Jump to content
House Price Crash Forum
GordonBrownSpentMyFuture

Vince Cable: People Do Not Understand How Bad The Economy Is.

Recommended Posts

Guardian: Vince Cable: People do not understand how bad the economy is

Business secretary says politicians have not made clear the time and pain needed to restructure Britain's broken economic model.

Patrick Wintour, political editor

guardian.co.uk, Friday 20 May 2011 23.12 BST

Vince Cable has warned that the political class has not yet prepared the public for the scale of the underlying problems facing the UK economy and the coming squeeze on living standards.

In a frank interview with the Guardian the business secretary repeatedly referred to the time and pain that will be needed to restructure what he regards as a broken economic model.

"It is a challenge to us to communicate it better. I don't think it is understood that the British economy declined 6 or 7% – [that is] 10% below trend," Cable said. "We are actually a poorer country, mainly because of the banking crash, the recession that followed it and partly due to the squeeze we are now under from the changing balance of the world economy."

He argued: "Britain is no longer one of the world's price setters. We take our prices from international commodity markets driven by China and India. That is something we have got to live with and adjust to. It is painful. It is a challenge to us in government to explain it. The political class as a whole is not preparing the public for how massive the problem is."

He expresses frustration that "the debate about the economy is in the wrong place," partly blaming Labour for still being in a state of denial that its golden decade of growth had been built on an unsustainable model of financial services.

"There is not a sustained critique, pressure or argument from the progressive wing of politics. Ultimately it comes back to this defensiveness and an unwillingness to accept that Britain was operating a model that failed … it makes it more difficult for us to get through to the public about the scale of the problem. That is to everyone's loss."

He said: "As a country we are going to have to go through some very big major structural changes, but if the dominant debate is 'Well, what is the problem? Why are we all doing this stuff? It is not really necessary.' Of course it makes it more difficult."

Cable, one of five Liberal Democrat ministers in the cabinet, said it was realistic for the coalition to eradicate the structural deficit by the end of this parliament, adding "our credibility hinges on it".

But he does not convey optimism about growth in the short term. "The fact is that we are now having to get used perhaps to lower growth and a gradual process of building the economy up again."

He said: "We have had a very, very profound crisis which is going to take a long time to dig out of. It is about the deficit, but that is only one of the symptoms. We had the complete collapse of a model based on consumer spending, a housing bubble, an overweight banking system – three banks each of them with a balance sheet larger than the British economy. It was a disaster waiting to happen and it did happen. It has done profound damage and it is damage that is going to last a long time."

He predicted the impact on people's lives will not come primarily from government spending cuts, but the squeeze in living standards caused by world prices and a 20% devaluation of sterling against other major currencies.

Without questioning the growth forecasts from the Office for Budget Responsibility, he stressed the uncertainty of external factors. "We cannot predict what is going to happen in the eurozone, and how that is going to impact on us, and we cannot predict what is going to happen to oil prices."

Cable recently wrote that "economic policy making is like driving a car with an opaque windscreen, a large rearview mirror and poor brakes", and told the Guardian the metaphor applied to Mervyn King, the governor of the Bank of England, as he made the big calls on monetary policy designed to spur growth.

More broadly, he said: "The danger is over-confidence — the belief that the government can control everything in the economy. Governments cannot. Economic management is difficult."

He also denied the government is locked into a cycle of more spending cuts if growth slows. He said: "What is not often acknowledged is that there is a lot of flexibility built into current policy. The main element of flexibility is in monetary policy and the second is the basic Keynesian stabilisers. That is the way the government is functioning. We are not trying to maintain budget balance come what may. If the economy slows down, the deficit temporarily has to rise to take account of cyclical change, flexibility is built in."

Cable expressed disappointment that tribalism has returned to politics in the wake of the AV referendum, admitting it will be difficult for his party in the short term. But he claimed the change could be turned to Nick Clegg's advantage.

"There is now a large constituency of people out there who, for want of a better word, are de-tribalised, who hate the ya-boo, left-right debate who are looking for a home, and in a way that is our constituency. Blair appealed to that [group] a decade ago, successfully."

He said despite the vitriol directed at his party during the local elections, it had retained a base of 15% from which it can build.

