Vince Cable Said "property Bubble" Was "the Wrong Basis" Of Brown's Economy

[Tired of Waiting]

Vince Cable has told the BBC that last decade's (Brown's) economy was "based completely on the wrong basis, we had property bubble, vast increase in personal debt, we had an economy that was over-dependent on the City of London"

In an interview to radio 4 Today Programme Cable said:

QUOTE: " In terms of the growth process, what we are doing at the moment, the Chancellor and I are leading a process in government, looking at all the key sectors of the UK economy, looking at key policy areas, like regulation, competition, trade, planning, trying to make sure that these support recovery and growth. And this isn't a simple process, I mean we had economic growth in the last decade that tuned out to be based completely on the wrong basis, we had property bubble, vast increase in personal debt, we had an economy that was over-dependent on the City of London and the south east, we got to rebalance the economy as well as grow it (...) "

LINK ( 8 minutes into the audio): http://news.bbc.co.uk/today/hi/today/newsid_9372000/9372712.stm

Vince Cable gets it.

.

Edited January 26, 2011 by Tired of Waiting

[exiges]

Cable gets it.

But is he going to do anything about it.

The LibDems U-turn on tuition fees highlights the difference between theory and practice.

Edited January 25, 2011 by exiges

[cica]

He'll suspiciously go back on it when questioned about it in the coming weeks.

Cable is so close yet so far to "getting it". He talks a lot of sense then denies what he says and "corrects" himself.

Initially critical of QE he changed his mind.

Went back on saying public spending wasn't the way out of this.

In 2008 he made comments implying the government shouldn't pressure the BoE into low interest rates...and went back on those comments.

[R K]

vast increase in personal deb

students?

more houses in the SE?

bankers are the future?

[Georgia O'Keeffe]

Vince Cable: Last decade's (Brown's) economy was "based completely on the wrong basis, we had property bubble, vast increase in personal debt, we had an economy that was over-dependent on the City of London"

In an interview to radio 4 Today Programme Cable said: "In terms of the growth process, what we are doing at the moment, the Chancellor and I are leading a process in government, looking at all the key sectors of the UK economy, looking at key policy areas, like regulation, competition, trade, planning, trying to make sure that these support recovery and growth. And this isn't a simple process, I mean we had economic growth in the last decade that tuned out to be based completely on the wrong basis, we had property bubble, vast increase in personal debt, we had an economy that was over-dependent on the City of London and the south east, we got to rebalance the economy as well as grow it (...)"

LINK (8 min into the audio): Audio: http://news.bbc.co.uk/today/hi/today/newsid_9372000/9372712.stm

Cable gets it.

he doesnt really get it, hes about 20 years out with his start date

[Executive Sadman]

Most of the coalition 'get it'.

Its just that the morons who make up 90+% of the British public prefer ignorance is bliss, and liebours 'dont think, just spend' approach suits them down to the ground. Or at least it will until inflation means they cant heat their homes, fuel their cars and feed themselves.

[Executive Sadman]

Lets see what Cameron does over the Sky issue.

http://www.independent.co.uk/news/uk/politics/did-camerons-dinner-with-murdoch-break-ministers-code-2193292.html

Why all the fuss about sky?

Liebour and BBC have been in bed for decades. Various BBC employees have said as much over the years.

Hopefully both will be irrelevant in time.

I personally dont care who owns TV, so long as the internet remains largely unregulated and uncensored.

[Nuggets Mahoney]

Why all the fuss about sky?

Liebour and BBC have been in bed for decades. Various BBC employees have said as much over the years.

Hopefully both will be irrelevant in time.

I personally dont care who owns TV, so long as the internet remains largely unregulated and uncensored.

You might find this article interesting...

The end of the net as we know it

ISPs are threatening to cripple websites that don't pay them first. Barry Collins fears a disastrous end to net neutrality

You flip open your laptop, click on the BBC iPlayer bookmark and press Play on the latest episode of QI. But instead of that tedious, plinky-plonky theme tune droning out of your laptop’s speakers, you’re left staring at the whirring, circular icon as the video buffers and buffers and buffers...

[Democorruptcy]

Sounds like a man who should be housing minister instead of

[Tired of Waiting]

But is he going to do anything about it. (...)

He wants to, but there are very strong political opposition to it, both inside and outside the government, as we all know. Powerful vested interests all over the place. To be frank, I doubt Cable will be able to convince the government into doing much about it, particularly now that he has been weakened by that Telegraph sting operation.

By the way, the Telegraph is not really a cable supporter, quite the opposite, and has managed to weaken Cable considerably, unfortunately.

[Tired of Waiting]

Most of the coalition 'get it'.

I hope they do NOW, but until recently they didn't - from both parties!

George Osborne bought a £1.85 million house in 2006, and Ed Balls bought a £655,000 house in April 2007 ! (with a £438,000 mortgage). Morons! All of them!

http://www.housepricecrash.co.uk/forum/index.php?showtopic=158233&st=0&gopid=2869106entry2869106

By the way, that may explain Balls' emphasis on supporting the housing market after 2007:

http://www.housepricecrash.co.uk/forum/index.php?showtopic=158226&pid=2868185&st=0entry2868185

Its just that the morons who make up 90+% of the British public prefer ignorance is bliss, and liebours 'dont think, just spend' approach suits them down to the ground. Or at least it will until inflation means they cant heat their homes, fuel their cars and feed themselves.

I think the main responsible for it is the British media. They were utterly incompetent during the bubble-inflating phase. This site (!) was one of the few places trying to warn the nation about the incoming disaster! FFS!

[Tired of Waiting]

Sounds like a man who should be housing minister instead of

Sounds like a man who should be Prime Minister (with a majority in Parliament, not in coalition, otherwise he wouldn't be able to implement the LibDems manifesto). Alas ... reality is ... thicker.

[Tired of Waiting]

he doesnt really get it, hes about 20 years out with his start date

This bubble started after 9-11, when interest rates were pushed right down.

[Riedquat]

Most of the coalition 'get it'.

Its just that the morons who make up 90+% of the British public prefer ignorance is bliss, and liebours 'dont think, just spend' approach suits them down to the ground. Or at least it will until inflation means they cant heat their homes, fuel their cars and feed themselves.

Most of the coalition get it but 90+% of them and their pals have done very nicely out of it all thank you very much. The result is that there's no appetite to fix the problem in either the population or the government.

[Georgia O'Keeffe]

This bubble started after 9-11, when interest rates were pushed right down.

nope it started in the 80s with big bang, thats when the banks/derivatives/financial wizadry were unleashed, since then the outcome has been inevitable, you are only focusing on the blow off phase, but the debt growth personal/govt has been a bog standard exponential curve. Debt growth on debt growth to keep it going, im sure if you logged it youd get a pretty standard straight line

Edited January 25, 2011 by Tamara De Lempicka

[Tired of Waiting]

nope it started in the 80s with big bang, thats when the banks were unleashed, since then the outcome has been inevitable, you are only focusing on the blow off phase, but the debt growth personal/govt has been a bog standard exponential curve. Debt growth on debt growth to keep it going, im sure if you logged it youd get a pretty standard straight line

That Mckinsy chart on total national debts shows a more recent peak.

(I can't look for it now, sorry, I have to log-off. Almost beer time!)

[Georgia O'Keeffe]

That Mckinsy chart on total national debts shows a more recent peak.

(I can't look for it now, sorry, I have to log-off. Almost beer time!)

im not talking about national debt, the reason its shot up is because the exponential curve inevitably reached its limit, that is just a matter of timing, if it hadnt imploded the national debt as a percentage would still look fine, if it had imploded in the late 90s the national debt graph would look just as horrific because GDP would have still contracted by a corresponding amount relative to the debt at that time , but it had to reach a limit thats the point and it had to grow exponentially to keep it from imploding earlier

Edited January 25, 2011 by Tamara De Lempicka

[Democorruptcy]

That Mckinsy chart on total national debts shows a more recent peak.

(I can't look for it now, sorry, I have to log-off. Almost beer time!)

TDL is correct.

The debt peak is only a symptom of when the financial sector seized control from our politicians in the 80's

[Tired of Waiting]

im not talking about national debt, the reason its shot up is because the exponential curve inevitably reached its limit, that is just a matter of timing, if it hadnt imploded the national debt as a percentage would still look fine, if it had imploded in the late 90s the national debt graph would look just as horrific because GDP would have still contracted by a corresponding amount relative to the debt at that time , but it had to reach a limit thats the point and it had to grow exponentially to keep it from imploding earlier

I've found the chart - below. Take a look.

Clarification: I didn't say government debt. I said total national debt = gov. + household + companies.

Good post.

I fully agree that the BoE shares the blame. Though to be fair, when RPI inflation started to overshot the 2% target in 2003 (blue line in the chart below), the BoE was going to increase interest rates to curb it.

But in December 2003 Gordon Brown removed housing costs from the inflation index, forcing the Bank of England to keep interest rates too low for too long. Mervyn King said last year in a House of Lords Economics Committee that he was against it, and said so to Gordon Brown at the time. But I agree that the Bank should have opposed it much more strongly, and Mervyn should even have threatened to resign if forced to change to CPI.

Anyway, RPI overshoot the inflation target from the beginning of 2003 all the way to mid-2008, but the BoE could not increase interest rates, as it had to follow CPI instead.

Note in the chart below that at the end of 2003 the UK credit bubble was peaking. Higher IR would have curbed it. But then, thanks mainly to IR kept too low (and lack regulation), it started to inflate again.

