The Good News Keeps On Coming

[drfc1951]

There will be good news in 2015 after the election.

[IC1967]

I agree. Labour are going to get hammered.

[IC1967]

Austerity not just working in UK but also working in Ireland. More proof that austerity is the way forward.

http://www.bbc.co.uk/news/business-25362493

[BillyStubbsTears]

Classic Mickonomics. Finds a tiny bit of reporting that supports his crackpot, nursery school economics ideas and he crows about how it clinches the argument.

Let's have a look at Ireland over the last 5 years. Yes, it has had some of the toughest Austerity in Europe. What have the results been?

GDP down nearly 20%
Unemployment trebled to 15% (that'd be 5 million on the dole if it was the UK). It has come down a touch, mainly due to emigration.
Deficit still more than 8% of GDP
Govt debt increased four fold.
Wages for the poorest down 20%.

There's a term for conditions like that. It's called a "Great Depression".

Mick reckons that imposing a Great Depression on a country is a sensible approach, and that one bit of incidental good news (which had NOTHING to do with Ireland's economic prospects) justifies the misery.

You get more sense discussing quantum physics with a corpse.

[Sprotyrover]

My Neighbour told me that the entire Irish Tax take was 22 billion euros and they have borrowed 85 billion!
It will be about 30 years before they get out if that mess!

[IC1967]

Let's have a look at Ireland over the last 5 years. Yes, it has had some of the toughest Austerity in Europe. What have the results been?

GDP down nearly 20%
Unemployment trebled to 15% (that'd be 5 million on the dole if it was the UK). It has come down a touch, mainly due to emigration.
Deficit still more than 8% of GDP
Govt debt increased four fold.
Wages for the poorest down 20%.

There's a term for conditions like that. It's called a "Great Depression".

Yes, let's have a look shall we.

GDP down nearly 20%. Good. That's more like the level it should have been pre crash. They were borrowing and living well beyond their means which meant GDP was artificially higher than it should have been. Due to austerity it is now back at a realistic more sustainable level.

Unemployment trebled to 15%. Good. That will be a reminder to them not to excessively borrow in the future. It's no good borrowing loads of money to create non jobs that are going to disappear when the bill needs paying. Unemployment is now falling rapidly. If they'd carried on borrowing like you'd have wanted it would eventually have gone much higher than 15%. I think given the amount of debt they've had 15% was pretty good. Just look at Spain, Greece, etc.

Deficit still more than 8%. With your policies it would be even higher. Due to austerity it is falling. If they'd carried on with your spend, borrow, spend policy it would be rising.

Government debt increased four fold. Yes because they followed another one of your madcap policies. They bailed out the banks. They should have just let them go bust.

Wages for the poorest down 20%. Good. They were paying themselves too much. Now they are paying themselves more realistically. As a consequence house prices are much lower. A win win situation.

There's a term for conditions like that. It's called a "Great Depression". No. It's called re-balancing your economy and starting to live within your means.

[IC1967]

My Neighbour told me that the entire Irish Tax take was 22 billion euros and they have borrowed 85 billion!
It will be about 30 years before they get out if that mess!

And Billy wanted them to borrow even more! Crazy.

[BillyStubbsTears]

Sproty.
"My Neighbour told me that the entire Irish Tax take was 22 billion euros and they have borrowed 85 billion!
It will be about 30 years before they get out if that mess!"

Aye. That's is what happenes when you put a common currency and monetary policy together and don't take it to the logical conclusions of having a common fiscal policy. What happened in Ireland (and Spain and Portugal) was that the interest rates were much, MUCH too low for their conditions in the late 90s and 00s. Interest rates were being set to accommodate conditions in Germany, which was (as always) fiscally tight and therefore required monetary stimulus. But the monetary stimulus in countries that were already growing rapidly was madness. And it led to a catastrophic property bubble, with banks' viability depending on ridiculous property valuations.

That could have been averted 10 years ago. The blame is spread right across the EZ  -Ireland being irresponsible. Germany, as ever, saying in effect "We will have policy that is suitable for us and f**k the rest of you."

