Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench
In the same category

Osborne cornered

IMG Auteur
Published : February 26th, 2013
510 words - Reading time : 1 - 2 minutes
( 2 votes, 5/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...
Category : Editorials

24hGold - Osborne corneredOn 20 March George Osborne, the UK’s Chancellor, will present his budget. So far he has made a valiant attempt to cap public sector spending, particularly when compared with other finance ministers who were slow to adopt austerity. He has reduced public sector spending from what it would otherwise be, but has not managed to cut the total figure. His strategy now for controlling the budget deficit increasingly depends on higher tax revenues from a combination of forecast economic growth and more aggressive tax collection.

He may be unaware that this is too optimistic. He is advised by a Treasury staffed by economists who believe that through a process of economic modelling and continual refinement of method their control over the desired outcome will be improved. Errors of the past are therefore less likely to be repeated in the future. This approach is the key to understanding the forecasting method upon which Osborne’s budget assumptions are based, and it is completely wrong.

Keynesians and monetarists share a belief that mathematical models are a valuable forecasting tool. For this to be true individual consumer and capital transactions in the future as well as the prices at which they occur have to be calculable: this is obviously not the case. The economic effect of future technological and other relevant developments has to be factored in; but how can this be known? Future demand for British goods from overseas buyers has to be assessed, over which no one has any control. Future currency rates against sterling have to be predicted – a sore point at the moment with sterling dropping like a stone.

The fact that different economic models come to similar conclusions is a reflection of the commonality of their assumptions and construction, not independent confirmation of future economic trends. Instead we must use reason.

By taking economic resources away from the private sector through taxation and monetary debasement you reduce the potential for economic progress. By continuing to support and promote favoured public sector activities (the primary function of every government department) you ensure that resources are tied up in production the market would not itself choose to support. By regulating freedom out of consumer choice, you suffocate basic free-market efficiencies.

Today’s suppressive economic policies ensure that the economic future will disappoint. Consequently, future tax revenue is overestimated, as well as any reduction of public sector costs associated with economic recovery. If some of the smarter minds in the Treasury suspect this, their instinct will be to increase taxes further to protect government finances.

Meanwhile, storm clouds are gathering, with sterling under pressure. Perhaps it has more to do with the failure of monetary policy to rescue the economy, and the likelihood that the Bank of England will choose yet more easing, than any pre-budget nerves. One wonders how many of those econometric models incorporated a 7% slide against both the US dollar and the euro since the New Year. Either way, a sterling crisis is hardly a propitious background for a budget, painting George Osborne into a very difficult corner.

Thanks to Alasdair Macleod from www.goldmoney.com
<< Previous article
Rate : Average :5 (2 votes)
>> Next article
FinanceAndEconomics.org is the website of Alasdair Macleod, who has a background as a stockbroker, banker and economist. Alasdair is available for seminars, speeches and interviews. Please check on Services to get further detalils.
WebsiteSubscribe to his services
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
Panicked Hedge Funds Now Praying...
30 Junovertheedge
"... and the silly game theory ..." Obviously you have no knowledge of game theory and its applications. Otherwise you wouldn't have used ...
The Gold Standard: Generator & P...
30 Junuser4779
Is it really so bad for Americans that they do not spend their lives labouring on a production line to make mass-produced goods, and have left this...
The Gold Standard: Generator & P...
30 Junsam_site
You state, “To continue selling to the West, China will have to open wide its doors to imports” Here’s the crux of your argument of why Chin...
The euro crisis
30 Junovertheedge1
"There is no immediate benefit from debating why." Debate? That would be like debating whether or not gravity exists. You stated the obvio...
The Ultimate Confirmation
29 Junovertheedge
It would appear that we share the same conclusion. A few sealed cans of kerosene might be handy as well. Thumbs up sir.
The Ultimate Confirmation
29 JunS W.1
My main sentiment here is why swap dollars for gold or silver only to sell at some later date for more dollars when that same paper is continually ...
The Ultimate Confirmation
28 Junovertheedge1
Well, gotta admit that there is a problem if a person tries to play silver as both an investment and as an insurance policy. I would suggest th...
The Ultimate Confirmation
27 JunS W.
Fair call, overtheedge. I've given Butler short shrift several times. Fancy spending 30 yrs analysing the silver market likely believing Ag...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Mining Company News
Viking Gold Expl.(Ag-Au-Cu)VGC.V
signs option to acquire Valor Energy Ltd. with plan to form a separate public company
CA$ 0.00+0.00%Trend Power :
Corporate news
Goldcorp(Cu-Le-Zn)G.TO
announces closing of secondary offering of shares of Tahoe Resources
CA$ 20.26-0.10%Trend Power :
Corporate news
Tahoe ResourcesTHO.TO
Announces Closing Of Secondary Offering By Goldcorp Inc.
CA$ 15.14-3.44%Trend Power :
Corporate news
Marathon GoldMOZ.TO
Closes First Tranche of $3.5M Financing
CA$ 0.24-2.00%Trend Power :
Financings
Marathon GoldMOZ.TO
Closes First Tranche of $3.5M Financing
CA$ 0.24-2.00%Trend Power :
Financings
Claude Resources(Au-Cu-Ngas)CRJ.TO
Increases Land Position at the Seabee Gold Operation and Consolidates Two Joint Venture Agree
CA$ 0.67-2.90%Trend Power :
Exploration and drilling
Eldorado Gold(Au-Fe)ELD.TO
Receives Project Permit Approval for the Eastern Dragon Project
CA$ 5.18+3.39%Trend Power :
Exploration and drilling
Gran Colombia.(Au)GCM.TO
Voting Results of the Annual Meeting of the Shareholders of Gran Colombia
CA$ 0.32+0.00%Trend Power :
Corporate news
Guyana(Ag-Cu-Ni)GPM.V
GPM METALS INC. announces Results of 2015 Annual Meeting
CA$ 0.12+0.00%Trend Power :
Corporate news
Talon Metals(Au)TLO.TO
announces results of AGM
CA$ 0.15+0.00%Trend Power :
Corporate news
Comments closed