Recession: Job losses will accelerate, predicts CBI

[milanbenes]

"Borrowing stimulates growth; growing property prices stimulate spending which in turn creates jobs. That is how the UK has managed so well. The problems come when borrowing gets out of control, but the market corrects this through interest rates. ",

DA, I am sorry, consumer borrowing tweaked by interest rates is NOT AT ALL the foundation of a solid sustainable economy - simple as.

Milan.

[ALM]

Borrowing stimulates growth; growing property prices stimulate spending which in turn creates jobs. That is how the UK has managed so well.

Interest rates are not thumbscrews they are the best way to stimulate and control an economy. It is governments that apply thumbscrews

Having previously studied the subject, I think your economics is aptly 'dodgy' DA. It's investment in capital rather than borrowing in itself which stimulates long term economic growth. The millions of fools up and down the country who have remortgaged their houses to the hilt in order to finance expensive cars, holidays and gadgets, all of which are produced abroad are doing very little for the economic well-being of the nation.

The idea that interest rates are the best way to control the economy is actually highly contentious. This approach, also known as 'monetarism', was practiced by many governemnts accross the world, including the conservatives under Thatcher and Major, with spectacularly bad results.

[The Lone Gunman]

This approach, also known as 'monetarism', was practiced by many governemnts accross the world, including the conservatives under Thatcher and Major, with spectacularly bad results.

I think you will find that when the Tories were thrown out of office the one decent legacy they left that the pundits agreed on was the strength of the economy.

[Lucifer Box]

The idea that interest rates are the best way to control the economy is actually highly contentious. This approach, also known as 'monetarism', was practiced by many governemnts accross the world, including the conservatives under Thatcher and Major, with spectacularly bad results.

Indeed. As Eddie George, former Governor of the Bank of England, once famously said: "controlling the economy with interest rates is like trying to pull a brick with a piece of elastic. Nothing happens for ages and then all of a sudden it shoots forward and hits you in the face."

And let's not forget the BoE's remit is only to use interest rates to control inflation, nothing more, nothing less. Other factors only enter obliquely into the equation if they themselves would affect the inflation rate.

[BlasterBates]

...or what about..

Managing a Software project is like trying to pull a brick with a piece of elastic. Nothing happens for ages and then all of a sudden it shoots forward and hits you in the face."

[ALM]

I think you will find that when the Tories were thrown out of office the one decent legacy they left that the pundits agreed on was the strength of the economy.

Hey I'm no fan of NL and actually prefer the Conservative approach of lower taxes and less intervention in the economy. However, their policy of using interest rates as a means controlling the economy was simply disastrous at times. Do you remember the problems the UK economy faced with inflation in the 80s and our forced depature from the ERM?

[The Lone Gunman]

trying to pull a brick with a piece of elastic. Nothing happens for ages and then all of a sudden it shoots forward and hits you in the face."

Sounds supiciously like my trap 2 activities after some of yesterdays threads......

[Lucifer Box]

Sounds supiciously like my trap 2 activities after some of yesterdays threads......

Ah, the good old Chinese helicopter pilot impersonation?

[The Lone Gunman]

Hey I'm no fan of NL and actually prefer the Conservative approach of lower taxes and less intervention in the economy. However, their policy of using interest rates as a means controlling the economy was simply disastrous at times. Do you remember the problems the UK economy faced with inflation in the 80s and when our forced depature from the ERM?

I remember those years well.

I would be inclined to suggest that what Thatcher did was bound to involve a lot of pain economically, but the outcome was a much more stable and managable economy.
Not all the woes of the era were specifically down to the Tories, but what they did was isolate the UK economy from many of the factors which damaged it in the past and were beyond our control.

Not saying they were perfect, but made the hard decisions and brought us through the hard times.

Gordo is now busy taking all those hard won assets and breaking them or giving them away.

[DodgyAgent]

Having previously studied the subject, I think your economics is aptly 'dodgy' DA. It's investment in capital rather than borrowing in itself which stimulates long term economic growth. The millions of fools up and down the country who have remortgaged their houses to the hilt in order to finance expensive cars, holidays and gadgets, all of which are produced abroad are doing very little for the economic well-being of the nation.

The idea that interest rates are the best way to control the economy is actually highly contentious. This approach, also known as 'monetarism', was practiced by many governemnts accross the world, including the conservatives under Thatcher and Major, with spectacularly bad results.

You are talking about excessive borrowing, and yes you are quite right that boom and bust is an unhealthy economic environment, but it is better than bust only. What do you think that investment capital is made up of?.. yes savings of people with a surplus of cash. The point I am making is that investment capital is invested as a loan, or a gamble on a business venture. The investment capital is "invested" in a person or a business who has convinced investors that they will make a return on that investment. In other words one persons savings is another persons borrowings.

The problem that Germany and France have is that no one wants to borrow to either expand or set up buisnesses. What Germany needs is a boom, and the only way they are going to stimulate that is to encourage economic activity by getting people to spend instead of save.