Tuesday, Feb 23, 2010
Time to try something different?
Bloomberg: Deathbed of Keynesian Economics Will Be in U.K.
Britain has cut interest rates, pumped up government spending, printed money like crazy, and nationalized almost half the banking industry. Just about everything possible has been done to encourage consumption. The results have been miserable. The economy is flat on its back, unemployment is rising, the pound is sinking, and the bond markets are bracketing the country with Greece and Portugal in the category marked “bankruptcy imminent.” What’s needed is a total change of direction. Get the deficit under control. Raise interest rates to restore confidence in the pound, and reward saving. Cut taxes to stimulate enterprise and investment.
Posted by ontheotherhand @ 05:27 PM (1949 views) Add Comment
28 Comments
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1. general congreve said...
No, f4ck that. Keep spending what we haven't got. I want national bankruptcy and the biggest gold bull market the world has ever seen. Keep up the good work Mr. Brown.
2. enuii said...
'Just about everything possible has been done to encourage consumption'; thats what we have done as a nation on the back of undisciplined mortgage lending over the last 10 years. There comes a point when the public literally cannot afford to borrow any more and we have passed that point.
3. Cool_hand said...
Keynesian Economics might of worked if Mr Brown had followed the 1st rule: You save in the good times so you can spend in the bad times. Funny that.
4. hogwash said...
"Short of digging Karl Marx out of his London grave, and putting him in charge, it is hard to see how the state could get more involved in the economy."
5. hpwatcher said...
No, f4ck that. Keep spending what we haven't got. I want national bankruptcy and the biggest gold bull market the world has ever seen. Keep up the good work Mr. Brown.
I'm tempted to agree, but the problem is that I don't want to see the country ruined....but sadly, that's the direction that BOE and the Government want to take things.
6. paul said...
The property-hoarding baby boomers would be Not Very Happy if interest rates were to rise. MPs and central bankers are property-hoarding (and flipping) baby boomers, ergo interest rates cannot be allowed to rise and bankruptcy will be imminent.
7. Roberto Birquet said...
How about the deathbed of Thatcherism. That created the crisis, not Keynes. Keynes has a strong argument along the lines that Housepricecrash has run for years. That markets are irrational and are led more by animal spirits than fundamentals. Do you disagree?
There comes a point when the public literally cannot afford to borrow any more and we have passed that point...No that point arrived five years ago, but it was in the private sector. We lived on credit cards and equity withdrawal.
The role of government is to run a surplus when when the animal spirits push up private borrowing and asset prices, and to run a deficit hen banks get overcautious. My problem with Brown is that he ran a deficit while the private sector was running a huge deficit. Idiot! For me, Keynes is leaps ahead of the market fundamentalists, hanging onto to an 18th century economist (Smith) as much interested in ethics than real economics as he tried to find a model for the new world of post-religion nascent industrialisation. The Bloomberg writer complains of nationalising banks, but had we not, they wouldn't exist. And, woah, let's see where the economy goes. He's a little gnomic on that. My medicine would be more dramatic than the government's. The nationalisations are right. But we should not look for profit, but accept huge losses, and allow asset valuations to fall. That will mean large deficits in the public sector, but it will allow the private sector (which is the real villain of the piece) to sort itself out.
Meanwhile, public sector-backed lending based on the needs of the economy and not the voodooeconomics of paying billions to losers in banking. Utter madness, again the Bloomberg man is silent. i wonder why? His idea of cutting taxes while still cutting the deficit is also madness. The grand irony is the Bloomberg man says: If it’s not working, that just proves the stimulus should be even larger. But his answer. Market fundamentalism bombed and spectacularly so, so let's carry it on but more so. Garbage! I wonder is this offmessage opinion gets on HPC!
8. quiet guy said...
@general congreve
I have to agree with hpwatcher; I don't want to live in a real world Mad Max movie. I think it is possible that Labour will get back in again in which case a really strong dose of stimulation might be prescribed.
9. 51ck-6-51x said...
paul -
At some point they won't be able to afford to holiday abroad, will we see some action if it's not too late by then or will they start providing home owners with foreign currency tax credits?
