Bit of light reading

[River Don]

One for BST and BobG perhaps.


https://docs.google.com/fileview?id=0B-1xOBvWPk73YjkwOTJjOTQtZjg5Mi00ZjJjLThlOGQtZTBiYmYxMGE5YWFi&hl=en&authkey=CODMhvYL

[BobG]

It is. Thanks Don. I haven't come across him before but he does make it fairly simple. I'm going to send the link to my Tory friend. So far he's not been persuaded of anything wrong in the 'liquidity crisis' theory. It'll be absolutely fascinating to see him attempt to overturn this He'll try. Oh yes, he'll try. There's none so blind as the wilfully short sighted and the politically prejudiced.

Bob

[BillyStubbsTears]

Don't seem to be able to open the link, but since I'm knacked with a cold like a Colin Sutherland left-hander, I'm not up to any hardcthinking any road. Will have a gander tomorrow.

[Boomstick]

It is. Thanks Don. I haven't come across him before but he does make it fairly simple. I'm going to send the link to my Tory friend. So far he's not been persuaded of anything wrong in the 'liquidity crisis' theory. It'll be absolutely fascinating to see him attempt to overturn this He'll try. Oh yes, he'll try. There's none so blind as the wilfully short sighted and the politically prejudiced.

Bob

Its fairly obvious to anyone who kept an eye on it. Its jus a shame most people seem more interested in x-factor. Oh and either your tory friend a crypto nu-labourite or you have your wires crossed.

Banks are businesses, some fail some succeed. Not all can succeed its how the markets work. Pumping the billions into the economy creating more fake money in the process has just put the problem back. We are now starting to pay for the billions with the necessary budget cuts, all the while waiting for it to happen again but MUCH WORSE.

Have a watch of this.




money as debt

[BillyStubbsTears]

Boomstick wrote:

Banks are businesses, some fail some succeed. Not all can succeed its how the markets work. Pumping the billions into the economy creating more fake money in the process has just put the problem back. We are now starting to pay for the billions with the necessary budget cuts, all the while waiting for it to happen again but MUCH WORSE.

Do you have the faintest idea what you are talking about? Banks are NOT like Grocers' shops. If a bank fails, it's not just a minor inconvenience meaning that you have to drive a mile further to get your Brussel Sprouts.

If a bank fails, it takes YOUR MONEY with it. And the result is that everyone else who has money in other banks panics, removes it and sticks it under their beds.

And that results in a crisis the like of which you are clearly incapable of conceiving. In fact, the like of which we had in the 1930s, when the whole system of Western Democracy was damn-near washed away in the tsunami that came along with the collapse of the banking system in the early 1930s.

In the system that we have today, banks ARE special. Like it or not, they have us by the knackers. We simply cannot allow them the collapse. The trite, pat attitude is that doing so would teach the bankers a lesson. That is ignorance of the highest order. Doing so would lead to the entire system of western capitalism crashing and, within months, to unemployment of 6 or 8 million.

You show your ignorance of the issue by your comment on the upcoming cuts, and the reason for them. They are NOT due to the bailout of the banks or to \"creating fake money\", whatever that means. The Budget cuts that we are now facing are almost entirely due to the natural effects that happen in a recesession in a capitalist economy. Tax income collapses as companies' profits fall - government spending increases, both to cover welfare payments and as government takes up the slack and smooths out the worst of the trough. That is TEXTBOOK economic theory. There is ALWAYS a defecit to deasl with at the end of arecession. The recession that we have just had was the most severe for 80 years - hence the scale of the fiscal defecit that we are left with is huge. But it is NOT due to the reasons you state.

The bank bailouts actually comprised government BUYING SHARES in the banks. Which, unless you believe that the whole structure of our economy is irreversibly wrecked, means that the Government owns an asset that it can sell and recoup its outlay on one day.

