The British Prime Minister is one of the Stupidest People Alive

[cthulu2016]

22. I apologize. I shouldn't have been political earlier

I should have kept it to economics.

When one said, "There's no money left," that was not a meaningful statement. With the global economic slowdown the costs to the UK of borrowing were certain to only go lower and normal economics demanded, like flat out demanded increased deficit spending.

Not just increased spending, but increased deficit spending in particular. Net borrowing is down throughout the world, including in the UK. Borrowing is a major part of economic growth, including employment and wage growth. The government becomes the borrower of last resort.

The demand for credit in the UK affects interest rates. That demand is both government and private borrowing combined. If the private sector borrows 100 less and the government steps in to borrow 90 more, to stimulate the economy, or depress the economy less, the total demand for credit is still down 10.

But the increase of 90 in government borrowing will be said to be likely to drive up interest rates. When someone says that they are either very dense or they are politically or ideologically motivated to want to reduce government spending categorically, and are offering a plainly false argument toward that end.

Only right wing *economic* crack-pots failed to understand that interest rates would not and could not go up in the wake of this mess we are in unless 1) there was an imaginable default risk, or 2) the economy showed real (durable) signs of recovering.

Most right wing European politicians are to the left of American Democrats in some ways. But one can be moderate in ways while still being an economic crackpot. Jack Kemp was moderate on some things but an ardent believer that we need to return to the gold standard.

The US and UK and Japan (with a much larger debt than we have, I think) are not default risks. And net borrowing would still be down in those economies even if the government deficit was much larger. And if a government is preaching austerity the bond traders know there won't be any economic growth to worry about.

So of course interest rates will be low, whether the government tries austerity or stimulus. There is a real chance that interest rates will rise if there is enough stimulus, but that rise is not caused by the borrowing demands of the government, it is caused by the apprehension that the economy will recover as a result, making a 2% return on a bond a much less attractive proposition.

Cameron is depressing GDP in his nation in order to keep interest rates low because low rates lead to higher GDP. It is demented. It really is like saying the sun goes around the Earth.

There were economists who said, "Double the deficit and interest rates won't budge a bit." They were correct, but ignored. The higher interest rates were assumed by these weird right wing types to be in the offing even though they were nowhere to be found, and fought against despite their not existing (!)

Whatever pain you are experiencing from austerity is not only unnecessary, it is counter-productive.