Oops, they may be listening.
10. alan_540 said...
@General Congreve ... Hilarious - funniest thing I've read on here in ages! Well, apart from titanic capain coming over all religious fundamentalist just now.
11. p. doff said...
Not more baby-boomer bashing, perleease! Give it a rest will you, you're starting to sound ridiculous. Most boomers bought a home simply for themselves and their families to live in, and not as an investment - isn't that the mantra on this site?
P.S. Many boomers couldn't give a stuff about rates going up as they should have all but paid off their mortgage. I would go so far as to say that a lot of boomers would prefer rates to go up so that their savings can provide some sort of return.
Oh yeah, they've got savings as well as a house - something else to hate them for no doubt.
12. matt_the_hat said...
Its not the houses or the savings - its the national debt and off balance sheet pensions (which are very soon about to go on balance sheet) which makes boomers unpopular.
13. alan_540 said...
@9 p. doff ... Couldn't agree more.
14. 51ck-6-51x said...
Sounds like we're about to invoke the sleepshop.
15. p. doff said...
@ 10. What's the national debt and pensions got to do with it? Don't forget us boomers financed our parents state pensions, even though they lived in the heyday of generous cast-iron final salary private ones. Many of todays ageing boomers suffered from the collapse of private pensions and endowments after paying in most of their working lives. God help them if they have to rely on the work shy, want it now, younger generation to help them in their old age. At least they have houses to sell - oh, I forgot, you lot would rather confiscate them and kick the old f@rts out into the street.
16. braindeed said...
9. p. doff said...
Not more baby-boomer bashing, perleease! Give it a rest will you, you're starting to sound ridiculous. Most boomers bought a home simply for themselves and their families to live in, and not as an investment - isn't that the mantra on this site?
Fair comment on that part. Some of the things I've expressed have been construed as boomer bashing - I'd like to say that boomers done what was best given their opportunities.
My belief is that they have arrived at retirement with over generous provision made ...IN RELATION TO THEIR CONTRIBUTIONS. The Boomer phenomenon was well understood by actuaries, but political expediency, followed by Reganomics made sure that the burden would be passed to the next generation.....the Politicians who benefited are dead and buried, forgotten almost. Notwithstanding the fact that the boomers just looked after themselves as best they could, there can be no doubt that there are many who should have paid in more, and still could.....given the tax burden these new generations are being made to carry.
Just don't expect to hear it on the hustings..
17. hpwatcher said...
Not more baby-boomer bashing, perleease! Give it a rest will you, you're starting to sound ridiculous. Most boomers bought a home simply for themselves and their families to live in, and not as an investment - isn't that the mantra on this site?
A good many baby-boomers would probably have been paying interest rates that were a good deal higher that they are now, though of course, house prices would have been cheaper; so I guess it's all a question of balance.
At the moment, though there seems to be very little to look forward to, I fully expect the downturn to continue.
18. p. doff said...
@Braindeed 'My belief is that they have arrived at retirement with over generous provision made ...IN RELATION TO THEIR CONTRIBUTIONS'
'Fraid your belief is flawed old chap. Like many boomer-bashers on this site you generalise and over-simplify. Granted, some boomers have done well out of their pensions, but so will some of the younger generation who are lucky enough to be in public sector civil service type jobs. There is still an army of boomers who were/are in the private sector who have paid into a system and been screwed by it. One of my pensions was paid by my employer into Equitable Life, and we all know what happened to that. Luckily I transferred mine out into a new work scheme, but was heavily penalised in the process. My endowment was with Norwich Union, and wouldn't even pay off the mortgage (if I still had one) let alone pay me the anticipated handsome lump sum towards my retirement. Like many of the younger generation today, some of us boomers could see the system was going to fail us badly in those days (and I haven't much confidence in the state pension either), but instead of whingeing and moaning we got up and did something about it. So some of us won't be a burden on future generations, we'll just be screwed once again for being frugal and making alternative provision for our old age.
