Thursday, January 08, 2009

Economic Stimuli

The BoE has cut interest rates again by 0.5% to a base rate of 1.5%. Now I may be showing some economic ignorance here, but isn't this below where the ideal rate should be? It was a good move to start cutting the interest rates last year, in fact to my mind the cuts started a little late.

However, what benefit does the person on the street get from rates much below 3%? Not much unless you are on variable mortgages or rare products that track below 3%. Just the other day, the Tories announced a tax break for basic-rate savers this was well received, so why are we punishing savers with rates that are too low? The banks are now passing the rate cuts onto borrowers, not even the ones owned by the Government!

Sudden excesses in the printing money are like Guido says, Mugabinomics, and as such is the litmus test for any Governments level of desperation.

What do I think?

All of the world money is spinning around in Asia, we need to get some of it back over here. To do this we need to offer to the good people in Asia products and services that they want to purchase at competitive prices. Plans to stimulate the British Economy should focus on how we can grow our trade and presence in the emerging markets in the world. We should be looking to help British Companies that have the potential to do well in Asia help with grants and tax breaks. Why haven't we done this already? Probably because the UK no longer has any real ability to make trade decisions in the wider world, as this is a function of the European Commission. Could it possibly be that in times of economic depression the National Governments of the EU no longer have the executive means and independance in which to implement necessary changes to domestic economic policies?

So, why not just address this issue instead of sending the printing presses into overdrive and punishing those people that showed the wisdom to save instead of borrowing excessively? Probably so Mr Brown can tell the world that this way is better than being a “Do-Nothing Tory”.

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