George Soros, the internationally renowned investor, has warned David Cameron that his policies would push the British economy back into recession unless it changed their hardline austerity package. Speaking in Davos, the man who famously wrecked the economic reputation of the last Conservative administration on Black Wednesday said the mix of tax increases and spending cuts would lead to recession.
"I don't think it can possibly be implemented without pushing the economy into a recession." Noting that the initial market reaction to the government's tough stance had been positive, Soros added: "We will have to see it unfold. My expectation is that it will prove to be unsustainable." http://www.guardian.co.uk/politics/2011/jan/26/george-soros-david-cameron-recession
In truth the real reason for the recession is the stock of money in our economy is in decline this is its driving force. As old debts are paid off new money is only created by more debt issued by banks and government spending/borrowing both sources are falling in volume, unless more debt is taken on by households and government then consumption and production will fall further it is the downward spiral to economic depression. Which is exactly what happened in the 1930's.
At the bottom of a recession you do not waste money trying to boost investment when there is no demand to sustain it. You go for liquidity. You put cash into circulation. You do not increase VAT, but push prices down, rather than up. Give away pensioner coupons, vouchers and scrappage schemes. Give money to those who will spend it, such as benefit recipients, the low paid not those who put it in a drawer, such as banks.
If half the money showered on banks over the past 18 months had been showered on the high street, the economy would not be in such terrible shape. Indeed, if banks had been left to default on their casinos and public money spent instead on nationalising and guaranteeing their retail activities, there would have been traumas, as in Argentina and Iceland. But the economy would now be recovering faster than it is. At very least the bank bailout policy deserves a high level public inquiry. The trouble is that this would need bankers to be honest, economists decisive and politicians humble.