19. braindeed said...
p.doff @16
I was not talking about you or any individual.
As I stated, actuaries understood that the number of boomers implied a need for greater contributions IN TOTAL - they were never collected and as such represent a delayed fraud perpetrated upon future generations. Individuals can only do their best, but if governments fail to grasp the nettle for expedient, ballot box reasons then it is, indeed, fraud.
I remember repeated and strenuous warnings from the same profession with regard to the pension concessions granted to policemen and certain civil servants as being untenable and irresponsible. Mrs T had just won a war (against prevailing opinion) and was intent on taming the unions (miners primarily) - her argument was that the Reganomic laissire faire or 'trickle down' would provide the locomotive of future growth. along with deregulation of the financial sector.
And here we are - the actuaries were right.
20. doomwatch said...
Anybody who studied law, history or PPE at University should be banned from becoming an MP or holding any
senior economic post. It's time to hand the country back to the peolple who get on with things and made this country
once great; the engineers.
21. braindeed said...
18. doomwatch said...
t's time to hand the country back to the peolple who get on with things and made this country
once great; the engineers
....find me one that can draft an economic model on a lathe, and I'm in.
22. growler said...
@5 Paul: echo comments about bashing baby boomers.
I'm 1964 and in rented. I'd like the rates to go up so that those people who were oversold get out of the market and sue their so-called professionals that sold them the loan in the first place. So bring it on with higher IRs. If people have planned correctly, they will be able to manage it as homeowners. If they haven't - well... I have little sympathy.
But please don't generalise. There are more of us baby-boomers with you than you think
23. alan said...
"What’s needed is a total change of direction. Get the deficit under control. Raise interest rates to restore confidence in the pound, and reward saving. Cut taxes to stimulate enterprise and investment."
Yup, sounds OK to me.
Bloomberg will publish this sort of thing, being based in the USA. You won't see this advocated in the British media. No point falling foul of the establishment.
How long will it be before politicians start to work out what's right for the country rather than what will keep them in office (and their snouts in the trough)?
Personally, I don't think the older member of the population are driving Brown's scorched earth policy - many "boomers" paid £25,000 for their house 30 years ago and now have £15,000 in savings, earning a measly low percentage. OK, the house is over inflated at £200,000 these days but the only way to cash in on it is Equity Withdrawal (or die and leave it to someone). If they sell it they still need a place to live, don't they?
24. clockslinger said...
Braindeed, you are certainly right to locate the roots of the present political and economic environment in the Thatcher/Regan years. That was the source of the casino economy that has been followed since, deregulation, consumerism, PPP (admittedly taken far further under Nu Labour), the dogmatic insistance on "markets" even where the "goods" concerned have a non market value and lets not forget the ridiculous notion of trickle down. We do well to remember 'cause you couldn't make it up, or suceed in putting this over on the population if you weren't a ruthless oligarchy running a nation of people too busy shopping and spending to take notice. Let's be careful about intergenerational angst however as i think you'll find that the real mischief is the vast income and wealth gap in this unhappy island across ALL generations...what age do you think the average merchant banker will retire and on what pension pot?
25. rumble said...
Pfff... Keynesian economics is politics dressed as economics. A big drag. Replace it and the Westminster weirdos lose control.
26. Someone? said...
Keynsian economics died in the 1970s. Its recent resurrection was the result of political impotence.
27. braindeed said...
22. @ clockslinger said...
Let's be careful about intergenerational angst however as i think you'll find that the real mischief is the vast income and wealth gap in this unhappy island across ALL generations
I was careful as I could to state 'IN TOTAL' ....implying that although I still think the boomers take out more than they contributed, there are indeed some within that subset who did better than others - any correction (impossible now) would have to have been pro-rata.
28. letthemfall said...
The real nonsense in this article is that MT brought about a durable economic recovery. From 1980 we had recession, credit boom, recession; from 1997 we had credit boom (only bigger), recession. But such blunt assertions go down well here - like those that suggest everything is the fault of baby boomers, socialism, Gordon Brown, public sector... and so on ad nauseum.