Independent: Fears Of New Economic Crash As British Families Run £40Bn Deficit

[bankstersparadise]

If they arn't doing something productive with it then its not a "keynesian" stimulus. QE isnt keynesian, helicopter cash inst keynesian. Public sector non-jobs isnt keynesian. Corbyns house building program is keynesian.

How important is Corbyn being PM for you Gold bull case?

[goldbug9999]

How important is Corbyn being PM for you Gold bull case?

its a fair cop, you rumbled my plan to manipulate global commodity markets by influencing maybe the half a dozen people who give a sh1t on HPC (although I'm not entirely sure what corbyn has got to do with the price of gold ...).

Edited December 22, 2015 by goldbug9999

[winkie]

Nothings changed.....

edit ......cleaner illusion version.

Edited December 22, 2015 by winkie

[pig]

Isn't keyne about government spending when the rest of the economy tanks, so by keeping a large deficit qe and low rates effectively the same thing?

The big question is where is all the money going. Because they aren't doing anything productive with it.

Yes there have been cuts, but costs seem to rise just as quickly despite deflation.

My understanding is that the money is being spent on tax cuts. We're on a perpetual cycle of 'oh dear the deficit is still terrible we're going to have to make more cuts" Followed by 'well obviously the NHS et al doesn't work so we'd better go private'.

[spyguy]

Are you saying there is no price discovery in bond markets? ;-)

I honestly don't know.

I feel that the bond markets have and are being gamed, wrong, whatever.

Negative yielding Italian debt? I would say the debt markets are bust!

[evetsm]

In effect Osborne has privatised the budget deficit reduction.

If govt. deleverages then axiomatically private sector must releverage to achieve the same level of output (ingoring net trade).

govt policy dogma is the problem. Osborne should have run a higher deficit, let rates tick up a little faster and allowed private sector to deleverage further. Instead hes gone for the Lawson trick and created another housing/consumer boom.

so the Keynesian solution is to INCREASE govt borrowing while at the same time allow rates to increase? And how will govt service the increase cost of debt, they can't service what debt they already have ?

The problem in a debt based money system, you have to increase total debt when more money is printed, it is precisely why we need sound money. We need a fixed amount of money that can be divided down as more units are required, out consolidated as less money is required. We need money that starts out as a debt to no one. But the bankers make less profits on such an honest system, and the govt relies on the bankers to make good on the politicians bribes to the electorate. So nothing happens except the Keynesians contorting themselves into knots to explain why debt is good

Edited December 23, 2015 by evetsm

[porca misèria]

The orthodox Keynesian approach has failed catastrophically, as those of us who've argued against it said would be the case. Ever cheaper money is a disincentive to private sector deleveraging.

Were you one of those saying so back in about 2005 when Keynesian policies had ended boom and bust?

[porca misèria]

If they arn't doing something productive with it then its not a "keynesian" stimulus. QE isnt keynesian, helicopter cash inst keynesian. Public sector non-jobs isnt keynesian. Corbyns house building program is keynesian.

Not true. Keynes himself spoke of employing one gang of men to dig a hole in the road in the morning, and another to fill it in the afternoon. He was arguing for spending unproductively.

[R K]

so the Keynesian solution is to INCREASE govt borrowing while at the same time allow rates to increase? And how will govt service the increase cost of debt, they can't service what debt they already have ?

The problem in a debt based money system, you have to increase total debt when more money is printed, it is precisely why we need sound money. We need a fixed amount of money that can be divided down as more units are required, out consolidated as less money is required. We need money that starts out as a debt to no one. But the bankers make less profits on such an honest system, and the govt relies on the bankers to make good on the politicians bribes to the electorate. So nothing happens except the Keynesians contorting themselves into knots to explain why debt is good

There isnt any economic reason to shrink the size of govt. when most people actually want to see (and pay for) better funded services, housing, infrastructure and so on. Osbornes fiscal "target" is a straw man of his own making. he repeatedly fails to meet it because austerity doesnt make sense economically. Failed in EZ, failed in UK. Any sensible person would conclude the problem is policy.