\"Creating fake money\" (by which I assume you mean Quantitative Easing) is another textbook way to avert the most dangerous potential outcome of a recession as horrifica s the one we have just experienced - a deflationary collapse. QE did NOT lead to an increase in Government debt. What it did was to ensure thatwe didn't go into the kind of Japan-style collapse where inflation goes negative and the entire economy gums up.

As for Don's original post, the bloke who wrote it clearly understands the issues. He is howling, from the Left, for other people to understand that the whole edifice is fundamentally flawed. Which may or may not be true.

But, as with so many other Left theoreticians, who crave the collapse of the capitalist system, he doesn't explain what the effects would have been of doing what he seems to have been suggesting - selectively allowing banks to go bust. But we KNOW what the effect would be, because, after his blogs finish, that is PRECISELY what happened in America, when the Bush administration pulled the plug on Lehman Brothers. And THAT was the moment that the current crisis really turned into an unmitigated disaster.

Now, from that point on, we could have taken the approach of \"Ah well, let the market take its course.\" Those on the far Left would have rubbed their hands, because it might have led to the collapse of capitalism. Yer man writing yon blog gives the game away. He says in summer 2008, with barely disguised glee, \"The  financial crisis will get much, much worse before it gets better. We are
then going to see the real economy severely hit with unemployment rocketing. We will also see rising inflation with food shortages in poor countries and food too expensive for the poor to afford in rich countries like America.\"

Those on the very far right would have applauded, because it would have been the pure market economics response. And the results would have been a catastrophe beyond anyone's imagination. It would have made the 1930s look like just losing your dinner money.

Fortunately, all these theoretical bleaters still live in a world that hasn't utterly collapsed. They still live in a world where they can argue the toss and claim moral superiority (\"If only the world had listened to ME, everything would be alright now...\") They can do so because when the chips really and truly were down, when America didn't know what the fcuk to do to stem the dam-burst that they had precipitated, the Western World was shown the way out by a centre-left Government in a small island off North-West Europe. The actions of that government in October 2008 meant that we have fortunately just been left with a particularly bad recession to deal with, not a total collapse of western capitalism and our entire way of life.

We haven't seen the apocalyptic result that the blog predicted, precisely because Brown's government (seemingly alone in the Western World) understood the basic Keynesian response that was required to stabilise the situation. And the response that the UK took was quickly copied across Europe and the US. Assuming the current lot don't fcuk it up in their mad dash to balance the books before the next election (which is utter lunacy in a Keynesian model) then in twenty years we'll be able to look back on this recession with dismay at the difficulty we had in overcoming it. But that will be a damn sight better than how people in 1950 looked back to the way the 1930s recession was handled.

[River Don]

Here's the blog should you be interested.

http://golemxiv-credo.blogspot.com/

[Boomstick]

BillyStubbsTears wrote:

Boomstick wrote:

Banks are businesses, some fail some succeed. Not all can succeed its how the markets work. Pumping the billions into the economy creating more fake money in the process has just put the problem back. We are now starting to pay for the billions with the necessary budget cuts, all the while waiting for it to happen again but MUCH WORSE.

Do you have the faintest idea what you are talking about? Banks are NOT like Grocers' shops. If a bank fails, it's not just a minor inconvenience meaning that you have to drive a mile further to get your Brussel Sprouts.

If a bank fails, it takes YOUR MONEY with it. And the result is that everyone else who has money in other banks panics, removes it and sticks it under their beds.

And that results in a crisis the like of which you are clearly incapable of conceiving. In fact, the like of which we had in the 1930s, when the whole system of Western Democracy was damn-near washed away in the tsunami that came along with the collapse of the banking system in the early 1930s.

In the system that we have today, banks ARE special. Like it or not, they have us by the knackers. We simply cannot allow them the collapse. The trite, pat attitude is that doing so would teach the bankers a lesson. That is ignorance of the highest order. Doing so would lead to the entire system of western capitalism crashing and, within months, to unemployment of 6 or 8 million.

