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The effect of the reduction in welfare payments (I think they use to be called transfer payments) is not identified clearly but will lead to further reductions in consumer spending (on basics?). What is not clear to me is whether OBR has factored in the negative multiplier effect ie not spending leads to further job losses or wage reductions. Inflation is likely to be above 5% for many months destroying disposable income more. Although manufacturing is doing well there are signs that skills shortages are being felt and just who has the money to continuing buying what we make. !.7% is optimistic and next month's GDP figures may set off a panic plan 'B' or is it 'C' (is the budget a ham-fisted B).

Two elephants in the room.

1. Savers, especially retiree savers, are being crucified by the ultra low interest rates on savings.

Prudent people save and those on fixed incomes save. By eliminating any return on their savings prudent people do not go out in a mad splash to get rid of their cash. It is not in their nature.

No, they become even more prudent. They save more. They stop spending.

All those retired people with free bus passes who were going out on buses and spending their interest on their savings... are now just going out for free rides on buses.

The High Street is suffering as a result.

2. House prices.

House prices are being kept up by artificially low interest rates and by Government schemes to keep unemployed people in their homes.

The problem with this is that it has killed the housing market dead. Capitalism in the housing market is not being allowed to run its course.

This has resulted in ludicrous valuations on houses by estate agents in order to get 'business on their books'.

It has also resulted in unrealistic expectations from sellers who believe that their house should more than it was in the height of the housing bubble in 2007.

The reduced mortgage lending is only part of the problem but to say that it is the sole reason for a stagnant housing market is just wrong. House asking prices in the UK are simply too high a multiple of the average wage.

What all of this does is stop people buying houses, moving house, buying the new furniture and fixtures for their new home.

The High Street is suffering as a result. People cannot move for work. It is economic stagnation.

The UK economy has ground to a halt more or less.

It is getting worse.

Looking at the job boards since last October there has been a very noticeable decline in advertised contract and permanent roles in the areas of Engineering and IT.

Salaries are falling. Inflation is rising.

The only people I know who are still doing well are those in the Public Sector who, supposedly, were about to undergo some kind of mass Coalition cull.

It has not happened.

Probably for the best as the Private Sector is on its knees.

I forgot. There is a third elephant on the other side of the Atlantic - the collapsing US Dollar.

The more Ben Bernanke prints the more commodities soar and the faster the Dollar falls.

If Bernanke goes ahead with QE3 the Dollar may collapse altogether. Commodities will go through the roof and most of us will be unable to eat, heat our homes or buy anything.

Interest rates would have to be raised rapidly in the US to save the Dollar probably plunging the US into a Second Great Depression - if you think it is bad now...

Problem is, IRs will also be forced up around the World including the UK.

I was feeling quite content before I started this. How is Portugal getting on?

Portugal down. Dow will probably rise in this topsy turvy printy money world.

in a long piece Paul has convinced me...he is not too impressed....growth down and growth down and er, growth er, down again and that means the borrowing goes on longer and...gets bigger, is that about it, Paul?

tawse57. Agreed sir. At some point the housing "boom" has to be flushed out the system. The sooner we do it the sooner things get moving again.

I cannot believe the Tories are putting money into subsidising first-time buyers. What is the matter with these softies? Are we in a capitalist system or not? Keep them out the market until the market returns to a realistic level. Those who are in the market who overpaid should loose their shirt. Extend and pretend is bad enough, but this is like asking to invest money into Bernie Madoff's scheme +now+, ie so long after it was clear the whole thing was garbage as to defy belief.

Agreed on the public sector stuff too. Not one single paper-pushing king that I know in the civil service has been given the boot. Champagne socialists are still buying Riesling in the South East!

I cannot believe that the Tories are susidising first time buyers either...a box on the MI is where I started...hangins too good for 'em, I say....

Even though I'm on Mason's blog I'm not a pensioner Stevie. I'm a would be FTB who doesn't want a helping hand into a lifetime of debt.

so the forecasts are wrong again, and will be wrong again.

What we are experiencing is not true capitalism, too many distorting factors, the banks and the financial institutions didnt play it straight, politicians being bought off by the same institutions, and the whole bubble of property in this country being kept artificially high or else the balance sheets of the banks will be in a worse shape than they already are.