"Business secretary says politicians have not made clear the time and pain needed to restructure Britain's broken economic model."

So, any clearer...?

Brace yourselves, British public, you ain't seen nothing yet and you have your bloated, fraudulently inflated house prices to thank for it. Well done.

Share this post


Link to post
Share on other sites

The key issue raised - that of an over-reliance on services in general and financial services in particular is something that needs more exposure.

It's also refreshing to hear a politician who is realistic about Britain's place in the world. If only we could get the same kind of thinking when it comes to military matters rather than the collective daydreaming that we are still a world power.

Share this post


Link to post
Share on other sites

Not bad apart from the order of issues. The housing bubble was the cause of much consumer spending.

It was also the cuase of the LOSS of many of the jobs outside of the banking sector and associated ponzi enhanced sectors. Those jobs were not just lost due to competitiion but were FORCED out of the economy.

Saving the banks by pretending that the elevated housing and land prices are relaistic is only going to lead to MORE malinvestment, MORE debt, and MORE LOSSES of jobs in other sectors.

I don;t think Cable understands how bad the economy is - how many fewer new jobs, new start ups, new business ventures will not get going or have ANY chance of competing on the world economy explicitly due to the intervention by the politicians and the bankrupt of england. It is not talked about becuase THEY DO NOT UNDERSTAND THE PROBLEM, the vast majority of them have never had a productive job in their life or tried to create one.

Share this post


Link to post
Share on other sites

Saving the banks by pretending that the elevated housing and land prices are relaistic is only going to lead to MORE malinvestment, MORE debt, and MORE LOSSES of jobs in other sectors.

And to continue to defer the pain into the future.

The current 18 to whatever generation have been abandoned like a bad start to the F1 season. It's all about next years car now.

(if you see what I mean)

Share this post


Link to post
Share on other sites

It was also the cuase of the LOSS of many of the jobs outside of the banking sector and associated ponzi enhanced sectors. Those jobs were not just lost due to competitiion but were FORCED out of the economy.

Saving the banks by pretending that the elevated housing and land prices are relaistic is only going to lead to MORE malinvestment, MORE debt, and MORE LOSSES of jobs in other sectors.

+1

I'm from Birmingham, which is also where I currently live. Once known as a smoky, industrial city that had an abundance of manufacturing jobs, it is now a clean, homogeneous, cosmopolitan city which, with the exception of a couple of large shopping centres and a bloated city council, offers absolutely no jobs at all.

Within the last few years, and under a Labour government(!), we have witnessed the destruction and asset stripping of MG Rover and the hostile takeover of Cadbury by a US firm using UK taxpayers' money. Cadbury and Bournville itself is being gradually turned into Birmingham's equivalent of the Black Country Museum - the difference being that people actually live in this museum... and pay a premium for the privilege - and the MG Rover plant has become what is quite possibly the ugliest, sh!ttest looking community college you have ever seen (anyone who has ever driven past it on the A38 will know exactly what I'm talking about). Furthermore, in the city centre they are building an ugly new "super library", to replace the ugly old one, right outside one of the most stunning Edwardian buildings in the city.

So a "super college" and a "super library" - these are things that are currently being invested in in the city of Birmingham. They also intend to redevelop New Street Station - which does indeed need it - and to roll-out the high speed rail network, presumably so that once you've studied at our super college, and read books located in our super library, you can commute every day down to London and back because that's the only place in the whole country that actually offers any jobs - and you certainly won't be able to afford to live there.

And when I say "jobs" I mean serving coffees, cleaning offices and waiting on the tables of politicians and bankers. Other than that and call centre work I don't know what else this country has to offer any more.

Share this post


Link to post
Share on other sites

What he said is perfectly true..

We are not understanding the reality !!

Benefits, houseprices, defensiveness, failing to understand the world !!

Share this post


Link to post
Share on other sites

And when I say "jobs" I mean serving coffees, cleaning offices and waiting on the tables of politicians and bankers. Other than that and call centre work I don't know what else this country has to offer any more.

Selling houses and hamburgers to each other? :unsure:

Share this post


Link to post
Share on other sites

Note he is saying that to a large extent inflation will be the medium through which the pain is delivered.

