The 08-?? Depression

[mjdgreg]

This thread is hilarious. It's like watching a dribbling delinquent on Jeremy Kyle get battered around by him and his audience. I remember learning about the Great Depression/Weimar Germany when I was at school and often wonder what my history teacher would write on mjdgreg's essays.

I do think you've been a bit harsh in your description of Billy. I may not see eye to eye with him but even I would not characterise him the way you have. Your teacher would have given me 10 out of 10 (unless of course he was a deluded leftie).

[mjdgreg]

I think he might have been reading this:

http://www.forbes.com/sites/greatspeculations/2012/09/19/demographics-to-blame-for-inescapable-deflation/

Is that the best you can do? pmsl. I bet it took you ages to come up with that. How anyone can say I got my post from there is laughable. That's not to say I didn't find the article interesting. You'd do far better pulling the article apart if you disagree with it. But you won't, because you don't have the nouse to be able to and seem to spend all your time being the plagiarism policeman.

[mjdgreg]

I'm gobsmacked tbh. That anyone, anyone! could put forwards that drivel about baby boomers

If you'd said dribble instead of drivel your view may have had more merit.

[mjdgreg]

Do you think your thread title The 08-?? Depression is a bit of an exaggeration to say the least? It's amazing the views you form when you've been looking at a graph.

[Glyn_Wigley]

Damn, the puppy's leaving little messages all over the carpet now...

[BillyStubbsTears]

So in the 1970s, we ignore OPEC quadrupling oil prices. We ignore the inflationary effects of the massive US spending on the Vietnam War.

I haven't got the time to pull apart all of your ludicrous arguments, but I'll still do the odd one so you don't have a free run at brain-washing all your leftie friends. OK, so if we accept that the Vietnam war caused high inflation (obviously I don't) then why didn't the same thing happen when the US waged war on Iraq and Afghanistan? What about when oil went to over $90 a barrel? According to you inflation should have took off. It didn't. Why?

I'm not holding my breath for a sensible answer, just more leftie spend spend spend proposals for which you are happy for future generations to pick up the bill.

 

Go on Mad "Baby Boom" Mick. I'll humour you again.

1) The cost of defence spending in the USA during the Vietnam War was proportionally much higher than the cost of defence spending during the Iraq/Afghanistan wars. The American Congressional Research Services agency estimates the figures at 9.6% and 4.3% of GDP respectively.

2) This racheted-up  defence spending led directly to the pressures on the dollar that caused the collapse of the Bretton Woods currency system. This was massively exacerbated by Nixon's unilaterally decision to abandon the convertibility of the dollar into gold in 1972. This effectively removed the anchor that world currencies had had, and led them to float freely on the markets. For a period of time, there was something approaching chaos as markets searched for the "true" value of currencies and Central Banks searched for the monetary policies to control currency volatility. And of course, one of the key drivers of inflation is an undervalued currency - I'm sure you understand the mechanics Mick.

3) In 1973, the price of oil was quadrupled OVERNIGHT. There has never in the whole of modern history been an increase in the cost of a major commodity anything like as dramatic as that. And it stayed high. It didn't come down. In fact, it then went on to triple in price in 1979 after the Iranian Revolution. By contrast, in the 2000s, it took something like 6-8 years for the price of oil to quadruple. And then it fell in price by 70% in less than a year as the Financial Crash took effect.

Now, I'm sure you don't need me to remind you about this next bit Mick, you being a genius and all that, but you do have a habit of pretending to be thicker than you are, so I'll say it anyway. Inflation is not related to the level of prices. It is related to how quickly those price level are changing.

So, When oil quadrupled in price between 2000-2008, our UK inflation rate DID increase. But slowly; it went up from around 1% in 2000 to around 4% just before the crash. When oil quadrupled in price in October 1973, inflation exploded. from 1970-Oct 1973 it had been bobbing between 6-10%. By mid 74 it was  17% and by mid 75 it was 27%. And then after the Ayatollah came to power and the price of oil rapidly trebled, inflation more than doubled in less than a year.

If the price of oil quadrupled tonight, I will guarantee you that you'd see inflation go through the roof over the next few years. Baby boomers or no baby boomers.

[wilts rover]

So in the 1970s, we ignore OPEC quadrupling oil prices. We ignore the inflationary effects of the massive US spending on the Vietnam War.

