Britain’s conservatives have gambled heavily. If deep budget cuts amid economic weakness send the economy plunging back into recession, the government may be unable to make the cuts stick, and austerity could be discredited around the world. If disaster is avoided, it will strengthen the hand of fiscal conservatives everywhere. It would be an exciting experiment to watch if so many livelihoods weren’t caught in the balance.
The article provides a useful overview both of the measures being taken and of the political and economic risks. However, Mr. Avent seems to have gotten one thing completely wrong: “It” is an “exciting experiment” because, and precisely to the extent that, “so many livelihoods [are] caught in the balance.”
CK,
It no longer matters who controls the Congress or Presidency as regards the nation’s fiscal policy as of today. Of course anything can change,but it appears that the die is set on QE2. All this means is that a policy of inflating our currency further is the current tactic of the Fed. The method will be,AGAIN,for the Fed to purchase toxic assets at the value that the Banks place on them. The target is an Inflation rate of 2% which,the hope is,will stimulate demand(if your money goes down in value tommorow,it will be spent today),and decrease unemployment to an official 6-8%rate. The potential negative effects of QE2 are so numerous and complex that we should discuss them individually,but just a few of these unintended consequences could be hyperinflation,civil war,or world war,oh well,anything is better than losing our Imperial Economic power in order to become Western Europe.