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how to make a fish out of fish soup

if you are in a good mood, you may want to skip this off-topic post, it’s an essay from the london review of books written by ‘john lanchester’ in march this year, read and weep…

…Cuts of that magnitude have never been achieved in this country. Mrs Thatcher managed to cut some areas of public spending to zero growth; the difference between that and a contraction of 16 per cent is unimaginable. The Institute for Fiscal Studies ? which admittedly specialises in bad news of this kind ? thinks the numbers are, even in this dire prognosis, too optimistic. It makes less optimistic assumptions about the growth of the economy, preferring not to accept the Treasury?s rose-coloured figure of 2.75 per cent. Plugging these less cheerful growth estimates into its fiscal model, the guesstimate for the cuts, if the ring-fencing is enforced, is from 18 to 24 per cent. What does that mean? According to Rowena Crawford, an IFS economist, quoted in the FT: ?For the Ministry of Defence an 18 per cent cut means something on the scale of no longer employing the army.?…

the situation being discussed, is admittedly the british economy, but with a few minor differences in details this is pretty much the scenario for all of our wonderful capitalist economies in the long-term, how depressing…

…Conclusion: whatever the political hue of the new government, it has to walk a fiscal tightrope. It is probably going to be a very good election to lose. Faced with this, the trajectory of the public mood will, I think, closely match that of the Kübler-Ross grief cycle. At the moment, thanks to the subjective mildness of the recession, we are still in denial. Next, as the full extent of the bill becomes clearer, there will be anger, especially since the hard times will have next to no effect on the bankers and politicians who, in the public mind, caused the crisis. Then there will be a helpful-for-the-government period of inflation. Then interest rates will shoot up in an attempt to control inflation, and at the same time we will see tax rises, services closing and job losses. It?s at this point, as the recovery begins to seem like a tractionless slog, that we?ll go through the depression stage of the cycle…

m / 21-04-2010 11:09

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