Britain\’s spending cuts have been branded as \”absolutely insane\” by one of the world\’s leading currency traders, who expects the pound to tumble beyond the low it has set this year.
As we know, fiscal contraction in a recession isn\’t being very Keynesian. However, there is another potential driver of growth: the external balance.
If the pound declines we raise the costs of imports, thus stimulating domestic demand for domestic production and we also lower the costs of our exports to others: thus stimulating domestic demand via exports.
We have thus stimulated domestic demand without continuing to throw vast gobs of cash at the public sector. So it\’s rather nice that the £ will be falling, isn\’t it?
Hey, it worked for us in 1931….one of the lessons of the 1930s that all too few seem to want to recall.