Tag Archives: Public sector

Never mind the deficit just vote for the recovery!

It’s difficult to know who to back in next month’s UK elections. Europe is a major issue which the most normally sensible parties, or at least the parties who the public normally consider to be the more sensible,  have largely chosen to ignore  in the run up. The events in the eurozone are highly significant, in particular the Greek crisis,  yet those in the most pro-EU parties don’t want to talk about them at all.

There’s next to nothing about it on Labour’s main website, Labourlist, for example.

Funny that!  Those who believe in a united Europe, as many of our more ardent EU advocates clearly do, should feel as strongly about unemployed young people in Spain or poverty in Greece as about hardship in the UK.  Yet, if they ever remember to make a critical comment, it is not because they wish to change anything. The just expired Parliament has seen a complete absence of Labour opposition to any new laws or powers for the EU.

If the UK today had 50% youth unemployment as the south of Euroland currently suffers, Labour would never let us all hear the end of it – and rightly so. If the UK had Greek levels of unemployment, and a Greek cost of living crisis which has depressed average real incomes by almost a quarter since 2007, again we would not hear the end of it, as Labour would rightly think it completely unacceptable. So why is it that these people who believe in pan European solidarity have nothing to say about the scandal of poverty and joblessness in large chunks of Euroland? Why are they not insisting on new policies for the EU?

The situation is far from ideal but it’s probably best to vote for the party who you feel will produce the best recovery. The recovery, when it happens, will fix all deficit problems. Firstly a healthy economy will mean increased taxation revenue. Secondly, if the economy is healthy no-one is going to worry about debts and deficit anyway. The US$ is surging at present as investors buy up $ securities. Are they worried about a $17 trillion (or is it $18 trillion by now?) debt?

I don’t think so. There are those in the USA who can’t make head nor tail of it all and are pushing for a balanced budget. I can’t see them getting anywhere but heaven help us all if they do!

Three Sector Balances Haven’t Gone Unnoticed by the Economic Mainstream

MMT incorporates the concept and emphasises the importance of the sector financial balances model of aggregate demand. It is a simple concept. The public sector, the private sector and foreign sector surpluses/deficits net to zero in any measured time period.

It causes neo-liberal types some problems. They probably do not like the idea of a public sector deficit being a necessary condition for a private sector surplus. They would like to pretend that the public account and private sector can be in strong surplus simultaneously. That’s impossible except for those countries who export much more than they import. So I wouldn’t expect to see three sector graphs offered up for public consumption by the mainstream media any time soon.

They are pretty good indicators of how the share market might perform though so naturally they can’t be totally ignored!

http://business.financialpost.com/2012/12/11/goldmans-top-economist-explains-his-big-call-for-the-u-s-economy/

For what it’s worth I would agree that its a good time to buy shares. Watch that black line (the private sector) in the first graph. When it bottoms out, it will be a good time to sell!

If previous experience is anything to go by, the indicators will be completely misinterpreted for popular consumption. The reduced future public sector deficit will be hailed as a great success by various western  governments.  There won’t be any mention that this will mean the private sector will be overstretched. There won’t be any warnings of the next slump to come. The experts will be telling investors not to panic and prophesising soft landings etc.  You’ll know what I mean. You’ve heard it all before!

PS If anyone does really well from this advice I’m not too proud to accept tokens of appreciation!