Sigh

I gave a talk to Ipswich Quakers and friends last night and whilst doing so said that there was no chance the UK deficit would be cleared during the life of the next parliament whatever any politician says.

The reason is obvious. If the deficit is to be cleared then someone else has to go into deficit instead: that’s the way the economy works. Consumers, business, government and overseas finance have always to balance between them. But we have what FT commentators call a ‘global savings glut‘ where consumers with any wealth are stashing cash, and not saving it.

Is he really trying to insist that people are stashing cash under their beds? No, no, he’s not. He’s insisting that people are just letting that cash pile up in their bank accounts.

Which is saving. And yes, it does finance investment. Because that’s where all that credit creation by the banking system comes from. You know, that fucking shite that he keeps complaining about?

9 comments on “Sigh

  1. The Ipswich Quakers?

    I’m losing interest in the PsychoDick anyway, but I have no interest in American Football whatsoever.

  2. How priceless – the courageous distinction between stashing cash and saving cannot find a place on the entire spectrum of stupidity.

  3. But surely the point is that if consumers aren’t spending, then no amount of credit from the banks is going to make the economy grow – except for the banks…

  4. “But surely the point is that if consumers aren’t spending, then no amount of credit from the banks is going to make the economy grow – except for the banks…”

    If people aren’t spending, why are they asking the banks for credit?

  5. I’m not actually sure that saving does fund investment any more, not under Global Banking PLC. The system has moved beyond that, as I believe Frances Coppola has demonstrated (where is she these days by the way?). There isn’t any more the classic relationship between what goes in and what goes out, instead there is more a case of liquidity management.

    Not agreeing with His Ritchieness, but maybe our analysis is a bit too classical in a period (post 1971) where the money system ain’t what it used to be.

  6. @ Ian B
    The system has NOT moved beyond that. What *has* happened is that all the burdens imposed on business since 1997 means that there are so few opportunitiews to generate wealth, even in you are borrowing money at a negative real rate of interest, that no-one tries any more. There were times before Jume 2010 that I spent more time complying with government regulations (mostly on accounting trivialities) than on actually earning the money. Things have improved (flat-rate VAT scheme particularly) so now I can keep one set of accounts instead of SIX different ones that Gordon Brown required to keep solely for the UK government.
    Frances is a nice younger lady but she fails to overcome her disbelief in reality

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