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aa3

Why No Uk Government Can Do Serious Cutbacks.

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The national budget is going to be about £700 billion, with tax receipts at £500 billion(if they hold up). Deficit = £200 billion.

Lets say a government came in and tried to get the deficit under control(or was forced to by the bond/currency markets).. and tried to reduce spending by £150 billion, still leaving a deficit of £50 billion. £150 billion divided by £700 billion works out to 21%. And let us say that each percent cut equals the same percent cut in jobs of the state.

The British state directly employs about 5.5 million, and probably 2.5 million more working as contractors in one form or another. So 8 million workers dependent on this budget. A 21% cut in this employment would result in = 1.7 million jobs lost. Instantly unemployment would rocket to about 20%.

I would suggest most of these government employees also are the main carriers of mortgage debt. Since the government jobs are the higher paying in today's society and much more stable. Or at minimum of the couples who have mortgages its very very common that 1 of the couple works for the state. And since people have stretched so far, they cannot meet payments without 1 income. Which I find it unlikely if the state was to lay off 1.7 million that most of these people would be able to replace that income. The result over time would be gradual default on I would conservatively guess million homes, and then banks having to sell that supply into an economy in outright depression.

Therefore regardless of what happens and regardless of who wins the election, they will print whatever the difference is. Even if tax revenues continue to collapse, even if inflation gets going. Of course it seems a mere delaying tactic as the private economy is already losing over 100,000 jobs a month. 1.2 million a year, with no signs of a turnaround. Which is nearing 10% of the private sector jobs vanishing a year.

Edited by aa3

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Which is exactly why printing money is the right answer. In my opinion, the government should fund it's deficit through printing, but with an inflation target of 0%. I don't mean CPI or RPI, I mean keeping broad money stable.

I'm probably just a hippy and a commie, but I think we have a stupid monetary system and we should get rid of it.

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Since the government jobs are the higher paying in today's society and much more stable.

Easy to solve.

Cull the senior management for not hitting targets. Promote a couple of the best middle managers to fill their roles at a lower wage. Cull a load of the most lazy middle managers and employ a few hard workers from the floor, again at a lower rate of pay. You could then recruit to fill the holes in the lower rungs.

Net effect: lower cost to the tax payer, the chaff has been cut, same number of people in employment and the government can claim headlines such has "200 to be recruited in Xsector" due to the new people recruited to fill the lower rungs.

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The national budget is going to be about �700 billion, with tax receipts at �500 billion(if they hold up). Deficit = £200 billion.

Lets say a government came in and tried to get the deficit under control(or was forced to by the bond/currency markets).. and tried to reduce spending by �150 billion, still leaving a deficit of �50 billion. �150 billion divided by �700 billion works out to 21%. And let us say that each percent cut equals the same percent cut in jobs of the state.

Probably a higher percentage as a large part of that 700 bn in not salary - for instance benefits.

The British state directly employs about 5.5 million, and probably 2.5 million more working as contractors in one form or another. So 8 million workers dependent on this budget. A 21% cut in this employment would result in = 1.7 million jobs lost. Instantly unemployment would rocket to about 20%.

Or they could halve the hours for 3.4m

I would suggest most of these government employees also are the main carriers of mortgage debt.

I don't see why

Since the government jobs are the higher paying in today's society and much more stable.

Median yes, but mean no IIIR.

Or at minimum of the couples who have mortgages its very very common that 1 of the couple works for the state. And since people have stretched so far, they cannot meet payments without 1 income. Which I find it unlikely if the state was to lay off 1.7 million that most of these people would be able to replace that income. The result over time would be gradual default on I would conservatively guess million homes, and then banks having to sell that supply into an economy in outright depression.

Or the banks might sit on the repos like they appear to be doing in the states.

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The national budget is going to be about �700 billion, with tax receipts at �500 billion(if they hold up). Deficit = £200 billion.

Lets say a government came in and tried to get the deficit under control(or was forced to by the bond/currency markets).. and tried to reduce spending by �150 billion, still leaving a deficit of �50 billion. �150 billion divided by �700 billion works out to 21%. And let us say that each percent cut equals the same percent cut in jobs of the state.

