Wednesday, 23 March 2016

should i stay or should i go?


One of the things we covered when I studied economics was the role of government to encourage stability and reduce uncertainty.

Later, a European boss of mine used to refer to the need for things to be 'boringly predictable'; I knew what he meant. Kind of 'Say it, Do it.'

I can understand these sentiments for the big picture. If the future path of government policy is uncertain, it raises risk premiums and can lead businesses and individuals to delay spending and investment.

If there is uncertainty about the monetary or fiscal policy, the tax or regulatory regime, or even over voting outcomes then it all gets added into risk pricing.

Our leadership, here in the UK, seems to have just about all of these effects.

Government spending has swung around with inaccurate forecasts from no less than the Chancellor himself.

The current fiscal mandate is being challenged by many economists who think that (a) the target for 2019/20 is misguided and (b) it will be missed in any case.

Some politicised tax changes were announced in the budget and then rescinded within a couple of days.

This introduced a new gap on top of the unexplained prior gap and both are currently left hanging and unaccounted for.

There's stealth measures around tax credit cuts that no-one is yet spotting but probably the chancellor relies upon.

The GBP to USD is bouncing around about its five year low.

The main parties are themselves divided and at least two of them have rumours about new leaders, ranging from Boris Johnson for the Tories and Dan Jarvis for Labour.

In both cases the popular date for this further upheaval is just after the referendum.

With that still to decide, as The Clash might say, "Should I stay or should I go?"

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