So, economic stimulus

[fivemack]

VAT has gone down by 2.5% as of 1 December, which means the fancy camera I want to buy could conceivably cost 15 quid less in the New Year than it does now. Of course, fancy cameras being made mostly of microchips, it's likely to cost fifteen quid less anyway thanks to process optimisation in the silicon foundries of Taiwan, but hopefully these are cumulative.

But the purpose of an economic stimulus can't just be to move lumps of consumption around by a few months; I don't think that even in the current climate it's necessary to run a big sale in November purely so that you have the cash to pay the salaries for your shop workers in December.

So Alistair Darling's job is to make Britons more profligate than they are now for the next two years (despite the financial mess being, as far as I can see, a function of a decade of unbalanced profligacy) and more frugal than they are now for at least four years to follow. I don't see how subtle tweaks to the tax system can do this; indeed, I don't know if it can be done. Interest rates are the obvious instrument, but profligacy and frugality are functions of upbringing and circumstance in that order; after-tax interest rates on straight savings accounts are now below the rate of inflation, but this has meant that I grumble slightly, keep most of my money in just-as-insured short-term bonds, and devote slightly more to the stock market where there's a possibility of higher returns.

What government policy would make you go out and spend more in February?

Comments

[fivemack.livejournal.com]

The third paragraph feels obvious, but demonstrably even that hasn't worked on me;
I have convinced myself that I feel sufficiently rich already and so, the last two times that my salary has gone up, I've increased the standing-order savings to exactly cancel out the gain.

I don't have a very good answer as to what I'm saving for; I'm in the absurdly lucky position of being able to pay for my gadgets and my holidays out of disposable income. If challenged I'd say house, but I think only because that's the conventional thing on which to spend: there's still part of my mind which contemplates moving to a big European city while I'm still young and free, for which aim a house in Cambridge would be unhelpful.

[aldabra]

Clearly what they ought to do is tax you more, which would come straight out of your savings standing order without you noticing, and give the money to me. 8-)

Although I feel distinctly more comfortable already, now house prices are falling even if they aren't in Cambridge yet; I was very much geared the wrong way in the boom, and I'm spending more freely now than I have in years largely because house prices aren't any more rising by more than my gross income. If the government allows house prices to fall to three and a half times average salary (especially now average salaries are falling...) I'll be entirely relaxed about buying things.

[simont]

house prices are falling even if they aren't in Cambridge yet

My mortgage provider's online banking service presents a constantly updated estimate of the value of my house, presumably so that they can keep temptingly pointing out to me that I could borrow £yegods extra at the touch of a button. (At the piffling cost of a crippling increase in my monthly repayments which I wouldn't have to think about until it was too late, and also having a good chance of negative equity next month. Thanks but no thanks.)

That running estimate has been heading steadily downwards over the year since I bought (though sadly it didn't occur to me to look it up on a regular basis and note down the answers), so at least somebody thinks house prices are falling even in Cambridge!

[dd-b.livejournal.com]

Liquid reserves represent choice and flexibility; it's perfectly sensible to run them up even without a specific goal in mind. I suppose if you decide to give it all away, you might then regret not giving it away *earlier*, but other than that, I can't think of a downside. House, early retirement, another degree, your own business; whatever.

Well, other than money become worthless and all.