You show your ignorance of the issue by your comment on the upcoming cuts, and the reason for them. They are NOT due to the bailout of the banks or to \"creating fake money\", whatever that means. The Budget cuts that we are now facing are almost entirely due to the natural effects that happen in a recesession in a capitalist economy. Tax income collapses as companies' profits fall - government spending increases, both to cover welfare payments and as government takes up the slack and smooths out the worst of the trough. That is TEXTBOOK economic theory. There is ALWAYS a defecit to deasl with at the end of arecession. The recession that we have just had was the most severe for 80 years - hence the scale of the fiscal defecit that we are left with is huge. But it is NOT due to the reasons you state.

The bank bailouts actually comprised government BUYING SHARES in the banks. Which, unless you believe that the whole structure of our economy is irreversibly wrecked, means that the Government owns an asset that it can sell and recoup its outlay on one day.

\"Creating fake money\" (by which I assume you mean Quantitative Easing) is another textbook way to avert the most dangerous potential outcome of a recession as horrifica s the one we have just experienced - a deflationary collapse. QE did NOT lead to an increase in Government debt. What it did was to ensure thatwe didn't go into the kind of Japan-style collapse where inflation goes negative and the entire economy gums up.

As for Don's original post, the bloke who wrote it clearly understands the issues. He is howling, from the Left, for other people to understand that the whole edifice is fundamentally flawed. Which may or may not be true.

But, as with so many other Left theoreticians, who crave the collapse of the capitalist system, he doesn't explain what the effects would have been of doing what he seems to have been suggesting - selectively allowing banks to go bust. But we KNOW what the effect would be, because, after his blogs finish, that is PRECISELY what happened in America, when the Bush administration pulled the plug on Lehman Brothers. And THAT was the moment that the current crisis really turned into an unmitigated disaster.

Now, from that point on, we could have taken the approach of \"Ah well, let the market take its course.\" Those on the far Left would have rubbed their hands, because it might have led to the collapse of capitalism. Yer man writing yon blog gives the game away. He says in summer 2008, with barely disguised glee, \"The  financial crisis will get much, much worse before it gets better. We are
then going to see the real economy severely hit with unemployment rocketing. We will also see rising inflation with food shortages in poor countries and food too expensive for the poor to afford in rich countries like America.\"

Those on the very far right would have applauded, because it would have been the pure market economics response. And the results would have been a catastrophe beyond anyone's imagination. It would have made the 1930s look like just losing your dinner money.

Fortunately, all these theoretical bleaters still live in a world that hasn't utterly collapsed. They still live in a world where they can argue the toss and claim moral superiority (\"If only the world had listened to ME, everything would be alright now...\") They can do so because when the chips really and truly were down, when America didn't know what the fcuk to do to stem the dam-burst that they had precipitated, the Western World was shown the way out by a centre-left Government in a small island off North-West Europe. The actions of that government in October 2008 meant that we have fortunately just been left with a particularly bad recession to deal with, not a total collapse of western capitalism and our entire way of life.

We haven't seen the apocalyptic result that the blog predicted, precisely because Brown's government (seemingly alone in the Western World) understood the basic Keynesian response that was required to stabilise the situation. And the response that the UK took was quickly copied across Europe and the US. Assuming the current lot don't fcuk it up in their mad dash to balance the books before the next election (which is utter lunacy in a Keynesian model) then in twenty years we'll be able to look back on this recession with dismay at the difficulty we had in overcoming it. But that will be a damn sight better than how people in 1950 looked back to the way the 1930s recession was handled.

