Saturday, 25 January 2014

Ed Balls promises to cause a UK recession by 2020

This afternoon Ed Balls MP, the Shadow Chancellor of the Exchequer, the man who would like to run the economy of the United Kingdom, promised to send the UK economy into recession by 2020 at the latest.

That is in addition to promising to subsidise the profits of large corporations via his Six Month Guaranteed McJob scheme. No choice offered obviously.

The UK economy runs an external deficit of 2 to 3% of GDP, and corporations have been net saving at least 2% of GDP since 2002. That is unlikely to change. Which means with a balanced government budget, either the financial sector or the household sector is going to have to be borrowing at least 4% of GDP more than they are saving to keep things going.

The sectoral balances are quite clear on the matter

Even if Balls is giving away mortgages on the back of cornflake packets, that is unsustainable. The level of leakage is too high, and it will drive the economy into recession if sustained.

Balls is the MP for Morley and Outwood. His constituency contains the graves of my forefathers. A good part of it is old mining country and it is by no means a wealthy area. The people that now live there will, once again, suffer needlessly due to the promised 'cuts' and the subsequent recession.

They are being deliberately lied to by the man who would be king.

They deserve better than that.


Neil Wilson said...

Worth linking Richard Murphy's post in here as well as corroboration that what Balls is proposing is literally impossible.

oldcobbler said...

But Balls also said "We will get the current budget into surplus as soon as possible in the next Parliament. How fast we can go will depend on the state of the economy and public finances we inherit."
"As soon as possible" doesn't sound very binding to me, and as you point out, the implication of the sectoral balances is that "the state of the economy" won't allow it. Isn't it just silly political posturing ?

Neil Wilson said...

Could be. He's a slippery fish.

However the line in the speech goes like this:

"So I am today announcing a binding fiscal commitment.

The next Labour government will balance the books and deliver a surplus on the current budget and falling national debt in the next Parliament."

That's the 2020 deadline.

gastro george said...

I guess the problem is that Balls is as political as Osborne. So is more concerned with the political impact of any policy within the media bubble than any connection with reality.

gastro george said...

The comments on Richard Murphy's post reminded me that, a few weeks ago, Hugh Pym, chief economics correspondent at the BBC, was on the TV saying that, once the economy was back in surplus, we still had a long way to go before we could pay back the whole national debt ... without any sense of comprehension.