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Finance Friday: economic theories

You spend years at university learning economic theories about market forces and supply and demand, get your bachelor degree and maybe a Master’s degree to boot. You go on to become a banker, politician or economist and then you find out real life doesn’t match the theory!

In real life, we have greed; people cheating and people running Ponzi schemes. In real life we have people fixing LIBOR and insider dealing. In real life, we have crooks and they don’t wear striped tee shirts and carry swag bags. They wear pin striped suits and will take you for all you have without ever getting their hands dirty.

We are still seeing more anguish over the world economy and the economists don’t have the answers. Their complex economic theories are of no use whatsoever.  The World Bank chief financial officer has given up his bonus, well he does earn £250K a year. The World Bank has decided to cut it’s costs and devote more money to projects to stimulate growth. There we see the problem, the people in power paying themselves obscene salaries at the expense of the people they are supposed to serve. At least that is one gravy train that is changing.

The World Bank has allocated $200M to fight the spread of Ebola, which is a virus that tends to ignore all theories, especially economic ones.

A future Conservative government would freeze benefits paid to people of working age for two years, Chancellor George Osborne has told the Conservative Party conference.

I suppose there is an economic theory to explain this, but I suspect it’s a policy driven by elitism and a hatred for ordinary people. Tax credits for working people were always a bad idea, they are a subsidy for low wage employers. Increasing the minimum wage would reduce the amount the government has to pay out in tax credits, housing benefit and council tax benefits at a stroke. No theory, fact!

It seems the middle income earners are likely to be the next group to be hit by Osborne’s austerity. Nurses and teachers are already aware of his meddling. Who will be next?

Britain needs investment in it’s infrastructure. Britain has a housing crisis. Can we find the investment to build new houses? It would be far better than throwing money away on HS2.

HS2 many sound like a good idea, but look at the cost both in monetary terms and the environmental impact. I don’t like these iconic new buildings that vied for the Stirling Prize either, they are expensive eyesores. Time for a reality check?

What do you think? If someone knocked you door and asked for £1,000 towards building HS2, would you pay it? Or would you prefer to donate a £1,000 to new hospitals across the country?

Please share your thoughts in the comments box. You can also follow me on Twitter.

One Response

  1. Pingback: The review: Manor House vintage fair this weekend | Mike10613's Blog

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