Lurked
Incorrect, it increases the likelyhood of investment and increases the amount that the government can spend investing in schools, education etc. It also increases the amount of FDI, all, of which increases the wealth of the country and its productive capacity.
The reason the government likes us to spend and not save, ie increase the velocity of money is that the other effect is they end up collecting more tax.
When we spend money, more ofter than not we also pay tax. Eg VAT, excise duty, insurance premium tax, air fair tax, 8.3% tax on new cars before VAT is added on top.
If we all saved a little, this represents a loss of income to the treasury.
If we all borrow and spend money, out of every £100 we borrow personally and spend, the governent picks up some income from the purchase taxes we pay. Now they can build schools with that increased tax take. Good so far but now we have spent more than we can afford,we end up on the hook because now we have to pay back the loans with intetest.
I have illustrated why us spending gives the government more tax take.
I can illustrate the velocity of money increase being good for government. A household pays a window cleaner £100 per month to clean their windows. The owner decides it's a bit of a luxury to have their windows cleaned every week so they decide to have them done once a month instead. The window cleaner now only earns £25 per month. The window cleaner earns less and therfore pays less tax. Not good for the government. The house owner keeps the money in the bank (foolish place to keep it but hey) and decides to save it for a rainy day. Not good for the government. That pesky house holder might sit on that money for years before he spends it on a meal out with his family. This delays the point the government gets to receive the VAT on the meal he buys and of course the tax on the profit the restaurant makes.
This is why it is critical to the treasury we all borrow and spend. A totally contrary action to the principle of becoming wealthier.
Why do you think intetest rates are so low? I keeps our huge borrowing interest payments low. It also penalises savers and encourages them to spend. After inflation, savers are getting poorer just by saving. Even at this all time sustained low interest rate level we are still running a trade deficit. Because western central banks are running out of bullets to revive their ailing economies by printing money and reducing interest rates, they've thought up a new wheeze, negative interest rates. Yes that's right, you'll be taxed if you save money. This will be hardish to accomplish while we can withdraw cash and store it under the matrass. Once cash is done away with (after all only drug dealers and criminals use cash or so we're led to believe ), you'll be stuffed.
The EU likes the idea of negative interest rates. The idea of being in polical and monetary union with a crumbling and indebted bloc of countries fills me with dread. Especially one with no control of the number and type of people that just walk in every week that by definition when they get their EU passport can walk in here too.
However you want to view it, it is not possible to become richer by borrowing to consume if you are forced to borrow to consume, you are getting poorer. It applies to individuals, companies and countries.
I can't fathom how spending increases the liklihood of investment. Please could you explain that to me?
To counter the idea of a small country being left out in the cold I suggest you read about Singapore. Once poor, now after 25 years of reformed leadership is now one of the wealthiest nations in the world.
If they can do it, so can we. Because they didn't start off being the 5th or 6th largest economy in the world when they reformed. Singapore didn't achieve it's success by shackling itself to a crumbling indebted union.
It urks me when our leaders who cannot be stupid try to convince us we aren't good enough to be free of the EU.
Long term, we have just as much chance of building our county's wealth out of the EU than in it. Given no one can predict what will happen economically, that leaves us other upside of leaving the EU, that we will be able to take back control of our country. I still haven't had a convincing reason why, letting 27 other heads of state influence by a factor of 9 to 1 what is right for our country is a positive move. That would be like saying to Tesco shareholders, we are diluting your vote by a factor of 10 and from now on, 90% of the vote will be decided by disinterested parties. Even if all Tesco shareholders vote 100 % in favour of a motion, it won't matter a jot because the other 90% will be able out vote them every single time.
Now we have Obama on the case, I really ask myself while tapping my fingers on my desk, what's in it for him. TTIP perhaps? I know you'll counter by saying, if we are out, the US will force us to sign our own agreement anyway. Well we also have to consider that the UK and US already has strong investments and trade both ways with each other. I can't see this being unwound by us refusing to sign up to a TTIP type agreement. Everyone will lose. For the USA, it's just easier if we're in the EU. I don't for one minute believe Obama made that soeech for our benefit.