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R K

Escape From The Balance Sheet Recession & The Qe Trap - Richard Koo

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Surely Koo should be awarding Osbo a gold star then....... public sector debt up from .76 trillion to 1.36 trillion to take up the slack of eight years of private deleveraging from 105% of GDP to 95% of GDP by Q1 2015.

No austerity just following Keynesian can kicking to the letter.

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Edit: to demonstrate even the institutional stupidity/ignorance Koo is up against.

You can hear almost verbatim the planted seed of Osbornes misguided "long term economic plan" in Rogoffs opening remarks.

The moment it all went horribly wrong.

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Surely Koo should be awarding Osbo a gold star then....... public sector debt up from .76 trillion to 1.36 trillion to take up the slack of eight years of private deleveraging from 105% of GDP to 95% of GDP by Q1 2015.

No austerity just following Keynesian can kicking to the letter.

Not this again. That wasnt his plan. It wasnt what he said would happen. That was what Koo (& others) predicted would be the outcome from implenting austerity during private sector deleveraging. You are confusing the policy with the outcome from the policy. i.e. policy says we will reduce debt by cutting spending. Reality is cutting spending increases debt and prevents private sector deleveraging. The opposite of what Koo is recommending. Even more obvious result in greece

Moreover 5 yrs later, with govt debt higher and increasing we are still at the ZLB with 0% inflation, haldane talking about cutting rates and OBR projecting releveraging of private sector b/sheets.

Edited by R K

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And looking at the trajectory of the above charts they're almost straight line up since the general election - but are always just about to dip.

The BoE's inflation charts revert to trend in much the same way. It's uncanny.

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It does make you wonder how bad things would have been if Miliband and Balls had been allowed to form the government instead of the Libdems/Tories.

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Genius. Massive amounts government spending will solve all our problems. I have to wonder why nobody has ever thought of this before.

It worked for the Banksters- why not the rest of us?

Edited by wonderpup

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Genius. Massive amounts government spending will solve all our problems. I have to wonder why nobody has ever thought of this before.

At the ZLB. If you want higher rates it is a no-brainer so it is very odd why those who want higher rates want the opposite.

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It does make you wonder how bad things would have been if Miliband and Balls had been allowed to form the government instead of the Libdems/Tories.

Depends if they stuck to Darlings plan. If so, most likely much better. Osbornes front loaded austerity cost 3 years cumulative lost output and a much longer recession/falling real wages and most likely Cameron/Osborne their jobs.

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Depends if they stuck to Darlings plan. If so, most likely much better. Osbornes front loaded austerity cost 3 years cumulative lost output and a much longer recession/falling real wages and most likely Cameron/Osborne their jobs.

Have you found anything wrong with any of labour's policies ....ever?

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Have you found anything wrong with any of labour's policies ....ever?

I have no interest at all in Labour per se, only in the sense or nonsense of different policies. It is an observation on different policies not parties.

Darlings plan was superior to Osbornes failed plan but even so probably not sufficiently accomodative. If Osborne had implemented Darlings plan Id support that but he front loaded austerity at the ZLB which reduced output during the worst recession in 70 years with the resultant longer recession and cumulative loss of output. he then attempted to bump output with all his htb policies in a desperate attempt to boost short term growth ahead of the election.

Its fairly straightforward. A gross error presumably for political reasons (obsession with smaller state)

Presumably you dont agree with Koos analysis? If so why not? Can you explain why you think he is wrong? It might be more fruitful and interesting than attacking me personally (I didnt attack you personally)

Edited by R K

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I have no interest at all in Labour per se, only in the sense or nonsense of different policies. It is an observation on different policies not parties.

Darlings plan was superior to Osbornes failed plan but even so probably not sufficiently accomodative. If Osborne had implemented Darlings plan Id support that but he front loaded austerity at the ZLB which reduced output during the worst recession in 70 years with the resultant longer recession and cumulative loss of output. he then attempted to bump output with all his htb policies in a desperate attempt to boost short term growth ahead of the election.

Its fairly straightforward. A gross error presumably for political reasons (obsession with smaller state)

Presumably you dont agree with Koos analysis? If so why not? Can you explain why you think he is wrong? It might be more fruitful and interesting than attacking me personally (I didnt attack you personally)

But with plan A we would have less debt and less fake growth, hence this plan A would have been better.

