Cut & paste Recession

[????]

Lots of sense here....

How to make the recession less painful ? cut taxes

If we want to get out of this recession in one piece, what really needs to be done?

Interest rate cuts won't work. They haven't worked in the US, they didn't work in Japan. That's because as a nation, we're up to our eyeballs in debt. Banks can't afford to lend money; we can't afford to borrow it. All of us need to pay off our debts and build up our savings. So it doesn't matter how cheap money gets, we've snapped out of spending mode and strapped on our tin hats.

So the quickest route out of recession is to help people pay down debt and build up their savings. Inflation is one way to reduce the value of debt, but it generally comes with a hefty price tag ? currency collapse and economic meltdown. Higher interest rates might help build up savings, but they'd also make debt more expensive to service.

How can we help people save more without fuelling inflation or making our debt burden even worse? Simple. Cut taxes.

If you cut taxes, you almost automatically increase productivity, because you take money from a wasteful, inefficient organisation ? the government ? and reallocate it to someone who actually gives a damn about how effectively it's spent ? the individual. And rather than squander the money on property (as the Government is proposing), individuals would use it sensibly, saving it, or using it to pay down debt.

This isn't a magic bullet. It won't stop the recession ? nothing can. The looming bust is nature's way of telling us that we spent too much money on unproductive garbage during the good times.

Look at it this way. If we'd taken all the money we spent as a nation on property in the past ten years, and had pumped it into ? let's say ? our energy infrastructure, then maybe we'd have lower gas bills, and a nice, productive industry providing highly paid, specialist jobs that would be tough to outsource. Instead, all we've got is big debts, an unwanted pile of jerry-built buy-to-let flats which are already turning into slums, thousands of unemployed estate agents, and a national energy crisis.

It's depressing, yes. But what we can do now is put an end to the rot and the waste. The quicker those savings build up, the faster balance sheets are repaired and the quicker we can get out of this downturn.

Will this happen? I doubt it. The Government still believes the great lie, that you can spend yourself rich. It still believes that "something must be done."

Better get ready for a long, drawn-out, painful recession.

[AcedOut]

Government cuts taxes. Government must then print more money. Resultant issue - inflation. That doesn't work.

[????]

er-----they could reduce spending....

[david_carnell]

???? Wrote:

-------------------------------------------------------

> If you cut taxes, you almost automatically

> increase productivity, because you take money from

> a wasteful, inefficient organisation ? the

> government ? and reallocate it to someone who

> actually gives a damn about how effectively it's

> spent ? the individual. And rather than squander

> the money on property (as the Government is

> proposing), individuals would use it sensibly,

> saving it, or using it to pay down debt.

This is where, for me at least, this argument falls down. 'People' are given far too much credit. 'People', in general, are actually quite dim and wouldn't know a good investment if it bit them on the arse. For a long time, probably a decade or more, the average person has had a bit more cash to play with. Have people saved wisely, or invested? No, they bought plasma tvs and expesnive foreign holidays. Why do you assume that if everyone suddenly got a bit more cash in their pocket with lower taxes of whatever sort they would suddenly turn into Warren Buffet?

[AcedOut]

Exactly. The (tax) money from the 'People' is supposed to be spent wisely by the 'Government'. This is essentially the problem.

If anything though, there should have been tighter controls around debt. 110% mortgages should never have been allowed. Multiple credit cards with crazy limits should never have been allowed. But they were, and now we're picking up the pieces. There were fairly easy controls that could have been put around retail debt. The more complex instruments were merely a derivative of this debt mountain which the government would never have been able to understand anyway (well, neither did the bankers and risk managers!)

[SeanMacGabhann]

Given (y)our job AcedOut, I imagine anyone suggesting those controls a couple of years ago would have been given short shrift n'est pas? When times are good, no-one is allowed to say "hang on a minute, is this wise?"

Anyone who does is told "hush, this is different to the last boom - we won't crash again"

[MelbourneGr]

If the Government were to spend less, it would hit a lot of Government funded projects etc, many of which are a complete waste, but it keeps people employed.

I don't know what volume of people will face redundancy, but the people who are able to hang on to their jobs and avoid salary cuts should have a higher disposable income with cuts in interest rates?

[AcedOut]

Well trading is a little like being in government - you just have too stay out of trouble for your term (typically a year, but longer periods of consistency for head trader - the real money maker). Timing in this business is key to a prosperous career. Unfortunately for Gordon Brown, the mess is just starting unravel (yes, just STARTING)...

There is far too much short-sightedness everywhere. Banking, politics, everything. If personal incentives were longer-term, then I'm sure things would improve, but unfortunately human beings are inherently forgetful of cycles over around 8-10 years, so the same mistakes get made over and over again.

[SteveT]

The government speak of real estate as if it is our economy.

Big mistake, money is made from what products we make and sell abroad.

Nothing in real estate makes wealth for the country.

When we produce like China, then we will be loaded just like them.

Soooo not a five minute job then.