Viking Supporters Co-operative
Viking Chat => Off Topic => Topic started by: BillyStubbsTears on February 22, 2013, 10:49:54 pm
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http://m.bbc.co.uk/news/business-21554311
If the whole economic disaster wasn't such a historic tragedy that will screw us up for decades, it would be hilarious.
You start by deciding that THE most important thing is to retain our AAA status (it wasn't).
You design a policy of cuts to ensure this happens (it couldn't).
You cripple the economy and produce zero growth in three years (as you were told it would).
You lose the AAA rating (because you have no growth).
You then say this proves that you are on the right track and must continue doing what you have been doing.
What an Almighty disaster. But what do you expect when you put a weasley little failed journalist and middling History graduate in charge of the f**king economy?
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Was just about to post the same
Did n`t he once say judge him on his performance?
Well Gideon, pack your bags and f**k off! You`ve failed and screwed us all!
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Amen Fili
And while he's f**king off, he can take the Assistant Editor of the Financial Times with him. She's just been on the news saying "At the time of the last Election, we thought markets losing confidence in our debt was the key thing. We've come to realise that lack of growth is the crucial problem."
We've come to f**king well realise!?!
As if no f**ker was saying that 3 years ago.
It is economically illiterate f**kwits like her and Gideon who will have head-shaking books written about them in future years. Economic historians will look back and ask how these Kitsons ever got remotely close to bring influential when they know the square root of f**k all about what the key issues of the debt crisis are.
Kitsons, the lot of them.
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Cameron must be now thinking what Tories think in a crisis, he`s got to knife his mate in the back to try and save his own skin, he must realise that he can`t go to another general election with this idiot in charge of the Country`s finances, but it`s too late for him now, there`s no chance of this lot getting re elected, lets just hope we have n`t gone over the cliff edge by then!
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Amen Fili
And while he's f***ing off, he can take the Assistant Editor of the Financial Times with him. She's just been on the news saying "At the time of the last Election, we thought markets losing confidence in our debt was the key thing. We've come to realise that lack of growth is the crucial problem."
Alle bloody luyah Now where have I heard someone telling these people that ......................but will it change????
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I'm just waiting to see who defends this and what pathetic excuses exactly they'll use..
Of course, it's all Labour's fault, isn't it?
Oh, and the wrong type of, er, sunshine?
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I'm just waiting to see who defends this and what pathetic excuses exactly they'll use..Of course, it's all Labour's fault, isn't it?
Oh, and the wrong type of, er, sunshine?
:cool: :lol:
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I'm just waiting to see who defends this and what pathetic excuses exactly they'll use..
Of course, it's all Labour's fault, isn't it?
Oh, and the wrong type of, er, sunshine?
It`ll be the near miss asteroid or the meteor that came down in Russia! :)
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I'm just waiting to see who defends this and what pathetic excuses exactly they'll use..
Of course, it's all Labour's fault, isn't it?
Oh, and the wrong type of, er, sunshine?
It`ll be the near miss asteroid or the meteor that came down in Russia! :)
Never know, could be all this horsemeat f**king up growth.
Processed meat's took quite a hit apparently, that's got to be it. Yeah that'll hold up..
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A quote from Gideon when he was shadow Chancellor
"It's now clear that Britain's economic reputation is on the line at the next general election, another reason for bringing the date forward and having that election now," said the shadow chancellor, George Osborne. "For the first time since these ratings began in 1978, the outlook for British debt has been downgraded from stable to negative."
Well Gideon, have a word with Dave and call the election!
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Is Mick still about or has the banhammer been wielded? I'd have loved to have seen his response to this.
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Cameron must be now thinking what Tories think in a crisis, he`s got to knife his mate in the back to try and save his own skin, he must realise that he can`t go to another general election with this idiot in charge of the Country`s finances, but it`s too late for him now, there`s no chance of this lot getting re elected, lets just hope we have n`t gone over the cliff edge by then!
But who would you want to replace him? Gove? Hunt? Hague is the best of a bad bunch for the job but he's clever enough to know not to take it if he wants to keep his reputation.
Actually the only man in the current government fit for the job is Cable but I can't see Cameron giving that high a job to a LibDem. So much for working together for the good of the country, party comes first!
