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British government considering £5 ($7.9) billion injection to economy

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posted on Sep, 20 2011 @ 01:58 PM
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This is a total surprise, as the UK government has consistently resisted large-scale stimulus measures in favour of austerity:


Ministers are discussing how to inject £5bn into the economy without abandoning their deficit reduction strategy, the BBC understands...

The government has faced calls for a "Plan B" on the economy amid flagging growth and rising unemployment...


The Treasury, no less, has already voiced serious concern:


The Treasury has said any change in strategy would risk its credibility...

The BBC understands a debate is underway at the top of government about what more can be done to boost economic growth without being seen to back away from the coalition's tough deficit reduction target - which Mr Osborne has called the UK's "rock of stability".

Some ministers believe up to £5bn in extra capital spending, on top of what was announced in March's Budget, could be channelled towards the nation's roads, rail and broadband.

The government has already promised to speed up major public works projects and publish an infrastructure plan by the end of the year - but business groups have urged them to go further.

The government has always rejected Labour's calls for an economic "Plan B".

But Nick Robinson said ministers believed the £5bn capital boost would not represent a U-turn since the Treasury's fiscal targets are based around current spending rather than capital expenditure.

(italics added for clarity)

Source

This is going to spark a huge debate. The UK govt has maximised its credentials as a prudent guardian of a sustainable economy by ruthlessly cutting back on spending. Any suggestion that the economy might need stimulating has been met with the response that 'we can't afford to intervene, as the deficit is simply too enormous'.

But with the IMF today revising its prognosis from a growth rate of 1.7% to 1.1% (Source), it appears the government is succumbing to outside advice/pressure:


The news emerged as the International Monetary Fund said world leaders must take strong action to prevent the risk of a double-dip recession.

(Source: OP article)

This is a very difficult balancing act, with the Bank of England only ten days ago predicting that inflation may reach 5% this year [source] (which is way above the official 2% target).

So what would the BofE do? —


Furthermore, while it kept its cards close to its chest on the matter, the Bank of England clearly has the door open to re-engaging in quantitative easing (QE) if the current financial turmoil continues and the economy's struggles continue.

(Source as immediately above)

It all sounds increasingly like clutching at straws. The UK govt has pursued a laudable policy of deficit reduction, but has found that an already ailing economy has been starved of much-needed oxygen in the process. A sudden injection of cash looks like it makes sense on the surface, but what has changed since it has been saying it can't afford such action? Nothing.

Further QE is just a further sign of desperation, and, frankly the money will simply end up in the coffers of the banks, as they seek to increase liquidity while refusing to lend to businesses, which is precisely what has happened so far.

The answer? There isn't one. Those in power are just kidding themselves they can keep their dying economies alive.




posted on Sep, 20 2011 @ 02:06 PM
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Im sure the politicians will just divy it up between themselves to spend on luxuary items and let the wealth trickle down like duing the expences fiasco.

Ill throw in my $0.02, it would be better if they take at 5 billion and sink it into fuel subsidies as the price of energy has risen 30% this year , why it has is beyond me.

Lets not waste the money on the olymipcs or bankers bonuses but ease the burden on the already suffering population.



posted on Sep, 20 2011 @ 02:07 PM
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reply to post by pause4thought
 


Like that's gonna work.



posted on Sep, 20 2011 @ 02:17 PM
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The uk hasnt done anything by itself for many years!

I suppose its good they are doing somthing, just not very sure this is the somthing they need.....



posted on Sep, 20 2011 @ 02:22 PM
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i think this idea has come from the new IMF head Christine Lagarde a few days ago who thinks that the present budget cuts and austerity plans are likely to put the world economy into a downward spiral. She thinks governments need to INCREASE expenditure in the short term to prevent this happening. governments need to foster growth in the short-term.

blogs.msdn.com...

Like the OP I think they are grasping at straws at the moment. However, I'm no expert on economics but something recently has certainly got them worried in financial circles.



posted on Sep, 20 2011 @ 02:25 PM
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reply to post by michaelmcclen
 





...it would be better if they take at 5 billion and sink it into fuel subsidies as the price of energy has risen 30% this year...

You know that's a really intelligent suggestion. I mean how many companies will actually benefit from focussing all those billions on 3 specific industries? Reducing the cost of fuel would impact every area of the economy (-though I don't know how far £5 billion would go).



posted on Sep, 20 2011 @ 02:49 PM
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Infrastructure, rail and broadband are a fools choice on what to spend 5 billion on id rather spend the cash on some of the following if it had to be used to boost produce.

I always state to grow an economy you need to produce energy..............

Before I get started I dont believe in global warming, but I do believe in renewable energies.

The Uk is an Island with rich and fertil land,I would create wind farm after wind farm off the north coast, it provides jobs for engineers, provides energy to use and to sell abroad.