The government procurement budget is close to 160 [Edit, depends who you ask...] billion a year all told.

You can probably cut most of that apart from the NHS, British industry gives such poor value for money its mostly wasted anyway (welfare really). So some job losses but not that many.

Edited by Cogs

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http://www.guardian.co.uk/politics/2009/ju...spending-pledge

"There will be efficiency savings, there will be a sale of state assets, there will be reforms of the way departments work. If these programmes are cut, then that is fine, but I want to get the resources to the frontline, to policing, to hospitals and to schools," he told the BBC.

The efficiency savings Brown refers to would have to come from mass employee cuts probably in the back office. This would raise the unmployment, and because of the way the organisation are located (it's a political decision - e.g relocate the ONS to Wales) would have disproportionate effect across the country.

They have tried to sell 'assets' (Royal Mail, etc) but essentially it sounds to me Brown is suggesting the UK can't finance current expenditure. It's a bad time to be selling assets in the middle of the worst recession since the 1930's. 'there will be a sale of state assets' is pretty clear cut but then again as article mentions he may have made a mistake.

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At some point the government won't be able to sell debt anymore (already seems to have happened, the last bond sale without QE money was a flop). If it can't raise money via bonds it has two choices, raise interest rates and cut spending voluntarily or wait till they have to got to the IMF who will make them do both. Which choice do you think our government will make? I reckon by October/November we'll be going to the IMF in the midst of a currency collapse and then there will be a huge cull of public sector jobs, and interest rates will rise. Anger will finally boil over and we will see stuff we haven't seen since the miner's strike. Alan Johnson will be PM for a few months before Cameron comes in next year and does what the Tories had to do in the 80s and spend a decade blaming labour for the mess we're in.

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Why not cut wages by 20% or even say 30% for management?

As highlighted procurement is a cost problem.

What would you do about public sector pensions, they are just adding to the deficit?

The country is flat broke.

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Basically you can't have cutbacks without cuts. Even if its in procurement, then the companies they are procuring from will cut staff relative to the size of the cuts.

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Which is exactly why printing money is the right answer. In my opinion, the government should fund it's deficit through printing, but with an inflation target of 0%. I don't mean CPI or RPI, I mean keeping broad money stable.

I'm probably just a hippy and a commie, but I think we have a stupid monetary system and we should get rid of it.

I've been arguing for a social credit system. Get rid of the fractional reserve private creation of money.. and make all money come into existence through the national state creating it to fund most of its budget. Even more radical although we'll never see this.. I'd spend the new money into the economy by giving it equally to every adult citizen, and they can spend it however they want.

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Basically you can't have cutbacks without cuts. Even if its in procurement, then the companies they are procuring from will cut staff relative to the size of the cuts.

What you are highlighting here is the inability of the system to breathe.

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At some point the government won't be able to sell debt anymore (already seems to have happened, the last bond sale without QE money was a flop). If it can't raise money via bonds it has two choices, raise interest rates and cut spending voluntarily or wait till they have to got to the IMF who will make them do both. Which choice do you think our government will make? I reckon by October/November we'll be going to the IMF in the midst of a currency collapse and then there will be a huge cull of public sector jobs, and interest rates will rise. Anger will finally boil over and we will see stuff we haven't seen since the miner's strike. Alan Johnson will be PM for a few months before Cameron comes in next year and does what the Tories had to do in the 80s and spend a decade blaming labour for the mess we're in.

Thats a possibility, the IMF essentially taking control of the country and 'forcing' the cuts to be made. I don't think politically any party can make the cuts this time, they would just be too epic in size.

Basically it would be the Argentina scenario. There are a lot of eerie parallels between Britain and Argentina. At one point Argentina was the 8th largest economy of the world and Buenos Aires the huge 10 million+ person capital was one of the world financial centers.

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What you are highlighting here is the inability of the system to breathe.

Exactly. Since the state has such an overwhelming prescence in the system it can't move without affecting the whole system and the system doesn't have any give in it atm. So it would have to do things like one poster mentioned cutting management salaries and using that money to hire additional people. But the chances of that happening are imo astronomically low.

