James Max - TV / Radio Presenter | Property Expert

Financial crisis? What financial crisis?

You’d think from the way our politicians are behaving that they had not realised what the financial markets have been telling us for a while. Whilst the 2008 banking collapse and financial system meltdown was very much a failure of markets and confidence, the problems today result from our politicians’ inability to act decisively.

The FTSE 100 index has just closed down 4.7%. It’s less about the falls in any one particular session. More that there is extreme volatility. Volatile markets cause unease. Financial markets will only recover once confidence is restored. We all know the economies around the world have slowed. In itself that isn’t a problem if we understand and operate within the new paradigm. That means some simple measures are required.

i)                    The US must stop overspending and over borrowing and get its finances back in order. World confidence in the dollar as the world’s reserve currency is required for stability.

ii)                  Eurozone needs to accept that either Greece will drop out of the Euro or to prepare Eurobonds, underpinned by the whole of the Eurozone area. The current half measures won’t work and won’t do.

iii)                The EU must peg back its budget. Dramatic cuts on waste, red tape and bureaucracy must be pushed through at break neck speed. A cut of 10% in real terms should be aimed for in the budgetary year 2011/2012.

iv)                The UK must adapt and change its taxation plans now. An immediate cut in VAT for certain goods and services which will kick start immediate spending (housebuilding/refurbishment work for starters). Bin the 50 pence tax rate, more allowances and incentives for forms to take on workers and a cut in taxation for companies willing to invest.

v)                  High octane investment in higher education of the degrees and research we need and want. Again through tax benefits for those companies willing to help pay for educational programmes.

There is more that can be done. We need to get goods moving, people working and investment underway. This won’t be achieved by slowing the cuts programme or any of the measures being currently suggested. They are old hat. Don’t work and will end up being a waste of time. We also have to put an immediate end to wasted programmes and projects that have frittered public funds. Rewards for success. Not for failure. Incentives for enterprise. Not for non jobs. Hard work and dedication are required. We can get through this but now is not the time to look towards short term election gains. The decisions made now will affect a generation. Get them wrong and we will all suffer for years to come.


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