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The economic outlook

In the UK, the Chancellor made his Autumn economic statement yesterday. Will the economy get better or worse as a result? It seems we are going to see more austerity and so it will probably get worse. People will have less money to spend and that will be lower sales for retailers and service providers.

It is difficult to know whether austerity is right or not. Look what happened in Greece. In Greece they borrowed too much and virtually went bankrupt, if you believe the news. I think they did borrow and didn’t consider that an economic crisis could cause severe problems. The big problem is as soon as their creditors think they might default, they want more interest. The credit rating agencies downgraded Greece and then they had to pay higher rates of interest on the bonds they issued making default not just likely; but a certainty.

The UK isn’t like Greece, it can just ‘print’ the money to buy back bonds and get interest payments down really low. If we borrowed too much, we could be downgraded by the credit rating agencies and then we could have to pay higher interest rates. Is austerity working?  It seems austerity includes cutting welfare by a few billion while spending over 12 billions on the Olympics. The Jubilee celebrations also cost a lot of money. Are they cutting down on the right things? Who does the government owe all this money to anyway. The Chinese government is often blamed, but the truth is, it is owed to banks and financial funds. The wealthy of the world invest in those banks and funds. Who are the super-rich that governments all owe money too? They are the billionaires who made their money from oil, gas and technology. The oil barons virtually hold us all to ransom, we need fuel and we need natural gas to keep warm in winter and to make electricity. The Chancellor announced more gas fired power stations, so that situation is likely to get worse.

Are there any innovative solutions to the economic problems? We need new domestic energy sources and shale gas could be an option. We also need to look at offshore wind farms and even the Severn barrage could be an option. We need to become less reliant on oil and gas. We also need to trade a bit smarter with the rest of the world. Allowing the pound to devalue wouldn’t be a bad thing and a lot more quantitative easing would do that. It would make importing oil and gas more expensive, but other imports would be more expensive too. Our exports would be less expensive and so we could export more. The government could always scrap VAT on energy and cut it on petrol. Increasing VAT again on other things would make sense, so VAT could be removed from gas and electricity, which is an essential. The government could also look at the profits of multinationals and make sure they all pay their taxes. The ones uncovered so far are probably the tip of the iceberg. Areas to look at are eBusiness companies and any company that imports goods into the UK. The financial sector should also be looked at to see if they are paying their fair share of taxes. A financial transactions tax would also raise a lot of money without hitting the poorest in society so much.

I think things will get worse for the economy until 2014, when things will improve. I see the stock market recovering in 2014 and companies selling their goods and services to business or to the rich will do well. I see the poorest in society getting very much poorer as benefits are cut, food prices increased and energy bills become even more unaffordable.

What do you think? Is the government on the right track or should they borrow and build houses to get the country working again? Please comment and have your say…

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