Sense on Cents

The United Kingdom may be our closest political ally but in terms of financial paths, our friends across the pond are taking a decidedly different tact in terms of addressing their mountainous fiscal deficit. Today’s news that the UK will undertake real fiscal austerity was a foregone conclusion with the election of new Prime Minister David Cameron this past May. That said, the reality of the news does pack a wallop when contrasted to the deficit spending here in the United States. For details on the UK’s renewed sense of austerity, let’s review The WSJ’s U.K. Treasury Chief Details Spending Cuts:

U.K. Chancellor of the Exchequer George Osborne laid out sweeping spending cuts Wednesday, sticking to the timetable for paring back the budget deficit that he unveiled in June.

In a spending review statement that could have a major impact on the economic recovery and will shape the political landscape for years ahead, Mr. Osborne confirmed that the noncapital government spending levels remain as he set them out in his emergency budget in the summer.

Mr. Osborne confirmed the government is therefore sticking to its plans to eliminate the structural budget deficit, and place debt as a percentage of gross domestic product on a downward path by 2014-15.

Mr. Osborne also announced a £2 billion ($3.14 billion) a year increase in capital spending from his June plans, although capital expenditure will still face deep cuts. And he said debt interest payments will be £5 billion less than previously estimated by 2014-15.

“It is a hard road, but it leads to a better future,” Mr. Osborne said of the spending cuts. “We are going to bring the years of ever-rising borrowing to an end. We are going to ensure, like every solvent household in the country, that what we buy, we can afford.”

Novel concepts, no? Actually, these simple fiscal realities promoted by Osborne may seem novel but they are not. Living within one’s means may be novel to nations, politicians, and central bankers who spend money and devalue currencies like drunken sailors.

For those who truly appreciate the simplest of sense on cents, living within — if not below — one’s means is the true path to long term prosperity.

Navigate accordingly.

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. As President of Greenwich Investment Management, an SEC regulated privately held registered investment adviser, I am merely a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

This entry was posted on Wednesday, October 20th, 2010 at 8:47 AM and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.