Re: Borrowing to invest in the NPF
Hi <!--EZCODE ITALIC START-->
UDS<!--EZCODE ITALIC END-->,
You argue your case well, for an earthling. I had to consult with Sir Isaac, hence the delay in replying.
We are firmly of the view that there is a total illusion about this whole NPF thing.
Unless economic behaviour <!--EZCODE BOLD START-->
actually changes<!--EZCODE BOLD END-->, in the sense of diverting from consumption to capital accumulation, how can mere engineering of the national balance sheet make any difference?
Let us imagine that the Government suddenly found the budgetary Holy Grail, the way to tame the economic cycle and run a balanced budget every year.
In these circumstances, Charlie's NPF would imply that although the budget was otherwise balanced we should borrow 1% of GNP to invest in the NPF because of the demographic timebomb.
But nothing of any economic impact would be happening; all that would be happening is that a hugely geared national balance sheet would be built up. Whether that is a good thing or not depends on whether the NPF outpaces the cost of borrowing - and if we are so sure of that why not wallow in it. Borrow as much as you dare and punt it on the world stockmarkets.:eek
No, there is a Law of Gravity operating here. True economic saving is about behavioural change - cutting down on current consumption to build up future capital.
The fact that Charlie has so quickly decided to borrow to meet his NPF obligations proves that the NPF does not represent any change in budgetary policy or economic behaviour - it is a self-serving, pompous, naive sham. :no