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Paul Krugman Attacks Britain's Austerity Drive As 'deeply Destructive'


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Amusing.

I start tearing game_overs arguments apart and ask for hard data proof of how its socialism's fault, when in fact the great divergence began during Thatchers/Reagans terms in office..... and he disappears from the thread.

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Amusing.

I start tearing game_overs arguments apart and ask for hard data proof of how its socialism's fault, when in fact the great divergence began during Thatchers/Reagans terms in office..... and he disappears from the thread.

Why was credit allowed to rip?

And what did governments in the west spend this money on?

And you say that it only takes a few years for the impact of policy changes to take effect and yet you blame the current crisis on decisions made in the 80's which is 30 years ago.

Russia itself still does not have democracy and the first revolution was in 1905.

It may end up taking 150 years before Russia has true democracy.

:blink:

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debt destroys wealth.

What happened was that as productivity rose real term wages did not rise to match. The income streams were instead diverted to the wealthy and the financial classes. Thus more goods were being produced but the masses could not out of their wages afford their purchase. If noone bought the increased goods then unemployment would have to rise and that would cause all sorts of problems for the political/financial classes. Thus the gap was bridged by debt. To allow purchase of the increases arising from productivity the masses were given debt instead of wage rises. But debt acts to reduce future demand due to servicing costs. Eventually a point is reached were the masses are debt saturated and the whole system collapses. There are of course other things mixed in such as the rise of china and its mechantalist trade surplus polices, but these things only served to enhance an already existing systemic imbalance.

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Why was credit allowed to rip?

And what did governments in the west spend this money on?

And you say that it only takes a few years for the impact of policy changes to take effect and yet you blame the current crisis on decisions made in the 80's which is 30 years ago.

Russia itself still does not have democracy and the first revolution was in 1905.

It may end up taking 150 years before Russia has true democracy.

:blink:

What happened was that as productivity rose real term wages did not rise to match. The income streams were instead diverted to the wealthy and the financial classes. Thus more goods were being produced but the masses could not out of their wages afford their purchase. If noone bought the increased goods then unemployment would have to rise and that would cause all sorts of problems for the political/financial classes. Thus the gap was bridged by debt. To allow purchase of the increases arising from productivity the masses were given debt instead of wage rises. But debt acts to reduce future demand due to servicing costs. Eventually a point is reached were the masses are debt saturated and the whole system collapses. Thats why we are seeing the collapse now and not 30 years ago. The effects were almost immediate as the divergence in the previous graphs showed, and the growth in debt, but the end result of those effects are occurring now. There are of course other things mixed in such as the rise of china and its mechantalist trade surplus polices, but these things only served to enhance an already existing systemic imbalance.

And please answer my previous question you said it was socialistic policies between 1945-1978 that caused the great divergence. Give me proof. Give hard data showing how it was done. Give hard data showing that the time differential between policy and effect is 50 years.

Edited by alexw
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What happened was that as productivity rose real term wages did not rise to match. The income streams were instead diverted to the wealthy and the financial classes. Thus more goods were being produced but the masses could not out of their wages afford their purchase. If noone bought the increased goods then unemployment would have to rise and that would cause all sorts of problems for the political/financial classes. Thus the gap was bridged by debt. To allow purchase of the increases arising from productivity the masses were given debt instead of wage rises. But debt acts to reduce future demand due to servicing costs. Eventually a point is reached were the masses are debt saturated and the whole system collapses. There are of course other things mixed in such as the rise of china and its mechantalist trade surplus polices, but these things only served to enhance an already existing systemic imbalance.

What happened was taxes increased to pay for the welfare state but people's standard of living rose as they were allowed by government driven loosening of credit to take on debt to fill the gap.

Now the credit bubble has burst, after people have paid their taxes they have no money left to spend in the real economy.

And wages are not rising due to the government policy of flooding the labour market with cheap migrant labour in order to prevent a wage/price spiral which would derail their QE policy.

At the end of the day, if wages rise the government will have to stop printing and hike interest rates so the only alternative is to cut the size of the state.

Either way the state has lived way beyond its means for decades and if you think the answer is an even bigger state then your analysis is seriously flawed IMO.

:blink:

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What happened was taxes increased to pay for the welfare state but people's standard of living rose as they were allowed by government driven loosening of credit to take on debt to fill the gap.

Now the credit bubble has burst, after people have paid their taxes they have no money left to spend in the real economy.

