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Project Armageddon – The Final Report

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http://www.tullettprebon.com/Documents/strategyinsights/Tim_Morgan_Report_007.pdf

The United Kingdom is mired in debt, and her economy is flat-lining. Each side of the political divide has a different take on the best solutions to these problems. The Coalition government believes that the huge fiscal deficit must be eliminated. Its opponents argue that fiscal tightening will undermine the prospects for growth.

Project Armageddon was established to examine the possibility that both sides’ warnings are correct but that neither side’s prescriptions will work. We conclude that Britain’s debts are unsupportable without sustained

economic growth, and that the economy, as currently configured, is aligned against growth.

Radical solutions are required if a debt disaster is to be averted. All macroeconomic options have been tried, and have failed. The only remaining options lie in the field of supply-side reform. Unfortunately, public opinion may be inimical to the scale of reform that is required.

Did this report get posted on here? Can't remember seeing it. Full report and graphs at the link.

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Some new buzz words into the mix there......

supply side reform...

inimical.....

Wonder how we should interpret those terms?

Supply Side Reforms = Shitstorm type cuts in Public spending = large unemployment totals

Inimical = A Tottenham and Hackney type response by Joe Public?

What exactly is this mob driving at?

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Good, the right things being recognised.

Government cannot stimulate Britain out of this mess, all the State is capable of doing is robbing wealth and wasting it.

We need to stop stopping people doing stuff (fairly easy really, just shut down regulations left right and centre) but the hard part is to make it cheaper to live in this country, and that means slaughter the value of land. Only way I can see to do it that won't end up in Courts for 50 years is to dramatically relax planning laws and make a windfall tax on inflated agricultural land (that in attractive building areas) appreciation as a result. Result is that living cost drops and much of the appreciation of value is shared to the common pot. Have to leave some with the owner or they'll retain it for agriculture.

House prices drop through the floor which messes the banks up but I guess the time would come to take them on at their true value (nil) to preserve the money system - I doubt we can change the Worlds money system just by ourselves.

There'd be very rough consequences but that's coming anyway.

Relying on the State to create a vibrant economy would be very funny if it wasn't so tragic.

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The biggie here isn't so much land (that's #2) as the welfare state. Specifically, the perverse incentives that leave people better-off on means-tested benefits than working on low-to-middling (and in some cases well-above-average) incomes.

Least-ugly solution: scrap ALL means-tested benefits. Substitute a citizens income - maybe the £140/week they'e talking of as a state pension - to cover everything including housing. No exceptions for anyone fit to work.

Corollary: work will pay, even if it's only a few quid a week. Even seasonal jobs - like the fruit-picking done by east-europeans - suddenly become worthwhile, as they don't mean losing your benefits and the risk of losing everything when the season ends.

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Supply side economics don't work in a world with wage/regulatory arbitrage-almost all the profits go to capital and the low tax on profits and capital gains (along with tax avoidance schemes) means that most of the capital in the system ends up in the hands of too few people.

A smarter way would be to increase the share of profit going to labour, stimulate demand and thus create more jobs and thus more demand.

But this approach lacks appeal to people who see no reason to share the fruits of the economy when they have both the power and the ideological fig leaf to avoid having to do it.

Isn't it odd that almost every scheme proposed by the Financial sector to solve our problems seem to involve less protections, rights and wages for labour, and less taxes for capital. :lol::lol::lol:

What the supply siders and their fellow trickledown advocates fail to grasp is that the most valuable resource on the planet- the one resource that capitalism simply cannot do without is demand.

You could have the cheapest workforce, the best product, the smartest sales team, the highest brand profile- but if no one out there has the money to buy your product it is worthless.

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Isn't it odd that almost every scheme proposed by the Financial sector to solve our problems seem to involve less protections, rights and wages for labour, and less taxes for capital. :lol::lol::lol:

.. and no matter how much they get their way, the 'promised land' never materializes.

The longest period of generally sustained growth in the West was the 1945-1973 period. A time of heavily regulated finance and generally full employment, where productivity improvements were directly translated into wage increases (bretton woods probably helped as well). Of course, it was not a good time for High Finance, and the very rich merely got to increase their wealth at the same rate as everyone else.

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The longest period of generally sustained growth in the West was the 1945-1973 period. A time of heavily regulated finance and generally full employment, where productivity improvements were directly translated into wage increases (bretton woods probably helped as well). Of course, it was not a good time for High Finance, and the very rich merely got to increase their wealth at the same rate as everyone else.

Hard to see how we would get back to something like this from where we are now, especially with so much of our real productive activity having been replaced with ponzi finance.

People just cannot get their heads around what is wrong with 'making' money out of such things as houses. For every winner they is an equal and opposite loser. The unearned money one makes on their house ends up being made up with real earned money from a new entrant, a new entrant that will have near zero money spare to spend in the general economy. How the hell do TPTB expect to get real growth going when so much of the nations wealth is being wasted in the non-productive housing market? No wonder they want to keep the housing ponzi alive, it's now too big to fail, if it fails the UK fails.

