Bob Diamond resigns

[BillyStubbsTears]

Mick. My final words on the issue. I think we've done this to death now but (gentleman that I am) I will answer every one of your points.

1)

Given that the coalition have only reduced public spending by 0.8% how do you explain your comment 'It worked and would have continued to work had Gideon not pulled it.' Seems to me that according to you, unemployment should be falling, not rising because we are still spending lots of money just as you and Mr Keynes would want us to. Why do you think George has 'pulled it'?

0.8% of a £1.5 trillion economy adds up to a rather large amount. More than £12bn. That's £12bn per year removed from the economy. It'd pay for about 250,000 jobs directly. And those people would have money in their pockets and buy things that other people make, keeping them in work too. That's the whole nub of the argument. And, crucially, the main Coalition cut-backs right at the start were in infrastructure projects. So you have builder workers, engineers etc, sat on their arses drawing dole, when they could have been producing improved infrastructure for the country. New houses. New schools. New fibre-optic systems.

Why won't Krugman have a debate with Schiff?

I'm not Krugman's PA. I neither know nor care. I don't need to see them debate. I can read what each of them says and make up my own mind.

Why did unemployment rise from 2005 under Labour when the true rate was over 2.5m making your original answer based on 1.5m invalid?

Why did unemployment rise? I gave you my two pennorth here on this very same page. http://www.drfc-vsc.co.uk/index.php?topic=233536.msg251776#msg251776
Is your attention span THAT short?

Do you accept that the BoE is politically influenced?

Everyone in the world is politically influenced. Your question is meaningless. If what you really mean is "Do you accept that the BoE is unduly politically influenced in its decisions on setting interest rates" then my answer is "no". For the reasons that I set out in the EDIT part of this post: http://www.drfc-vsc.co.uk/index.php?topic=233536.msg251574#msg251574

Why do you say the Keynes school of thought has been missing for a generation when the world's biggest economy is controlled by Ben Bernanke who is a massive Keynes follower?

The US economy is not "controlled" by Bernanke. Who do you think he is? Goldfinger? As head of the Fed, he can decide monetary policy. He cannot control fiscal policy. That's the job of the President and Congress. Obama, at heart is a Keynesian, but his attempts to run Keynesian stimuli have been hobbled by the Tea Party in Congress. Prior to Bernanke taking over at the Fed, it was run for a generation by committed anti-Keynesians, most notable Alan Greenspan. You want a candidate for the man who did most to engender the current Catastrophe? Go look at Greenspan. He was the one who fostered the debt boom for 10 years.

Why do you think people should spend to get us out of the mess we're in when most of them are in debt, have seen their houses fall in value (and they are going to keep falling), wages being frozen/cut and standard of living falling? Why don't you think it is right for them to get their debts under control before they start spending again? What is wrong about living within your means?

How do you get debt under control if your earnings collapse? And how do you keep earning if everyone (or a significant proportion of the population) stops spending? I have heard no serious answer to this from anyone, beyond a hope that some confidence fairy will sprinkle magic dust over the economy and we'll all find work, once we have suffered enough. And I'm being serious here. In 2009, Austerity was put forward as the answer to all our ills by the (anti-Keynesian) head of the ECB, Jean-Claude Trichet said: "The idea that austerity measures could trigger stagnation is incorrect. Confidence-inspiring policies (through cutting back deficits) will foster and not hamper economic recovery." Aye. Right there. Look how effectively Austerity-inspired confidence has helped European growth over the past couple of years.
http://www.tradingeconomics.com/euro-area/gdp-growth

Or Unemployment
http://www.tradingeconomics.com/euro-area/unemployment-rate

The argument that you get out of a serious debt-fuelled Depression by everyone cutting back spending is PRECISELY the mistake that Herbert hoover made in 1929-30, triggering the God Almighty Depression. It's the mistake that Japan made in 1990. It doesn't work, either in theory or in practice. You can repeat it as many times as you want but it doesn't work. It never has and it will not do this time.

What would happen if the government found that no-one was daft enough to lend them any more money because we've reached the point when there are serious doubts about us having the ability to pay it back? What would Mr Keynes do then?

This is the ace in the hole for the Austerity brigade. If we don't stop borrowing, bond rates will go up, just like they did in Greece, Spain, Italy etc.

Well here's a funny thing Mick. When Gordon Brown was spending like a drunken sailor (as you so childishly put it) and our deficit was sky-rocketing, you'd have thought that our bond rates would have gone up as investors got the jitters. But they didn't. They came down by nearly half between 2007-2010. That's long-term Govt bonds. So, even when the deficit was at its highest, the Markets still gave no sign whatsoever, none at all that they considered us to be at risk of not re-paying our debt. The same story goes for USA. It's Govt debt has almost doubled since 2007, but its long term bond rates have halved. The same goes for Japan. It's Govt debt has quadrupled since 1990, but it's bond rates are one-sixth of what they were back then.

Here's a funny thing Mick. Even though our debt to GDP is now three times higher than it was when Thatcher left office, the interest rate we pay on that debt is 5 times lower. So, the amount we are paying the Markets in interest to fund Govt debt is LOWER now than it was when our debt reached a record low in 1990. Figure that one out. And show me where the indications are that the Bond Markets are going to suddenly go all vigilante on us.

Do you think Gordon was correct to bail out the banks?

Yes. Without doubt. Because, had he not done so, we would now be in the middle of an unimaginable catastrophe, instead of just a very bad one. You reckon that if he'd let a couple of banks fail, we'd have just carried on as normal the day after? Really?

Final answer to your final post.

The trouble is with your pontificating, is that there is not a shred of evidence from history to back it up.
At the end of WWII, we had a Govt Debt to GDP ratio of 250%. According to your theory, that should have led to economic meltdown. It didn't. We had a 30 year period of almost consistent growth, with some relatively mild recessions along the way. GDP went up. Unemployment stayed at historically very low levels. The National Debt came down. Rapidly. And in only 6 years in that whole time did the Govt run an annual surplus. That was Keynesian economic management in practice. We had no option but to run up a colossal debt during the war. We sorted it out, not by Austerity, but by accumulation of more debt which was put to work in making the economy grow. It worked, spectacularly well. It's the solution now. And it does NOT result in future generations having to pay higher taxes. It results in future generations having a better standard of living through a dynamically growing economy.

There's the nub of the difference. The policy that I support has been demonstrated to work. The Austerity policy has been demonstrated to produce the biggest Depression of the last 150 years. As Einstein said, continue to put forward the same argument when it has been shown to fail is a definition of insanity.

[BillyStubbsTears]

Bugger. Just written out a detailed reply to every one of your questions and the site has swallowed it up and not processed it. Not got time to do it again. Suffice to say that most of your questions have thorough answers on this very thread.

The key one, the one that gets right to the heart of the matter is your final post. The people supporting a reining back of debt by reducing spending rely on the arguments that:
a) You can reduce debt and get the economy going again by reducing spending
b) there will be the dire consequences if you don't reduce Govt spending.

But history actually says exactly EXACTLY the opposite.

In 1945, our Govt debt to GDP was 250%. We'd had no option but to run a huge deficit during the war. According to your ideas Mick, we should have had economic Armageddon after the war. At the very least, we should have slashed Govt spending to next to nothing and hoped that the Market would respond and fill the gap.

That's not what happened.

We ran Govt Deficits in 24 of the next 30 years. Only 6 times did the Govt balance the books. And the result? Almost continuous GDP growth. Unprecedented low unemployment for a generation.

Want to know the secret Mick? We never paid off the debt. We carried on picking up more debt pretty much every single year. The debt went up from ~£20bn in 1945, to ~£35bn in 1970. But the economy grew even faster. Much faster. So the debt as a proportion of our income fell from £250% to about 40%. The only really nasty recession we had during that time was in 1947-8, when the Labour Govt had actually balanced the books by savagely cutting Govt spending. The result was that the economy collapsed for 12 months. The Govt then re-commenced running deficits and the economy took off. By 1970, GDP was five times bigger than it had been in 1945. That was the result of almost continuous Govt deficits.

Now. Your approach in 1945 would have been for us to pay back debt as quickly as possible. To reduce Govt spending as rapidly as possible. There are historical examples of this being done, apart from the one year that it was tried at the end of the war.

Herbert Hoover did it in 1929-30. That is what tipped the World into the Mother of All Depressions.

Japan did it in 1990-92. That is what tipped them into the Lost Decade, from which they have still not really emerged.

And Ireland, Greece and Spain are doing it right now. Right as we speak. The consequence is collapsed GDP and 25% unemployment.

I agree that I want the future for my kids to be good. I want them to pay low taxes and have a strong economy. But you do not do it by cutting back now. There is not a single example in the history of the world of that approach working to solve a debt crisis during a big, global recession. Not one. As Einstein said, "Doing the same thing over and over again and expecting difference results next time is a definition of insanity."

[mjdgreg]

Bugger. Just written out a detailed reply to every one of your questions and the site has swallowed it up and not processed it. Not got time to do it again. Suffice to say that most of your questions have thorough answers on this very thread.

Pull the other one. As soon as I start asking you to answer my questions you come up with some cock and bull story because you can't answer them. I'll leave the readers to make of that what they will.

[BillyStubbsTears]

Dogs and rabbits spring to mind.

But, since you are so keen to hear from me, I'll indulge you.

The answers to everyone but 2 of your Tourette's-like question outburst are in this very thread. Go and read them.

The other two.
1) I have no idea why Krugman won't debate with Schiff. Do you think I'm his PA? I also have no interest in a debate. I can read what each of them writes and make up my mind without seeing them in the flesh.

You know what happens in debates? The smoothed polished one wins, not necessarily the one with the right answers. See under "Nick Clegg".

2) 0.8% of of Govt spending is not a trivial amount. It is the thick end of £10bn. That would have directly funded something like 100,000 jobs. Those people would then be buying other goods and services and keeping other people in work. There would also be less spent on dole payments as a result.

THAT is why the current Govt's spending reductions throttled off growth and unemoyment reduction. The figures are bloody obvious. We grew about 2% between late 09 and late 2010. In the last 21 months, since the Coalition cuts began, we have grown by precisely zero.

[Filo]

Bugger. Just written out a detailed reply to every one of your questions and the site has swallowed it up and not processed it. Not got time to do it again. Suffice to say that most of your questions have thorough answers on this very thread.

Pull the other one. As soon as I start asking you to answer my questions you come up with some cock and bull story because you can't answer them. I'll leave the readers to make of that what they will.

I think the readers sussed long ago that you are a Troll, almost every post you make condradicts a previous post you've made!

[mjdgreg]

I think the readers sussed long ago that you are a Troll, almost every post you make condradicts a previous post you've made!

If that's the case then I challenge you to find 10 examples out of the 100's that I've posted. I'm not holding my breath.

[mjdgreg]

The answers to everyone but 2 of your Tourette's-like question outburst are in this very thread. Go and read them.

Untrue. If that is the case then it should only be a 2 minute job to copy and paste your previous answers with my questions. I'm not holding my breath.

[BillyStubbsTears]

Jesus wept. Just to f**king well shut you up.

1) Was Brown right to bail out the banks?
Yes. Comprehensively. We would have been in the Depression to end all Depressions had he not. Total and utter meltdown.

2) Is the BoE politically influenced?
The question is meaningless. If you mean "Does the Treasury put pressure on the BoE to change interest rates in a way that helps the Govt?" then "no". Otherwise, why on earth did Brown let them significantly raise rates in the run up to the 2001 and 2005 Elections.

Still waiting for your evidence to the contrary.

3) Bernanke does not contr the US economy. As head of the Fed, he is responsible for monetary policy. Fiscal policy (the key Keynesian lever) is controlled by President and Congress. Obama is a Keynesian but has been hamstrung by the flat-earthers in the Tea Party. So proper Keynesian responses are not being implemented.

By the way, Bernanke's most important predecessor, Alan Greenspan, was a devout anti-Keynesian. You want a candidate for the man who did most to screw the world economy? Start with him.

4) Why did unemployment rise in 2005. Answer on page 2. Go dig it out because I'm f**ked if I'm writing it again.

Any more scattergun questions? That's every one that you have fired off answered in depth.

[mjdgreg]

1) I have no idea why Krugman won't debate with Schiff. Do you think I'm his PA? I also have no interest in a debate. I can read what each of them writes and make up my mind without seeing them in the flesh.

The correct answer is that Krugman knows he would lose and his reputation would be trashed more than it already is.

[mjdgreg]

Why do you think people should spend to get us out of the mess we're in when most of them are in debt, have seen their houses fall in value (and they are going to keep falling), wages being frozen/cut and standard of living falling? Why don't you think it is right for them to get their debts under control before they start spending again? What is wrong about living within your means?

Still waiting for a proper answer.

[mjdgreg]

What would happen if the government found that no-one was daft enough to lend them any more money because we've reached the point when there are serious doubts about us having the ability to pay it back? What would Mr Keynes do then?

Still waiting for an answer.

[mjdgreg]

Why did unemployment rise from 2005 under Labour when the true rate was over 2.5m making your original answer based on 1.5m invalid?

Still waiting for an answer not based on an unemployment figure of 1.5m.

[mjdgreg]

Any more scattergun questions? That's every one that you have fired off answered in depth.

I need answers to all my other questions before I fire off any more at you. Answered in depth. Don't make me laugh. It's like pulling teeth getting answers off you. I bet you failed all your exams at school because you didn't read the questions properly and gave answers that were nothing to do with the question (that's if you tried to answer the question in the first place).

[BillyStubbsTears]

1) I explained the Paradix of Thrift weeks ago, but since you don't even remember what has been posted in this thread, here we go again.

If I pay down my debt, by definition I buy less of your goods and services. And vice versa if you are paying own your debt. So, we both see our income reduce. Multiply that across the economy as a whole and you see the paradox. By everyone paying down debt simultaneously, we all get poorer. The debt we have left as a proportion of our income may actually increase. As the old economist said in that situation: the more debt you pay back, the more you owe.

You CANNOT pay of debt without economic growth (without our economy and society going back a century). You CANNOT get economic growth if everyone is paying off debt. Simple really.

2) Ah yes. That one about the bond markets eventually deciding not to lend to us. That is what the right wingers have been saying or years. If we don't stop borrowing, the markets will crucify us. Just like Greece.

Trouble is, there's no evidence for it.

The markets indicate a country's ability to pay back debt by the interest rate they charge on borrowing through Govt bonds. Higher rates equals more danger of the country defaulting.

When Brown was spending like a drunken sailor as you so childishly put it, when the UK debt was going through the roof, surely the bond markets would have taken fright? Surely our bond rates would have rocketed?

Nope.

Between 2007 and 2010, our bond rates fell by half, to record low levels.

Same thing happened in USA, even when they lost their AAA rating.

But surely, the bond markets will get spooked eventually and cripple us?

Here's the really funny thing Mick. In Japan, the Govt debt went up 4 fold between 1990 and today. Today, their Govt debt to GDP is about 250% and rising. Their bond rates are just over 1%. The markets are falling over themselves to lend money to Japan, despite them having the biggest debt problem in the world.

For countries with their own currency and control over their own monetary policy (ie, not the EuroZone) there is no indication whatsoever that the bond markets are going to go all vigilante.

[BillyStubbsTears]

Why did unemployment rise from 2005 under Labour when the true rate was over 2.5m making your original answer based on 1.5m invalid?

Still waiting for an answer not based on an unemployment figure of 1.5m.

You were asking why the figure rose. I explained why it rose. It didn't matter whether the initial figure was 1.5, 1.5 million or 1.5 billion. I explained why it rose. Do you not even understand your own questions?

[BillyStubbsTears]

Any more scattergun questions? That's every one that you have fired off answered in depth.

I need answers to all my other questions before I fire off any more at you. Answered in depth. Don't make me laugh. It's like pulling teeth getting answers off you. I bet you failed all your exams at school because you didn't read the questions properly and gave answers that were nothing to do with the question (that's if you tried to answer the question in the first place).

If it makes you feel better Mick, believe what you want. You wouldn't believe me if I told you my qualifications any road, so what's the point.

Now. Do you have anything substantive to add to this debate or are you going to keep asking questions and never replying when asked for your own answers.

[mjdgreg]

Why do you think people should spend to get us out of the mess we're in when most of them are in debt, have seen their houses fall in value (and they are going to keep falling), wages being frozen/cut and standard of living falling? Why don't you think it is right for them to get their debts under control before they start spending again? What is wrong about living within your means?

That's clear then. You think that the way to get out of debt is to get more debt. The only solution is to live beyond your means. Don't you realise how daft you are making yourself look? Somehow I don't think you'll find many people agreeing with you on that one. It's all well and good having these economic theories but if they bear no resemblance to the real world they are pointless.

I don't need a fancy theory from a crank economist to tell me what to do. All you have to do is use your common-sense. If you're in debt the last thing you need in a financial crisis is more debt. Get it paid off then you might have half a chance of keeping a roof over your head. Get some savings behind you and then start spending. Obvious really. Can't understand why you or Mr Keynes couldn't work that one out.

[mjdgreg]

What would happen if the government found that no-one was daft enough to lend them any more money because we've reached the point when there are serious doubts about us having the ability to pay it back? What would Mr Keynes do then?

Have you ever heard of 'worse-case scenario'? It would appear not, given your complacent answer. I'm sure we'll all sleep easier in our beds now that you have told us that the bond markets are never going to turn on us. Unbelievable.

[BillyStubbsTears]

Aye Mick, I do believe that. And I gave you chapter and verse on EXACTLY how the country used that approach to get out of a far, far bigger debt hole after the War.

You are perfectly at liberty to disagree with me. But if you are going to do, you ought to do us the courtesy of explaining what YOU think happened to sort out our debt problem after the War.

And while you're at it, you can find us an example of any country in history that has got out of a debt problem during a recession by cutting back its spending. Just one.

[mjdgreg]

1) Was Brown right to bail out the banks?
Yes. Comprehensively. We would have been in the Depression to end all Depressions had he not. Total and utter meltdown.

So you think it was right that the banks could gamble recklessly knowing that they would always be bailed out. Not my idea of capitalism. Then again I'm not a leftie.

[BillyStubbsTears]

What would happen if the government found that no-one was daft enough to lend them any more money because we've reached the point when there are serious doubts about us having the ability to pay it back? What would Mr Keynes do then?

Have you ever heard of 'worse-case scenario'? It would appear not, given your complacent answer. I'm sure we'll all sleep easier in our beds now that you have told us that the bond markets are never going to turn on us. Unbelievable.

Come on then. I've been inviting you for weeks to tell us exactly what the mechanisms are whereby the alternative approach (cutting debt) will work. And to give us examples of cases where it has worked.

Stop throwing insults. Give us some facts.

[BillyStubbsTears]

1) Was Brown right to bail out the banks?
Yes. Comprehensively. We would have been in the Depression to end all Depressions had he not. Total and utter meltdown.

So you think it was right that the banks could gamble recklessly knowing that they would always be bailed out. Not my idea of capitalism. Then again I'm not a leftie.

No. I didn't say that. Go back and read your question and my answer.

The underlying problem was that the banks were allowed FAR too much leeway to take reckless gambles. Not only in the UK. EVERYWHERE.

With hindsight (there we go again) this should have been stamped down on. You will not find a single right wing politician, banker, financier or economist who was asking for that AT THE TIME.

Once we ended up where we were, then we and every single other major country in the world had absolutely no option but to bail out the banks.

