IMF gives Tories a glowing report

[mjdgreg]

mjdgreg. You must be right that it's impossible to get out of a debt crisis by borrowing more. That is very clear, logical and obviously correct.

There's just one problem that I need some help on. See, at the end of WWII, our Public Debt to GDP was almost 250%. Cripplingly high. By 1975, it was less than 40%. Perfectly manageable. Surely, we must have done that by massively reducing public spending and running budget surpluses?

But, mjdgreg, I'm really, really struggling here. Because when you look at the numbers, in fact we only ran budget surpluses for 4 years out of those 30 years. This is getting scary. Because it appears that the Government borrowed more in 26 out of 30 years, and yet our debt burden came down?

And, do you know what mjdgreg? The same thing happened in just about every other major Western country.

That can't be right mjdgreg, can it? Government borrowing more but debt as a proportion of income going down?

Can you help me out and explain what REALLY happened? My best guess is that there was a pinko plot to fiddle the numbers.

If you'd just left your post at the first paragraph you would have gone a little way to restoring your battered credibility.

Unfortunately try as you might you can't resist basing all your arguments on Public Debt to GDP and ignoring all the other factors that go into making up our economy and the true level of the nation's debt.

Reading your posts people would be forgiven for thinking 'debt crisis, what debt crisis'? It must be a figment of people's imaginations because Labour did such a marvellous job of running the economy.

Unfortunately for you and your deluded leftie mates we all know what really happened. Labour once again (as they always do when in power) bankrupted the country again. This time though they have really taken the biscuit.

So I'd appreciate it if all you leftie fools out there would just harden up a bit and take the medicine that's coming and stop blaming the coalition and realise this is all Labour's doing.

[Filo]

mjdgreg. You must be right that it's impossible to get out of a debt crisis by borrowing more. That is very clear, logical and obviously correct.

There's just one problem that I need some help on. See, at the end of WWII, our Public Debt to GDP was almost 250%. Cripplingly high. By 1975, it was less than 40%. Perfectly manageable. Surely, we must have done that by massively reducing public spending and running budget surpluses?

But, mjdgreg, I'm really, really struggling here. Because when you look at the numbers, in fact we only ran budget surpluses for 4 years out of those 30 years. This is getting scary. Because it appears that the Government borrowed more in 26 out of 30 years, and yet our debt burden came down?

And, do you know what mjdgreg? The same thing happened in just about every other major Western country.

That can't be right mjdgreg, can it? Government borrowing more but debt as a proportion of income going down?

Can you help me out and explain what REALLY happened? My best guess is that there was a pinko plot to fiddle the numbers.

If you'd just left your post at the first paragraph you would have gone a little way to restoring your battered credibility.

Unfortunately try as you might you can't resist basing all your arguments on Public Debt to GDP and ignoring all the other factors that go into making up our economy and the true level of the nation's debt.

Reading your posts people would be forgiven for thinking 'debt crisis, what debt crisis'? It must be a figment of people's imaginations because Labour did such a marvellous job of running the economy.

Unfortunately for you and your deluded leftie mates we all know what really happened. Labour once again (as they always do when in power) bankrupted the country again. This time though they have really taken the biscuit.

So I'd appreciate it if all you leftie fools out there would just harden up a bit and take the medicine that's coming and stop blaming the coalition and realise this is all Labour's doing.

Mick, you`ve responded to that post without explaining anything, could you explain why you think BST is wrong with facts figures that contradict BST`s facts and figures, without finding an article to copy and paste, my guess is you can`t find an article and as such you have n`t an explanation!

[bobjimwilly]

Dear Mick,

I thought you deal in facts?

Regards,

A mad leftie

[big fat yorkshire pudding]

See it all depends on where you sit, in the past we had economies that could build by developing industry and i think it's fair to say we don't have that quite as much anymore.  I think it's also fair that we say all governments were guilty of failing to protect British manufacturing etc.

But what a lot of people seem to think is that we should  tax the big businesses.  Well let me tell you as an accountant working for a large PLC that won't always work for a number of reasons.  But one main one is that the companies will simply move abroad.  My company has been doing that in large numbers and we've seen whole teams of people outsourced or moved abroad.  That's where the tax big business argument falls down, what people seem to forget is those of us within PLC's pay taxes and contribute probably more than many public sector workers whilst working longer hours with less holidays.