We're screwed now whichever way the domino falls...

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.. and no matter how much they get their way, the 'promised land' never materializes.

The longest period of generally sustained growth in the West was the 1945-1973 period. A time of heavily regulated finance and generally full employment, where productivity improvements were directly translated into wage increases (bretton woods probably helped as well). Of course, it was not a good time for High Finance, and the very rich merely got to increase their wealth at the same rate as everyone else.

Except during that time competitors of the west were in ruin but now they are firing all cylinder...

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Quote:

'Britain’s fiscal and economic problems

result from grotesque mishandling

of the economy under the 1997-

2010 Labour administration. Gordon

Brown’s reform of the financial

regulatory system, and his insistence

that the Bank of England determine

monetary policy on the basis of retail

inflation alone, resulted in a reckless

escalation in mortgage lending.

The ensuing property price boom

spurred unsustainable growth in a

plethora of housing-related sectors,

and underwrote a rapid expansion

in consumer borrowing. Believing

that this bubble was real growth,

Brown spent up to, and beyond, the

apparent expansion in the tax base

that had resulted from the propertydriven

boom. Real public spending

increased by 53% in a period in which

the economy expanded by just 17%.

As soon as the bubble burst, a chasm

rapidly opened up between excessive

spending and falling tax revenues.

In addition to skewing the economy

towards debt and public spending,

Brown and his colleagues imposed

ever-increasing regulatory and

fiscal burdens on business, and

simultaneously transferred resources

from private industry into a public

sector whose productivity was subject

to continuous decline. This weakened

the overall productivity of the

British economy.

Labour’s period in office was

characterised not just by economic

and fiscal mismanagement but also

by the promotion of a culture of moral

absolutism centred around spurious

and selective concepts of ‘fairness’.

This culture, and the accompanying

sense of individual and collective

entitlement, is the biggest obstacle in

the way of effective economic reform.'

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'Britain’s fiscal and economic problems

result from grotesque mishandling

of the economy under the 1997-

2010 Labour administration. Gordon

Brown’s reform of the financial

regulatory system, and his insistence

that the Bank of England determine

monetary policy on the basis of retail

inflation alone, resulted in a reckless

escalation in mortgage lending.

The ensuing property price boom

spurred unsustainable growth in a

plethora of housing-related sectors,

and underwrote a rapid expansion

in consumer borrowing. Believing

that this bubble was real growth,

Brown spent up to, and beyond, the

apparent expansion in the tax base

that had resulted from the propertydriven

boom. Real public spending

increased by 53% in a period in which

the economy expanded by just 17%.

As soon as the bubble burst, a chasm

rapidly opened up between excessive

spending and falling tax revenues.

In addition to skewing the economy

towards debt and public spending,

Brown and his colleagues imposed

ever-increasing regulatory and

fiscal burdens on business, and

simultaneously transferred resources

from private industry into a public

sector whose productivity was subject

to continuous decline. This weakened

the overall productivity of the

British economy.

Labour’s period in office was

characterised not just by economic

and fiscal mismanagement but also

by the promotion of a culture of moral

absolutism centred around spurious

and selective concepts of ‘fairness’.

This culture, and the accompanying

sense of individual and collective

entitlement, is the biggest obstacle in

the way of effective economic reform.'

The problem is that 'effective economic reform' always seems to consist of reducing the wages, protections, and rights of labour while reducing the obligations, taxes and social responsibilities of Capital.

The reality- as distinct from the rhetoric- is that more and more of the wealth our economies create is being captured by the top few percent of the population, leading to a crisis in demand for goods and services.

As for a sense of entitlement- let's not forget which group of people in our society have been bailed out at massive taxpayer expense and to date show not the slightest intention to change the behaviour that made that bailout necessary- far from it, they continue to reward themselves vast sums on the basis that 'they are worth it'.

Also to characterise the concept of 'fairness' as trivial is not correct. Every revolution in history was driven by the perception that unfairness was entrenched in the governing system and could only be removed by force.

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Still not the slightest inkling in there of what the actual issues are.

The statists have gotta stop telling the population what to use as money and let the market get on with it. Simple as that.

