The economic consequences of Mr. Sunak


Mr. Sunak has his own problems with the Treasury, an institution still swayed by the austerity doctrines that brought us the “expansionary fiscal contraction” and the Osborne era, when public investment was cut to the bone, procyclically, at a time of near recession, all in the futile search for debt stabilization that would have been better achieved – and with less pain – by focusing instead on growth.They cut investments because they were easy to cut, but it was also the most destructive form of austerity, as we know from a library of productivity scholarships and the stellar track record of super -investors: Switzerland, the Nordic countries and South Korea, to name a few.

Mr Sunak’s handling of the crisis has so far been excellent, given the atrocious hand he has been given and Britain’s unforeseen lack of a German. Short-term work system to serve as an automatic stabilizer.

He endorsed the call for an explosion in spending on infrastructure and technology as Britain can borrow for half a century at rates close to zero. Projects with a multiplier greater than 1.0 that pay off royally over time are a no-brainer.

He canceled a Gothic strategy report written by Treasury officials citing the dangers of a 1970s Gilts crisis (there was none) in order to push for tax increases and sweeping tax cuts. social assistance.

But then the mood changed. The fear of bond vigilantes has returned, even though there is not a glimmer of market turmoil. “Suddenly they say there is no more money. This is completely wrong. If you keep the growth going, you may not even need to raise taxes much, if at all, ”said Professor Pissarides.

UK government debt has an average maturity of over 14 years, the longest of any major economy. The debt ratio is in the middle of the pack. Gilts look seedy until you take a look at Japanese, American, French, or Italian debt. Everything is relative in the global beauty pageant, and the reserve managers have to park their trillions somewhere.


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