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I'll say the same thing I always say, the modern world is so reliant on vast swathes of countries it's perhaps a minefield for any chancellor as they can only affect their own country. Internally we're doing ok it's the problems abroad that are the biggest issue and will continue to be.
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BFYP
Aye. And Austerity Über Alles has been the policy in Europe too.
So, when you hear Gideon telling us that we are f**ked because Europe is f**ked, what conclusion do you draw?
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I was in the car with Alex when I heard this news. Alex got quite, well, worried tbh. He thought I was having a heart attack. And when I reassured him, he asked me why I was swearing so 'damn much'?!
I really don't understand how this, or indeed any, country, can find itself in the position where f u c k wits like Reagan, Thatcher, Bush 1, Bush 2 and Cameron are in power? I mean, what fatheads would actually fall for such a horrendous stupidity as that? Forget the politics - I'm talking about capability and capacity to set a plan to manage a country even half way effectively.
If I ever develop a long term, irreversible, illness I've always thought I would do this country a really, really, really big favour. I thought I'd lost the opportunity a couple of decades ago now - but it's come back hasn't it?
Cheers
BobG
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We've gone from a pretty much self reliant country,to a country that relies on everybody else,the mines were closed,the steel industry practically broken up,instead of making our own things,we import from China and make them stronger and stronger,while we get weaker by the day.
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Cameron must be now thinking what Tories think in a crisis, he`s got to knife his mate in the back to try and save his own skin, he must realise that he can`t go to another general election with this idiot in charge of the Country`s finances, but it`s too late for him now, there`s no chance of this lot getting re elected, lets just hope we have n`t gone over the cliff edge by then!
But who would you want to replace him? Gove? Hunt? Hague is the best of a bad bunch for the job but he's clever enough to know not to take it if he wants to keep his reputation.
Actually the only man in the current government fit for the job is Cable but I can't see Cameron giving that high a job to a LibDem. So much for working together for the good of the country, party comes first!
Out of the entire coalition, there be only one man capable...Dr Cable...the man who should have got the gig in the first place.
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Interesting to note how the 4G fiasco appears to have gone under the radar (excuse the pun!!) of most.
The government were expecting to raise 3.5 billion from the sale of licenses for the 4G network via an auction. The auction apparently raised 2.5 billion, a margin of error of 1 billion pounds!!!! WTF!!!! Anyone who has ever had anything to do with a budget will know that its standard practice to allow for a margin of error of +/- 10%, but A billion pounds on a 3.5 billion initiative to raise cash?
Got the smell of brown envelopes and things that move in the night for me!!!!
As for the auction, why did the government not say, we have X number of licenses, we wish to raise 3.5 billion, divide one by the other, and thats the price that is required to have a license granted! Pay it or do one!!!! Or would that be too simplistic a solution?
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Interesting to note how the 4G fiasco appears to have gone under the radar (excuse the pun!!) of most.
The government were expecting to raise 3.5 billion from the sale of licenses for the 4G network via an auction. The auction apparently raised 2.5 billion, a margin of error of 1 billion pounds!!!! WTF!!!! Anyone who has ever had anything to do with a budget will know that its standard practice to allow for a margin of error of +/- 10%, but A billion pounds on a 3.5 billion initiative to raise cash?
Got the smell of brown envelopes and things that move in the night for me!!!!
As for the auction, why did the government not say, we have X number of licenses, we wish to raise 3.5 billion, divide one by the other, and thats the price that is required to have a license granted! Pay it or do one!!!! Or would that be too simplistic a solution?
Why would Dave do anything that made any sense whatsoever?
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Interesting to note how the 4G fiasco appears to have gone under the radar (excuse the pun!!) of most.
The government were expecting to raise 3.5 billion from the sale of licenses for the 4G network via an auction. The auction apparently raised 2.5 billion, a margin of error of 1 billion pounds!!!! WTF!!!! Anyone who has ever had anything to do with a budget will know that its standard practice to allow for a margin of error of +/- 10%, but A billion pounds on a 3.5 billion initiative to raise cash?
Got the smell of brown envelopes and things that move in the night for me!!!!
As for the auction, why did the government not say, we have X number of licenses, we wish to raise 3.5 billion, divide one by the other, and thats the price that is required to have a license granted! Pay it or do one!!!! Or would that be too simplistic a solution?
Because in that instance you risk loosing £3.5 billion and raising absolutely zero. It was a commercial auction, the companies who were bidding knew how much the licence was worth to them - and weren't about to pay any more. The problem was the goverment over=estimated 4G - as they did 3G too if memory serves me right so rather than looking at it as £2.5 billion gained we are now looking at it as £1 billion lost.
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According to the report I listened to on Radio 5 live, the 3G auction raised 22.5 billion which was in excess of what had been expected.
Insofar as the 4G "auction" the government commissioned a working party to assess the amount that would be raised. The amount actually raised was far below what was stated could have been raised, so if the chancellor has been left red faced for announcing it and indeed plumbing that figure into the governments budget figures they know who to turn to.
As far as the money gained rather than money lost scenario, come off it, it todays competitive telecommunications market, do you seriously think that anyone of them would cut the others throat to gain a competitive advantage over the others!!!! Like I say, any hard nosed government would have said, you want a license, this is what it cost's take it or leave it.......don't see many taking the leave it option!!!!!!
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The £3.5bn figure came from an estimate by the Office for Budget Responsibility in the Autumn Statement.
Two observations.
1) That estimate by the OBR was used by Gideon to claim that he was reducing the deficit this year. Without it, he would have been forced to admit that his defect reduction policy had failed. With it, he was able to pull a fast one and completely wrong-foot Ed Balls. Typical of Gideon to play a smart-arse trick like this then look a fool when the actual numbers end up not stacking up.
2) The OBR have been wrong on pretty much EVERY prediction they have made. They were set up by Gideon and Danny Alexander as a political ploy, claiming that Labour had always massaged the figures. They wanted to show that they were going to use a wonderful independent body to do budgetary predictions free from Treasury influence.
But the OBR has got every call wrong. They have spent 30 months making wildly over-optimistic claims about what growth was coming in the economy. They have consistently under estimated inflation. And then they got the 4G income out by 40%. They are an utter waste of space, and compared to them, the predictions that the Treasury civil servants made under Brown and Darling were near-perfect.
And now the OBR claims that our perma-slump is nothing to do with the spending cuts that Osborne initiated in 2010. In fact they say that it is due to everything EXCEPT the cuts. Given their record, I know what my take is.
(PS. The OBR is headed by an economist who was at Cambridge at the same time as Clegg. They obviously turned out some f**king stars that year...)
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Am I right in thinking that the OBR is a quango? I thought they were meant to be shutting them down and not opening up pointless ones.
So we've sacrificed things like the UK Film Council that made money for something utterly pointless full of people ludicrously thick or optimistic.
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RedJ
I guess it is a Quango.
In fairness, I understand why the OBR get it so wrong. They are using ideas and models that simply do not apply to the exceptional current circumstances. This is PRECISELY what happened in the 1930s, when the Givernment stuck to policies and theories that they thought were we established, but turned out to be hopeless in the particular circumstances of the Great Depression. The term "The Treasury View" became a nasty insult among post-War economists, meaning a fixed view of the world that refuses to be budged by evidence, which was what the Treasury had in the 30s, leading directly to the horror of the Depression.
That's exactly what we are going through again. The Treasury and the OBR are applying incorrect analysis to the problem, so they are getting incorrect predictions. Where they have no excuse is that many, many eminent economists are screaming this at them, but they are too pig-headed to change their ideas. They are convinced that they are correct, even though every new set of data shows just how wrong they are.
In 30 years time, these people will be mercilessly torn apart by historians writing about the ignorance and arrogance that prolonged this stupid mini-Depression of ours. Totally avoidable if we had had different people in charge.
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Bit of a sweeping statement there Billy, how do you know what ideas and models that they are using?
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Bit of a sweeping statement there Billy, how do you know what ideas and models that they are using?
God knows, cos even they don't, it would seem.
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Bit of a sweeping statement there Billy, how do you know what ideas and models that they are using?
I read what they say Savvy. I read a lot about it. It is truly fascinating to see just how poor a science economics is. Shot through with arrogance, politically slanted viewpoints and unsubstantiated opinions. I'd be in my element as an economist...
Seriously, the big thing about the OBR is that they are firmly on the side if the debate that insists that fiscal multipliers are small, and that therefore the fiscal consolidation that we and Europe have undergone cannot be the reason for our woeful economic performance over the last 3 years since Austerity-mania took over. They base that belief on the (well established) record that fiscal multipliers are small in robust economies. But they stick their fingers in their ears and refuse to listen to to growing weight of theoretical and empirical arguments showing that fiscal multipliers are far larger than they believe in depressed economies, and that as a result, Austerity in depressed economies will inevitably lead to a perma-slump.
Exactly the same argument is voiced aggressively by Oli Rehn, deputy head of the European Commission, who is obsessively determined to show that Austerity and only Austerity will work for Europe, and who considers 25% unemployment across the Med to be just an unfortunate side effect. He displayed breathtaking arrogance last week in a report where he complained that people criticising his policies were being "unhelpful". In other words, "We know what we are doing and how dare you publish arguments or empirical facts that contradict us." Quite unbelievable!
Read Simon Wren-Lewis (professor of economics at Oxford), Martin Wolf (financial commentator at the Financial Times) Paul deGrauwe at the European Commussion or Jonathan Portes (head of the National Institute for Economic and Social Research and ex economist at the Treasury under Ken Clarke when we came steaming out of the last recession in excellent shape) for some pretty devastating take-downs of the ideas that the OBR and Rehn are wedded to.
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Lol! Have to say after the law of diminishing marginal returns most economics goes above my head! Have to agree regarding economics being a combination of "schools of thought" and "conjecture" which some how allow politicians to justify their own positions on any given subject!
This article provides an illustration of what I was getting at in my original point:
Nota bene the graph on the right hand side entitled who paid what!!!!! Not even going to get started on the wide spread between who paid what, and if greater competition was truly at the heart of the decision process, why did the chinkies get knocked back?
Like I said at the outset, 4 licenses divided by 3.5 billion, who wants them boys, are you in or are you out, then we'd have seen a scramble, I've every confidence!!!! But as I stated previously is this too simplistic?
Of course one other option would have been to get all the interested parties at the set rate I mentioned, and then if there were more than 4, get Ofcom to do what they are mandated to do in the first place and make sure the four selected offer the best all round deal for the consumer, or again would that be too simplistic?
http://news.sky.com/story/1054455/new-4g-phone-operators-announced-by-ofcom
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Savvy.
The thing about economics is though that, in the long run, it IS subject to the rigour of the Scientific Method. So, if Economist A holds to a certain theory that makes certain predictions and those predictions turn out to be wrong in the short term, he can claim that there are special circumstances that affect his predictions. But if the predictions keep being wrong, year after year, then there is no conclusion to draw other than that the theory is wrong and should be binned.
What has happened since the Great Crash is that there have been two conflicting schools of economic thought.
One said that this was a special collapse, the like of which we hadn't seen for a lifetime. And that it was crucial to go back to the 1930s for lessons about what to do. Specifically, we must make sure that we didn't throttle off demand in the economy by cutting back Govt spending while the private sector was on its death bed.
The other one said that the debt situation was terrifying and that what we needed to do was to get debt down immediately. Doing that would give business confidence that Govt was serious and that would mean that the private sector would thrive.
In 2008-10, the first school of thought held sway. Huge Govt stimulus was used to stop economies worldwide falling off the cliff. But in 2010, in America to some extent, UK very much and especially in the EU, the second school won the argument. Jean-Claude Juncker of the ECB said that is was essential to pull back Govt spending and that by doing so we would see private sector confidence bloom. Georege Osborne said pretty much exactly the same.
The result has been three years of feeble or no growth in Europe and the UK. America didn't pull the plug quite as sharply so they haven't suffered as badly, but their emergence from recession has slowed.
I could understand 6, 12, 18 months of the second plan not yielding rewards. After 36 months, it starts to look like the whole intellectual basis of that plan is bullshit.
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Also, outwith of the National Debt, in the outside world of the private sector the immediate effect of the credit crunch was exactly the sort of contraction of the money supply that Thatcher was trying to achieve in the first half of her first term...!
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Glyn
To be fair to Thatcher (Jesus - never thought I'd hear myself say THAT) there was a economic rationale behind what Thatcher was trying to achieve. The problem by the late 70s was inflation and the classic way to throttle inflation out of the system is to raise interest rates and depress demand. That's what she did. (Whether it worked is another issue altogether...)
Conversely, when the problem is depressed demand, the classic solution is to lower interest rates and encourage investment. But when you have a global collapse in demand as spectacular as the one in 07/08, even reducing interest rates to zero doesn't do the trick.
The ONLY thing that Governments can then do is to borrow and spend to make up the shortfall in demand and get the wheels if the economy moving again.
Constricting Govt spending just exacerbates the slowdown and delays the recovery.
UK and Europe constricted Govt spending. We've all experienced a prolonged slump and a delayed recovery. No shit Sherlock? And yet, to the likes of Osborne, the OBR, Olli Rehn etc, this is a surprise. This wasn't supposed to happen according to their calcs. Because their calcs are predicated on the fiscal multiplier being small (ie Govt spending being inefficient). But every week that this crisis goes on makes it more and more obvious that the basis of their calculations are simply incorrect.
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...... full of people ludicrously thick or optimistic.
If ever they fall short of members then they could borrow a few from here! ;)
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The problem by the late 70s was inflation and the classic way to throttle inflation out of the system is to raise interest rates and depress demand. That's what she did. (Whether it worked is another issue altogether...).
Although Quantity Theory Of Money goes way back, the Monetarist methods that Maggie espeoused were only outlined by Milton Freidman in 1956, so far from being a classic method of controlling inflation it was pretty much untried when she came to power.
This was because the nature of the Money Supply had changed in the 20th century:
The M1 measure was the classic definition of the money supply; basically the total value of the coins and notes in circulation. As such it was relatively easy to use the money supply to control the economy - money could be just collected as taxes and not respent, instead just sitting vaults not circulating.
However, by the late 20th century 'virtual' money not in the hands of the central bank but with just as much purchasing power as real money (ie credit, cheques, other transferable assets) had spread from just the business community to pretty much the whole population. The measure of the Money Supply that included this was M3. It was the attempt to control of this section of the Money Supply that was new and untried.
It's also the lack of the M3 credit that is hampering any recovery because it's shrunk the money supply: hence quantative easing, which is an attempt to expand the money supply though increasing M1 and get money circulating and creating demand instead of banks sitting on money and not lending it.
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As one very simple example of exactly the point that Glyn made at the foot of the previous page (the constriction of the money supply) I happen to be in the market for a mortgage with which to buy a property for subsequent renting. I know that's anathema to some, but that's the way it is. Now, I am employed, I have what is considered to be a bloody good salary, my own private mortgage is only 35% of the value of my house and will be paid off in May this year too, I have an absolutely spotless 15 year track record of being a rentier, I own another property in Swindon outright, I have a 50% share in the ownership of another 16 properties in Milton Keynes. I have never been late making a mortgage payment. I have access to upwards of half a million in equity. I am a sodding great bet when it comes to lending money to people. There are very few who will have a better record than me.
And guess what? On any half way sensible basis what I propose to do is profitable - for both the lender and for me. But the banks and co are so shit scared that they all, all, want to impose such restrictive conditions that, even if they'll lend at all, it becomes plain pointless.
So I shan't bother. And bang goes another £10K of spend to the economy - on stuff like paint, wood and all the crap, and people, that would have resulted from a tidy up. Ergo - I am now forced to help the economy contract even further.
This is the economics of the mad house.
BobG
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Can you lend me fifty quid to mend the shed?
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As one very simple example of exactly the point that Glyn made at the foot of the previous page (the constriction of the money supply) I happen to be in the market for a mortgage with which to buy a property for subsequent renting. I know that's anathema to some, but that's the way it is. Now, I am employed, I have what is considered to be a bloody good salary, my own private mortgage is only 35% of the value of my house and will be paid off in May this year too, I have an absolutely spotless 15 year track record of being a rentier, I own another property in Swindon outright, I have a 50% share in the ownership of another 16 properties in Milton Keynes. I have never been late making a mortgage payment. I have access to upwards of half a million in equity. I am a sodding great bet when it comes to lending money to people. There are very few who will have a better record than me.