I haven't got the time to pull apart all of your ludicrous arguments, but I'll still do the odd one so you don't have a free run at brain-washing all your leftie friends. OK, so if we accept that the Vietnam war caused high inflation (obviously I don't) then why didn't the same thing happen when the US waged war on Iraq and Afghanistan? What about when oil went to over $90 a barrel? According to you inflation should have took off. It didn't. Why?

I'm not holding my breath for a sensible answer, just more leftie spend spend spend proposals for which you are happy for future generations to pick up the bill.

 

Because America didn't commit the same amount of resources to Iraq & Afghanistan that they did in Vietnam. The consequences of that war were such that they couldn't afford to and risk a huge public backlash when the casualties came home. That's why we and several other counties are there, its a coalition.

Anyway inflation didnt rise just because of the Vietnam War, it owes more to the Yom Kippur War, which led directly to OPEC's action in raising oil prices (and may very well have contributed to the end of the Vietnam War).

The graph showing it is here: http://en.wikipedia.org/wiki/1973_oil_crisis

[big fat yorkshire pudding]

I'm confused this morning.  All along Labour tell us we shouldn't cut as it will help to boost growth etc, yet last night they voted to cut a budget designed to boost growth (which I don't agree with by the way).  But my point is one minute they say one thing, the next they're changing their mind.  Is it me or is their only policy to play games with the opposition?

[BillyStubbsTears]

BFYP

I don't follow your logic. The issue from Labour's side on the EU budget argument is nothing to do with home much our own Govt should be spending. It's about whether that spending should be given to the EU or spent at home.

But of course there's politicking going on as well. That's politics. Labour are quite within their rights to put on the spot a PM who less than 12 months ago was trumpeting how hard he was on Europe. Here's a chance for him to prove it on something substantial.

[Hounslowrover]

Also Labour is being consistent as it voted for a real-terms cut in the budget in July.  It now puts Cameron on the spot to see how tough he really is on Europe.

[mjdgreg]

I could have written every word myself. Exposes Billy's ideas for what they are. Economics of the madhouse. Notice how scathing he is of socialist France. If Billy had his way we'd end up just like France. I've taken the article below from the following more extensive link:

http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2012/11/02/the-role-of-risk-in-asset-allocation.aspx


A Simple World
By Charles Gave

Many of our readers seem to believe that the world is getting ever more complex. I disagree. In fact, I have never seen a world whose key drivers were so simple to grasp. Almost everybody, save a few politicians in France and BillyStubbsTears, realize that government is the problem. Even the 50% or more of US citizens who receive "bribes" with money borrowed from their grandchildren concede the spending has to slow. As the anti-Obama adverts on TV put it: “Where did the trillions go?”

Servicing debt is not a problem when there is growth. However, increased government spending does not lead to higher growth but to lower growth. We won’t hear this message from complex souls like Paul Krugman and Joseph Stiglitz, both Nobel Prize winners in economics. But as Hayek said while accepting the prize, there should never have been a Nobel Prize in Economics. Even a cursory look at economic history shows that increased government spending drags down the growth rate, largely because it drives out productive investment (see How The World Works).

Wealth is not created by artificially cheapening money. When prices are manipulated to the point where they have nothing to do with reality, then the only rational decision is to shift to cash and to wait for prices to send signals again (see A Measure Of Keynesianism). As a result, the velocity of money goes to zero and the economy moves ex-growth. This is exactly what we are seeing today as the world’s idiotic central banks apply a strategy that Japan has spent 20 years proving does not work.

None of this is rocket science. Let’s look at the banks – a web of financial complexity we’re told. But one does not need the ability to slice a lousy mortgage loan into 37 different risk-rated tranches to know that when a bank has to go bankrupt, the shareholders and the bondholders of the bank should go to zero. The executives should go to jail if needed (always very popular) and the depositors can remain protected though a nationalization of the said banks. Three or four years later, once their balance sheets have been cleaned up and their capital reconstituted through an infusion of public money, the banks can then be reintroduced in the stock market and privatized at five times the amounts spent by the government. This is what happened in Sweden after 1992 but did not happen in Japan over the last twenty years and is certainly not unfolding today in Europe.. We all know the results.

Equally, there remains no justification for comingling the casino-like operations of an investment bank and the post-office function of a commercial bank. This is because these institutions are in different businesses; the first one plays with the partners’ money and the second one with the depositors’ money.

Tampering with prices, or with interest rates, allowing a quasi-monopoly to develop in the banking system, using debt to pay for current expenditures, manipulating exchange rates, killing the saver, etc… all of this does not work, and never did.

So the solution to our current malaise is very simple: we have to stop now. Reduce government spending, stop manipulating money, let market pricing return – or the result will be a vicious cycle of low growth and rising debt, or certain depression.

The choice is just as simple for investors:

Stick with countries that have avoided the worst of the bad policies, like Canada, Sweden, Denmark, Poland, Switzerland, Australia, New Zealand, Singapore, Hong Kong or even Korea. All of these countries either kept fiscal balances and taxes low (or started reducing them), and/or regulated their financial systems to prevent casino madness.

Consider certain countries that are improving on the margin. This includes the UK. It also includes China, which is opening its capital account and liberalizing its financial system. Spain and Italy are distant possibilities.
Respond quickly and exuberantly if the US elections bring a change of leadership.
Forget about countries like France – they have never understood and never will.

[BillyStubbsTears]

Yeah, but what about the baby boomers?

[mjdgreg]

Yeah, but what about the baby boomers?

I'm glad you're coming around to my point of view. Charles Grave isn't perfect. He talks a lot of sense, but is obviously unaware of the huge effect demographics have on an economy (just like you and your leftie friends). When you add the effects of demographics into the mix it makes you aware of just how bad things are.

Increasing our debt when we have less 'productive' people in the economy to pay for it, makes your point of view even more ludicrous.

[BillyStubbsTears]

Aye. Ta for clearing that up.

[mjdgreg]

Aye. Ta for clearing that up.

You're welcome. At last you've seen the light. About bleeding time.

[BillyStubbsTears]

A pleasure Mick.

I've seen the light that there's no converting you, that's for sure.

We were discussing the clear and unequivocal evidence a few weeks back that the multiplier on Govt spending is much greater than 1. Which means that £1 increase (or decrease) in Govt spending results in an increase in GDP greater than £1. That's unequivocal evidence from 28 countries over the last 3 years.

But you, Mick, ignore this evidence, and instead quote your Messiahs who tell you that that can't be true. "However, increased government spending does not lead to higher growth but to lower growth" in the latest diatribe. I've no idea where they get that information from. There is not the slightest bit of factual evidence to back that up.

He quotes Sweden. Sweden has had higher Govt spending and higher Govt debt that the UK for pretty much the whole of tiem since WWII. It's also had higher growth. Ditto New Zealand, who had stellar growth in the early 90s when they had very high Govt spending and debt, but whose growth has bobbed around much lower levels since they embarked on a programme of cutting Govt spending sharply from the mid-90s.

The facts, when you actually look at them, simply do not fit the message that your Hayekian writer wants to peddle.
(Not that I expect you to look at facts Mick. You never do. You simply ignore them and paste yet another posting that argues what you want to hear. Month after month after month.)

And then there's the REALLY pressing issue for the current predicament. Your man blithely says "increased government spending drags down the growth rate, largely because it drives out productive investment ."

Right. Now, IF the private sector were booming, he might have a point, to the extent that Govt and private business would both be competing for the same credit, and hence would drive up the cost of credit.

But in the current environment, the private sector is NOT investing. It's hoarding money. THAT is precisely the reason that the climb out of the depths of the Depression has been so slow. So, Govt borrowing and spending does not, in any way whatsoever "drive out productive investment." The "productive investment" is not happening anyway. THAT is the core of the crisis in growth.

Consider. Why do you think that interest rates are so low across the Developed World? The interest rate is the "cost" of borrowed money. If your man's analysis was correct, if Govt was competing with private business for credit, the interest rates would be going up. But the rates aren't going up. Because no one wants the credit in the first place. Because private business doesn't want to invest. So Govt cannot, by definition, be crowding out private investment. Which is kind of where we started. (And before you start the conspiracy theory drivel about Govts holding down Central Bank interest rates unnaturally, ask why the open Bond Market rates are also at historic lows.)

But never mind. The Hayek supporters have got a myth to peddle. Govt spending is inherently inefficient and should be driven out. End of story. Any alternative analysis, any empirical evidence that refutes that argument will be utterly ignored and instead we'll keep repeating the same mantra. They are like religious zealots, or the Socialist Workers Party demonstrators - no matter how often the world proves them wrong, they keep barking the same line.