We have Harland and Wolf here in Northern Ireland with skilled fabricaters who at the moment are knocking up a few wind turbines.

I would put the scientists to good use by improving our agricultural industry but not by genitical modifying our seeds but by improving existing yeilds and building super structure green houses that feed our population and again we can see off the surplus to europe.

Education would be my next step, free education and university placements to every UK citizen. Stopping people from a higher education is stopping evolution in its tracks. We need as many people as possible gaining worth while degrees.

All of the above create plenty of jobs and give us a product to sell, unlike now where the UK is mainly a service sector driven industry. If only I could run for PM i'd be chewing them out every chance I get during PMQT's.
edit on 20-9-2011 by michaelmcclen because: elaborated



posted on Sep, 20 2011 @ 03:00 PM
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reply to post by michaelmcclen
 


With ideas like that, if you're not a politician, you should be.


Investing in education means taking the long view. All the better for starting from scratch with...

On the other hand, to invest in education, the money has to come from tax — which basically means industry.

So food might be a safer investment. I can't see the EU taking kindly to such initiatives, though. Can't rock the boat with French farmers, can you? I mean if you tried subsidizing them any further they wouldn't even need to get up in the morning. (Which, though initially popular, would destroy production entirely...)

Tax breaks - on industry in particular - have my vote.



posted on Sep, 20 2011 @ 03:07 PM
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reply to post by pause4thought
 


I don't know why helicopter Bernake is so worry about perhaps because he knows that dollars will be going to that 7.9 billion injection he will be doing just that with under the Q3.

Perhaps the looks of concerns is just nothing but a show.

Q3 means inflation. Dumping toilet paper dollars into the economies is nothing but an illusion.



posted on Sep, 20 2011 @ 03:15 PM
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Originally posted by pause4thought
reply to post by michaelmcclen
 


With ideas like that, if you're not a politician, you should be.


Investing in education means taking the long view. All the better for starting from scratch with...

On the other hand, to invest in education, the money has to come from tax — which basically means industry.

So food might be a safer investment. I can't see the EU taking kindly to such initiatives, though. Can't rock the boat with French farmers, can you? I mean if you tried subsidizing them any further they wouldn't even need to get up in the morning. (Which, though initially popular, would destroy production entirely...)

Tax breaks - on industry in particular - have my vote.




Germany has already stated it has its eyes on Irelands food produce to keep its engineers happy, so we know there is a market already to buy up our produce. The added benifit of superstructure greenhouses is that you can grow any plant or vegtable in the world by controling the enviroment in which they grow , so no more seasonal fruit or veg with the added bonus of not having to import any which costs, product+labour+fuel.

Education should be underwritten by the tax payer most definatly, as its going to be providing workers with precious skills that if used correctly that could produce a thriving UK where jobs are plentiful and where university leavers are wanting to stay here to work and thus pay off their debt for free education via taxes,

*Engineering jobs for renuable energies and agriculture
*Scientific jobs for agriculture also medicine

If you think about it now, most of our economy is spent paying scientist billions of pounds on making newer, better and more advance weaponery which benifits not one citizen.

If we took that money and spent it on our civilisation Id put money on it our country would be a much richer happier place to live and be a beacon to society and the world at large.



posted on Sep, 20 2011 @ 03:16 PM
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reply to post by marg6043
 


I wonder what the result would have been if QE 1 & 2 had gone towards tax breaks on industry & the man in the street? I mean if you've already thrown well over $1 trillion at a problem, and aimed it well, should you really be in need of yet another 'stimulus package'?

(Or maybe the US has been sorted, so the money can be given to the UK out of the kindness of Ben's heart...)



posted on Sep, 20 2011 @ 03:21 PM
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reply to post by michaelmcclen
 





If you think about it now, most of our economy is spent paying scientist billions of pounds on making newer, better and more advance weaponery which benifits not one citizen.

If we took that money and spent it on our civilisation Id put money on it our country would be a much richer happier place to live and be a beacon to society and the world at large.

You really should start a new party. You've got my vote already.



posted on Sep, 20 2011 @ 05:44 PM
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reply to post by pause4thought
 


That is the problem, that is not solution, since 2008 money has been used to fill in the wounds of a decaying economic system the results are less than desirable, what next more money to keep filling up the new wounds plus the old ones have not heal yet.

Countries are printing money to make the citizens believes that everything is doing great.



posted on Sep, 20 2011 @ 06:03 PM
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Looks as if they are now agreeing with the pathetic Labour party that warned that huge cuts would cause a double dip.

These elitist college boys have no Idea past sound bites and dogma. My guess is that a pundit has said the coalition will not last so the are getting ready for another election.

What happens then because there is no choice at all as they are all ineffectual. Even a hung vote ends up with career politicians plotting a personal path to the house of lords.

We have had our pay cut, our pensions raided and our kids forced into debt at the start of their lives.

What a shambles



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