When the collapse came, Ireland could have done what Mick suggests that they, we and America should have done. Let banks go bust. It was the underwriting of the banks that sent Ireland's debt to astronomical levels. And yep, they could have refused to do that. Just like we could have done. What Mick and the swivel-eyed loons never address is what would have happened then.

But we have a clue as to what would have happened then. Because Bush and Hank Paulson let it happen to ONE bank - Lehmans. And what happened when Lehamans went bust was the biggest economic catastrophe in 80 years. Bank lending stopped overnight. Economic activity fell off a cliff overnight. Countries from America, Germany, UK, France, Japan, Italy, to Ireland, Iceland and Greece saw their economies shrink by 5-10% in 6 months. Perfectly viable companies went under because they couldn't get the credit that modern Capitalism is predicated on.

That was the result of ONE bank collapse. Within a month a strategy was in place to stabilise other banks. It meant that (in countries that didn't go for Austerity) something approaching normal economic activity began to return within 9-12 months. But even so, we've seen tens of millions of economically viable people thrown into long-term unemployment. Lives wrecked. Economies hampered for decades.

And that was the result of ONE bank collapse. Multiply that by the 50 or 100 banks that the swivel-eyed loons think should have been allowed to go bust. And think what the consequences would have been.

Anyone with savings losing the lot.
People tootling off the the autobank to find it permanently shut down and no access to their wages.
And then people not getting wages because their employers had no access to credit.
And even the companies that had significant savings would have had no way of accessing these, because they were tied up in frozen accounts of collapsed banks.

You regularly hear this line trotted out by right wing headcases, that if only Brown hadn't bailed out the banks, everything would now be so much better. What would actually have happened is that society as we know it would have collapsed within months in the biggest catastrophe of the entire Capitalist era. Not just here. Across the entire world.

[BillyStubbsTears]

My Neighbour told me that the entire Irish Tax take was 22 billion euros and they have borrowed 85 billion!
It will be about 30 years before they get out if that mess!

And Billy wanted them to borrow even more! Crazy.

Mick.

You are so far off the pace, it is almost embarrassing to talk to you. You have no comprehension of the complexity of this situation. And (as ever) you haven't the barest grasp of what I think.

Ireland could not have borrowed more. Have a think why not, then have a think what the answer might have been.

[IC1967]

You don't half exaggerate. I wish I had such a brilliant crystal ball that could predict the future as well as the one you have. There is no way it would have been as cataclysmic as you are making out.

Things would have been bad for a while but then we'd have recovered strongly and would have hopefully have learnt our lesson that borrowing and spending is not the way to run an economy.

Anyway we have an example of what happens to an economy when it allows its banks to go bust. Its called Iceland. Its about the same size as Ireland so is an excellent country to use for comparison.

Their banks all collapsed at once during 2008. Going in to 2008, Iceland’s three largest banks had accrued a debt of more than eight times of GDP. The Icelandic government, instead of bailing them out, they let them go bust, leaving the the country in turmoil.

The domestic stock market fell by 95% in 2009 compared to 2007, and Iceland’s GDP fell by 14% during the same period. To have its banking system fail was, at the time, considered to be one of the worst things that could happen to an economy by like minded people to Billy.

The Icelandic government did what it could to save the domestic investors, by saying it would guarantee the assets for its own inhabitants. By doing this they left the international investors to share what was left after the domestic ones had their share. The government also refused to pay any insurance to international
banks. In doing this they decreased their credit rating around the world.

Today, 4 years after the catastrophe in Iceland, things are looking much better. GDP has recovered and has grown 6.9% since 2010, which is a significant increase compared to other European countries, and the unemployment rate is also looking better in Iceland than in many other countries around the world.

Looking at these data, it is obvious that allowing failing banks to go into bankruptcy really is not such a devastating option. It is the best option.

Comparing growth between Iceland and Ireland, an economy
of similar size that chose to bail out its banks in the crisis 2009, shows that Iceland is actually doing significantly better.

