Wednesday, March 16, 2016

It's almost as if there is a "paradox of thrift!"

UK Chancellor of the Exchequer George Osborne, blustering his way in his budget speech (link as delivered) through huge forecast revisions over the space of a few months --

The combination of our action to reduce borrowing this year, along with the revisions to our nominal GDP driven by lower inflation, have produced this paradoxical result. In cash terms the national debt is lower than it was forecast to be in the autumn, but so too is the nominal size of our economy. We measure the fiscal target against debt to GDP. So while debt as a percentage of GDP is above target and set to be higher in 2015-16 than the year before; Compared to the forecast, the actual level of our national debt in cash is £9 billion lower.

George keeps cutting spending to cut the debt, but GDP falls faster than the debt, so the debt burden actually rises. Someone needs to write a book about this amazing discovery.

No comments: