November 24, 2008

Labour risks causing deflation

The big excuse for the enormous splurge of debt labour have created, debt that will will be repaying through higher taxes for years to come, is the threat of deflation. If we get into a deflationary spiral it could turn the recession into a depression. Unfortunately if it actually does anything noticeable for consumers at all the feeble tax cut they managed of reducing VAT to 15% (admittedly as much as the EU will allow that tax to be cut) could itself risk causing deflation! Had they chosen to reduce National Insurance, rather than raising it, there would have been no such risk. People would be better off from having more money and by reducing this tax on employment they would be better off because they would be more likely to still have a job.


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