Wednesday, December 23, 2009

The demand for deficits

From a report in the Times:

Anxious families are repaying debts instead of spending in the shops, amid concern over the uncertain economic outlook. The share of income saved in banks and building societies has risen to its highest level in more than a decade, heightening fears that faltering consumer demand could prolong the recession.

So what we really need to escape recession is an immediate cut in government spending, reducing demand even further.

And a nice passage from Robert Skidelsky, on market sentiment about government deficits:

The government must cut its spending now, because this is what “the markets” expect. These are the same markets that so wounded the banking system that it had to be rescued by the taxpayer. They are now demanding fiscal consolidation as the price of their continued support for governments whose fiscal troubles they have largely caused.

No comments: