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Dr_Mibbles

This Recession V's Other Recessions (From The Past Century)

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So, how's that austerity working out?

Excessive take up of debt by all, means we will be flat lining for a few more years yet, we have bottom dollar interest rates along with a reasonable standard of living purchased and paid for with debt, reached saturation point.....now it is pay-back-time........consolidation and redistribution. ;)

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So, how's that austerity working out?

We're still waiting for it. And continuing to overspend massively, despite some modest correction to the economy.

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Agreed, austerity where?

And it is a bit rich to ask to "go all Keynesian" in the 'bad' times when it was ignored during the 'good' times as is highlighted on these forums frequently. Having cake and eating it springs to mind.

Bad bets MUST be allowed to fail, whether it is a bad bet made by an individual, a company (including banks) or a government, People MUST learn the hard financial lessons ... people cannot go on and on spending money they have not earned.

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Its different this time

The classic "lower the interest rates" tool is not available.

Zombies are not being allowed to fail.

so we have money being burned by the dead, and real alive firms either unable to finance due to the risk they pose and the impossibly low returns v the risk...specially as zombies are still consuming the self same markets without the constraint of having to be efficient, or indeed, make money.

As for Austerity.....bring some on please.

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Debt-2000-2018.png

How can the Govt claim that they 'have got rid of a third of the debt' ?? All ministers and some MP's keep dropping this into the conversation when being interviewed, but the ONS figures here show different. I have said on HPC a number of times that the national debt and the structural debt are being blurred by the Politicians - trying to pull the wool over our eyes. The plain fact is we are borrowing very heavily almost every month (the structural deficit) and this graph shows where the total national debt will be by 2018 - massive and still not actually falling!

If a bond crisis happens anytime soon then we are doomed. It's only because most of the Western world are in the same sort of boat that international bond rates have remained so low - not actually because Osborne and the Tories have a so called prudent budget in hand. :blink::huh:

Edited by plummet expert

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Dr. Mibbles posts have a common theme. hot equals cold, day equals night, high equals low.

Its a bit difficult to have a logical debate when his diction is a little off.

I cant blame him, the media has encouraged this kind of ignorance with the continual US = Stimulus, EU = Austerity theme, despite the borrowing figures for both being barely different.

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Debt-2000-2018.png

How can the Govt claim that they 'have got rid of a third of the debt' ?? All ministers and some MP's keep dropping this into the conversation when being interviewed, but the ONS figures here show different. I have said on HPC a number of times that the national debt and the structural debt are being blurred by the Politicians - trying to pull the wool over our eyes. The plain fact is we are borrowing very heavily almost every month (the structural deficit) and this graph shows where the total national debt will be by 2018 - massive and still not actually falling!

If a bond crisis happens anytime soon then we are doomed. It's only because most of the Western world are in the same sort of boat that international bond rates have remained so low - not actually because Osborne and the Tories have a so called prudent budget in hand. :blink::huh:

Occasionally they make it clear they're talking about the annual (primary) deficit which went above 11% under Gordon Brown and has come down to around 7% this year. But you're right, they never discuss the national debt or the total deficit (annual deficit + debt interest).

The only comparable instance of govt borrowing on this scale was WWII when the country practically bankrupted itself fighting the Nazis. A price worth paying, obviously. Then, however, private sector debt was less than 40% of GDP rather than the 400% it is now. It still took the country a generation to recover from the shock. In fact it could be argued that the UK never really did recover despite the material advantages we've come to enjoy since.

A bond crisis would be the coup de grace. It's all very well saying we should borrow and spend more but the country has already forfeit its AAA. The ratings agencies won't hesitate to pull the trigger in future, indeed there's talk that they will do so again shortly should Osborne's deficit reduction strategy continue to drift. It's not that Osborne hasn't spent enough, it's hard to imagine how anyone could have spent more, but that he's spent so unwisely: holding up house prices and providing a rolling bailout for the City instead of driving the phantom capital out of the housing market and reducing taxes across the board.

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A guy who studies the great depression made a short, simple list of things governments do that prolong depressions. Here is is.

'(1) Prevent or delay liquidation. Lend money to shaky businesses, call on banks to lend further, etc.

(2) Inflate further. Further inflation blocks the necessary fall in prices, thus delaying adjustment and prolonging depression. Further credit expansion creates more malinvestments, which, in their turn, will have to be liquidated in some later depression. A government “easy money” policy prevents the market’s return to the necessary higher interest rates.

(3) Keep wage rates up. Artificial maintenance of wage rates in a depression insures permanent mass unemployment. Furthermore, in a deflation, when prices are falling, keeping the same rate of money wages means that real wage rates have been pushed higher. In the face of falling business demand, this greatly aggravates the

unemployment problem.

(4) Keep prices up. Keeping prices above their free-market levels will create unsalable surpluses, and prevent a return to prosperity.

(5) Stimulate consumption and discourage saving. We have seen that more saving and less consumption would speed recovery; more consumption and less saving aggravate the shortage of saved capital even further. Government can encourage consumption by “food stamp plans” and relief payments. It can discourage savings

and investment by higher taxes, particularly on the wealthy and on corporations and estates. As a matter of fact, any increase of taxes and government spending will discourage saving and investment and stimulate consumption, since government spending is all consumption. Some of the private funds would have been saved

and invested; all of the government funds are consumed. Any increase in the relative size of government in the economy, therefore, shifts the societal consumption–investment ratio in favor of consumption, and prolongs the depression'

Sound familiar?

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So, how's that austerity working out?

progres3a_1.jpg

Totally different kind of recession this time so I'm not sure what your point is.

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I think some of you should watch this video.

couldnt watch till the end....slow slow slow arguments.

Now, yes, a Sovereign can issue all the bonds it likes.

now...is INFLATION a default?

I think it is.

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Totally different kind of recession this time so I'm not sure what your point is.

Yes, i think there is a kind of delusion that the past 50 years were 'normal'. We had the unlikely to be repeated interaction of cheap energy, favourable demographics (a baby boom then a bust) leading to improved 'inputs' into the economy.

This is an apples and oranges situation and illustrates a complete lack of insight towards any context, rendering such comparisons pointless.

Did any of the previous recessions begin with systemic debt ratios of 500% of GDP?

Did any of the previous recessions coincide with vast amounts of retirees beginning to claim benefits and exit the workforce?

Did any of the previous recessions occur in a truly globalized world where a structural shift towards another sector (in this case re-industrialization) is virtually impossible?

etc.

There's not going to be any 'return to normal' because the past few decades have not been 'normal'. However, they could stop doing additional harm by destroying the value of accumulated capital via QE.

Edited by Executive Sadman

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So, how's that austerity working out?

This is not a recession, we are at the cusp of a systemic change, but the 'old powers' (banksters, corporate oligarchy and the politicians working for them) are fighting tooth and nail to preserve the status quo.

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This is not a recession, we are at the cusp of a systemic change, but the 'old powers' (banksters, corporate oligarchy and the politicians working for them) are fighting tooth and nail to preserve the status quo.

....I think you made a mistake......

the words "status quo" need replacing with.....

to preserve "their salary`s, bonuses, pensions and perceived "demi-god" status"

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I think some of you should watch this video.

Thanks for posting that. Valid opinions in there.

Who thought bonds would be so resilient five years ago?

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The path chosen is not Austerity. It's do as I do not as I say time. The path chosen by the government and BofE is officially called Financial Repression.

I agree with what you are saying, But isn't this what has got to happen?

I understand your aim to amass enough wealth so you can retire early and best of luck to you. But I think we have been living in a world where Labour has not been rewarded enough and the capitalists have made out like bandits.

I have done very well over the last few years on non work income as I imagine you have as well. But money for nothing in the long run is not sustainable.

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Its different this time

You're right, it is different this time, but not for the reasons you mention.

The difference this time is that the government has embarked on real-terms spending reductions during a depression which have hampered economic recovery, and collapsed the tax base, resulting in higher deficits.

In all other recessions, government did not kick away the crutch while the private sector went through a period of temporary de-leveraging. This really isn't rocket science, it's basic cause and effect.

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This is not a recession, we are at the cusp of a systemic change, but the 'old powers' (banksters, corporate oligarchy and the politicians working for them) are fighting tooth and nail to preserve the status quo.

I see no evidence to support this viewpoint at all.

What I do see is a period of temporary private sector weakness, during which the government can and should stimulate the economy to prevent total economic collapse. And no, I don't mean QE, which has been largely ineffective, but genuine fiscal stimulus. The private sector (businesses and consumers) do need to pay down debts, but they cannot do this if all sections of the economy de-leverage at the same time, because other peoples spending is your income.

