4 thoughts on “Forget fancy schemes – government borrowing is holding back UK exporters”

  1. Posted 31/07/2014 at 11:18 | Permalink

    Why do trade deficits even matter? When I pay money to the supermarket in exchange for goods, nobody says that there is a ‘trade deficit’ between me and the supermarket. Similarly, if one country is importing goods from another but not exporting any to it, why is this a ‘trade deficit’? The fact that I am unable to grow my own food, and so instead have to buy it in the supermarket, is not necessarily a disastrous thing. Similaly, if a country is rich enough to be able to buy everything it needs from other countries, and does not make any of those goods itself, why is that such a disastrous thing?

  2. Posted 31/07/2014 at 14:41 | Permalink

    Adam – I agree. It is unsustainable borrowing by governments that is the problem

  3. Posted 31/07/2014 at 17:21 | Permalink

    Try initiating a consumer led recovery and you do not stimulate production; you empty warehouses first and then a considerable proportion of the resulting demand will be satisfied by imports.

    Production anticipates consumer demand but is never driven by it so, QE and freely available credit at super low interest rates have resulted in a vast BOP deficit. What a surprise!

    Lets hope the fruits of fracking are not long coming.

  4. Posted 01/08/2014 at 17:02 | Permalink

    Adam Fitchet, when you buy goods from Tesco you pay with the product of your labour (or the labour of others if you are receiving benefits). Therefore you earn sufficient not to be in overall deficit and, were you to be so you would need to borrow the amount of the deficit from your bank.

    So it is with the UK although they have the supplement of inward investment to help them out of a hole.

    UK inward investment is currently running at around £8.5 billion a quarter whilst the deficit in the last two quarters has been running at £22+ billion.

    For there to be a viable foreign exchange market there must be more than just a demand for overseas currencies paid for with sterling or the value of the pound will start falling and your purchases from Tesco will cost progressively more. After all, who wants to get stuck with sterling when the music stops.

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