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But with plan A we would have less debt and less fake growth, hence this plan A would have been better.

But we need the fake growth and debt to pay for the State pension and health ponzies. We will worry about the fact it was all fake when the boomers are dead.

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But we need the fake growth and debt to pay for the State pension and health ponzies. We will worry about the fact it was all fake when the boomers are dead.

They're doing 12 weeks of roadworks close to my house in Yorkshire to widen a single lane carriageway for about 30 metres so the flow of traffic doesnt stop when the occasional car turns into a very small caravan park. I drive this route daily and can't ever remember being slowed down there.

In my 40 years on planet earth i have never seen such unnecessary roadworks, if the state stopped wasting endless billions i'm sure there would be enough in the kitty to fund boomers their unpaid for pensions. (unpaid for in the sense theyre living longer than expected and healthcare costs are so much higher)

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I have no interest at all in Labour per se, only in the sense or nonsense of different policies. It is an observation on different policies not parties.

Darlings plan was superior to Osbornes failed plan but even so probably not sufficiently accomodative. If Osborne had implemented Darlings plan Id support that but he front loaded austerity at the ZLB which reduced output during the worst recession in 70 years with the resultant longer recession and cumulative loss of output. he then attempted to bump output with all his htb policies in a desperate attempt to boost short term growth ahead of the election.

Its fairly straightforward. A gross error presumably for political reasons (obsession with smaller state)

Presumably you dont agree with Koos analysis? If so why not? Can you explain why you think he is wrong? It might be more fruitful and interesting than attacking me personally (I didnt attack you

It's a shadow banking crisis not a balance sheet recession. >$100 trillion in eurodollar debt instruments created via money market mutuals, hedge funds, asset backed commerical paper conduits etc. outside the jurisdiction of the Federal Reserve. Impossible to control, re-liquify or even document except in outline. The ultimate triumph of free market capitalism. Global recession was temporarily averted after 2008 by an unprecedented fiscal expansion in the BRIC economies which served to purchase and distribute Western govt debt. That too reached its tipping point in 2014 and the tsunami of industrial deflation now sweeping the world is a consequence. The balance sheets Koo frets about will have to be repaired by insolvency, unemployment and (hyper)inflation.

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But with plan A we would have less debt and less fake growth, hence this plan A would have been better.

Osbourne u-turned on Plan A and letting the consequences roll because the economy and employment slumped again. As this is HPC, another plan from the start may have resulted in less targeting of mortgage lending and leverage subsidies to banks and house builders on the scale they have, because it may not have been 'necessary', and house prices might be lower than they are. Whatever one's view on public spending, this government's panicked (planned?) hyper-drive towards rebuilding the same imbalances with same winners/losers as previously is particularly sh!t.

Note the timeline: Crisis - Slump - Shock & Awe - Election - Contract public sector/EZ problems/Higher commodity prices/<insert whatever suits> - Slump - Policy reversal - double down with FLS - HTB - HTB2 - HTBISA etc.

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Osbourne u-turned on Plan A and letting the consequences roll because the economy and employment slumped again. As this is HPC, another plan from the start may have resulted in less targeting of mortgage lending and leverage subsidies to banks and house builders on the scale they have, because it may not have been 'necessary', and house prices might be lower than they are. Whatever one's view on public spending, this government's panicked (planned?) hyper-drive towards rebuilding the same imbalances with same winners/losers as previously is particularly sh!t.

Note the timeline: Crisis - Slump - Shock & Awe - Election - Contract public sector/EZ problems/Higher commodity prices/<insert whatever suits> - Slump - Policy reversal - double down with FLS - HTB - HTB2 - HTBISA etc.

Exactly how anyone on HPC can support plan whatever he done as it achieved nothing more than boosting house.

All the Tory party plans for the coming 5 years must involve more of the same.

I despise them with a passion as they were gifted the chance to rebalance the economy and let house prices fall but didn;t have the bottle.

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But with plan A we would have less debt and less fake growth, hence this plan A would have been better.

Why & how? Northshore explained above how Osborne tried that & it failed, which you then seemed to agree with.

As OP said, Osborne should have maintained govt. spending until private sector had deleveraged further (as US did). he wouldnt then have had to rely on ramping up the housing sector to generate "fake" growth to try and save his own neck. You are correct that he seeks to repeat this mistake with bells on if UK is unfortunate enough to have him for another 5 years.

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