Thursday, 8 November 2012

Economy Stoophid?

I don't think Obama won on the economy but certainly a few positive figures vindicated the stimulus package advocated and negotiated by him and his team. The double cliff fall lies ahead which a Romney win would have secured and probably enlarged.

However, to paraphrase a native American tribal saying, an economist is a person who travels through life facing backwards, with history completely visible back to a far ago horizon. They are though blind to the future, with their eyes facing the wrong way.  To the tribe, this was the only truth, the past. You used your experience not to predict the future, but to react in an educated way to it.

Sure there are pundits who saw the 2007-8 crash, sure some saw the stimulus package working, and others in the EU see austerity as the only cure. Well some of them have been right and some of them are going to be right, but excluding a catastrophe like an asteroid strike, we know that things can only go so low as a notionable liquidatable value, or actually as low as the government then really does take over a free-fall economy. On the other hand, we know that over valuation is likely not to be as extreme as in the late "naughties" and public spending and lending will be pegged back for many years to come if not a new golden rule is struck now in GDP to spend to borrowing ratios.

I see that what we have infront of us now as being like the philosophical oxymoron: when the unstoppable force meets the imovable object, the force stops and the object moves. The "house" is going to move and Obama-ism is going to be tethered back: in other words, the double cliff fall is going to be attenuated and a combination of say pay roll ( employer's national insurance) relief, training relief and other tax breaks on investment in productivity will go ahead. Also Afganistan will be racked down and several near redundant defence technologies will be either mothballed pending retirement or sent for scrap, with their support crews being demobilised from the military.

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