Source: http://www.mckinsey.com/mgi/reports/freepass_pdfs/debt_and_deleveraging/debt_and_deleveraging_full_report.pdf

It was not exactly a "banking crisis". It was a credit bubble. The difference is that the credit bubble was his, Gordon Brown's, fault.

1) Brown created the "tripartite" structure that failed to spot it and curbed it.

2) Brown blocked the BoE from curbing the bubble in December 2003, by switching from RPI to CPI, removing housing costs from the inflation index, thus stopping the BoE from raising interest rates in 2004 (a pre-electoral year...). Thanks to that change, the BoE was forced to keep interest rates too low all the way until 2008 (RPI overshot 3% all the way).

It was a credit bubble, fuelled by Gordon Brown's political short termism, and criminal economic incompetence.

The question is: why did Brown do that?

My guess: Back in 2003 Brown did not foresee the full size of the disaster he was sowing. His main goal was to be the next prime minister. His first main concern was with the 2005 election. RPI was overshooting the inflation target, due to rising housing costs, and the the BoE was going to raise IR in 2004. That would slow down the economy, and reduce Labour's chances of wining the 2005 election (already weakened politically by the Iraq war, remember). Brown's solution? Remove housing costs from the inflation index, and that will stop the BoE from raising IRs. Simple.

There are question whether Brown knew at the time that this index tampering would:

Create a housing bubble,

Or the size of it,

And then the consequences for the financial system,

And for the real economy;

And for millions of people.

But one thing is certain: The more he foresaw, more of a b@stard he was. The less he foresaw, more of a moron he was.

[Georgia O'Keeffe]

I've found the chart - below. Take a look.

Clarification: I didn't say government debt. I said total national debt = gov. + household + companies.

so the increase was 50% in 8 years, now if you can take that data back to 1980 i contest that you would likely see similar rises, 210 to 300, and 100 to 210

Edited January 25, 2011 by Tamara De Lempicka

[Realistbear]

Vince Cable has told the BBC that last decade's (Brown's) economy was "based completely on the wrong basis, we had property bubble, vast increase in personal debt, we had an economy that was over-dependent on the City of London"

In an interview to radio 4 Today Programme Cable said:

QUOTE: " In terms of the growth process, what we are doing at the moment, the Chancellor and I are leading a process in government, looking at all the key sectors of the UK economy, looking at key policy areas, like regulation, competition, trade, planning, trying to make sure that these support recovery and growth. And this isn't a simple process, I mean we had economic growth in the last decade that tuned out to be based completely on the wrong basis, we had property bubble, vast increase in personal debt, we had an economy that was over-dependent on the City of London and the south east, we got to rebalance the economy as well as grow it (...) "

LINK ( 8 minutes into the audio): http://news.bbc.co.uk/today/hi/today/newsid_9372000/9372712.stm

Vince Cable gets it.

.

Almost. There is a direct link between the property bubble and the City which facilitated it.

The entire disaster was wrapped around HPI.

Edited January 25, 2011 by Realistbear

[Stars]

im not talking about national debt, the reason its shot up is because the exponential curve inevitably reached its limit, that is just a matter of timing, if it hadnt imploded the national debt as a percentage would still look fine, if it had imploded in the late 90s the national debt graph would look just as horrific because GDP would have still contracted by a corresponding amount relative to the debt at that time , but it had to reach a limit thats the point and it had to grow exponentially to keep it from imploding earlier

agreed

+1

[Tired of Waiting]

so the increase was 50% in 8 years, now if you can take that data back to 1980 i contest that you would likely see similar rises, 210 to 300, and 100 to 210

But the total was not so bad yet. Twice in 2002 and 2003 the total debt contracted a bit. See that chart. (The BoE was still targeting RPI.) It was peaking, and should have been contained then and there. The BoE was going to increase rates in 2004, but Brown prevented it, by switching to CPI - removing housing costs from the index.

They could also have curbed the credit bubble via mortgage regulation, such as minimum deposit, maximum multiples of income, end of self-cert, etc.

The bubble could have been curbed then. Easily. It was just a matter of political will. But Brown had other priorities.

And the UK media failed to whistle-blow.

[Tired of Waiting]

Almost. There is a direct link between the property bubble and the City which facilitated it.

The entire disaster was wrapped around HPI.

I think he basically said that: property bubble, personal debt, City.

[Tankus]

I hope they do NOW, but until recently they didn't - from both parties!

George Osborne bought a £1.85 million house in 2006, and Ed Balls bought a £655,000 house in April 2007 ! (with a £438,000 mortgage). Morons! All of them!

http://www.housepric...6

By the way, that may explain Balls' emphasis on supporting the housing market after 2007:

http://www.housepric...0

I think the main responsible for it is the British media. They were utterly incompetent during the bubble-inflating phase. This site (!) was one of the few places trying to warn the nation about the incoming disaster! FFS!

But who is paying the mortgage ....hmmmm ?

Edited January 26, 2011 by Tankus