And as to Willy\’s other proposals

This is exceptionally good:

And, last, the government should slash employers\’ national insurance contributions until unemployment falls below 2 million, while cutting taxes on the low-paid.

Although he\’s still managed to miss the point that Keynes made about this. It should be employees\’ NI which is cut. If you want to have a bit of fiscal stimulus then you want to get it out there fast. And you want  people to see that they\’re getting it too. You want the cash to show up in the employees\’ paycheques in the next paycheque.

But still, at least we\’re on bard now with the idea that in varying NI the government does have a simple and sound method of fiscal stmulus. It\’s isn\’t necessary nor desirable to charge off and spend tens of billions on the pet desires of idiots. Just stop taking the money off people and watch it fructify.

However, this truly is stupid:

Here is how. The Treasury should offer to buy part of every new loan made to an SME as long as the originating bank accepts a small proportion of any loss and holds part of the loan itself to show its confidence in its lending decision. The Treasury should then merge these thousands of loan fractions into big bonds that it would indemnify, turning them into a security that the Bank of England – or private buyers – could buy.

In our paper, Credit Where It\’s Due, Lancaster\’s Professor Ken Peasnell and I estimate that this measure could lift SME lending by at least 10% a year, so that in 2013/14 the cumulative stimulus would represent up to £15bn a year. Banks can put up less capital, run less risk and access cheap finance. Triggering collective action by all banks and bringing forward investment by many SMEs will improve the economic climate, so the Treasury need not charge an insurance premium for its guarantee because the loan loss rate should be small – and high take-up at this stage in the cycle is highly desirable.

This is a Freddie Mac/Fannie Mae for business loans.

We do all know which part of the American financial system bled the most cash, don\’t we? Fannie and Freddie? We do all know which part of the American financial system is still in conservatorship, is still bleeding money? Fannie and Freddie?

And the minging cretin thinks we shouldn\’t even charge a premium for the insurance?

Jeebus. Does Oxford have an ivory tower we can lock him up in: one with no communication with the outside world for preference.

6 thoughts on “And as to Willy\’s other proposals”

  1. Something exceedingly similar was proposed by one George Osborne at the Conservative Party Conference, as I recall….

  2. Hang on, I would see it like this:

    Cut employee’s contribution: velocity of money goes up, nominal GDP goes up, cost of hiring relative to output price falls, employment increases.

    Cut employer’s contribution: cost of hiring falls, employment increases.

    Doesn’t the latter plan “cut out the middleman”, so to speak? I mean, what if cutting employee’s contributions caused the velocity of money to fall somehow? Of course this all assumes that wages are sticky, to bypass tax incidence theory.

  3. Richard,

    It depends what you consider the problem is. If the problem is one of lack of demand you need to reduce employees’ NI to put more money in their pockets so they spend more so businesses want to expand so they take on more workers. If the problem is one of supply you cut employers’ NI to give companies more spending power to encourage them to take on more workers. See?

Leave a Reply

Your email address will not be published. Required fields are marked *