Mick. I was taught by Catholic nuns for a fair bit of my childhood. They had exactly the same approach to any argument that God didn't exist, or that little baby Jesus wasn't the saviour of mankind. They were truth-denying, f***ing barking mad zealots as well.
 

[mjdgreg]

What you don't seem to realise is that growth in an economy is dependent on demographic expansion, rising labour productivity or increases in capital. Government spending when it goes on social issues does not increase growth. All it does is create more debt and is subsequently a further drag on the economy.

[BillyStubbsTears]

There you go again Mick. You comprehensively lose an argument (again) so you twist like a fish on a dockside and change the argument. It's impossible to discuss with you Mick. Utterly impossible. Because you have the attention span of a gnat.

Let's consider this thread as a case in point.
You Mick, raised the issue of demographics as affecting inflation. That is a perfectly sensible issue to raise. But you can't just simply raise it as a factor can you Mick? Oh no. You have to claim that it is THE dominating factor and will determine everything.

When several of us point out that this is rather silly, you ignore this and instead cut and paste a rant from a Hayekian ideologue on an entirely different subject - the efficacy of Govt spending. (Aside: he makes himself look rather silly by putting the UK forward as a prime example of how reduced state spending is the way out of recession. Yeah, right. I suspect the rest of the world will be falling over itself to follow our lead.)

When I point out the fallacies at the core of that argument, you flip again and produce a rant about Govt spending on non-productive items.

Mick
Each one of those topics is worthy of discussion. But you're not interested in discussion are you Mick? When the fallacies of one argument are made clear to you, you simply choose another argument and carry on as though nothing had happened, usually quoting yet another neo-Hayekian zealot as though that clinches the argument because he says something you agree with (even though you've said times many that economists are cranks).

What precisely do you come on here to argue for Mick, when you are so utterly incapable of sticking to the point at hand?

[wilts rover]

What precisely do you come on here to argue for Mick, when you are so utterly incapable of sticking to the point at hand?

Err, can I have a go at 'to try and wind you up' - or trolling as i believe it is called in that there interyweb world.

[BobG]

I don't think I have ever, ever come across a more self important, opinionated fool than good old MJD. even debates with my 11 year old son stick to the point longer and are conducted, on both sides, with a deal more rationality than poor old MJD has shown here.

I think you would benefit from 3 years at a Uni Mick. Don't really matter which one. Any of 'em would do. Try Salford. You might learn the art of debate. As it is, you are simply puerile.

BobG

[Filo]

I don't think I have ever, ever come across a more self important, opinionated fool than good old MJD. even debates with my 11 year old son stick to the point longer and are conducted, on both sides, with a deal more rationality than poor old MJD has shown here.

I think you would benefit from 3 years at a Uni Mick. Don't really matter which one. Any of 'em would do. Try Salford. You might learn the art of debate. As it is, you are simply puerile.

BobG

High Melton does n`t count

[Glyn_Wigley]

What you don't seem to realise is that growth in an economy is dependent on demographic expansion, rising labour productivity or increases in capital.

b*llocks. Go and learn microeconomics. And I mean from a textbook, not a blog.

[BillyStubbsTears]

What you don't seem to realise is that growth in an economy is dependent on demographic expansion, rising labour productivity or increases in capital.

b*llocks. Go and learn microeconomics. And I mean from a textbook, not a blog.

Given that this explanation of growth excludes technological advancement, it is older even that Thomas Malthus's 200 year old Doomsday analysis that I accused Mick of peddling a few days back. Malthus at least realised that technological breakthroughs would lead to increases in output, but he thought that the ensuing output would be devoured by the feral poor, who would therefore procreate extensively and eventually have more mouths to feed than agriculture could support, leading to mass starvation and a collapse in the population levels.

He was shown to be wrong a century back. Mick hasn't even caught up with him yet.

Mick. As part of your ongoing education, I'll give you six simple additional mechanisms by which GDP growth can occur.

1) Technological improvement, leading to more efficient ways of doing things.
2) More women entering the labour force, leading to an increasing in the productive capacity with no increase in the overall population.
3) Workers working longer hours per year, leading to an increase in the prod....etc, etc.
4) Workers working longer years in their lifetimes, leading to an increas....etc, etc.
5) More efficient managerial systems, deciding how to allocate labour and capital to particular tasks so that more tasks can be accomplished with the same capital and labour.
6) Better trained/educated/rewarded labour, such that the same total labour force can and will tackle more productive problems.

