I listened to a very interesting slot on the ‘Today Programme’ this morning. It was designed to cut through the significant polarisation occurring between proponents of the ‘Plan A’ ‘Plan B’ economic argument raging at the moment.
You can listen to it here (Link)
Apart from the early assertion that expansionary contraction is never likely to produce growth (no matter how hard the Government try to make us believe it will), the main point that hit home for me was that the answer is all about risk appetite.
As with all these things there is never a purely right or wrong answer. To freely quote a line from ‘The West Wing’
“There are very few un-nuanced moments in politics, and they normally come with a body count.”
This is not one of those moments. The shades of grey here need to be considered and political ideology just gets in the way.
Regardless of the reason, we find ourselves on an austerity drive, designed to reduce significant public debt. This is resulting in low growth and rising unemployment. However, the benefits of a mid way course change would not bring significant change to the current situation and may well destabilise the situation further.
This is where the risk appetite is tested. You can deal with your debt, or you can have a stimulus package that increases growth (a bit) and reduces unemployment (a bit).
What is your risk appetite?
You decide.
Matthew Scott.