And guess what? On any half way sensible basis what I propose to do is profitable - for both the lender and for me. But the banks and co are so shit scared that they all, all, want to impose such restrictive conditions that, even if they'll lend at all, it becomes plain pointless.
So I shan't bother. And bang goes another £10K of spend to the economy - on stuff like paint, wood and all the crap, and people, that would have resulted from a tidy up. Ergo - I am now forced to help the economy contract even further.
This is the economics of the mad house.
BobG
And the best solution is for the government to step in do what the banks aren't doing - lend to businesses. And you'll notice I said lend, not give. And only to someone who can show that the exact same thing has been turned down by a high street bank already. The banks can't complain about competition if they're not not willing to operate in that market.
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Glyn.
Or actually GIVE the money out to businesses and individuals. One point that both Friedman and Keynes would have agreed on when you are at the zero lower bound on interest rates is that Govt should expand the monetary base AND GET IT INTO HANDS THAT WILL SPEND IT. Friedman coined the term Helicopter Money, suggesting that in such a scenario, the Governor of the Fed should sprinkle dollar bills from a helicopter.
The debate on this concept is (finally) starting to be taken seriously among policy makers. If we have another year of flatlining throughout the developed world, it'll get taken more seriously still.
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Glyn.
Or actually GIVE the money out to businesses and individuals. One point that both Friedman and Keynes would have agreed on when you are at the zero lower bound on interest rates is that Govt should expand the monetary base AND GET IT INTO HANDS THAT WILL SPEND IT. Friedman coined the term Helicopter Money, suggesting that in such a scenario, the Governor of the Fed should sprinkle dollar bills from a helicopter.
The debate on this concept is (finally) starting to be taken seriously among policy makers. If we have another year of flatlining throughout the developed world, it'll get taken more seriously still.
The right-wingers will decry anything that smacks of giving money away. However, there's nothing to stop any lenders having very easy terms. ;)
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Glyn.
Or actually GIVE the money out to businesses and individuals. One point that both Friedman and Keynes would have agreed on when you are at the zero lower bound on interest rates is that Govt should expand the monetary base AND GET IT INTO HANDS THAT WILL SPEND IT. Friedman coined the term Helicopter Money, suggesting that in such a scenario, the Governor of the Fed should sprinkle dollar bills from a helicopter.
The debate on this concept is (finally) starting to be taken seriously among policy makers. If we have another year of flatlining throughout the developed world, it'll get taken more seriously still.
One way to do that would be to cut taxes, both for individuals and businesses.
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One way to do that would be to cut taxes, both for individuals and businesses.
A sledgehammer to crack a walnut. You wouldn't be directing it at where it does most good and not getting the most effective stimulus for the cost of it.
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Glyn.
Or actually GIVE the money out to businesseso and individuals. One point that both Friedman and Keynes would have agreed on when you are at the zero lower bound on interest rates is that Govt should expand the monetary base AND GET IT INTO HANDS THAT WILL SPEND IT. Friedman coined the term Helicopter Money, suggesting that in such a scenario, the Governor of the Fed should sprinkle dollar bills from a helicopter.
The debate on this concept is (finally) starting to be taken seriously among policy makers. If we have another year of flatlining throughout the developed world, it'll get taken more seriously still.
One way to do that would be to cut taxes, both for individuals and businesses.
TRB
As Glynn says, that ain't going to be the best way to do it. The key was in the bit in capital letters. If you want to stimulate the economy, you have to get money circulating. There's no point directing money into people's pockets if it just stays there. That is why the cries for Corporation Tax to be cut are particularly stupid. Companies are already sitting on hundreds of billions of pounds that they are too scared to invest. Why give them more money to sit on?
What we need to do is put money into places where it will be spent. Do you know the easiest way to do that? Increase welfare benefits. That's trick No1. No2 is to spend money on projects that employ poorly paid staff who will spend most of their new income. Stuff like construction.
Now. This lot in power. They cut capital investment on Day One. So that was construction f**ked. And they make a big play on cutting benefits.
And I thought Cameron had a First in PPE from Oxford? I assume the PP saw him through because he seems to know f**k all about the E
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Glyn.