1. read the 1st paragraph on the introduction
2. On one hand you are slating the tory budget cuts and bleet on about good old maggie, and then on the other hand you say \"the Budget cuts that we are now facing are almost entirely due to the natural effects that happen in a recesession in a capitalist economy\".
3. The financial compensation scheme prevents the little guy from losing, it compensates 100% of the 1st 50k. If you have more than this, lucky you, may I suggest spreading it around a few banks.
4. He aint left wing, stop twisting things. He says it will get worse before it gets better due to the way the government handled it. He isnt 'craving' for a collapse.
5. I suppose the decade before all this was still all hunky dory, 'like a mill pond' as you have said before. Gordon Brown did no wrong bla bla bla.
He blamed it on a worldwide problem when it all went wrong, but when it was briefly going ok before it inevitably went tits up, he was more than quick to reap the kudos for himself.
6. Its you that has missed the point, not me BS.

[BillyStubbsTears]

Boomstick wrote:

1. read the 1st paragraph on the introduction

Which translates as, \"this is written for people who agree with me.\"

2. On one hand you are slating the tory budget cuts and bleet on about good old maggie, and then on the other hand you say \"the Budget cuts that we are now facing are almost entirely due to the natural effects that happen in a recesession in a capitalist economy\".

Of COURSE deficits have to be addressed. The question the SPEED at which youy do it. You can wipe out the Government deficit overnight. Dead simple. Close every school and hospital and disband the armed forces. Job done. But that'd be a bit daft wouldn't it. Government cut-backs have a major effect on the performance of the wider economy. By cutting at the unprecedented rate that this lot are proposing (far faster than Thatcher managed to do after the 1980-81 recession) a huge gamble is being taken.[/quote]

3. The financial compensation scheme prevents the little guy from losing, it compensates 100% of the 1st 50k. If you have more than this, lucky you, may I suggest spreading it around a few banks.

But it's about CONFIDENCE! It's about people having CONFIDENCE in the banks and confidence in the Government. The £50k guarantee existed at the time of the Northern Rock near-collapse, but it didn't stop little old ladies queueing up in Newcastle to take their money out. And (although this will grate with you) far more importantly, it was about BANKS having confidence in EACH OTHER. Banks shuffle around phenomenal quantities of money between themselves, depending on who needs to lend at a given time and who is cash-rich. If there was the danger of banks collapsing, that lending stops, and the oil in the engine of Capitalism evaporates. THAT is precisely what started to happen in the summer of 2008. That was what made the economic slowdown so severe and so abrupt. And that was just from the THREAT of banks collapsing. If large numbers of banks had actually gone to the wall the knock on effect on the capitalist economy would have been indescribable.

4. He aint left wing, stop twisting things. He says it will get worse before it gets better due to the way the government handled it. He isnt 'craving' for a collapse.

In his very own words, in 2008, he's predicting economic carnage like the 1930s. He's predicting Soup Kitchens and rocketing unemployment. None of that has happened. What has happened has been a severe recession, smoothed out by timely government intervention. Just like the Keynesian textbook says.

5. I suppose the decade before all this was still all hunky dory, 'like a mill pond' as you have said before. Gordon Brown did no wrong bla bla bla.
He blamed it on a worldwide problem when it all went wrong, but when it was briefly going ok before it inevitably went tits up, he was more than quick to reap the kudos for himself.

Brown himself has said that the massive mistake was to not have an interntational agreement on reining the banks in over the previous 15 years. But the UK could not have done that on their own. Had we done that in, say 2000, Frnakfurt and Wall Street would have said, \"Ta very much\", taken the business that would have fled London and we'd have had our own personal, isolated recession there and then.

As for things \"BRIEFLY going OK\", I'm wondering whether your balls have dropped yet. You clearly are not old enough or widely read enough to have a sense of the historical perspective. You clearly believe that economies run perfectly well until some evil lefty f**ks them up. But they don't. Recessions happen regularly and nastily. We had four vicious ones between 1973 and 1991 and the results pretty well destroyed our own area, like a heavyweight boxer taking a combination shot until he's punch-drunk.

Then, from 1993 to 2008, we had the longest unbroken stable period of growth for nealry 150 years, at a time when every other major economy had periods of recession. EVERY OTHER ONE. The key peoplke responsible for that were Kenneth Clark who's expansionist policies led us out of the 90-91 recession in a very un-Thatcherite way and Gordon Brown under whose tenure we had a quite remarkably stable economic performance for a decade. Utterly unprecedented in any of our lifetimes. And totally against the global trend from 1997-2008, when the rest of the world was either stagnating or yo-yoing. [/quote]

6. Its you that has missed the point, not me BS.[/quote]

Aye, and my cock's bigger than yours an all.

[River Don]

\"Creating fake money\" (by which I assume you mean Quantitative Easing) is another textbook way to avert the most dangerous potential outcome of a recession as horrific as the one we have just experienced - a deflationary collapse. QE did NOT lead to an increase in Government debt. What it did was to ensure that we didn't go into the kind of Japan-style collapse where inflation goes negative and the entire economy gums up.

I admit I didn't follow the story of the Japanese lost decade in any detail. This guy has quite a lot to say about Japan though.

http://golemxiv-credo.blogspot.com/2010/08/japan-in-trouble.html

http://golemxiv-credo.blogspot.com/2010/04/japan-lesson-in-pain-and-lies.html

He seems to claim they followed classic Keynesian policies of stimulus, pumping money in to the banks to re-inflate the economy and it has failed.

Anyway i'm a bit confused, did Japan attempt to stimulate their economy or follow a policy of cuts?

[BillyStubbsTears]

River Don wrote:

\"Creating fake money\" (by which I assume you mean Quantitative Easing) is another textbook way to avert the most dangerous potential outcome of a recession as horrific as the one we have just experienced - a deflationary collapse. QE did NOT lead to an increase in Government debt. What it did was to ensure that we didn't go into the kind of Japan-style collapse where inflation goes negative and the entire economy gums up.

I admit I didn't follow the story of the Japanese lost decade in any detail. This guy has quite a lot to say about Japan though.

http://golemxiv-credo.blogspot.com/2010/08/japan-in-trouble.html

http://golemxiv-credo.blogspot.com/2010/04/japan-lesson-in-pain-and-lies.html

He seems to claim they followed classic Keynesian policies of stimulus, pumping money in to the banks to re-inflate the economy and it has failed.

Anyway i'm a bit confused, did Japan attempt to stimulate their economy or follow a policy of cuts?

Your man is being a tad naughty there. He's polemicising for a political purpose.

In a nutshell, what Japan did in the early 90s was half a job. They bailed out their banks, but they did nothing to stop their wider economies going into a deflationary spiral.

Their inflation rate went negative in the early 90s during the recession. Sounds wonderful but it's actually an utter disaster. If you know that the washing machine that you want will be cheaper next year than it is now, you put off the purchase. Instead you put the money away. OK in moderation, but when an entire society does it, the result is a catastrophe.

People stop spending.

So companies lose their markets.

So unemployment goes up.

So welfare payments increase.

And tax revenue decreases.

So the deficit increases.

And since GDP is falling, the ratio of total debt to GDP increases even faster.

The key solution to this is to ensure that deflation never starts. That is what Quantitative Easing was all about. Following that, the textbook Keynesian approach is to keep Governement spending strong until economic growth in the private sector is re-established. Do this and you emerge from even a deep recession with reasonable growth. THEN you start to pay back the debt that you have accumulated. But ONLY THEN!

Japan did not follow this approach at the time. They had a relatively low total debt in 1990 (about 60% of GDP, which is about the same that we have). They were terrified of this debt getting bigger, so they cut government spending quickly. With the result that the recovery in the PRIVATE SECTOR stalled. Deflation became embedded. GDP dropped and the debt-to-GDP ration ballooned out of control. Currently its somewhere around 200% of GDP - the highest in the developed world, and only behind Zimbabwe anywhere in the world.

Japan eventually tried QE and Keynesian stimulation in the late 90s - far, far too late. It did have some success in stimulating domestic demand, but only marginal effect on the deflationary problem which had become deeply embedded by then.

This is my huge fear about the current Govt's policies. They are ideologically wedded to Thatcherite monetarist policies that see inflation as the big evil to be defeated. This means that they are ideologically dead set against Government Keynesian stimulation. Which puts them firmly in the Japan camp.

Now, no-one is saying that history is bound to repeat. It may well be that we are already over the worst, and that demand and growth are already well established. If they are, the thanks for this is due to the Keynesian approach taken by Brown in late 2008-2010. And we can now get on with doing what Govts always have to do after recessions, which is to address the resulting debt problem. Although even there, the speed at which Osbourne is planning to do this is much, much faster than after any recession in living memory.

If growth is NOT well established, then the frantic efforts to slash the deficit risk putting us into precisely the Japan scenario. If this does happen, it won't be the sudden off-the-edge-of-a-cliff scenario that we had back in mid-2008. It will be a lingering slow-motion self-inflicted suicide. What the Japanese call a \"Lost Decade\". And remember, they were starting that catastrophe with a far stronger economy than we currently have - probably the strongest in the world. If WE have a Lost Decade from here, then God help us.

Fingers crossed eh?

[CusworthRovers]

I think this might help you all understand:



A little boy goes to his dad and asks, \"What is politics?\"
Dad says, \"Well son, let me try to explain it this way:
I’m the breadwinner of the family, so let’s call me capitalism.
Your Mum, she’s the administrator of the money, so we’ll call her the Government.
We’re here to take care of your needs, so we’ll call you the people.
The nanny, we’ll consider her the Working Class.
And your baby brother, we’ll call him the Future.
Now, think about that and see if that makes sense.\"

So the little boy goes off to bed thinking about what dad said. Later that night, he hears his baby brother crying, so he gets up to check on him. He finds that the baby has shit his nappy. So the little boy goes to his parents room and finds his mother sound asleep. Not wanting to wake her, he goes to the nanny’s room. Finding the door locked, he peeks in the keyhole and sees his father shagging the nanny. He gives up and goes back to bed.
The next morning, the little boy says to his father, \"Dad, I think I understand the concept of politics now.\"
The father says, \"Good son, tell me in your own words what you think politics is all about.\"

The little boy replies, \"Well, while Capitalism is screwing the Working Class, the Government is sound asleep, the People are being ignored and the Future is in deep shit.

[River Don]

Surely that can't be the whole story though BST?

Japanese people stop spending. - But we didn't in the West. The US and Europe were still consuming away like mad.

So companies lose their markets. - But only the home market.

So unemployment goes up. - But wasn't Japans real problem that they were losing out to the likes of S. Korea and China?

And doesn't that mean we are now in the same position as Japan, since we'll also struggle to grow and export our way out of trouble no matter how much stimulus we chuck at it since we can't compete with China?

If the banks are actually sitting on trillions of debt as Golem suggests and it isn't just a liquidity crisis, isn't the stimulus in the world is just being absorbed by that anyway. You have to admit, at the moment it looks a bit like it is, they ain't lending to business that's for sure.

Indeed, we seem to be in a very similar position to Japan already, 0% interest rates, little sign of growth and the Americans have already resorted to more QE to stave off a double dip. As for more stimulus, haven't we already shot our bolt and pretty much thrown all we've got at it?

The blog suggests all the massive stimulus has done is delay a fast catastrophe and leave us with a slow burning one... You have to be a little bit worried he might be on to something?

[big fat yorkshire pudding]

The problem with the Japanese economy is how much of it now leaves the businesses there - much like what is happening in this country in a way.

I did a report on Sony as part of my final projects at uni.  The key aspect is just how much of their shareholding now exists outside of Japan.  This was the catalyst for their growth initially but now a fair whack of that profit is shared outside of Japan, as well as the manufacturing no longer taking place in Japan.

They are quite similar to us in a way and River Don hits the nail on the head.  A vast amount of their market is not within Asia but in Europe and the US - hence the recession hitting them hard.

I quite liked the blog in question.  It hits a few key topics but in reality it is quite hard to understand how the next few years will go.  One thing that may and will hit China is the huge increases occurring in shipping costs - that will hit them a little as it may raise the costs a little bit and it won't take much to cause problems to many businesses.

[BillyStubbsTears]

River Don wrote:

Surely that can't be the whole story though BST?

Japanese people stop spending. - But we didn't in the West. The US and Europe were still consuming away like mad.

So companies lose their markets. - But only the home market.

So unemployment goes up. - But wasn't Japans real problem that they were losing out to the likes of S. Korea and China?

And doesn't that mean we are now in the same position as Japan, since we'll also struggle to grow and export our way out of trouble no matter how much stimulus we chuck at it since we can't compete with China?

If the banks are actually sitting on trillions of debt as Golem suggests and it isn't just a liquidity crisis, isn't the stimulus in the world is just being absorbed by that anyway. You have to admit, at the moment it looks a bit like it is, they ain't lending to business that's for sure.

Indeed, we seem to be in a very similar position to Japan already, 0% interest rates, little sign of growth and the Americans have already resorted to more QE to stave off a double dip. As for more stimulus, haven't we already shot our bolt and pretty much thrown all we've got at it?

The blog suggests all the massive stimulus has done is delay a fast catastrophe and leave us with a slow burning one... You have to be a little bit worried he might be on to something?

It's true that Japan has always had a strong export economy, but you can't simply ignore their home market. There are (or were, before they stopped spending) 125million of the richest people in the world. The sudden loss of confidence in that home market would hobble even a strong exporter like Japan.

As for us being in a very similar position to Japan, there is at least one enormous, and very pertinent difference. We (or at least Brown's Government) learned the lesson of Japan. Japan was very, very slow to start the stimulus package. They allowed deflation to become entrenched before they realised how serious the situation was. It took them 5 years after the start of the 1990 crisis to bring their interest rates down to the sort of levels that we have. It took them a decade to start QE. It was all too late.

Here, we did those things pretty much immediately when the crisis struck. The initial results are promising. We appear to have avoided the deflationary spiral. That was Aim Number One. That was the defensive covering-up that kept us on our feet when we were one punch away from oblivion.

Finally, as for the bloggers, I have little time for the prophets of doom that know a million reasons why every idea is flawed but never propose an alternative. The Abominable No-Man who knows the problem in everything but never proposes a solution. For all their perceptive (if one-eyed) comments, your correspondents give not one single proposal for what to do instead of what we did do. They simply sit there on the touchline weaving their conspircay theories about the eveil banking world. They condemn the people who have to make the difficult decisions for propping up a system that they have decided is not worth saving. But they find not one comment about what would happen if THEIR OWN policies were followed. The rest of us, thankfully, will never have to find out. Because it would be the catastrophe to end all catastrophes.

[BobG]

Rather glibly, when I sent the link to my Tory mate last night, I also sent it to a socialist mate giving both the 'insight' that a left wing blogger was suggesting that perhaps the Tories and Osbourne were right after all - do nothing and let the banks collapse. They're both intelligent enough to recognise the utterly disastrous consequences of such an event so my hope now is that the pigeon will be bringing me both a left and a right view of a) how to stop the banks collapsing, b) how to restore economic well being and c) how to do a) and b) without utterly contradicting both of their arguments of how to deliver c)

I am waiting with bated breath

BobG

[BillyStubbsTears]

BobG wrote:

They're both intelligent enough to recognise the utterly disastrous consequences of such an event so my hope now is that the pigeon will be bringing me both a left and a right view of a) how to stop the banks collapsing, b) how to restore economic well being and c) how to do a) and b) without utterly contradicting both of their arguments of how to deliver c)

I am waiting with bated breath

BobG

Bob.