And wages are not rising due to the government policy of flooding the labour market with cheap migrant labour in order to prevent a wage/price spiral which would derail their QE policy.

At the end of the day, if wages rise the government will have to stop printing and hike interest rates so the only alternative is to cut the size of the state.

Either way the state has lived way beyond its means for decades and if you think the answer is an even bigger state then your analysis is seriously flawed IMO.

:blink:

NO.

As that previous graphic showed the debt bubble began in the mid-1980's, and it was personal debt not government debt ballooning. Also entitlement spending in the US as a percentage of GDP from when the great divergence began to now has increased by only ~2%.

http://www.usgovernmentdebt.us/spending_chart_1970_2017USp_09s1li111mcn_00f10f40f_Entitlement_Spending_Chart

And taxes have not increased in the US, they have varied a bit as a percentage of GDP but currently are at multi-decade lows. As the graph below shows taxes certainly are not the reason that household debt more than doubled.

current-tax-receipts-680.jpg

Also the break between wages and productivity happened way before the the flooding of our nations with immigrant workers. The immigrant workers have simply been another way to keep wages down for the corporates, to break the wage-productivity link. If anything if QE is to devalue debts a wage price spiral is exactly what is needed. You cannot inflate away debts without wages rising. We were only able to devalue our debts in the 1970's because wages rose in line with the increase in money supply.

And i'm not saying a bigger state is the answer. I'm saying the cause of these problems isn't the state and isnt socialism which seems to be all you ever say. The cause is the imbalances internal to our nations as well as imbalances between nations. Those imbalances were for and by the economic elites who benefited from those imbalances. Its why for example half the US's wealth, a nation of 300 million, is now owned by 400 families. That sort of thing is anthema to socialism and to most true capitalists. Its corruption and take over our economic systems by a corrupt crony oligarchic elite.

Edited by alexw
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Amusing I post a logical coherent argument which you don't refute instead deciding to say I have no intelligence.

If i'm wrong please point out where the logical chain of statements I made regarding what you said was incorrect.

As for my intelligence the last time I took the mensa test my IQ was 135. I also have a U.S. obtained doctorate in the hard sciences. I'm trying to educate you but it doesn't seem possible sadly.

No your an idiot. Every time I try and engage with you, you then reinterpret everything I have said as some bizarre parody. i.e. a strawman argument.

I say to you how horrendous living under communism was and you retort "what your saying is they lived in mud huts" :rolleyes: Your plainly a moron, which is why I'm not bothering with your crap, or your made up claims.

Oh and by the way I got 149 on my Mensa test prior to my joining, which is high enough to get in, your made up 135 is not high enough, and you lied about that :lol::lol:

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No your an idiot. Every time I try and engage with you, you then reinterpret everything I have said as some bizarre parody. i.e. a strawman argument.

I say to you how horrendous living under communism was and you retort "what your saying is they lived in mud huts" :rolleyes: Your plainly a moron, which is why I'm not bothering with your crap, or your made up claims.

Oh and by the way I got 149 on my Mensa test prior to my joining, which is high enough to get in, your made up 135 is not high enough, and you lied about that :lol::lol:

I doubt you have a 149 IQ your arguments are not intelligent enough for that. They are posted in a non-thoughtful extremely childish way. You don't seem to have the capability for logical thinking.

For example my retort about mud huts was in reply to you saying socialistic governments only destroy wealth. If that is true then the USSR having 50 odd years of communism would have destroyed all its wealth. Ergo the mud huts comment.

That is an example of logical thinking you are incapable of understanding.

The link between you saying communism is horrendous and the mud huts comment by me is something you have simply made up.

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That is an example of logical thinking you are incapable of understanding.

You would not understand logic if it punched you in the face as evidenced by your mangled thinking and false reasoning throughout this thread.

Your just trolling, and badly, no one is really as stupid as your pretending to be.

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You would not understand logic if it punched you in the face as evidenced by your mangled thinking and false reasoning throughout this thread.

Your just trolling, and badly, no one is really as stupid as your pretending to be.

If my reasoning is mangled then prove me wrong, show me where my logic is incorrect in this statement -

"My retort about mud huts was in reply to you saying socialistic governments only destroy wealth. If that is true then the USSR having 50 odd years of communism would have destroyed all its wealth. Wealth is the goods/services we consume, the things that increase our standard of living, of which housing is one. Ergo the mud huts comment."

Edited by alexw
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WRONG.

china was running trade deficits all through the 1980's.