The UK like all other countries can do nothing to get out of the whole they are in individually, because there will always be someone waiting to take advantage with their bets for against that particular country if they break rank and because the wealth of those making the decisions as politicians or the special interest groups on behalf of the wealthy would lose their fortunes.

The budget today was as much as could have been expected, micro touches here and there , because there is nothing else that can be done when everyone else is doing the same.

There are two ways out of this mess.

It won't be pretty and everyone will suffer, but I would argue it would be a quicker pain and quicker recovery than the long drawn out suffering we face irrespective of what colour of government we have.

So the first option is to let what should have happened happen, let the debts work themselves out, if a bank or firm or entity cannot operate without the bail out it received letting them fail and some debt forgiveness is one way.


The second option and I suspect without wearing a tinfoil hat this is what will happen is the dollar will fail and the rest will follow, the debt can never be repaid.
What will be engineered is a new world currency

If we needed more proof that the housing market is completely *, and that the strategy is to prop up house prices, you could scarcely do better than for the Government to start subsidising first time buyers. I knew the writing was on the wall when the Labour Government did something similar back in about 2006.

As for the relaxation of the planning rules. I'm sure that the system was for from perfect, but I can't help feeling that this is intended to bring on a spate of opportunistic developments (that would not have been approved) so as to boost the figures for construction and private investment. You only have to llok across the Irish sea to see how that might end.

Anyone hear Ed Balls on Radio 4 this morning. Interview let him get all comfy then read him about 4 quotes from his time in power on deregulation. Poor little Ed, it really burst his bubble. We will remember their poor regulation in the morning and when the sun goes down. Lest we forget, Labour cannot run a bath.

I see he is back on bbc 24 now looking just as happy after a quick cry and a leaf through a well thumbed copy of "How to be successful in 24 hours" in the toilets. Chin up Ed! Remember: effort and positive thinking are more than a match for a low IQ.

I think George Osborne will come to be known as the 'Octopus' Chancellor, he gives with one hand but takes away with seven.

All this user's posts have been removed.Why?

I did hear Balls on Radio 4 this morning being very aggressively interviewed. I then heard Stephanie F's summing up of the budget and Balls - it was utterly disgraceful. Isn't she a friend of Osborne's? It sure sounded like it. She stated that apart from 2 US nobel laureates, the whole economics establishment agreed with Osborne - TINA all over again.

"so the forecasts are wrong again, and will be wrong again."

It's worth asking, especially after Chote of the OBR's performance on Newsnight last night which Paxo chased for a short while: what is the utility of forecasts that don't forecast anything?

Which study was it that compared the forecasts of a number of national and organisation's economic models against just assuming that this year would have the same outcome as last year? All of the models were worse predictors than the latter. In other words they had zero utility.

One major argument against neo-liberalism is that, empirically, it is useless.

"Balls/Blair/New Labour deregulated the banking/finance industry with the full backing of the Tories. Balls' boss bailed out the banks just as fervently as the Tories would have done."

Sorry - not interested in hypothetical situations. Feels like a real cop-out. Clearly all are liberal, I'll give you that, but a good policy can be executed poorly by a poor practitioner. That doesn't make the idea bad. Mao wasn't the last word in communism because he ran his own demented version. Labour ran their own incompetent mix of liberalism with a huge state and made a massive Balls up of it.

I knew Blair was an ardent admirer of Thatcher so when I was at YTV Blair and Campbell were answering questions and I asked the question why did he admire Thatcher, before transmission I was tannoyed as to where I was sitting in the studio audience and sure enough I was never called, Alistair vetted every question and knew who to call and who not to, what an operator....

HAND OF HISTORY - BUT WHERE AGAIN? (#16)

Campbell's adoration of the Magus clouded his 'operational judgement'.

I have a still-shot, taken from Newsnight iPlayer, that looks over Campbell's shoulder at his notes (from one of his books?). The video clip of Blair's 'Hand of History' moment was played, and Campbell, adoringly, read his note STUMBLING AT THE DISCREPANCY. Neither party addressed the truth of what Blair had (typically) slid away from. Of course this deluded man wanted to say "MY SHOULDER" - NO QUESTION.

Mother of Parliaments - democracy - Rule of Law - yada yada.