At the moment the signs are not good, and anxiety about the future means many families are keeping a lock on their deposit accounts. The sums they hold amount to about £200bn, and the chancellor, Jeremy Hunt, could really do with some of it being spent soon – though in a measured and steady fashion, to make sure the central bank does not get spooked and raise interest rates again.
This leaves the economy stuck in a rut, trapped by the flight of people and investment cash after the Brexit vote into having to operate at a significantly lower level.
It is the lack of capacity to generate goods and services following this exodus that exercises the Bank of England. Former Bank official Adam Posen, who now heads the Peterson Institute thinktank in Washington, puts all of the UK’s short-term problems down to Brexit. Without it, the workers and the investment funds would be flowing, which would allow the economy to expand without pushing up inflation. This would allow the Bank to keep interest rates low and the economy humming.
S equals I. That’s an identity. So folks with £200 billion in savings is a problem from investment in the economy?
If you gave everyone strong basic income, would the economy just sort itself out?
@? Questions we can answer: No
Good God you are stupid.
Smog got ya down?
No, it wouldn’t. Because the incentive to do anything would be strongly suppressed by the taxation on anything and everything you do to get more than that allotted amount for the majority of people.
All it would do is breed more salon socialists who’d do fuck-all except demand more, mostly freshly imported from Shitholistan and trained to see a good scam to abuse when they come across it.
Treasury has been pushing this line since Mark Carnage appeared on the scene. Money’s no good unless it is being spent rather than hoarded – what makes the world go round. The pesky public, however, also values the peace of mind that comes from savings, allows them to sleep at night. We could have been persuaded to risk/blow a discretionary amount on fripperies and speculative investments, but the tax man got there first.
Interesting to see that everything is STILL caused by Brexit. The solution here would appear to be to tell the EU to fuck off, and just run the UK as you wish.
I’d also scrap all the green crap and frack everything within sight or hearing, to provide lots and lots of cheap, plentiful energy.
As for the Greenatics, I always seem to think of Crassus when it comes to them. But perhaps crucifying them on the windmills instead of at the side of the road might be a new approach.
If you gave everyone strong basic income, would the economy just sort itself out?
Country already effectively does that. You have a benefit system it’s a piece of cake to get on to & nothing stopping people supplementing that income in the black & grey economies. Which enormous numbers do.
And how does that work out for you?
Former Bank official Adam Posen, who now heads the Peterson Institute thinktank in Washington, puts all of the UK’s short-term problems down to Brexit. Without it, the workers and the investment funds would be flowing, which would allow the economy to expand without pushing up inflation. This would allow the Bank to keep interest rates low and the economy humming
Everything will get magically “better” if you stop trying to be a country, proles.
Speaking from a EU country currently circling the plug hole…er no.
I have been contemplating making a fairly, for me, major purchase. Having been an idiot with my credit card in my younger days, when I still should have known better, I now have a fairly strict philosophy on spending. If it is something that I would very much like to have but don’t actually need, I don’t borrow money to buy it, I save up. This means that I will have to be squirrelling money away in a savings account for about another eighteen months. Am I harming the economy by refusing to get into debt?
@Stonyground – you could get a 0% purchase credit card, buy the goods, and save the money to pay off the debt when the (say) 21 or 24 months are up. We’ve just started trying this stunt now. I hope I don’t cock it up. I did it once before but I was younger and brighter.
There are some regular saver accounts that pay handy amounts of interest.
I should say that this is part of our response to inflation – buy now before the price goes up.
“Savings” is a stock variable. “Saving” is a flow variable. The “S” in the “S = I” identity refers to “Saving”, not “Savings” because Investment is also a flow variable which has to be the case for the identity to hold true. (One should not mix stock and flow variables.)
Having said that, if people spend more of their savings, the capacity utilization rate rises, which means more investment, which means more saving because S = I, which leads to higher savings. Here, a stock leads to a flow which leads back to a stock.
Recall that the Paradox of Thrift says that the attempt to save leads to less saving by the community in aggregate. This is the same thing but in reverse, i.e., the attempt to save less by spending leads to more saving/savings for the community.
How dare people have savings, how can you make them dependent on the government if they aren’t living pay check to pay check.
Given the benefits system in the U.K. could you give everyone a universal basic income but removed tax allowances and plays around with basic tax and minimum wage so for most people the effect was zero, basically remove the need to apply for benefits. How different would it be other than the perception of the benefits system
If I want to be “productive” by trying to self-provision as much as possible (water, sleeping space, berries …) on commons, is that bad for GDP but good for me?
What if I could grow wild grains and marijuana in the forest with the natural farming techniques documented by Masanobu Fukuoka in “One Straw Revolution”?
7 billion people can’t do that. See the Tragedy of the Commons:
https://www.jstor.org/stable/1724745
Ah yes, Posen:
https://www.theamericanconservative.com/adam-posen-woke-capitalist-for-social-justice/
“trapped by the flight of people and investment cash after the Brexit vote”
It’s anecdotal but as I recall the flight of the Poles and Romanians happened just before the first lockdown. It was COVID rather than Brexit that did it. And actually there seem to be more Polish and Romanian stores than ever, so maybe my perception of the flight was wrong.
As for the flight of investment cash, that is no more than a lie.
The fallacy of composition and the paradox of thrift. I suppose I’m missing the point again.
“If a population decides to save more money at all income levels, then total revenues for companies will decline. This decreased demand causes a contraction of output, giving employers and employees lower income” (wkpda)
“A fundamental macroeconomic accounting identity is that saving equals investment. By definition, saving is income minus spending. Investment refers to physical investment, not financial investment. That saving equals investment follows from the national income equals national product identity”
Were you using the right definitions of s and I?
This identity only holds true because investment here is defined as including inventory accumulation, both deliberate and unintended. Thus, should consumers decide to save more and spend less, the fall in demand would lead to an increase in business inventories. The change in inventories brings saving and investment into balance without any intention by business to increase investment. Also, the identity holds true because saving is defined to include private saving and “public saving” (actually public saving is positive when there is budget surplus, that is, public debt reduction).
Saving in aggregate must always equal investment. In a globalized economy, saving and investment balance at the global level.
S = I + (G – T) + (X – M)
The only way for the domestic private sector to net save, i.e., save in excess of investment (S > I), is for the sum of the other two sectors, i.e., the government sector and the foreign sector, to be in deficit, i.e., dis-saving.
《7 billion people can’t do that. See the Tragedy of the Commons:》
And what if only a few wanted to be like me and there is plenty of unused land to do it on?
Why has the Tragedy of Privatization taken away my natural right to live outside of society?
Why does crapitalism require coercing me into participating in markets?
As soon as you say “arable” land you’re talking about property again. Because you’re saying you’ll plant that arable land. And you’ll want to be there to be able to harvest the crop you’ve planted. Property.
Remove the arable part and your half acre is easy as pie. Obviously, don’t know where you live but the American West is covered with million upon million acres of national forest, state forest and all the rest. You could hide out in there – live away from society – and absolutely no one would ever know. You and your half acre. Life would be nasty, brutish and short but it could indeed be done. The only difficulty would be if you wanted that and also the interface with the rest of society. To gain food supplies, clothing, medical care, internet and such. But that’s not living outside society, is it?