Again explain in hard factual evidence how socialism was the cause.

Im not sure why you (or anyone else for that matter) are trying to pin the blame on any left/right, socialist/capitalist dichotomy. You can have responsible left or right wing governments, or irresponsible left or right wing govts. The trouble is both left AND right have been irresponsible in the UK, both living up to the UKs reputation for poor levels of investment, and being the hare in the tortoise and hare race.

We went to the IMF for a bailout in the late 70s as interest on public debt become unmanageable.

All that 'thatcherism' did was respond to the fact that the state's ability to borrow was tapped out, so markets were deregulated to allow the private sector to take over the burden. That persisted for the next 25 years, and now we see the state taking over the slack once again.

That is to say excessive spending and debt loads to run the economy had been entrenched for at least 10 years before thatcher set the ball rolling for the private sector to take over where the state had let off.

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I think the data / charts in these old posts may help a bit the argument in this thread.

I think you are partially right, regarding the "world" economy". But the UK is seriously and deeply fecked.

The world will be OKish soon-ishly. Most countries in the world have a cold. Some have a flu. But Japan and Britain have pneumonia. Look at the 2 charts below.

McK%205.jpg

debt-sovereign.png

We are screwed for at least a decade, maybe 2, and we will never catchup with countries we thought were our "peers", such as France, Germany, and even Italy. Even Brazil will overtake us in a couple of years. We will fall to about 10th place/economy in about 5 years. Sorry.

Source: Mckinsey Institute. Link to the full report below (in PDF). The chart in question is on page 10.

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

PS: Note that at the end of 2003 the total debt was almost peaking. But in Dec 2003 Chancellor Brown changed the inflation index, from RPI to CPI, despite BoE's opposition, forcing the BoE to keep interest rates too low. Yes, it was mainly Gordon Brown's fault.

A very important new report by the Bank for International Settlements (BIS).

UK Total Debt (Gov.+ Households + Companies) / GDP still going up.

First solid data that I am aware of since the McKinsey report showed total debts up to 2008. This BIS report comes all the way up to 2010.

debttogdp2010.png

Source: http://www.bis.org/publ/qtrpdf/r_qt1009e.pdf

IMO the debt/GDP going up is only partially explained by the UK GDP reduction - of around 5% since the crisis IIRC.

Notice that the data excludes the financial sectors. In this case Ireland and the USA are not as bad as I had thought. France is though.

Japan and UK are getting even worse. We knew already that Canada and Germany were fine, and that Spain was as screwed up as us.

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Im not sure why you (or anyone else for that matter) are trying to pin the blame on any left/right, socialist/capitalist dichotomy. You can have responsible left or right wing governments, or irresponsible left or right wing govts. The trouble is both left AND right have been irresponsible in the UK, both living up to the UKs reputation for poor levels of investment, and being the hare in the tortoise and hare race.

We went to the IMF for a bailout in the late 70s as interest on public debt become unmanageable.

All that 'thatcherism' did was respond to the fact that the state's ability to borrow was tapped out, so markets were deregulated to allow the private sector to take over the burden. That persisted for the next 25 years, and now we see the state taking over the slack once again.

That is to say excessive spending and debt loads to run the economy had been entrenched for at least 10 years before thatcher set the ball rolling for the private sector to take over where the state had let off.

Because there is a clear philosophical difference between left and right and the left are interpreting what is happening now as the end of capitalism whereas I would argue that states are bankrupt because of the general and widespread adoption of Socialist principles in most western economies since the end of WW2.

Free stuff for everyone is hardly capitalism and it is hardly surprising that the west is effectively bankrupt as a result.

:blink:

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...If anything if QE is to devalue debts a wage price spiral is exactly what is needed. You cannot inflate away debts without wages rising. We were only able to devalue our debts in the 1970's because wages rose in line with the increase in money supply.

And i'm not saying a bigger state is the answer. I'm saying the cause of these problems isn't the state and isnt socialism which seems to be all you ever say. The cause is the imbalances internal to our nations as well as imbalances between nations. Those imbalances were for and by the economic elites who benefited from those imbalances...

+1, FWIW

Interesting debate.

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NO.

