Tough budget needed to stave off grim future

[FakeViking]

On a general note, last year the economic crisis was SO BAD that Lenny had to introduce the budget early so as to kick start recovery.

This year the economic crisis is SO MUCH WORSE yet he still took a few months off during the summer and will introduce the Budget at virtually the last possible date.

But he's the best possible MoF we have, we are where we are, the past is a foreign country, it was all Lehmann's fault, green shoots appearing, light at the end of the tunnel, emerging economic trends, etc.

[toughbutfair]

If it's 'unfair' for everyone, that it will be fair, no?
But you and I know perfectly well that that is not what is being cooked up in government buildings. Just look at the name of the three 'experts' who made a presention to the government yesterday. We are about to see the gap between the have's and have nots widen significantly and these blind Dublin 4 types believe that the community that is about to be crucified will just sit back and take it.

You have to leave educated people make economic decisions, you cannot expect Johnny sixpack from Ballymun come up with an economic plan to stop our overspending.

[Cassandra Syndrome]

your point only holds if taken to extreme, clearly he means a modest reduction in wages/prices will increase employment to such an extent as to grow the economy much more, not a massive decrease in wages...but then again the greedy and wealthy aren't even prepared to sacrifice anything (with falling prices already) to help the unemployed

Keynes Paradox of Thrift. Not a fan of Keynes, he is spot in about the effects on the economy when wages are cut across the board. How can employment magically increase if there is less consumption?

Private capital expenditure done a mutual animal spirits way can set off the accelator. But who wants to invest? Who can invest?

Thats what happens when the circular flow of income gets diluted by leverage and there is f all savings going on.

[Cassandra Syndrome]

You have to leave educated people make economic decisions, you cannot expect Johnny sixpack from Ballymun come up with an economic plan to stop our overspending.

But Johnny sixpack has been in the real world. Most of these educated people have no business acumen.

Economics is a social science.

[feargach]

your point only holds if taken to extreme, clearly he means a modest reduction in wages/prices will increase employment to such an extent as to grow the economy much more, not a massive decrease in wages...but then again the greedy and wealthy aren't even prepared to sacrifice anything (with falling prices already) to help the unemployed

a modest reduction in wages/prices will increase PROFITS, not employment. And the increased profits will be used to pay off debt, upward-only rent reviews etc.

This is where the voodoo fails. Job creation falls in a recession because money has other places to go than job creation. If a business manages to eke out a profit through pay cuts, they typically turn that into a dividend for shareholders, not new workers.

And, of course, your analysis fails to account for the fall in demand caused by the wage reduction.

Most economists argue that there is no such thing as a good deflation. A tiny number of fringe theorists claim that the 1920 six month US deflationary blip was a good thing, but only if it is short can it be true. That episode was stopped by the Federal reserve cutting rates, but that method of stopping deflation cannot be used in Ireland. And that is the ONLY deflation in the entire planet's history that was stopped before it could do irrecoverable damage.

Let me repeat that. There have been many instances of wages/prices falling over time in history. Only ONCE in all time were the authorities able to stop it in time. and the method they used to stop it (cutting interest rates from a high base) is not available to us.

Get it now?

In real life, deflation feeds upon itself, making itself worse as time progresses.