You heard if from a cabinet minister folks.

if you based investment decisions on what cabinet ministers or even chancellors said, youd have avoided property in the late 90s and thrown all your savings into banks, equities, or even better Ireland in 2006. I have difficulty believing a cabinet minister can control the behaviour of 60mn people any more than i can let alone 6bn

Share this post


Link to post
Share on other sites

if you based investment decisions on what cabinet ministers or even chancellors said, youd have avoided property in the late 90s and thrown all your savings into banks, equities, or even better Ireland in 2006. I have difficulty believing a cabinet minister can control the behaviour of 60mn people any more than i can let alone 6bn

eh?

Share this post


Link to post
Share on other sites

The public doesn't understand how bad the economy is.

The public also doesn't understand WHY the economy is as bad as it is.

The media need to tell the public some of the stupid / expensive decisions the previous govt. made putting us where we are.

Currently Labour and the BBC are getting away with saying it's "the nasty tories"

Edited by exiges

Share this post


Link to post
Share on other sites

Don't worry, benefits are inflation proofed, and pensions grow faster than inflation now. Which means any contraction falls disproportionately upon those producing. Putting all the pain on them isn't going to solve anything.

Edited by leicestersq

Share this post


Link to post
Share on other sites

eh?

govts have practically no control over social mood, they are simply a part of the social mood. The UK cant stop greeks defaulting tomorrow, or regime change in any other country, or wars or even the confidence in their own country. If solutions and economies were that easy to implement and run and had a bigger impact than actual behaviour the UK and world wouldnt be in the mess it currently is. THeories are for paper, Behaviour is the biggest impact on reality and thats unmappable across 60m or 6bn people

Edited by georgia o'keeffe

Share this post


Link to post
Share on other sites

+1

I'm from Birmingham, which is also where I currently live. Once known as a smoky, industrial city that had an abundance of manufacturing jobs, it is now a clean, homogeneous, cosmopolitan city which, with the exception of a couple of large shopping centres and a bloated city council, offers absolutely no jobs at all.

Within the last few years, and under a Labour government(!), we have witnessed the destruction and asset stripping of MG Rover and the hostile takeover of Cadbury by a US firm using UK taxpayers' money. Cadbury and Bournville itself is being gradually turned into Birmingham's equivalent of the Black Country Museum - the difference being that people actually live in this museum... and pay a premium for the privilege - and the MG Rover plant has become what is quite possibly the ugliest, sh!ttest looking community college you have ever seen (anyone who has ever driven past it on the A38 will know exactly what I'm talking about). Furthermore, in the city centre they are building an ugly new "super library", to replace the ugly old one, right outside one of the most stunning Edwardian buildings in the city.

So a "super college" and a "super library" - these are things that are currently being invested in in the city of Birmingham. They also intend to redevelop New Street Station - which does indeed need it - and to roll-out the high speed rail network, presumably so that once you've studied at our super college, and read books located in our super library, you can commute every day down to London and back because that's the only place in the whole country that actually offers any jobs - and you certainly won't be able to afford to live there.

And when I say "jobs" I mean serving coffees, cleaning offices and waiting on the tables of politicians and bankers. Other than that and call centre work I don't know what else this country has to offer any more.

Great post!

Share this post


Link to post
Share on other sites

Behaviour is the biggest impact on reality and thats unmappable

nonsense, economics is first and foremost about behaviour, and gets some right and misses other bits; inflation is a pretty reasonable conclusion for a number of reasons both domestic and international, not 100% certain but not 0% certain either

Share this post


Link to post
Share on other sites

The public doesn't understand how bad the economy is.

The public also doesn't understand WHY the economy is as bad as it is.

The media need to tell the public some of the stupid / expensive decisions the previous govt. made putting us where we are.

Currently Labour and the BBC are getting away with saying it's "the nasty tories"

+1

But why are the "nasty Tories" letting them get away with it? Because they're all one and the same. It's a big pantomime. One of the very first things the Labour government did was give control over to the Bank of England. Well the BoE didn't do a very good job did they... so why hasn't the coalition government taken those powers back off them?

Osborne could save Merv the effort of getting his quill out every few months by just reversing everything Brown did and hiking interest rates back up again to tackle inflation. But he won't be doing that, will he, because it's all a big show.