Or actually GIVE the money out to businesseso and individuals. One point that both Friedman and Keynes would have agreed on when you are at the zero lower bound on interest rates is that Govt should expand the monetary base AND GET IT INTO HANDS THAT WILL SPEND IT. Friedman coined the term Helicopter Money, suggesting that in such a scenario, the Governor of the Fed should sprinkle dollar bills from a helicopter.
The debate on this concept is (finally) starting to be taken seriously among policy makers. If we have another year of flatlining throughout the developed world, it'll get taken more seriously still.
One way to do that would be to cut taxes, both for individuals and businesses.
TRB
As Glynn says, that ain't going to be the best way to do it. The key was in the bit in capital letters. If you want to stimulate the economy, you have to get money circulating. There's no point directing money into people's pockets if it just stays there. That is why the cries for Corporation Tax to be cut are particularly stupid. Companies are already sitting on hundreds of billions of pounds that they are too scared to invest. Why give them more money to sit on?
What we need to do is put money into places where it will be spent. Do you know the easiest way to do that? Increase welfare benefits. That's trick No1. No2 is to spend money on projects that employ poorly paid staff who will spend most of their new income. Stuff like construction.
Now. This lot in power. They cut capital investment on Day One. So that was construction f**ked. And they make a big play on cutting benefits.
And I thought Cameron had a First in PPE from Oxford? I assume the PP saw him through because he seems to know f**k all about the E
PPE? Has the Health and Safety Executive got onto the PM`s back now? :)
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One way to do that would be to cut taxes, both for individuals and businesses.
A sledgehammer to crack a walnut. You wouldn't be directing it at where it does most good and not getting the most effective stimulus for the cost of it.
You seem to be working on the assumption that politicians and central bankers are wiser at spending money than individuals and businesses. I'd have thought if the last few years have taught us nothing else it is that the assumption is flawed.
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Glyn.
Or actually GIVE the money out to businesseso and individuals. One point that both Friedman and Keynes would have agreed on when you are at the zero lower bound on interest rates is that Govt should expand the monetary base AND GET IT INTO HANDS THAT WILL SPEND IT. Friedman coined the term Helicopter Money, suggesting that in such a scenario, the Governor of the Fed should sprinkle dollar bills from a helicopter.
The debate on this concept is (finally) starting to be taken seriously among policy makers. If we have another year of flatlining throughout the developed world, it'll get taken more seriously still.
One way to do that would be to cut taxes, both for individuals and businesses.
TRB
As Glynn says, that ain't going to be the best way to do it. The key was in the bit in capital letters. If you want to stimulate the economy, you have to get money circulating. There's no point directing money into people's pockets if it just stays there. That is why the cries for Corporation Tax to be cut are particularly stupid. Companies are already sitting on hundreds of billions of pounds that they are too scared to invest. Why give them more money to sit on?
What we need to do is put money into places where it will be spent. Do you know the easiest way to do that? Increase welfare benefits. That's trick No1. No2 is to spend money on projects that employ poorly paid staff who will spend most of their new income. Stuff like construction.
Now. This lot in power. They cut capital investment on Day One. So that was construction f***ed. And they make a big play on cutting benefits.
And I thought Cameron had a First in PPE from Oxford? I assume the PP saw him through because he seems to know f*** all about the E
I'll agree with you on capital spending. Trouble is, it is an easy thing to cut because by and large it doesn't provoke squeals of protest. If you were a politician of any party and you had to choose between cutting, say, a house-building project and something like EMA, you'd probably choose the former- even though overall it would give you greater long-term benefits.
I can't agree with you on welfare payments, though. I take your point that benefit claimants will spend that money, hence stimulating demand (I'll avoid the obvious jokes that it will go on fags, booze and plasma TVs.) However, it will perpetuate the problem of an underclass that can "earn" more money for doing nothing than for doing a basic job.
Why not give people who make the effort to go out to work or set up a business a break? OK, they may use the extra money they get from tax reductions to pay off their debts- but once they've done that they will start to spend again.
And no, I don't mean extra money for "the rich" (which when you look closely usually means people who earn a few grand more than average salaries) but for the hard-working majority- via raising tax thresholds, maybe a cut in fuel duty, maybe the removal of ENIC (which is simply a payroll tax).
Trouble is, Osborne has painted himself into such a corner that he now lacks the imagination or courage to do even that.
