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25-09-2022, 10:26 AM
It is unfortunate that UK chose this idiot of a PM Liz who has zero capability in getting anything done short of shouting campaign slogans. She's just repeating all the silly mistakes she made as Foreign Minister and now to all important areas as Prime Minister.
There is some logic to the standard conservative mantra of lowering taxes to encourage the wealthiest bracket and corporates to further spend and invest thereby achieving a stimulus effect on the economy, but that is predicated on a number of critical hygiene factors:
1) Government has the budget for it - Definitely not now when it's running a severe deficit. Cutting taxes will simply result in a drop in government revenue thereby widening the deficit which would need to be funded with external debt. This will cause even more fiscal problems before solving any.
2) The business operating environment and investment thesis in UK must be positive or at least benign to support a certain level of corporate and consumer optimism. Only then will they spend and invest, otherwise it will just end up freeing truckloads of money for the rich people and companies to buy stuff like real estate, gold or worse still transfer of monetary assets overseas to seek greener pastures leading to massive capital outflow.
As we can see, UK does not meet any of these hygiene factors, that's why money is leaving or funneled into unproductive assets awaiting future appreciation driving the GBP down and further driving up inflation which in turn weakens the business investment environment.
Things will start to get worse as inflation will continue to climb due to global factors plus GBP's own depreciation and very soon severe social unrests will form as the middle income class shrinks and lower income / destitute population increase. This is a vicious cycle and if UK does not take corrective action soon enough would lead to a death spiral.
There is some logic to the standard conservative mantra of lowering taxes to encourage the wealthiest bracket and corporates to further spend and invest thereby achieving a stimulus effect on the economy, but that is predicated on a number of critical hygiene factors:
1) Government has the budget for it - Definitely not now when it's running a severe deficit. Cutting taxes will simply result in a drop in government revenue thereby widening the deficit which would need to be funded with external debt. This will cause even more fiscal problems before solving any.
2) The business operating environment and investment thesis in UK must be positive or at least benign to support a certain level of corporate and consumer optimism. Only then will they spend and invest, otherwise it will just end up freeing truckloads of money for the rich people and companies to buy stuff like real estate, gold or worse still transfer of monetary assets overseas to seek greener pastures leading to massive capital outflow.
As we can see, UK does not meet any of these hygiene factors, that's why money is leaving or funneled into unproductive assets awaiting future appreciation driving the GBP down and further driving up inflation which in turn weakens the business investment environment.
Things will start to get worse as inflation will continue to climb due to global factors plus GBP's own depreciation and very soon severe social unrests will form as the middle income class shrinks and lower income / destitute population increase. This is a vicious cycle and if UK does not take corrective action soon enough would lead to a death spiral.
