy shift to saying we will not redeem sovereign debt. Lenin did it.

    That would ensure we never got into a budget deficit again.
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    well that should be expected, the IMF generally support low to non-existent public spending.
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    (Original post by MagicNMedicine)
    You can kill the rest of it in a heartbeat by a policy shift to saying we will not redeem sovereign debt. Lenin did it.

    That would ensure we never got into a budget deficit again.
    Agree with first para, second doesn't make any sense. Russia defaulted in the 90s too and now has a deficit.
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    (Original post by Quady)
    Agree with first para, second doesn't make any sense. Russia defaulted in the 90s too and now has a deficit.
    Well it is an exaggerated example. With the general concern over sovereign debt at the moment, if a AAA listed country like the UK was to default on its debt, it could permanently break the idea that sovereign debt was a low risk asset, the repercussions would affect everyone not just us. In practice it would probably mean people were still willing to lend to governments, but would see it as a higher risk form of debt so lend at higher rates of interest.

    The exaggerated point I was making was that if prior default meant nobody was willing to lend the British government money, then it would be forced to run balanced budgets from then on, and fiscal policy would effectively end.

    I do think British default would have far more severe repercussions than Russian default did, however I don't expect us to default.
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    (Original post by MagicNMedicine)
    Now people understand why the Coalition is making major spending cuts in the defence budget.
    Not at all.
    Cameron has protected Health and International Development... He has protected the second largest budget, which to me clearly means we can afford defence, but he would rather put politics first.

    If he cut health and international development by 10-30% I would be forced to accept defence cuts as well. However, as he ring fence these budgets, we clearly have money to spend on defence and cuts in defence are unnecessary.
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    (Original post by Teaddict)
    If he cut health and international development by 10-30% I would be forced to accept defence cuts as well. However, as he ring fence these budgets, we clearly have money to spend on defence and cuts in defence are unnecessary.
    If cuts in defence are unnecessary then what is Cameron's motivation? Is he an agent sent from abroad to weaken us before the big invasion...? :eek:
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    (Original post by MagicNMedicine)
    If cuts in defence are unnecessary then what is Cameron's motivation? Is he an agent sent from abroad to weaken us before the big invasion...?
    I don't know what Cameron's motivation is and I don't particularly care for Cameron.
 
 
 
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