Cut for Growth

This afternoon provides an opportunity for polarised opinions
on crucial decisions that must be made and that will affect
everybody here. To be precise; should we put football, the highlights of the
golf or Wimbledon on the TVs? Whilst this debate is raging a
certain speech will be made (beginning at 12.30) that will have
more long term effects on all of us. If you have read any
paper, or watched any news, over the last days you will have
read more than enough debate about the likely measures and
their effects on everyone- so i'm not going into that. Prepare
for every Union official in the UK explaining why their members
have been unfairly singled out for harsh treatment and "regrettably"
justifying the inevitable strike action being forced upon them.
We could all try and fly away from it, but BA won't be flying. One of
the more notable (and accurate) forecasting bodies in the UK has estimated what the UK would look like in 2020 without cuts, as compared to it's condition with the expected deficit cuts. Our debt burden would be £2.4 trillion and represent 94.5% of GDP (with cuts it will be £1.6 trillion and 60.6% of GDP- which is scary enough, by the way). Our budget in 2020 should show a surplus equalling 1.3% of GDP vs a 2.8% deficit (presuming we haven't let Labor back in by then I guess). Our economy will be strengthened by cutting our debt quickly and severely, keeping tax rises to a minimum and basing those more on expenditure and not income. We have no entitlement as a nation to spend more than we got- which we have, nevertheless, done for many years. Therefore we all have to bear the pain of fixing a broken economy. When recovery grows there will be the chance to reward us with lower taxes in 3 or 4 years time... by a happy coincidence, just about when the current lot need to get re-elected... and about the time we'll all be getting hopeful (or depressed) about the next World Cup... if we qualify. Fading euphoria over Chinese currency action meant the Dow gave up all of a 1% gain and closed unchanged. CDX managed to hold on to some of the morning's tightening, but ITRX is wider in early trade. HSBC and IBRD raised money and Capella raised $500 million in 7 yrs- presumably to buy the team for the next world cup... get it??? Capella.... that sounds like... oh never mind. Happy Tuesday- data over here irrelevant today, it's all about George.