We can't like in 1945 build our way out of debt, it just is not possible as we haven't much to build these days.  The way to build the economy right now is to force down labour costs, force down business taxes and attract business back from China and abroad.  That is starting to happen but it's not happening enough. We will see manufacturing return as shipping costs increase and whatnot.  But in reality the British labour force priced itself out at the lower end and it was inevitable that would cause companies to move abroad.  I mean we have staff who want ridiculous amounts of money for the job that they do and then they go running to their union when someone suggests their contract may be terminated - crazy.  Some of us have to accept a bit of a cutback, I've had to, 0% percent payrises for us this year (though I was fortunate to earn a move up the ladder, I'm still near the bottom), but sometimes we just have to accept that we don't really need that 24 pack of lager on a weekend.

[mjdgreg]

I've more than explained the fallacy of his argument in my post as follows:

'Unfortunately try as you might you can't resist basing all your arguments on Public Debt to GDP and ignoring all the other factors that go into making up our economy and the true level of the nation's debt.'

I'll just say this one more time in the vain hope that it sinks through some of your thick skulls. GDP Debt ratio is only one piece of the jigsaw. It is not the be all and end all
for  basing your argument on.

To help you lefties understand a little bit better, I've found a nice simple youtube video which explains the true horror of the Labour years in power. It's short and doesn't use big words so you should be able to follow it and not have an attention span problem:

http://www.youtube.com/watch?v=jGAdzE13qMI

[BillyStubbsTears]

See Mick. You keep on saying that public debt-to-GDP is unimportant.

In that case, can you please explain, in simple, direct terms, what the Government's deficit reduction plan which you support is all about?

As regards other debt, yes our financial system is up to its eyeballs in debt. That is a massive problem to sort out. But it will categorically NOT be sorted out while ever the economy is going downhill.

Interestingly, our other, non-financial companies are NOT up to their eyeballs in debt. As I said yesterday, British companies are sitting on a collective pot of £700bn which they are terrified to invest. THAT is the key to this problem. Those companies need the re-assurance that they can risk re-investing that to get businesses up and running again.

As I said yesterday, we have slid into a classic Paradox of Thrift disaster. Individual companies see that the economy is flatlining. So they are terrified that their markets will dry up and they will have to live on retained profits. So they retain the profits and do not re-invest them. So the economy stagnates, just as they feared. So they retain even more of the profits. And we spiral downwards.

Just as Japan did 20 years ago.

Just as Keynes explained would happen more than 70 years ago.

There is a way out of this, just as Keynes explained, just as Paul Krugman passionately argues. Neither of them remotely what you call "lefties". Both of them highly respected economists. It requires Governments to kick start the economy. There is no other way out. There never has been in the history of economics.

It will come, eventually. The IMF are all-but screaming for it (albeit in very diplomatic language). The question is, how far into the hole will we be before it does come?

[mjdgreg]

See mjdgreg. You keep on saying that public debt-to-GDP is unimportant.

I have categorically never said that. Of course it's important but is only one factor when assessing the problem and not the only thing as you seem to think. I've explained my position in graphic detail before and I'm not about to explain it to you again.

[BillyStubbsTears]

Ok Mick

So, can you point me to a single example in economic history whereby a country has reduced its debt without significant GDP growth? Just one will do.

[mjdgreg]

Ok mjdgreg

So, can you point me to a single example in economic history whereby a country has reduced its debt without significant GDP growth? Just one will do.

If I do, will you admit you have lost the argument? Be very careful before you answer that one. Just bear in mind how many times I've totally trashed your arguments in the past. You have been warned.

[BillyStubbsTears]

Mick.

You find me a single example of a mature, liberal western market democracy that has SIGNIFICANTLY reduced its public debt to GDP ratio (ie knocked it down by more than 25%) without having SIGNIFICANT GDP growth (ie, more than two percent as an annual average over the period of debt reduction) and I'll say not another word on the subject.

And if you can't, I expect you to take the same pledge.

