In the UK it is obvious that there is no possibility of continuing with budget deficits of some 13% of GDP, the present prospect if no action is taken.
Unfortunately however the recent UK Budget produced no credible plan for dealing with this problem. It swept it into the lap of the new government after the May election, whatever that government is.
The UK and the Budget: Shaw Capital Management Korea. The UK cannot delude themselves that rapid resumed growth will lead to a rapid return of the previous revenue streams. UK growth in most forecasts, ours included, is projected as slow. In our view there is a good reason: the continuing shortage of oil and raw materials worldwide prevents rapid growth for the world
as a whole and since emerging market economies are continuing to grow rapidly that restricts the growth possibilities in countries like the UK and other developed countries.
We are already seeing inflation spread into China and otheremerging countries, forcing a tightening of policy.
It seems likely that this tightening will be enough to restrain world growth to rates that will not push commodity prices much higher.
Shaw Capital Management and Financing provides export trade financing to clients in every major world market and can convert accounts receivable finance transactions in 17 currencies. Avoid scams and other fraudulent transactions. Deal with the best financing companies only. No registration fee needed.
So even the fast-growing world economies are being forced to limit their growth ambitions; as for the UK they are achieving recovery, but hardly enthusiastic growth.
All this will only change when innovation in raw material use has freed up net world supplies.
Fortunately the flexibility of the UK labour market has restricted the jobs fallout. Unemployment has peaked below 8% (just over 5% on the benefit-claimant measure) as people have opted for wage freezes or cuts and shorter hours so there is underemployment
but not the disaster of double-digit unemployment rates.
But this environment is one in which tax revenues will not recover much and in which the demands for public spending will continue.
Time will tell how big the structural deficit that will emerge once the recovery is complete may be.
But policy decisions cannot wait until this is better known. So in this Budget the need was to produce a five-year public sector adjustment plan.
Two things should guide this plan: keeping the taxes down and competitive, so that growth and innovation resume, and restoring efficiency in public spending.
The UK and the Budget: Shaw Capital Management Korea. Spending cuts to begin with the last, the current government unleashed a massive surge in public spending from 2000, raising it by 8% of GDP before the crisis raised it by more again.
Everyone knew that without reform and gradual increases, such money would be wasted; there is no practical way to spend such vast sums without raising wages and wasting money on speculative projects.
Productivity in the public sector duly slumped and public sector remuneration including pensions has surged past the private sector where market forces suggest pay should be higher to reflect greater insecurity.
The UK and the Budget: Shaw Capital Management Korea. To reduce public spending back to where it started in 2000 as a share of GDP (at around 36%) would require it to grow in real terms by about 16% less than real GDP over the next five years. Since total GDP growth over that period is likely to be about 10%, which means that spending must be cut by about 1% a year in real terms.
This is a feasible target. The UK Treasury under Gordon Brown became a brute instrument of spending increase, oddly somewhat against the protests of some departments worrying about wasteful effects. The UK Treasury was never traditionally like this very much the opposite, a place from which wringing money was like getting blood from stones.
It should be returned to its traditional function of restraint; Treasury control, old-style, is the best instrument for forcing departments to find the economies they privately know they can make.
Unfortunately however the recent UK Budget produced no credible plan for dealing with this problem. It swept it into the lap of the new government after the May election, whatever that government is.
The UK and the Budget: Shaw Capital Management Korea. The UK cannot delude themselves that rapid resumed growth will lead to a rapid return of the previous revenue streams. UK growth in most forecasts, ours included, is projected as slow. In our view there is a good reason: the continuing shortage of oil and raw materials worldwide prevents rapid growth for the world
as a whole and since emerging market economies are continuing to grow rapidly that restricts the growth possibilities in countries like the UK and other developed countries.
We are already seeing inflation spread into China and otheremerging countries, forcing a tightening of policy.
It seems likely that this tightening will be enough to restrain world growth to rates that will not push commodity prices much higher.
Shaw Capital Management and Financing provides export trade financing to clients in every major world market and can convert accounts receivable finance transactions in 17 currencies. Avoid scams and other fraudulent transactions. Deal with the best financing companies only. No registration fee needed.
So even the fast-growing world economies are being forced to limit their growth ambitions; as for the UK they are achieving recovery, but hardly enthusiastic growth.
All this will only change when innovation in raw material use has freed up net world supplies.
Fortunately the flexibility of the UK labour market has restricted the jobs fallout. Unemployment has peaked below 8% (just over 5% on the benefit-claimant measure) as people have opted for wage freezes or cuts and shorter hours so there is underemployment
but not the disaster of double-digit unemployment rates.
But this environment is one in which tax revenues will not recover much and in which the demands for public spending will continue.
Time will tell how big the structural deficit that will emerge once the recovery is complete may be.
But policy decisions cannot wait until this is better known. So in this Budget the need was to produce a five-year public sector adjustment plan.
Two things should guide this plan: keeping the taxes down and competitive, so that growth and innovation resume, and restoring efficiency in public spending.
The UK and the Budget: Shaw Capital Management Korea. Spending cuts to begin with the last, the current government unleashed a massive surge in public spending from 2000, raising it by 8% of GDP before the crisis raised it by more again.
Everyone knew that without reform and gradual increases, such money would be wasted; there is no practical way to spend such vast sums without raising wages and wasting money on speculative projects.
Productivity in the public sector duly slumped and public sector remuneration including pensions has surged past the private sector where market forces suggest pay should be higher to reflect greater insecurity.
The UK and the Budget: Shaw Capital Management Korea. To reduce public spending back to where it started in 2000 as a share of GDP (at around 36%) would require it to grow in real terms by about 16% less than real GDP over the next five years. Since total GDP growth over that period is likely to be about 10%, which means that spending must be cut by about 1% a year in real terms.
This is a feasible target. The UK Treasury under Gordon Brown became a brute instrument of spending increase, oddly somewhat against the protests of some departments worrying about wasteful effects. The UK Treasury was never traditionally like this very much the opposite, a place from which wringing money was like getting blood from stones.
It should be returned to its traditional function of restraint; Treasury control, old-style, is the best instrument for forcing departments to find the economies they privately know they can make.
Shaw Capital Management: Shaw Capital Management Boiler Room Tips: The Uk And The Budget: Shaw Capital Management Korea : reddit
Related Coverage
* Shaw Capital Management: South Korea's EconomySouth Korea's output is continuing to accelerate, and the government needs to exit from its accommodative economic policies earlier than anticipated. The HSBC Korea's purchasing managers' index (PMI) rose from 55.6 in January to 58.2 in February - the highest since December 2007.
* China's Economy: By Shaw Capital Management Korea
China's Economy: by Shaw Capital Management Korea - China will continue fiscal stimulus spending and its current monetary policies this year as the country has, in the opinion of the Chinese Communist Party, not fully recovered from the economic downturn.
* Taiwan's Economy: By Shaw Capital Management Korea
With gross domestic product clocking 10.2% growth from a year ago in the fourth quarter, and 4.2% from the previous quarter, Taiwan returned to pre-financial crisis growth levels. In spite of the strong recovery in the second half of the year.
* Shaw Capital Management And Financing
No comments:
Post a Comment