As that previous graphic showed the debt bubble began in the mid-1980's, and it was personal debt not government debt ballooning. Also entitlement spending in the US as a percentage of GDP from when the great divergence began to now has increased by only ~2%.

http://www.usgovernmentdebt.us/spending_chart_1970_2017USp_09s1li111mcn_00f10f40f_Entitlement_Spending_Chart

And taxes have not increased in the US, they have varied a bit as a percentage of GDP but currently are at multi-decade lows. As the graph below shows taxes certainly are not the reason that household debt more than doubled.

current-tax-receipts-680.jpg

Also the break between wages and productivity happened way before the the flooding of our nations with immigrant workers. The immigrant workers have simply been another way to keep wages down for the corporates, to break the wage-productivity link. If anything if QE is to devalue debts a wage price spiral is exactly what is needed. You cannot inflate away debts without wages rising. We were only able to devalue our debts in the 1970's because wages rose in line with the increase in money supply.

And i'm not saying a bigger state is the answer. I'm saying the cause of these problems isn't the state and isnt socialism which seems to be all you ever say. The cause is the imbalances internal to our nations as well as imbalances between nations. Those imbalances were for and by the economic elites who benefited from those imbalances. Its why for example half the US's wealth, a nation of 300 million, is now owned by 400 families. That sort of thing is anthema to socialism and to most true capitalists. Its corruption and take over our economic systems by a corrupt crony oligarchic elite.

:lol:

So you think that in Socialist Societies a few families don't control all the wealth?

Seriously - you actually believe this?????????

:blink:

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Because there is a clear philosophical difference between left and right and the left are interpreting what is happening now as the end of capitalism whereas I would argue that states are bankrupt because of the general and widespread adoption of Socialist principles in most western economies since the end of WW2.

Free stuff for everyone is hardly capitalism and it is hardly surprising that the west is effectively bankrupt as a result.

:blink:

Sure, but the right has been giving away just as much, only not through the same channels.

Reagan/Bush borrowed to cut taxes, Clinton/Obama borrowed to fund entitlement spending.

The net result is the same, unsustainable growth of debt.

Its not so much a problem with left/right, its a problem with the short term thinking that tends to occur in limited term democracies.

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Sure, but the right has been giving away just as much, only not through the same channels.

Reagan/Bush borrowed to cut taxes, Clinton/Obama borrowed to fund entitlement spending.

Right vs Left is so 90's. Now its all about Statism vs Libertarianism.

This is why people backing Ron Paul won't move over to Romney.

The net result is the same, unsustainable growth of debt.

Which is why only a smaller state works.

Its not so much a problem with left/right, its a problem with the short term thinking that tends to occur in limited term democracies.

Indeed, the first American Libertarian nailed it.

"Democracy is nothing more than mob rule, where 51% steal as much as they can from the other 49%"

Thomas Jefferson.

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I just use right and left as convenient labels

obviously there is a vast grey area in the middle which many people occupy.

I would argue that we haven't had a genuinely right wing government in this country since the end of WW2

When we get a government that reduces the size of the state to around 30% of GDP, then I might concede that things had changed.

I think that many people on here are easily classified as either left or right wing so the labels must mean something.

It is very difficult to have any sort of meaningful debate on an internet forum unless you try and simplify the argument

every time I attempt to use irony, or humour or any kind of subtlety most people just don't get it.

:blink:

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Right vs Left is so 90's. Now its all about Statism vs Libertarianism.

This is why people backing Ron Paul won't move over to Romney.

Which is why only a smaller state works.

Indeed, the first American Libertarian nailed it.

"Democracy is nothing more than mob rule, where 51% steal as much as they can from the other 49%"

Thomas Jefferson.

I have been accused of being a statist by the anarchists here and I would agree

In my view, the argument is about the size of the state and what powers it has to interfere in peoples lives.

Many people here would like the state to control everything and these are the people I would describe as left wing.

To me, the EU is clearly a left wing enterprise because no one on the right would support the scale of regulation, subsidies, bureaucracy and corruption that the EU is responsible for.

The argument is important because the situation now is very similar to the 30's in many ways

An ideological battle is being fought and the outcome will determine the future - do we go forwards or do we spend the rest of the 21st Century repeating the same mistakes made in the 20th.

:blink:

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"Democracy is nothing more than mob rule, where 51% steal as much as they can from the other 49%"

Thomas Jefferson.

Absolutely. Obviously more complicated than that, but self-interest always rules (note that this includes how we feel about other people),& so it's a fundamental & insoluble problem of democracy. It's also a fundamental & insoluble problem to find a better system - although I'm sure we could improve the present one.

All democratic governments buy votes. The only hope is to persuade the electorate that their long term interests are sometimes best served by deferring present benefits. However, since governments have a poor track record of predicting how things will pan out, most people opt for jam today. It's unfortunate, but perfectly logical.