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One way to do that would be to cut taxes, both for individuals and businesses.
A sledgehammer to crack a walnut. You wouldn't be directing it at where it does most good and not getting the most effective stimulus for the cost of it.
You seem to be working on the assumption that politicians and central bankers are wiser at spending money than individuals and businesses. I'd have thought if the last few years have taught us nothing else it is that the assumption is flawed.
I don't need to think it, it's already happened with the tax cuts Gideon's made - they've just gone straight under the corporate mattresses and not been spent in investment.
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TRB
The danger with any cuts on tax on income is that this will go straight into paying off personal debts. It's the same with ENIC. Neither of those does anything to stimulate demand. Getting demand going requires injections if money that will circulate round the economy, not be used to pay off debts. Paying off of debts can come when we've got the economy going, not before. Otherwise it is entirely self-defeating.
That is why cutting VAT was a classic approach to demand stimulation. It made it cheaper to spend and so helped keep up demand in the economy. Osborne's first act was not just to rescind that cut, but to increase VAT still further. Economic stupidity done for ideological reasons (because Tories ideologically prefer to tax consumption rather than income.)
As I say, it really isn't rocket science. But as YOU say, Osborne has painted himself into a corner by insisting that the debt has to be tackled first. He now cannot admit what pretty much the whole world is screaming at him - that we're f**ked if Govt doesn't do something to get demand going.
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I fail to see why cutting ENIC (I'd abolish it personally but I doubt that can be done in one hit) would not stimulate demand. It is a tax on jobs- remove that and you can employ more people. I take your point on Corporation Tax- why give businesses a benefit there when many big ones are sitting on piles of cash. Although don't forget a Corporation Tax cut would be about attracting more inward investment.
Anyway, QE was supposed to get money circulating around the system and that didn't achieve its objectives. As you hinted in one of your previous comments on this thread, economists and central bankers have much in common with military strategists- they tend to fight the last war. Just as the British High Command in 1914 thought that wars were won by cavalry charges, so current economic thinking asserts that if we keep monetary policy loose for long enough then eventually the dam will break and demand will increase.
My view is that we are now coming round to the fundamentals of all this- debt is the problem. If you add up personal and Government debt in the UK it doesn't make a pretty picture. That's why the pound is falling through the floor, and that is why (rather than Osborne's mismanagement) we've lost our AAA rating. I suspect we are looking at years of low growth - a lost decade (a generation maybe) - not just in the UK but also in the US and the eurozone.
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TRB
When your debt problem is as big as ours, there is only one way to get out of it. You HAVE to grow, combined with mild inflation. There is no sensible alternative other than the Armageddon of default. THAT was Osborne's stupidity. He assumed that growth would follow from some fabled "confidence" coming into the economy if he cut spending.
This is unforgivable because we've known the technical solution strategy for this problem for 80 years. But in the UK and EZ, policy makers have quite deliberately ignored this solution for entirely ideological reasons.
As for ENIC, cutting that does nothing for demand. It is a supply-side cost reduction. It reduces the cost of employing people and therefore, potentially reduces the cost if supplying goods and processes. But companies will only take new staff on if there is DEMAND. There is no evidence whatsoever that the economy is being throttled by companies being stopped from taking on new staff. On the contrary, the collapse in productivity strongly suggests that companies have retained more staff than they really need in the hope that they can spring back when demand finally rises.
We MUST get demand up in the economy. This is by far and away our most pressing and dangerous problem.
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PS. The issue with QE is that policy makers have grown to their positions of influence in an era in which monetary policy was dominant. So they naturally look to monetary solutions to problems. That usually means reducing interest rates to spur economic growth. But we're already effectively at zero interest rates. So they have to go to unorthodox monetary approaches like QE.
QE has possibly helped mitigate the worst of the crisis but it is demonstrably not enough. We COULD try still more unorthodox monetary approaches, like Helicopter Money. But no-one seems to have the balls to go that far off the cliff.
What has been totally off the table for three years is the idea if fiscal stimulus, even though it has a well-established theoretical basis and even though it clearly and demonstrably helped a very quick rebound from the depths of the crisis in UK and USA when it was applied in a panic in 08-09.
It is entirely an ideological choice to eschew fiscal stimulus now.