Edited by aa3

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A 21% cut in this employment would result in = 1.7 million jobs lost. Instantly unemployment would rocket to about 20%.

Just cut total renumeration by 21% instead. e.g. 50% cut in pension contributions and 15% cut in wages. That's not far of private sector conditions who are basically paying for it all. Go further and lay off a few hundred thousand anyway.

It's all part of us all dropping back to a lower standard of living.

Although I'm conveniently ignoring the feedback effect of all those people spending less, causing more job losses etc., the positive spiral helped on the way up, it's just the price to pay the for unreal boom.

The rest of the world does not owe us a living. We now owe them a living.

VMR.

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Although I'm conveniently ignoring the feedback effect of all those people spending less, causing more job losses etc., the positive spiral helped on the way up, it's just the price to pay the for unreal boom.

Exactly. I don't see any great difference between cutting the income of 20% of the workforce by 100% and cutting the income of 100% of the workforce by 20%.

The same drop in aggregegate wages means the same reduction of spending power, and instead of, say, 20 people from a given office 100% likely to default on their mortgage, you now have 100 people 20% likely to default... approximately!

Edited by Selling up

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The national budget is going to be about �700 billion, with tax receipts at �500 billion(if they hold up). Deficit = £200 billion.

Lets say a government came in and tried to get the deficit under control(or was forced to by the bond/currency markets).. and tried to reduce spending by �150 billion, still leaving a deficit of �50 billion. �150 billion divided by �700 billion works out to 21%. And let us say that each percent cut equals the same percent cut in jobs of the state.

The British state directly employs about 5.5 million, and probably 2.5 million more working as contractors in one form or another. So 8 million workers dependent on this budget. A 21% cut in this employment would result in = 1.7 million jobs lost. Instantly unemployment would rocket to about 20%.

I would suggest most of these government employees also are the main carriers of mortgage debt. Since the government jobs are the higher paying in today's society and much more stable. Or at minimum of the couples who have mortgages its very very common that 1 of the couple works for the state. And since people have stretched so far, they cannot meet payments without 1 income. Which I find it unlikely if the state was to lay off 1.7 million that most of these people would be able to replace that income. The result over time would be gradual default on I would conservatively guess million homes, and then banks having to sell that supply into an economy in outright depression.

Therefore regardless of what happens and regardless of who wins the election, they will print whatever the difference is. Even if tax revenues continue to collapse, even if inflation gets going. Of course it seems a mere delaying tactic as the private economy is already losing over 100,000 jobs a month. 1.2 million a year, with no signs of a turnaround. Which is nearing 10% of the private sector jobs vanishing a year.

yep cutting back has become politically unpalletable

until they are forced into it

http://mises.org/TRADCYCL/AVOIDINF.ASP

Can We Still Avoid Inflation?

Friedrich A. Hayek

In one sense the question asked in the title of this lecture is purely rhetorical. I hope none of you has suspected me of doubting even for a moment that technically there is no problem in stopping inflation. If the monetary authorities really want to and are prepared to accept the consequences, they can always do so practically overnight. They fully control the base of the pyramid of credit, and a credible announcement that they will not increase the quantity of bank notes in circulation and bank deposits, and, if necessary, even decrease them, will do the trick. About this there is no doubt among economists. What I am concerned about is not the technical but the political possibilities. Here, indeed, we face a task so difficult that more and more people, including highly competent people, have resigned themselves to the inevitability of indefinitely continued inflation. I know in fact of no serious attempt to show how we can overcome these obstacles which lie not in the monetary but in the political field. And I cannot myself claim to have a patent medicine which I am sure is applicable and effective in the prevailing conditions. But I do not regard it as a task beyond the scope of human ingenuity once the urgency of the problem is generally understood. My main aim tonight is to bring out clearly why we must stop inflation if we are to preserve a viable society of free men. Once this urgent necessity is fully understood, I hope people will also gather the courage to grasp the hot irons which must be tackled if the political obstacles are to be removed and we are to have a chance of restoring a functioning market economy.

