What to make of the evidence

I was intrigued by the stories in the standard today.  A story on the economy (surprise) had a quote from the PM regarding the 2.5 million unemployed.  He said they would do everything they could to get people back into work but he warned that increased spending was not the answer.  But surely that is the key issue. He is right in some ways, increased gov spending is not the answer.  But the issue is that due to uncertainty of gov income (tax take),  little or no growth, large debt to be repaid (and large interest payments) and low inflation meaning that debt is not reducing in real terms in any meaningful way means that he is right maybe to not spend money he does not have.

The trouble is, whats is good for the goose is good for the gander.  People also have the same issue. Uncertainty of income (potential unemployment), little or no growth (no wage rises and increased cost of living), debt from the credit boom and no real reduction in debt from inflation means that people have the same attitude.  They don't want to spend.  Same again for companies.  So where will growth come from.  Its more proof that it is the money flow that keeps things working.  If gov won't spend then they need to ask themselves why would anyone else?

The article also raised some interesting thoughts.  I have no idea if the mechanisms being used are going to be effective.  But one of the ideas gov has is to increase the retirement age (through pension fiddling). So what will that do?  Well, seems to me that if unemployment is high especially youth unemployment and businesses are struggling then the longer the older section of the population stays in jobs the less opportunities for the young and the higher the ongoing costs of the companies who employ them.

At the same time tax take will reduce and the benefits costs will rise.  The number in employment to pay for the unemployed seems likely to shrink increasing the burden.

Surely the idea is to make money flow.  Make people retire earlier would be more cost effective to make up pension gaps for a short period (a few years) thus reducing company wage bills and enabling them to take on younger cheaper staff who need the opportunities.

I just don't get it.  What am I missing?

Later in the paper is evidence of my speculation a about property cost reductions never reducing.  The article is about Hampstead and the fact that a number of independent retailers are going to close because revenues have dropped but rents have not.  They quote the rent for £70k and the business rates on the property were £38K.  Come on guys.  Go with the trend.

The only way it seems to sort this mess out is surely to make everything relative and not somethings relative and others absolute.  Tax must be made relative.  Property costs to.  If the economy drops business rates must adjust downwards.