I suggest that the rest of Europe can learn from Iceland’s way of handling the crisis. The decision to rescue the domestic economy instead of saving the banks is the reason for why Iceland is doing better than other countries today.

Game, set and match.

[BillyStubbsTears]

Jesus wept Mick, you are spectacularly, impressively impervious to any common sense.

You honestly think that a collapse of the global banking system would have resulted in a bit of a bumpy ride, then we'd have come out in roaring good health in a few months? You are more stupid than I ever gave you credit for. If the global banking system had gone for anything more than a few months, we would have all gone feral. Social order woukd have gone. There would have been anarchy, revolution and war. The global banking system very nearly DID stop working for 3 weeks in Oct 2008. The result was the worst economic collapse for three generations. You multitask that by, say six or twelve months of total systemic banking collapse and have a think about what the consequences would be.

Now. Give me f**king strength, but you raise Iceland as an example of what we and Anerica should have done.

Iceland's banks going under meant nothing to the global economy. Because, large as they were compared to Iceland's economy, they were tiny by world standards.

Compare that to the effect that allowing mega banks like RBS, HBoS, Lloyds etc would have had. In 2008, Kaupthing, the biggest bank in Iceland, had assets of about £40bn. RBS had assets of about £1.9tr. You reckon letting RBS go under would have had the same effect as Kaupthing? Grow up soft lad. Stop reading your swivel-eyed loon blogs and do some thinking of your own.

Now, onto why Iceland recovered. Because Iceland's banking collapses didn't threaten the systemic survival of the global banking system, they could safely let the banks go without threatening global carnage. We, Ireland and others did not have that luxury. Iceland did, and very hard-headedly, they took that option. They also massively devalued their currency. They imposed draconian currency controls. They introduced a massive policy of Govt-funded debt relief for over-indebted mortgage holders.

The first of those made Iceland's exporters more competitive against the rest of the world. The second stopped Iceland's wealthy from pouring their money into more lucrative currencies overseas. The third is a perfect stimulus policy.

Now. Stick with us Mick, cos we're thinking like grown-ups here.

The first of those policies is what your right-wing nutter friends call "debasing the currency" and "cheating savers". Currency devaluation is a classic way to get out of a country-specific Depression by making your own goods cheaper than everyone else's, and grabbing a bigger share of world trade, thus rapidly kick-starting your own economy. But how could Ireland do that? It doesn't control it's own currency. And what do you think the effect of EVERYONE doing that simultaneously would have been, if UK, USA, The EZ, Japan etc had all let their banks go bust?

Just think about it for a moment.

As for the other two Icelandic policies, they are straight out of the "Socialist Way to Manage Capitalism's Problems" textbook. If you're telling me you agree with those, I'm 100% with you comrade.

Now. What was your point again Mick?

The other two are straight out of the socialist guide

[Sprotyrover]

Iceland might be the same size as Eire Geographically but the population is about a sixteenth.
When they went bust they merely got put their old fishing boats and started landing Cod again.
The Irish can't do that.

[IC1967]

Once again Billy you ignore macro economics. You assume that all countries will implement my policy. I've got news for you. They won't. Therefore the UK could let the banks go bust and the world wouldn't grind to a halt because most of the other countries would follow your policy.

You seem to have a very pessimistic nature, always fearing the worst. Take a leaf out of my book and look on the bright side of life for a change.

[BillyStubbsTears]

And another thread runs into the buffers with Mick making an arse of himself.

Rack em up and break off again...

[Filo]

If we had done as you suggest Mick, your betterware stock would have been looted long before now, your tenants wouldn't have been able to pay the rent on your houses and you would be skint like the rest of us, is that what you wanted Mick?

[IC1967]

If we had done as you suggest, your betterware stock would have been looted long before now, your tenants wouldn't have been able to pay the rent on your houses and you would be skint like the rest of us, is that what you wanted?

I don't mind a bit of short term pain for long term gain. However I would be able to ride the storm better than most because I am a saver not a spender. I am also a serial entrepreneur and I am sure I would be able to take advantage of the carnage with some new business opportunities.