If no-one spends, then of course no-one has any income. The government can and must provide temporary stimulus to allow the breathing space necessary for private sector de-leveraging to occur.

Edited by Dr_Mibbles

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I see no evidence to support this viewpoint at all.

What I do see is a period of temporary private sector weakness, during which the government can and should stimulate the economy to prevent total economic collapse. And no, I don't mean QE, which has been largely ineffective, but genuine fiscal stimulus. The private sector (businesses and consumers) do need to pay down debts, but they cannot do this if all sections of the economy de-leverage at the same time, because other peoples spending is your income.

Are you a Labour 'Spin Doctor'? :rolleyes:

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The private sector (businesses and consumers) do need to pay down debts, but they cannot do this if all sections of the economy de-leverage at the same time, because other peoples spending is your income.

If no-one spends, then of course no-one has any income. The government can and must provide temporary stimulus to allow the breathing space necessary for private sector de-leveraging to occur.

I'll swap some of the debt owed to me as a creditor, for a range of of assets currently being used by the big debtors; house and commercial interests and equity positions / land.

I think I can do a better job with the commercial interests (transferred to me at very good value) for restructuring some of those commercial interests to create good opportunities for employees (who don't already carry huge debts), than many people currently in control of the assets, who think they can borrow forever, debt upon debt, buy second homes, BTLs, all the luxuries, and don't see any problem in defaulting on bank because they still have the money/assets and has been able to spend 2-5 years spending with the extra debt you want them to have now.

Yes, life is good for such borrowers, less so for creditors where debtors can keep all the goodies from their life in debt. Entrepreneurs to help create your good thing of economic activity, aren't just big debtors who don't care what happens to creditors.

Debts are retired by paying them off, "restructuring" or default. In the first case, no value is lost; in the second, some value; in the third, all value. In desperately trying to raise cash to pay off loans, borrowers bring all kinds of assets to market, including stocks, bonds, commodities and real estate, causing their prices to plummet.

The process ends after the supply of credit falls to a level at which it is collateralised acceptably to the surviving creditors. Financial assets, and all other asset-classes of value, are selectively repudiated by default, not obliterated by inflation.

Edited by Venger

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You're right, it is different this time, but not for the reasons you mention.

The difference this time is that the government has embarked on real-terms spending reductions during a depression which have hampered economic recovery, and collapsed the tax base, resulting in higher deficits.

In all other recessions, government did not kick away the crutch while the private sector went through a period of temporary de-leveraging. This really isn't rocket science, it's basic cause and effect.

Public Spending

2007-08 ... £538.7bn ... 41.0% of GDP

2011-12 ... £693.6bn ... 45.4% of GDP

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So, how's that austerity working out?

progres3a_1.jpg

You're right, it is different this time, but not for the reasons you mention.

The difference this time is that the government has embarked on real-terms spending reductions during a depression which have hampered economic recovery, and collapsed the tax base, resulting in higher deficits.

In all other recessions, government did not kick away the crutch while the private sector went through a period of temporary de-leveraging. This really isn't rocket science, it's basic cause and effect.

well heres your lack of evidence that spending cuts in a recession doesnt work:

the 1973 recession, the second shortest one on that graph, the UK had an out of control budget deficit, and had to turn to the IMF to borrow money. the IMF agreed only on the condition that the UK cut spending. the UK recovered.

the second recession in 1979, thatcher didnt cut spending, it actually rose in real terms, that was the second longest recession on that graph.

in the 1990's this time thatcher did cut real terms spending, followed on by major, it also happens to be the fastest recovery and growth on that graph.

so if anything it shows that real terms cuts provide the best result in a recession.

also lets look abroad. reagan cut real terms spending during the recession and got america back to growth. in the 1990's recession george h bush passed a bill in a house and senate dominated by democrats who controlled both houses, to cut spending and raise taxes - the economy recovered.

clinton followed it on (after all it was an democrat approved bill) by reducing government spending as a proportion to gdp by the most of any of the recent presidents, by 4% . the economy boomed.

canada in the 1990's was in a recession and solved it by cutting government spending.

so you say there is no evidence, when in fact the majority of evidence shows that cutting government spending in a recession works.

Edited by mfp123

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  • 259 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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