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So you think that in Socialist Societies a few families don't control all the wealth?

Frankly, I have no idea what socialism, left, right etc. actually means anymore. There are so many nuances within each, the labels are completely meaningless as far as I'm concerned.

I would consider myself "left wing" in terms of the principles of not allow capital to be completely ascendent over labour (e.g. the redistributive aspect)

But of lot of the central economic planning that gets associated with "left wing" I would reject (although I still think there is a lot to be said of some centrally planned/owned infrastructure; national transport systems, or industries with natural monopolies).

I also find the idea of a completely free market absurd. One of the arguments made by the free market die-hards seems to be that a central or overly large government ends up being used as a tool to enforce monopolies (I sympathise with the view).

But I would argue that it's human nature to try and form groups and alliances in order to gain competitive advantage. Hence a in a free-market, you'd soon get groups forming, with their own means of enforcement. Then perhaps another group form to try and stop these groups from gaining too much power. And then sooner or later... you have an centrally elected government again.

In other words, a free market is just a fantasy; a utopia. The right's equivalent of Communism. (Nice idea, but no coconut)

It's therefore all about the size and power of the government/state. In this country (and others, particularly the US) we seem to be merrily marching into an Orwellian nightmare, only with more credit derivatives. :huh:

Edited by ska_mna
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Absolutely. Obviously more complicated than that, but self-interest always rules (note that this includes how we feel about other people),& so it's a fundamental & insoluble problem of democracy. It's also a fundamental & insoluble problem to find a better system - although I'm sure we could improve the present one.

All democratic governments buy votes. The only hope is to persuade the electorate that their long term interests are sometimes best served by deferring present benefits. However, since governments have a poor track record of predicting how things will pan out, most people opt for jam today. It's unfortunate, but perfectly logical.

This is why democratic states have a constantly repeating cycle of boom and bust.

I don't see how anyone can blame capitalism for this - clearly democracy is to blame.

:blink:

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Frankly, I have no idea what socialism, left, right etc. actually means anymore. There are so many nuances within each, the labels are completely meaningless as far as I'm concerned.

I would consider myself "left wing" in terms of the principles of not allow capital to be completely ascendent over labour (e.g. the redistributive aspect)

But of lot of the central economic planning that gets associated with "left wing" I would reject (although I still think there is a lot to be said of some centrally planned/owned infrastructure; national transport systems, or industries with natural monopolies).

I also find the idea of a completely free market absurd. One of the arguments made by the free market die-hards seems to be that a central or overly large government ends up being used as a tool to enforce monopolies (I sympathise with the view).

But I would argue that it's human nature to try and form groups and alliances in order to gain competitive advantage. Hence a in a free-market, you'd soon get groups forming, with their own means of enforcement. Then perhaps another group form to try and stop these groups from gaining too much power. And then sooner or later... you have an centrally elected government again.

In other words, a free market is just a fantasy; a utopia. The right's equivalent of Communism. (Nice idea, but no coconut)

It's therefore all about the size and power of the government/state. In this country (and others, particularly the US) we seem to be merrily marching into an Orwellian nightmare, only with more credit derivatives. :huh:

I would agree with all of that.

Personally though I think there are clear ideological and philosophical differences between right and left.

The confusion arises because many people who think they are left or right wing really aren't

they just vote one way or the other largely out of habit.

The laffer curve is one way of defining left and right IMO.

Many people here seem to think that if you take everything people produce - they will just carry on working for 'the greater good'

I would define people who believe this as 'left wing' or Socialists.

:)

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So the whole basis of your philosophy is that defaulting and removing debt interest payments from the deficit would result in governments running a balanced budget which would mean they would not have to cut in order to avoid returning to the markets.

Sorry - but the figures just don't add up.

Any country defaulting has also to endure huge cuts and this is why Greece does not want to leave the Euro - because they want to continue living way beyond their means by spending borrowing other peoples money.

:blink:

If Greece and others could have adjusted the currency value to enable them to live in a way they were accustomed to...living the simple, easy life they would not have needed to borrow as much as they have had to now just to stand still....high socialised wages/benefits paid with debt without productivity only leads to a perpetual need for ever increasing debt. ;)

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snip

Many people here seem to think that if you take everything people produce - they will just carry on working for 'the greater good'

I would define people who believe this as 'left wing' or Socialists.

:)

they could also be right wing nationalists.

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