I always love it when politicians make a bald lie and it is taken up by the press as the truth.
George Osborne’s statement about the lower income tax payers subsidising middle class child benefit is, so blatantly, not just wrong but the exact opposite of reality that I almost had a “Disgusted of Tunbridge Wells” moment.
Now the ‘spin’ is working overtime allowing that nice Mr Cameron to give a little bit back. Much more of this and the Tories will indeed be fighting the next election with no bedrock support at all.
The middle to top end earning range appears to be being asked to make all the sacrifices while government expenditure, and average public sector pay increases, continues to expand out of all proportion to reality.
Remember that in a period of apparent austerity August’s state spending was 11% higher than this time last year. Just taking everything back to 2009 would probably solve quite a few of our problems.
Fortunately none of the woes over state debt are impacting the spread betting markets at the moment as indications that Central Banks intend to be even more accommodative swept the news wires.
From Australia to Japan and across to the US the news was of lower than expected rate moves and talk of more fiscal stimuli.
The news took a bit of the shine off the Government Bond spread betting markets as investors seemed to ponder the possible increase in issuance over the coming years. However, with interest rates likely to remain ultra low for the foreseeable future virtually any reasonably quality rated paper is in demand.
The major bump on the highway remains the potential for inflation. It does seem strange to be talking about this when US inflation is at near half century lows but commodities are screaming higher and one would have thought that this will impact high street prices at some point.
The desperation to kick start the ‘old world’ economies may end up just creating the conditions for stagflation. For policy makers the other side of the coin is that if we slip into a double dip then the prospects of endemic deflation also rise considerably.
The tightrope of stability seems to get thinner and longer with every passing month.
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'Bond Spreads Weaken on Further Stimulus Talk' edited by DB, updated 06-Oct-10
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