[mjdgreg]

mjdgreg

You find me a single example of a mature, liberal western market democracy that has SIGNIFICANTLY reduced its public debt to GDP ratio (ie knocked it down by more than 25%) without having SIGNIFICANT GDP growth (ie, more than two percent as an annual average over the period of debt reduction) and I'll say not another word on the subject.

And if you can't, I expect you to take the same pledge.

You do know how to make me laugh. Talk about moving the goal posts. Instead of just being any country it now has to be, mature, liberal western democracy, reduced its public debt to GDP ratio by more than 25% and had GDP growth of less than 2% over the period of debt reduction.

Just admit I was about to totally embarrass  you but thanks to my good nature I gave you the wriggle room to to save a little bit of face. However it is only a little bit and I think impartial (i.e. non-leftie) viewers of this forum will make their own judgements and I fear they will conclude that you have shot yourself in the foot once again.

That said I do admire a fighter. You keep getting knocked down but you come back for more. That is indeed an admirable (if foolish) trait.

[Mr1Croft]

I think life is a lot harder than a few months ago for thousands upon thousands who are still out of work. It won't necessarily be harder for everyone, especially those in jobs, but for those who lost jobs at the beginning of the recession it will continue to get harder.

I think it's still quite incredible that people are blaming labour for a world recession that was primarily caused by the collapse of the u.s. housing market.

I also think it's a disgrace that the likes of mick believe all the tory hype that all these public sector jobs that are going are all useless and not needed. Do they forget the public sector jobs include the likes of policemen, nurses, doctors, teachers etc? Are these jobs not needed in society any more? 

I think you mis-understood what I was getting at, if you go back to the day before we slipped back into recession and compare it to today nothing radical has changed because of a result, the recession we are in at the moment (although we are still awaiting the full details) is nothing like the one in 2008.


I supported the Conservative Party in the last General Election, if I could go back in time and change it would I? No. I don't class myself as a 'righty' but I did understand at the time what the Tories planned to do. And yes I do think Gordon Brown helped to cause the world recession, he may not be the sole cause but it was his view that the third way would bring the United Kindgom to the heart of Globalization when he was chancellor, it was because of him that power shifted from Stock Markets to Banks and the UK was always bound to fail because of that, we could have had a Global Recession without the UK being the slowest to recover.


The question for me is would Labour have done any better? No, and that I am sure of, I would continue to offer my piece but this is too ideological for me now, there is no such thing as a Socialist or Tory anymore in the House of Commons, this is an age of neo liberalism and for that reason I will not enter in the left/right debate.

[BillyStubbsTears]

Eeh Mick, that's a very verbose way of saying "no I can't".

No wiggling here. I was simply requiring that the reduction in debt be reasonably significant, not just a transient blip, and that it be achieved within a socio-politico-economic system more or less like ours, given that the whole debate is about what WE should do.

But I'll indulge you. Give me ANY example.

[BillyStubbsTears]

Mr Croft
" if you go back to the day before we slipped back into recession and compare it to today nothing radical has changed because of a result, the recession we are in at the moment (although we are still awaiting the full details) is nothing like the one in 2008."

Forgive me, but this is a dangerous misunderstanding.

It is true that the depth of the current recession is nothing like as severe as that of 08-09. But that doesn't mean that it's not deeply, deeply damaging.

When you have a severe recession, like 08/09, it is vital that you emerge quickly and strongly. There are three reasons for this.

1) unless you return to growth quickly, there is a very big danger that your business base is permanently shrunk.
2) A long period of low or zero growth after a major recession results in very high unemployment for a long time. Apart from the moral obscenity that this is, it has a frightening economic consequence known as "hysteresis". Usually, in any economy, there is an inverse relationship between inflation and unemployment. In a nutshell, hysteresis means that the balance shifts and you can end up with the nightmare of high unemployment and high inflation systemically built into the economy, permanently damaging our economic outlook. The IMF's report this week specifically highlighted the risk of hysteresis.

3) Without growth, you CANNOT sort out the very serious debt problem. Period.

It is utterly crucial that we get back to strong growth quickly. But that cannot and will not happen in the current environment without the Government greatly slowing its deficit reduction plans and accepting that, to kick start things, fiscal loosening is required (infrastructure spending like Roosevelt's New Deal, or tax cuts -take your pick). The IMF said that in the very starkest terms this week once you peer beneath the diplomacy.