I have a firm faith that the solution is really quite straightforward. We've done the textbook thing to sort out a). Now the solution to b) will come along naturally IF we remember that fostering growth is at least as important as reducing the deficit as we come out of recession. That requires a careful and controlled reduction in Government spending, not a slash-and-burn approach.

[BobG]

But we're not going to remember that are we Billy? And that puts the fear of God up me and, in my opinion, puts the contradictions in a very baleful light.

BobG

[BillyStubbsTears]

BobG wrote:

But we're not going to remember that are we Billy? And that puts the fear of God up me and, in my opinion, puts the contradictions in a very baleful light.

BobG

Actually Bob, there is one particularly scary aspect to the current Govt's approach. The timescale they have set for eliminating the deficit.

Will Hutton points out that Sweden took about 10 years yo eliminate a similar sized deficit after the last recession. We are proposing to do so in 5 years.

Why 5 years? Is that timescale the result of a detailed assessment of the impact on the wider economy of drastic budget cuts? Or is it because that's when the next Election will be? And by cutting savagely NOW, they will be able to distribute tax cuts to the better off just before the election?

It is truly terrifying that Osbourne seems to have no comprehension of the danger that he is running by insisting on this unprecedented speed of cutbacks. He is ideologically fixed on the Thatcherite idea that ANY deficit is a bad thing and that if you shrink Government, private enterprise will automatically fill the gap. So the Japan scenario is not even discussed.

But then, what are his economics credentials? He got a moderate degree in History, failed as a journalist, then became a career politician. Great eh? In the most challenging economic times for 80 years, we give the reins to someone with neither the education nor the experience to take on the job.

[Savvy]

Boomstick wrote:

It is. Thanks Don. I haven't come across him before but he does make it fairly simple. I'm going to send the link to my Tory friend. So far he's not been persuaded of anything wrong in the 'liquidity crisis' theory. It'll be absolutely fascinating to see him attempt to overturn this He'll try. Oh yes, he'll try. There's none so blind as the wilfully short sighted and the politically prejudiced.

Bob

Its fairly obvious to anyone who kept an eye on it. Its jus a shame most people seem more interested in x-factor. Oh and either your tory friend a crypto nu-labourite or you have your wires crossed.

Banks are businesses, some fail some succeed. Not all can succeed its how the markets work. Pumping the billions into the economy creating more fake money in the process has just put the problem back. We are now starting to pay for the billions with the necessary budget cuts, all the while waiting for it to happen again but MUCH WORSE.

Have a watch of this.

A good watch...thanks for that, very thought provoking!




money as debt

[River Don]

http://www.telegraph.co.uk/finance/economics/7981334/No-defence-left-against-double-dip-recession-says-Nouriel-Roubini.html

“The US has run out of bullets,” said Nouriel Roubini, professor at New York University, and one of a caste of luminaries with grim forecasts at the annual Ambrosetti conference on Lake Como.
“More quantitative easing (bond purchases) by the Federal Reserve is not going to make any difference. Treasury yields are already down to 2.5pc yet credit spreads are widening again. Monetary policy can boost liquidity but it can’t deal with solvency problems,” he told Europe’s policy elite.

Dr Roubini said the US growth rate was likely to fall below 1pc in the second half of the year, despite the biggest stimulus in history: a cut in interest rates from 5pc to zero, a budget deficit of 10pc of GDP, and $3 trillion to shore up the financial system.
The anaemic pace compares with rates of 4pc-6pc at this stage of recovery in normal post-war recoveries.
“We have reached stall speed. Any shock at this point can tip you back into recession. With interbank spreads rising, you can get a vicious circle like 2008-2009,” he said, describing a self-feeding process as the real economy and the credit system hurt each other.

[Thinwhiteduke]

Boomstick wrote:

3. The financial compensation scheme prevents the little guy from losing, it compensates 100% of the 1st 50k. If you have more than this, lucky you, may I suggest spreading it around a few banks.

Tell me how I spread my £110k mortgage around a few banks then please?