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In a speech released this lunchtime on the BoE website, MPC member Martin Weale thinks monetary policy can help if things start getting worse – just bump up asset prices some more:

So I would now like to turn to what monetary policy could do to prevent inflation

dropping too far below its target, should economic and financial developments

make that appear a likely outcome. Interest rates are much lower than they were

last time the economy needed substantial support in the Autumn of 2008, and it

is unlikely that there is practical scope for a further reduction. On the other hand,

the Bank does have the option to buy more government debt, reducing longer term

interest rates. We are frequently reminded that gilts yields are at record lows; this

is, however, true only of short and medium dated stock. These yields are strongly

influenced by the expectation that Bank Rate will remain unusually low for some

time; the fact that 5-year yields are at record lows must be at least partly because,

before 2009, the Bank Rate had never been set below 2 per cent. At the long end

of the market, however, yields are not historically low. For example, as Chart 1

shows, the yield on Consols remains above 4 per cent while long-dated stocks

are paying more than 3½ per cent. These are well above the levels reached in

the middle of the last century; there is undoubtedly scope for further asset

purchases to trigger further reductions in yields on government debt should the

need arise. The resulting capital gains will provide support to consumption and

a general reduction in the term structure of interest rates is likely to lead to

knock-on capital gains on other assets which will provide further support to

consumer spending. Higher asset prices and lower interest rates are also likely

to support business investment. The extra demand which results will both support

output and help to underpin the rate of inflation.

I'm sure Weale would claim that this quote is taken out of context – his speech is about how Britons need to save more and how the economy needs rebalancing away from consumption. But that's the problem with the monetary policymakers – it's always "we need to change things, but not just now."

You could have lifted this speech out of 2001. Pumping up asset prices to maintain demand and prevent recession is what got us into this mess.

It's like frickin' Groundhog Day.

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In a speech released this lunchtime on the BoE website, MPC member Martin Weale thinks monetary policy can help if things start getting worse – just bump up asset prices some more:

I'm sure Weale would claim that this quote is taken out of context – his speech is about how Britons need to save more and how the economy needs rebalancing away from consumption. But that's the problem with the monetary policymakers – it's always "we need to change things, but not just now."

You could have lifted this speech out of 2001. Pumping up asset prices to maintain demand and prevent recession is what got us into this mess.

It's like frickin' Groundhog Day.

What else do you expect? - He's one of the slaveowning class and all his methodologies are going to revolve around motivating the slaves.

First it'll be rewards, then manipulation, then promises, then the cold shoulder and in the end....direct force.

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Except during that time competitors of the west were in ruin but now they are firing all cylinder...

In theory that would not be a massive problem, especially with the use of tariffs to ensure that we were not undercut by workers who had no rights/political voice/safety/etc. But with an over bloated finance sector calling the shots..

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Radical solutions are required if a debt disaster is to be averted. All macroeconomic options have been tried, and have failed. The only remaining options lie in the field of supply-side reform. Unfortunately, public opinion may be inimical tothe scale of reform that is required.

Apparently inimical means unfriendly, hostile but they don't like to use the latter words. Maybe they're too straightforward :lol:

Of course if supply-side reform involves policies that ultimately just reward bankers and politicians and the like again for their fraud, greed and incompetence etc at the expense of the public then obviously you can expect public opinion to be unfriendly and hostile and I dare say even inimical :lol:

Edited by billybong

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Higher asset prices and lower interest rates are also likely

to support business investment. The extra demand which results will both support

output and help to underpin the rate of inflation.

Sounds like the only ones going to be doing much spending are the top few percent. Good luck with that.

It's great (not) that they're desperate to find and anticipate ways of increasing inflation at the same time as inflation is already letting rip. Indeed a very broad interpretation of its remit by the BoE :lol::lol:

Of course it's typical of the BoE having lost all credibility.

Edited by billybong

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The problem is that 'effective economic reform' always seems to consist of reducing the wages, protections, and rights of labour while reducing the obligations, taxes and social responsibilities of Capital.

The rhetoric of a century ago hasn't been applicable to the UK since the post-war Attlee government.

Our problem today is that both capital and labour have been misdirected. Capital (hugely) away from the productive economy and into property speculation, labour (in many areas) away from the productive economy and into the tax-and-benefits mess. We need to fix both of those:

- make investment in the productive economy more attractive than flipping houses

- make work more attractive than benefits

Bottom line: if you want capital to take on social reponsibilities, you need it to get to work, not just blow bubbles. Taxing companies too much has done the exact opposite: stifled the real economy and driven capital into house price inflation.

The reality- as distinct from the rhetoric- is that more and more of the wealth our economies create is being captured by the top few percent of the population, leading to a crisis in demand for goods and services.

Property owners.

Those who earn enough to get rich on their own efforts aren't a few percent, they're a small fraction of the top 1% of earners. The top couple of hundred merchant bankers or footballers are obscenely overpaid, but it's the millions of property owners who have soaked the lifeblood out of the economy by force of sheer numbers.

As for a sense of entitlement- let's not forget which group of people in our society have been bailed out at massive taxpayer expense and to date show not the slightest intention to change the behaviour that made that bailout necessary- far from it, they continue to reward themselves vast sums on the basis that 'they are worth it'.

And let's just hope the present government doesn't ape its predecessor and write another blank cheque to the banks. Shame it's already too late. I'd think perhaps our economy's last real chance would've been in 2005 when house prices first tried to crash :ph34r:

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  • 284 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%



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