[BillyStubbsTears]

And the problem has just been highlighted by some Tory minister on Radio 4 this morning.

He was asked whether the Government has any plans to boost house building. This is a KEY area where we are crying out for activity. We have too few affordable houses and this has been a major factor in both the 08-09 recession and the 90-91 recession, as house price bubbles were formed by too much money chasing too few houses. And that's before you start on the moral argument of whether we should have decent housing stock. Tory and Labour Govts have been equally at fault for 30 years on this, and the consequence is a shocking situation of too few decent, affordable houses.

The Minister said, "well I don't think this is an area that the Govt should be getting involved. It could distort the construction sector."

Jesus f**king wept. The construction sector is already distorted. It has been decimated by the ongoing recession. But the Tories put ideology above practical bloody sense.

[mjdgreg]

Eeh mjdgreg, that's a very verbose way of saying "no I can't".

No wiggling here. I was simply requiring that the reduction in debt be reasonably significant, not just a transient blip, and that it be achieved within a socio-politico-economic system more or less like ours, given that the whole debate is about what WE should do.

But I'll indulge you. Give me ANY example.

I'll get back to you a bit later on. Today is my busiest gambling day of the week and has to take precedence over your requests.

[Filo]

Eeh mjdgreg, that's a very verbose way of saying "no I can't".

No wiggling here. I was simply requiring that the reduction in debt be reasonably significant, not just a transient blip, and that it be achieved within a socio-politico-economic system more or less like ours, given that the whole debate is about what WE should do.

But I'll indulge you. Give me ANY example.

I'll get back to you a bit later on. Today is my busiest gambling day of the week and has to take precedence over your requests.

Right, since BST asked you yesterday, before your busiest gambling day, you`ve so far failed to google any example and now you`re struggling, because you have n`t got anything to copy and paste!

[mjdgreg]

Right, since BST asked you yesterday, before your busiest gambling day, you`ve so far failed to google any example and now you`re struggling, because you have n`t got anything to copy and paste!

I'm just breaking off from my gambling for a minute to explain that I only read silly Billy's post this morning so how could I have responded last night? I spent last night boozing at my local club. I want to provide a detailed response which takes a lot longer than your usual 20 second posts. Trust me, it will be well worth waiting for.

[Filo]

Right, since BST asked you yesterday, before your busiest gambling day, you`ve so far failed to google any example and now you`re struggling, because you have n`t got anything to copy and paste!

I'm just breaking of from my gambling for a minute to explain that I only read silly Billy's post this morning so how could I have responded last night? I spent last night boozing at my local club. I want to provide a detailed response which takes a lot longer than your usual 20 second posts. Trust me, it will be well worth waiting for.

Buying time while you use google

And you did respond to BST`s post at 1-24am this morning/last night!

I thought the Conservative Club had closed down in Doncaster?


My 20 second post`s are usually to the point and contain minimal bullshit, where as your "reasoned" responses are either copied and pasted or never address the point and contain bulshit in every sentence

[mjdgreg]

Buying time while you use google

And you did respond to BST`s post at 1-24am this morning/last night!

I thought the Conservative Club had closed down in Doncaster?


My 20 second post`s are usually to the point and contain minimal information or reasoned argument, where as your "reasoned" responses are never copied and pasted always address the point and contain excellent reasoning in every sentence

Look, responding to you is costing me money (good job that I can afford it). I'm talking about Billy's post this morning. That's the one I need to reply to. Not the one where he moved the goal posts a considerable distance. Surely you want more than a 20 second answer?

I defy you to show one sentence of my prognostications that contains even the slightest smell of bullshit.

[South West Rover]

Ok Mick

So, can you point me to a single example in economic history whereby a country has reduced its debt without significant GDP growth? Just one will do.

If he can't, does it mean that our present course of action is wrong?  It's just that the anticipation is killing me......

[Filo]

Waiting!

