I strongly believe UK needs lower exchange rates.
Government should make strategic investments to reduce the unemployment.
Bank Of England should continue quantitative easing to fill the gap of loosing foriegn gilt investors as they are against the government's neutral fiscal policy measures than contractionary measures( if they pursue what i recommend here ).Purchasing more gilts in addition to filling the gap will also help to lower the gilt yields and help to lower the borrowing rates.It is so important to maintain neggative real interest rate to stimulate the economy via low interest on home loans (increase disposable income of families ) and encouraging business and private investments. Also the government can make Investments by budgetary efficiency savings and using that money to create government sponsored new ventures rather paying off the debts.Because the economy is in a tricky possition with low growth and higher unemployment trying go double dip.If confidence evaporates the growth will go negative and unemployment will go higher with a domino effect in the economy.This will lead in to a end of 1930s US style deflationary enviornment.Because at the time US policy makers mistakenly thought that they should stop stimulas and increase government revenue.It was considered as two attacks at once to a weak post depressed economy ( after 1933 great depression ). More less the same George Osbone in the UK doing at the moment contrast to his counterparty US treasury secretary Timothy Geithner doing in the US with the help of Ben S Bernake (Bernake was a student of the Great Depression, and said it could have been averted if the policy makers did not make mistakes).
I believe UK is having a stuctural problem that is reluctant to or weak to compete with its emerging counter parties (BRICs).Heavily depending on imports and producing low quantities in expensive exports with the falsely bloated currency thanks to the financial services.Its the time to face the reality to reduce the pride and start working from scratch.( produce consumer essentials and develop a manufacturing base )
UK's unnecessarly claimed benefit holders should start working and to compete with imigrants rather drinking beers watching foot ball at home and laughing at immigrants.
I agree to Osborne of cutting benefits spending and unnecessasary government workers.But he should not take that money off the economy by paying debts because the economy is too weak to handle such a amount of real money outflow.Insted i recommend him to invest smartly to illuminate the stuctural problems in the country in a constructive manner with a long term horizon.Paying debts and increasing investors confidence doesnot increase country's competetive possition in the global trade.It is highly detrimental for companies as it is dificult to export as the currency is still overvlued ( can go higher against the other currencies) and to gaing competetiveness.Its true that the UK does not have a huge export base.But the reason is that currency is too expensive to make a sizeable export base and create jobs in the country.
So via the government spending out of savings, quantitative easing to fill the gap in the Gilts market, structural change to get Brits in to work and lower exchange rates will help to ease the current and long term problems of the economy.
What i suggest more is.. UK Corporation's recruitments should be based on the skills rather than a nationalistic approach by ignoring the government's presure or bribes.They should be competetive in the international market no matter who works for them to gain competetiveness rather than going out of business.When the Brits are ready to take over the labour market from immigrants without harming the competetveness of the corporations after the structural change with skills and change in mindset it will automaticaly reduce the immigrants.Here lower exchange rates will make the way out for immigrants very quickly.For a instance UK government will not need to complain about indian skilled workers taking over UK jobs if the GBP and Indian Rupee exchange rate goes to 35 rupees.Then these workers will find their home country is better off than UK.It will save billions of outflow from the UK economy reduce the unemployment and help the current account as well.
Government should start investments which the private sector reluctant to do as they are fear of a double dip recession or the low competetiveness in the industry with available resourcess in the country.(businesses which are rely on outsourcing )
Government's investments should be creating jobs in the industries which has gone away from UK and people are heavily importing goods and services manufactured by this industries.
They can initialy start with high labour concentrated jobs than skilled based to use the benifit holders as the workfoce.Then they do not have to pay cheques for nothing.This industries should supply basic necessities for people (foods and cloths ).Also goverment should start to manufcture goods and services which has a huge weight on the CPI and the current account with goverment subsidies.Then the currency will automaticaly depriciate as the currency traders give up on the currency as government is doing nothing to reduce the debts.It will automaticaly discourage imports and people will have to consume locally created goods and services.
This will reduce the peoples living standards for some extent for some time but will help the country to emerge rather sink without loosing to its eastern competetors.