I also only let top quality tenants live in my houses that also live within their means and save regularly.  It's all you borrowers and spendthrifts that would suffer the most and quite rightly so. You need to be taught a lesson.

Hopefully you would then start to live within your means and save up for things first before buying them rather than doing as Billy would want you to and keep borrowing and spending. It's no wonder the British consumer is drowning in debt.

[Filo]

Mick, in that scenario your savings would be worth jack shit to you, they'd be gone swallowed up when you let the banks go bust

[IC1967]

i

n that scenario your savings would be worth jack shit to you, they'd be gone swallowed up when you let the banks go bust

You've been reading too much into what Billy says. He's all doom and gloom and always paints a picture much worse than would actually be the case. Not all banks would go bust, only some of them. The good banks would then take over the the bad banks. If the government followed my advice then depositors would have their savings protected. It would be the big global institutions that would be out of pocket (just like what happened in Iceland).

[Filo]

Puddled!

[BillyStubbsTears]

Utterly Filo.

I'll be honest, I still don't know if he's a WUM or if he's just as thick as a bucket of pigshit.

A little short-term difficulty if banks like RBS etc had been allowed to go bust on a large scale! Give me f**king strength...

[IC1967]

The way you talk you'd think everyone loses their money when a bank goes bust. That doesn't happen. It's perfectly simple to look after small depositors that can't afford to lose their money. You need to read the following link to see what actually does happen when a bank goes bust.

http://news.bbc.co.uk/1/hi/business/7115252.stm

[BillyStubbsTears]

Mick

You have convinced us that you are spectacularly thick. You can stop anytime you want.

What you have no f**king comprehension of whatsoever, is why the collapse of Lehman's was so damaging, and what would have happened if an even larger bank had gone under. Not to mention several of them.

So, here's some homework for you Mick. Write us 500 words on what the proximate cause of the intensification of the credit crunch in Sept-Oct 2008 was, and the consequence for the global economy in 2008-09.

A clue
Google "TED Spread". That is a market measure of the confidence that banks have in the creditworthiness of other banks. The entire Capitslist economic system depends upon banks having confidence in each other. If they don't, they refuse to lend funds from establishments with excess savers, to those who have a requirement to pay back creditors.

Without that confidence, the banking system ceases to function and the mechanism for getting money out into the economy collapses.

The TED Spread is the interest charge that banks set when they lend money to each other in this way. It is usually a tiny percentage value. When it goes up, in means banks are getting twitchy and preferring to hold onto their money rather than lend it. But that is the nightmare scenario. Because if confidence goes, the entire economic system seizes up. It's like the oil being drained out of a running engine.

Now. Toddle along Mick and have a look at what happened to TED Spreads after Paulson did what you suggest, and let Lehman's go bust. Then consider what the global consequences of that decision were.

And then, do us a favour and shut the f**k up with your nursery school-level ramblings.

[IC1967]

Look its very simple. Lehman's went bust. The world hasn't ended. America has less debt now because they didn't bail them out. They are now recovering more strongly because they have been less burdened by the additional debt that they would have had to take on. Other banks have taken note and have altered their behaviour accordingly. A lesson has been learnt.

We live in a capitalist world. If you screw up up you pay the penalty. If banks screw up, they go bust. Simple. If they know they are always going to be bailed out then they will take crazy risks (which is what they did). They did this because they knew good old Gordon Brown would underwrite all the risk.

I've got news for you. That is not how capitalism works. You need to get real. The solution to every problem is not more and more spending and borrowing. You really are a one trick pony.

[BillyStubbsTears]

You can't stop demonstrating your stupidity Mick can you?

The collapse of Lehmans produced an earthquake through the financial system. I suggested that you looked at TED Spreads, which you clearly couldn't be arsed to do. The TED Spread doubled within days of the Lehmans collapse. The financial system ground to a halt as panic swept through the banks and they stopped lending money to each other. The results were catastrophic - the biggest collapse in global economic output for 80 years. Perfectly sound companies, perfectly hard working people thrown on the scrapheap because there was no means of obtaining the credit that makes the capitalist system work.