Share this post


Link to post
Share on other sites

nonsense, economics is first and foremost about behaviour, and gets some right and misses other bits; inflation is a pretty reasonable conclusion for a number of reasons both domestic and international, not 100% certain but not 0% certain either

So if behaviour is mappable, and economics fundamental building block is that, then how come we are where we are.

The only logical conclusion is it is sh!t at mapping actual real behaviour of both the decision makers and followers but looks great on paper and its not like economists havent got 400+ years of the exact same thing happening on numerous occasions to work with

Edited by georgia o'keeffe

Share this post


Link to post
Share on other sites

partly blaming Labour for still being in a state of denial that its golden decade of growth had been built on an unsustainable model of financial services.

We had the complete collapse of a model based on consumer spending, a housing bubble,

He should be more explicit, we had no growth in the last decade only a debt funded spending economy, to remove the debt and expect continued or even increased growth is insanity. Good article though and revived faith in Cable for me, also confirmed suspicion that the LibDems weren't falling on a sword for anything less than a pending total catastrophe.

Share this post


Link to post
Share on other sites

So if behaviour is mappable, and economics fundamental building block is that, then how come we are where we are.

The only logical conclusion is it is sh!t at mapping actual real behaviour but looks great on paper

straw man - just because economics is imperfect and partially to blame for the errors of the past is to ignore its successes, you cannot selectively extrapolate failure to all future cases

Share this post


Link to post
Share on other sites

+1

But why are the "nasty Tories" letting them get away with it? Because they're all one and the same. It's a big pantomime. One of the very first things the Labour government did was give control over to the Bank of England. Well the BoE didn't do a very good job did they... so why hasn't the coalition government taken those powers back off them?

Osborne could save Merv the effort of getting his quill out every few months by just reversing everything Brown did and hiking interest rates back up again to tackle inflation. But he won't be doing that, will he, because it's all a big show.

The BoE didn't do a very good job at what? Blair & Brown crowed about an "independent Bank of England" but it never really happened.

Regulating the banks? Well that area of responsibility was ripped out of the BoE remit and handed to the FSA

Preventing HPI? Tackling that thorny issue was never possible because Broon & the Treasury deliberately chose to exclude housing costs from any of the inflationary targeting briefs given to the Bank of England. Merv is on record as stating that excluding house prices from anti inflation policy was a huge mistake and something he fought against.

The Tories have simply given back the job of regulating the banks to the BoE.... something it had always done prior to 1997.

Share this post


Link to post
Share on other sites

+1

I'm from Birmingham, which is also where I currently live. Once known as a smoky, industrial city that had an abundance of manufacturing jobs, it is now a clean, homogeneous, cosmopolitan city which, with the exception of a couple of large shopping centres and a bloated city council, offers absolutely no jobs at all.

Within the last few years, and under a Labour government(!), we have witnessed the destruction and asset stripping of MG Rover and the hostile takeover of Cadbury by a US firm using UK taxpayers' money. Cadbury and Bournville itself is being gradually turned into Birmingham's equivalent of the Black Country Museum - the difference being that people actually live in this museum... and pay a premium for the privilege - and the MG Rover plant has become what is quite possibly the ugliest, sh!ttest looking community college you have ever seen (anyone who has ever driven past it on the A38 will know exactly what I'm talking about). Furthermore, in the city centre they are building an ugly new "super library", to replace the ugly old one, right outside one of the most stunning Edwardian buildings in the city.

So a "super college" and a "super library" - these are things that are currently being invested in in the city of Birmingham. They also intend to redevelop New Street Station - which does indeed need it - and to roll-out the high speed rail network, presumably so that once you've studied at our super college, and read books located in our super library, you can commute every day down to London and back because that's the only place in the whole country that actually offers any jobs - and you certainly won't be able to afford to live there.

And when I say "jobs" I mean serving coffees, cleaning offices and waiting on the tables of politicians and bankers. Other than that and call centre work I don't know what else this country has to offer any more.

And this status quo has been written into law, we have legally bound ourselves to 20 more years of no industry

HUHNE’S GREEN SCHEMES THREATEN BRITISH INDUSTRY

those coffee machines better be solar powered or even those jobs will have to go

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 309 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.