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The national budget is going to be about �700 billion, with tax receipts at �500 billion(if they hold up). Deficit = £200 billion.

Lets say a government came in and tried to get the deficit under control(or was forced to by the bond/currency markets).. and tried to reduce spending by �150 billion, still leaving a deficit of �50 billion. �150 billion divided by �700 billion works out to 21%. And let us say that each percent cut equals the same percent cut in jobs of the state.

The British state directly employs about 5.5 million, and probably 2.5 million more working as contractors in one form or another. So 8 million workers dependent on this budget. A 21% cut in this employment would result in = 1.7 million jobs lost. Instantly unemployment would rocket to about 20%.

I would suggest most of these government employees also are the main carriers of mortgage debt. Since the government jobs are the higher paying in today's society and much more stable. Or at minimum of the couples who have mortgages its very very common that 1 of the couple works for the state. And since people have stretched so far, they cannot meet payments without 1 income. Which I find it unlikely if the state was to lay off 1.7 million that most of these people would be able to replace that income. The result over time would be gradual default on I would conservatively guess million homes, and then banks having to sell that supply into an economy in outright depression.

Therefore regardless of what happens and regardless of who wins the election, they will print whatever the difference is. Even if tax revenues continue to collapse, even if inflation gets going. Of course it seems a mere delaying tactic as the private economy is already losing over 100,000 jobs a month. 1.2 million a year, with no signs of a turnaround. Which is nearing 10% of the private sector jobs vanishing a year.

+1

Printy printy all the way.

It won't work - it means hyperinflationary depression and state failure instead of just depression and state failure but they will do it. The nice thing about printy prinbty if you are inside the government is that you can use some of it to make yourself ok personally - print, buy gold/beans/ju jitsu lesson/a bunker/etc

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Stop handing out money to wasters.

There's a tramp hangs around our street asks people for money so he can buy food/beer etc

Turns out he has a paid for council flat in another part of town. Said this himself.

8 o'clock yesterday morning one of the fellas in our street, off out to work, totally let rip shouting and swearing at the tramp to get out of our neighbohurhood and stop being such a lazy scumbag. Class. And true.

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+1

Printy printy all the way.

It won't work - it means hyperinflationary depression and state failure instead of just depression and state failure but they will do it. The nice thing about printy prinbty if you are inside the government is that you can use some of it to make yourself ok personally - print, buy gold/beans/ju jitsu lesson/a bunker/etc

do you think ju jitsu is the best martial art to learn for the coming collapse

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do you think ju jitsu is the best martial art to learn for the coming collapse

I'm with Mr Miagai - "best way to avoid getting hurt is no be there."

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Totally disagree.

Most of the money poured into the health service, and public services generally, has gone on wages or benefits. I have a couple of friends who are GP's; you would not believe how well they are paid.

The answer is simple. Public sector pay freeze for 3 years; public sector non front line recruitment freeze for same period; public sector pay maxed at £150k, with the names and roles of all those earning over £75k published so the public can decide whether they are VFM; no tax credits/benefits (incl. child benefit) to higher rate tax payers, charges for board and lodging to those in hospital. Cameron, if he has the bottle will do all of these things in his first 3 months, and reap a massive reward 3 years later, and cruise to victory one year after that.

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Stop handing out money to wasters.

I agree.

Providing it's from the top down. Starting with Her Maj' and Phil. Turf them out of the people's palaces and castles, ensure they don't get a bean from the Civil List and pay for their own security (perhaps) from their hidden Bank of England Nominee accounts. Give them a maisonette in Tower Hamlets and bung them what every other pensioner couple have to survive on.

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I agree.

Providing it's from the top down. Starting with Her Maj' and Phil. Turf them out of the people's palaces and castles, ensure they don't get a bean from the Civil List and pay for their own security (perhaps) from their hidden Bank of England Nominee accounts. Give them a maisonette in Tower Hamlets and bung them what every other pensioner couple have to survive on.

So you'd be a 'Don't know' if we had a referendum on becoming a republic?

p-o-p

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