You, Mick, immersed in your simpleton thought processes, brain addled by too many hours reading RightWingNutJob.com think that that was just a simple price that had to be paid. You say that America was better off for not bailing out Lehmans.

Your ignorance and stupidity have just reached new levels.

The collapse of the financial system post-Lehmans was so dangerous, that within 5 days, America was processing the biggest bank bailout in history. $700bn worth. Done in a mad panic before any more unnecessary damage to the economy was done.

How much of a panic? Thursday 18th Sept, a few days after Lehman went down, Ben Bernanke, the boss of the Fed was telling politicians that if they didn't get the bailout sorted, "we may not have an economy by Monday".

So, letting Lehmans go bust not only didn't stop America having to bail out other banks, it also worsened the worse economic cradsh in three generations. Good work eh?

Of course, you know better though, don't you?

Tell you what Mick. When we're talking about the consequences of bank collapse, should we trust the witterings of a Bettaware salesman and guitar tutor from Donny who spent 3 months last year screeching that Donny were going to get relegated because their possession efficiency was shit, or should we trust the opinion of a man who has studied, taught and practiced economics at the highest level for 40 years, who is an acknowledged expert on the causes of the Great Depression and Japan's 1990s collapse and was in the eye of the storm when all hell broke loose? What do you reckon?

[RedJ]

The fact that he's trying to argue that a county that ceased to exist in 1996 on another thread is still a thing says it all, BST.

[IC1967]

 

The financial system ground to a halt as panic swept through the banks and they stopped lending money to each other. The results were catastrophic - the biggest collapse in global economic output for 80 years. Perfectly sound companies, perfectly hard working people thrown on the scrapheap because there was no means of obtaining the credit that makes the capitalist system work.

Exaggerating again. I don't recall not being able to get hold of my money from the banks. Businesses and people still managed to borrow money. Some companies went bust but that is what is needed when there is a recession. The dead wood is got rid of and new companies spring from the ashes.

[IC1967]

The collapse of the financial system post-Lehmans was so dangerous, that within 5 days, America was processing the biggest bank bailout in history. $700bn worth. Done in a mad panic before any more unnecessary damage to the economy was done.

You said it 'mad panic'. That is not the best time to make such huge decisions. The USA is now saddled with an extra $700bn worth of debt due to decisions (that you agree with) made in a mad panic. Far better to have let the banks go bust and keep the USA's debt burden down to a more manageable level.

[IC1967]

 

should we trust the opinion of a man who has studied, taught and practiced economics at the highest level for 40 years, who is an acknowledged expert on the causes of the Great Depression and Japan's 1990s collapse and was in the eye of the storm when all hell broke loose? What do you reckon?

I didn't know you had such a high opinion of yourself. I don't care if you've studied, taught and practiced economics at the highest level for 40 years, and am an acknowledged expert on the causes of the Great Depression and Japan's 1990s collapse and was in the eye of the storm when all hell broke loose. You still talk utter rubbish.

I repeat, your policy of borrow ,spend, borrow, spend will ultimately lead to disaster. You're like the person buying everything on a credit card. You eventually reach your limit so get another card. Once that reaches its limit you get another one. You don't pay anything off except the interest every month. Eventually you can' t get anyone else to give you a credit card so you stop buying. You also find you are unable to afford the interest anymore and you go bankrupt leaving a load of debt behind you.

So you are no good to the economy as you have no buying power and the poor sods who gave you the credit card in the first place are left to pick up the pieces.

40 years as an economist and you can't work that one out.

[wilts rover]

Mick, quick favour as a fellow member of the Irish diaspora, Billy isn't talking about himself - he is talking about Ben Bernanke as quoted in his post. If you edit your post quickly now, no-one will know and you wont look as ridiculous as you do arguing against him....

[BillyStubbsTears]

Wilts.

Fascinating insight into Mick's ego there. He actually thinks someone with 40 years as a professor of economics would swap views with him. Rather than telling him to f**k off and come back once he'd read summat else besides MoneyWeek "The End of Britain" and the collected works of Peter Schiff.

Hey ho...