We should not have got to that position. That was the result of 30 years of free-market deregulatory madness, which New Labour hold as much responsibility for as anyone. Banks should not have been allowed to get so big that their failure would bring entire economies down. The world ended up with banks that had assets (or debts) bigger than entire countries' economies. Madness. With its roots right back in the right wing fundamentalism that swept the world in the late 70s.

But you didn't ask about that. You asked if Brown was right to bail them out. Which he was.  Having ended up in that position, we would be living in caves and eating rats now if Brown had not taken the lead and shown the mechanism to save the world banking system.

[BillyStubbsTears]

How are we getting on with them answers by the way? Google down is it?

[mjdgreg]

You were asking why the figure rose. I explained why it rose. It didn't matter whether the initial figure was 1.5, 1.5 million or 1.5 billion. I explained why it rose. Do you not even understand your own questions?

Your answer was based on NAIRU and an unemployment rate of 1.5m. You have not answered this question properly. You'll be pleased to know that I've now given up on getting a proper answer as there's only so many times I'm prepared to ask.

[BillyStubbsTears]

Oh for f**ks sake Mick, engage your brain.

If the HEADLINE rate of unemployment was 1.5m, and inflation started to rise then 1.5m was the headline rate corresponding to NAIRU. Whatever you claim the "real" rate was. That real rate would have been the "real" NAIRU rate.

Is that so hard to understand?

[BillyStubbsTears]

Oh for f***s sake Mick, engage your brain.

If the HEADLINE rate of unemployment was 1.5m, and inflation started to rise then 1.5m was the headline rate corresponding to NAIRU. Whatever you claim the "real" rate was. That real rate would have been the "real" NAIRU rate. It is simply a matter of definition of unemployment. It doesn't alter the argument about how and why the rise happened.

There is no contradiction. Just another failure on your part to follow simple logic.


Is that so hard to understand?

[mjdgreg]

Come on then. I've been inviting you for weeks to tell us exactly what the mechanisms are whereby the alternative approach (cutting debt) will work. And to give us examples of cases where it has worked.

I'll stop throwing insults if you give us some facts.

It's very simple and I have explained this in the past. You have me down as a one trick pony that believes that the solution is just to cut debt. Wrong. I've never said that this was the solution. However it is part of the solution.

You on the other hand are a one trick pony. You pin all your hopes on spending ever larger sums of money until eventually you spend so much that everything will be all right. No wonder politicians like the sound of that. It saves them from having to make any tough decisions. Trouble is that policy always ends in disaster. Just ask Jim Callaghan. Politicians and the public need to harden up like I've done and take the medicine.

Here is the solution. We need to cut back on public spending so that taxes can be cut. This needs to be a gradual process. By doing it gradually we can take up the unemployed public sector workers in the then thriving private sector. We need to stop borrowing money and start to live within our means. We need to get the National Debt paid off. We need to harden up and accept a lower standard of living for the sake of future generations' tax bills. Simple really and I didn't need to read it in a book written by a crank economist.

[mjdgreg]

Oh for f***s sake Mick, engage your brain.

If the HEADLINE rate of unemployment was 1.5m, and inflation started to rise then 1.5m was the headline rate corresponding to NAIRU. Whatever you claim the "real" rate was. That real rate would have been the "real" NAIRU rate.

Is that so hard to understand?

I'm afraid it is. Makes absolutely no sense to me whatsoever. I don't think I'm alone on that one. Let's try a little experiment. Don't elaborate on what you've said and let's see if anyone else understands what you're going on about. If they do then let them put it in simple English so we can all understand.

[mjdgreg]

You are perfectly at liberty to disagree with me. But if you are going to do, you ought to do us the courtesy of explaining what YOU think happened to sort out our debt problem after the War.

I wish you'd stop banging on about the war. In case you hadn't noticed the world has completely changed since then.

[mjdgreg]

If that's the case then I challenge you to find 10 examples out of the 100's that I've posted. I'm not holding my breath.

Still waiting. I'll make it easier. Can you find 5?