All the TV news channels have had their supposed experts speaking on the subject of deflation & its effect the economy. To a man they said the problem with deflation was the fact it would postpone customer spending as they waited for the signs of prices stabilising.
Without exception the experts failed to mention one other very real problem, a problem that could send the UK economy into a freefall that even these wondrous experts couldn’t see, ‘nothing new there then’ Deflation would devastate the governments already flawed plan to stem the economic downturn, why?
The fact is the Prime Minister & the Chancellor have based their calculations on growth, there plan not only relies on borrowing so much money it will destabilise the British economy for years to come, it also relies heavily on tax revenues planned at levels that now seem at best optimistic, but given the drop in consumer spending allied to the ever rising jobless total, with others on short time the tax from income falls seriously short of the planned level, with fuel tax revenues nowhere near the expected level as the oil price drops & pump price follows suit, these figures ensure the P.M.’s grandiose solution to recession are plainly flawed, and the servicing of the gigantic borrowing/debt they have proposed just will not be possible should the downturn continue, unless they intend to borrow even more money to service the debt, haven’t we been there before?? Add to this the ill advised 2½% cut in vat for thirteen months and the revenues plainly fall short of the Treasuries proposals.
But what is for certain is the effect of deflation on these plans, as the present drop in spending per capita were to be followed by a price deflation then the already dramatic drop in projected tax revenues would spiral completely out of control in a negative direction with even the most optimistic treasury & Bank of England spokesperson having great difficulty in denying Sir Richard Branson’s view of the economy which basically revolves around expletive deleted.
And if these supposed TV experts want to know what will bring customer spending back, its confidence and whilst job losses are relentless, whilst downward forecasts are conveniently altered on an almost daily basis, whilst the news from the banking/finance sector trickles down by the hour but is always astonishingly gross in its outcome, whilst politicians continue to shy away from the truth then confidence will stay in the quarry at rock bottom.
The truth is the public are far more savvy than the experts and politicians think, that’s because they live in the real world where the effects of the cold reality are felt the most and I suspect they will be very, very unforgiving once this is all over, but that regrettably is far, far away.
But through all this the public sector pension continues to hurt the economy to the extent it is now funded almost on a daily basis as the fatal combination of tax revenues & the downturn finally prove to all the public sector pension has got to go and go now. |