[mjdgreg]

I would like to point out that silly Billy is trying to have it both ways. He's trying to portray me as believing that austerity is the only way forward and that growth doesn't matter. I do believe that austerity is part of the way forward but also that due to austerity growth will follow. So it's not an either or situation it's more a case of how do you achieve growth. I fundamentally disagree with silly Billy that throwing more debt at at an already eye watering debt is the way to achieve growth and this is what the real debate is about. Now I've got that off my chest back to the real debate.

There are 2 widely accepted schools of thought as to how to reduce debt. The silly Billy approach relies on the debt shrinking ‘if’ the economy grows faster than interest on the accumulated debt. In our current situation that is one almighty big ‘if’. The other approach relies on cutting debt by spending cuts or tax increases. Contrary to how silly Billy would like to try and portray me, I don’t believe in either of those strategies.

Now for the example that you have all be waiting for with baited breath. Canada. Hopefully that one ticks all of silly Billy’s boxes.

In the 1990s Canada implemented deep cuts to tackle and then eliminate their dangerously high deficit. They managed a huge reduction in debt, from 102% of GDP at its peak in 1996 to 65.0% in 2007. This was the largest fiscal consolidation among the G-7 countries. A group of much smaller countries also reduced their deficits over roughly the same period. These countries were – Finland, Australia, Belgium, Denmark, the Netherlands, New Zealand and Sweden.

Canada really stands out though for its very heavy reliance on spending cuts to eliminate the deficit and then run budget surpluses.  They relied more on spending cuts than most of the smaller countries mentioned above. Canada also didn’t rely at all on tax increases to lower the deficit and debt. In fact once surpluses emerged after 2002, they cut taxes.
 
To summarise, Canada grew faster than the U.S. and most of Europe during this period despite fiscal restraint.

Game, set and match.

[BillyStubbsTears]

Mick

Did you have a look at Canada's GDP growth figures for that period? That was the whole point of the question I asked.

"Has any country ever significantly reduced its debt without undergoing significant GDP growth?"

Canada is the Poster Boy example trotted out by Austerity supporters. It is utterly irrelevant to the current situation. Canada was able to very successfully cut its debt because it's economy was already booming. At the back end of the 90s, it was roaring along at 6-8% GDP growth and it only briefly dropped below 2% in the whole period up to the Great Crash.

If we're going to have a debate, you could at least RTFQ.

So, I'll ask again. Has any country ever significantly reduced its debt without undergoing significant GDP growth?

[mjdgreg]

Did you have a look at Canada's GDP growth figures for that period? That was the whole point of the question I asked.

Did you look at my first paragraph in my reply which addresses your question? The debate is austerity versus spending. I am in the austerity camp and you are in the spending camp. Simple.

You try to argue that austerity doesn't work. I argue that it does (I also think other measures need to be taken as well) and have given a very convincing case study to back up my point of view.

According to you austerity doesn't work and any country that implements this strategy will fail. Well Canada did implement spending cuts and went on to succeed rather well thank you very much.

[RedJ]

Did you have a look at Canada's GDP growth figures for that period? That was the whole point of the question I asked.

Did you look at my first paragraph in my reply which addresses your question? The debate is austerity versus spending. I am in the austerity camp and you are in the spending camp. Simple.

You try to argue that austerity doesn't work. I argue that it does (I also think other measures need to be taken as well) and have given a very convincing case study to back up my point of view.

According to you austerity doesn't work and any country that implements this strategy will fail. Well Canada did implement spending cuts and went on to succeed rather well thank you very much.

he's saying austerity during the "bad times" though, even I (as I know you seem to think I'm a thick Kitson) could see that, and it isn't cos I'm one of his "loonie leftie mates".

[mjdgreg]

he's saying austerity during the "bad times" though, even I (as I know you seem to think I'm a thick c***) could see that, and it isn't cos I'm one of his "loonie leftie mates".

I think you'll find that silly Billy doesn't believe in austerity even in the 'good times'. In the good times he'd spend even more money. He doesn't believe in cutting your cloth accordingly or saving for a rainy day. In silly Billy land growth just keeps on magically appearing year after year as long as you can find some mug to lend you the money for you to spend.

Austerity in the good times is the best way forward but if you don't do that (and Labour certainly didn't) then you'll be left with no other option but to implement it in the bad times to make the best of a bad job.

