From: Gordon Lawrence, Stumperlowe View, Sheffield. Yorks Post.
JOHN Cole, in his interesting letter (The Yorkshire Post,
September 1), is rather scathing of those, especially Conservatives, who
advocate a tight budgetary policy in order to reduce the deficit and £1.4
trillion National Debt. In fact. he concludes by calling them economically
illiterate.
Supporting his assertions, he cites that the low interest regime
(generated by quantitative easing of the money supply) makes the rate of return
on public works highly advantageous and, therefore, extremely profitable, for
the Government to further its borrowings in order to implement new
infrastructure projects. He emphasises the benefits of higher employment, income
and tax receipts emanating from this paragon of leftist economic
policies.
It sounds all so convincing and simple. Indeed, simplistic would be more
of an appropriate term. The assumption is, that like the additional borrowing,
the pay back on infrastructure will be immediate or short term. Unfortunately,
for Mr Cole, public works often take years to construct and the return on
investment is loaded with uncertainty and long on fruition. Meanwhile, that
£50bn per annum we owe, has to be paid.
Ah! Print more money a la Jeremy Corbyn, but the foreigners who buy much
of the debt are not impressed as they see their returns devalued sterling drop
like a spent rocket. They sell, This pushes up UK interest rates in order to
attract replacement funding and GDP growth contracts. Your house of cards is
rapidly collapsing.
Now comes the retrenchment as the fiscal authorities batten down the
hatches, stall the infrastructure, and tighten budgetary and monetary policies
in an act of artificial respiration on the economy.
Left-wing idealism will always ignore, like great war commanders
minimising the strength of enemy positions, the complexity and
interrelationships of a modern economy and hallucinate on the joys of government
spending.
No matter how important infrastructure investment is, it should be
integrated into the fiscal aggregate in order to manage a workable debt and
healthy economy.