Enough for now?

[mjdgreg]

Look, it's very simple. Labour created a housing boom and consumers borrowed to the hilt in the expectation of ever rising house prices. They have now realised that this was an illusion and are not about to go on a spending spree any time soon, as a lot of people are now in debt and will be for many years to come.

Banks are sat on a lot of potential debt from lending against increasing house prices. Now house prices are falling the consumer and the banks are not about to get into even more debt so the economy is stuffed. The last thing we need is Government borrowing even more money to get the country into even more debt.

There will be no sustained recovery until the housing market reaches the bottom and this is going to take years because interest rates are too low to sort it out quickly. Add in the demographics time-bomb and we are going to be in a bad way for many years. Simply saying that everything will be all right if the Government spends a load more money we haven't got is the biggest load of cobblers I've ever read. You show no real understanding of what is going on because you are so left wing you can't see reason.

If only I was the benevolent dictator of the country things would soon be sorted out.

[mjdgreg]

b*llocks. Go and learn microeconomics. And I mean from a textbook, not a blog.

I would ask you to refrain from using bad language on the Sabbath. Any other day of the week is fine. You need to consider your fellow forum users, some of which may be quite holy.

As for microeconomics, I am a big picture sort of person and prefer to deal in macroeconomics. I get my views from real life not from textbooks. Anyone who has got the time to write such boring books obviously hasn't had time to live in the real world so by definition don't know what they're on about. My experience as a serial entrepreneur counts for much more than the drivel these cranks write.

[mjdgreg]

Those of you that want me to refute every point Billy makes are wasting your time. I've already done this on other threads and I'm not about to do it again. Billy seems to think that if he keeps on saying the same thing over and over again then what he says must be right.

No doubt all you lefties will agree with him because it all seems very plausible, especially when a few graphs are thrown in. Unfortunately for Billy I have conclusively proved him to be totally wrong and have shown you all the path to enlightenment. If you all want to follow Billy to the dark side then that is your choice. Just don't say you haven't been warned.

[Glyn_Wigley]

If only I was the benevolent dictator of the country things would soon be sorted out.

Aye, because you'd be hanging upsidedown from a lamppost within five minutes and everybody would have an increase in their happiness quotient.

[mjdgreg]

Aye, because you'd be hanging upsidedown from a lamppost within five minutes and everybody would have an increase in their happiness quotient.

I think you would find that the numbers of right wingers would increase dramatically and lefties would soon turn out to be a dying breed. Being a tolerant sort of person (unlike you and your leftie friends), I would do my best to stop the lefties being persecuted because there would be so much anger that they had got away with ruining the country for so long.

Anyway it's time you stopped looking at text books for the microeconomics of the situation. This marks you out as a 'small picture' sort of person who can't see the wood for the trees. Hopefully you have now learned that the big picture is far more important.

[BillyStubbsTears]

When the fallacies of one argument are made clear to you, you simply choose another argument and carry on as though nothing had happened

Followed by

Look, it's very simple. Labour created a housing boom and consumers borrowed to the hilt in the expectation of ever rising house prices. They have now realised that this was an illusion and are not about to go on a spending spree any time soon, as a lot of people are now in debt and will be for many years to come.

Banks are sat on a lot of potential debt from lending against increasing house prices. Now house prices are falling the consumer and the banks are not about to get into even more debt so the economy is stuffed. The last thing we need is Government borrowing even more money to get the country into even more debt.

There will be no sustained recovery until the housing market reaches the bottom and this is going to take years because interest rates are too low to sort it out quickly. Add in the demographics time-bomb and we are going to be in a bad way for many years. Simply saying that everything will be all right if the Government spends a load more money we haven't got is the biggest load of cobblers I've ever read. You show no real understanding of what is going on because you are so left wing you can't see reason.

If only I was the benevolent dictator of the country things would soon be sorted out.

I believe the most appropriate term is Q.E.D.

[Filo]

Look, it's very simple. Labour created a housing boom and consumers borrowed to the hilt in the expectation of ever rising house prices.

Multiple property owners that buy cheap and sell on for profit or rent out must take a big portion of the blame then eh?