[scriptman]

The tried and tested Tory ploy eh? If you can’t win the argument, beat the man.  I do happen to agree about austerity measures being an effective way of reducing debt. Then again any fool can starve the family to pay the bills. This is the Tory way after all…. high unemployment, low wages, hit the vulnerable and reward the wealthy. …. but hey, as long as figures look good on paper, who cares?  The last Tory Government thought leaving the likes of Liverpool, Newcastle, Donny, and Barnsley to rot was a price well worth paying.  Cameron and puppet Clegg are no different. 

The economy was in a healthy position under Blair and Brown. At least the Tories thought so, having supported the majority of fiscal strategies implemented by Labour.  Then of course came the small matter of the global economic meltdown, you know the one…. the one which the Tories hold Labour solely responsible for?

I’m sure, on paper, the economy will eventually look good for the Tories, but at what cost?  If I employed the same Tory fiscal approach to my family, I’d be up for neglect.

[mjdgreg]

The tried and tested Tory ploy eh? If you can’t win the argument, beat the man.  I do happen to agree about austerity measures being an effective way of reducing debt. Then again any fool can starve the family to pay the bills. This is the Tory way after all…. high unemployment, low wages, hit the vulnerable and reward the wealthy. …. but hey, as long as figures look good on paper, who cares?  The last Tory Government thought leaving the likes of Liverpool, Newcastle, Donny, and Barnsley to rot was a price well worth paying.  Cameron and puppet Clegg are no different. 

The economy was in a healthy position under Blair and Brown. At least the Tories thought so, having supported the majority of fiscal strategies implemented by Labour.  Then of course came the small matter of the global economic meltdown, you know the one…. the one which the Tories hold Labour solely responsible for?

I’m sure, on paper, the economy will eventually look good for the Tories, but at what cost?  If I employed the same Tory fiscal approach to my family, I’d be up for neglect.

Another misguided leftie joins the debate. I agree with you that the man is beaten (silly Billy). I'm glad even though you're a leftie you can see  he has lost the argument.

Now to sort out your ramblings. I am not a Tory. I can't remember the last time I voted. I just happen to think that the Labour alternative would totally ruin the country if they were given power for long enough.

Unemployment started rising under Labour despite all the extra public sector jobs that weren't needed. Low wages are a consequence of Labour opening the floodgates and allowing all the immigrants in from Poland etc.

Hit the vulnerable? Pensioners and benefit claimants have done all right under this government and raising the tax threshold has done wonders for the low paid. The wealthy are being hit quite hard. Loss of child benefit etc. It was the unions that ruined all the towns you mention.Labour were all about figures looking good on paper not the Tories.

Now for your most laughable comment, ' The economy was in a healthy position under Blair and Brown.' Anyone who can make that ludicrous statement does not deserve to have the rest of their views taken seriously.

The global meltdown was caused by allowing the banks to do as they pleased and take gigantic risks. Who failed to monitor and regulate them? Yes once again we find Labour are to blame.

If you employed the the same Labour  fiscal approach too you'd  be up for neglect. You'd need a new credit card every week and eventually you would lose your house and be declared bankrupt.

[The Red Baron]

It is utterly crucial that we get back to strong growth quickly. But that cannot and will not happen in the current environment without the Government greatly slowing its deficit reduction plans and accepting that, to kick start things, fiscal loosening is required (infrastructure spending like Roosevelt's New Deal, or tax cuts -take your pick). The IMF said that in the very starkest terms this week once you peer beneath the diplomacy.

Did I miss something? I thought the IMF called for an even looser monetary policy than we already have- lower interest rates (than 0.5%- FFS!) and more QE (i.e. printing money so the banks can hoard it and continue pay their staff big bonuses.) These are the policies that have failed to lift us out of recession and will continue to fail.

I agree there needs to be a growth strategy though- based on a combination of fiscal easing (a 12 month holiday on Employers' NI would be a start) and supply side reforms. Problem is, the Government can't agree on anything other than deficit reduction as cutting business taxes is anathema to most of the Lib Dems.

So, I expect we'll have a period of minimal growth (even if the Eurozone manages to avoid imploding) followed by a Labour Government who will increase public spending, leading to higher debt and high interest rates.