If there is a housing supply problem (clearly) then build more houses for rent & OO were appropriate. The only arument Ive seen against doing that in this thread (and many others) is usually either something to do with "immigrants" or economically illiterate.

[TheCountOfNowhere]

There isnt any economic reason to shrink the size of govt. when most people actually want to see (and pay for) better funded services

links ?

I would much prefer a tiny government, less scope for corruption etc

We need less tax, less interference, less help from someone taking 60% of our incomes and telling us what a great job they are doing with it.

[Sancho Panza]

I know what you are getting at (ht steve keen), but of course this statement isnt quite right becuase Osbourne hasn't been de-leveraging.....

https://notayesmanseconomics.wordpress.com/2015/12/22/how-austerity-morphed-into-a-fiscal-boost-in-the-uk/

A view echoed by Shaun Richards.

'But the rub as Shakespeare would put it is that austerity apparently means a real terms increase in public expenditure which means that it is a fiscal boost. Let me add some nuance to this as there are cut backs in some areas. It is a type of redistribution in the main and a major factor has been this one below which is in the process of ballooning due to the arrival of low inflation.'

[Errol]

There isnt any economic reason to shrink the size of govt. when most people actually want to see (and pay for) better funded services, housing, infrastructure

I don't think services, housing or infrastructure (necessarily) follow from having a large, expensive government.

We could cut government in half and probably see improvement across the board.

Edited December 23, 2015 by Errol

[Sancho Panza]

Ever cheaper money is a disincentive to private sector deleveraging. The policy of QE and ZIRP is disinflationary, promoting financial asset bubbles at the expense of the broader economy.

The UK is spectacularly bankrupt as a consequence. It has no future worthy of the name.

Well put.x2

[Sancho Panza]

There isnt any economic reason to shrink the size of govt. when most people actually want to see (and pay for) better funded services, housing, infrastructure and so on. Osbornes fiscal "target" is a straw man of his own making. he repeatedly fails to meet it because austerity doesnt make sense economically. Failed in EZ, failed in UK. Any sensible person would conclude the problem is policy.

But they don't want to pay for it, do they?

Are you suggesting that running fiscal deficits of 7%+ whilst achieving 2% growth has achieved anything but a larger debt crisis down the line?

The problem this time has been that instead of running surpluses in the good times to allow some fiscal expansion during the bad,our glorious leaders went on a splurge to win over the people of Worcester and other swing seats.

[Greg Bowman]

There isnt any economic reason to shrink the size of govt. when most people actually want to see (and pay for) better funded services, housing, infrastructure and so on

Do you work in teaching surrounded by Guardian readers Most productive tax payers think the bloated size of the non productive part of our economy is obscene ( excluding the obvious 'good' services health, teachers etc)

Even with schooling and health we put enough in but the average prole balks at paying £10 for a doctors visit or supporting their local school by actively encouraging good discipline in their children.

[19 year mortgage 8itch]

Do you work in teaching surrounded by Guardian readers Most productive tax payers think the bloated size of the non productive part of our economy is obscene ( excluding the obvious 'good' services health, teachers etc)

Even with schooling and health we put enough in but the average prole balks at paying £10 for a doctors visit or supporting their local school by actively encouraging good discipline in their children.

Did you actively support your local school by sending your children with good morals there or say ****** that and send them to private school?

[Tapori]

Do you work in teaching surrounded by Guardian readers Most productive tax payers think the bloated size of the non productive part of our economy is obscene ( excluding the obvious 'good' services health, teachers etc)

Even with schooling and health we put enough in but the average prole balks at paying £10 for a doctors visit or supporting their local school by actively encouraging good discipline in their children.

Woah there.

A good public sector like in the North of Europe means that good housing, good schools, no-fee universities, local amenities, libraries and good health care means people will help raise the GDP of the country as a whole and deliver better standards of living.

However, here, Anyone who works on the frontiline of the "Good," public services you would rightly pay tax for, will tell you that the waste is up top in middle management and the consequence of their navel-gazing decisions.

New-Labour - Mortgage everything and cure institutional issues with more management. and more management.

Tories: Sell everything and put your mates or some crazed businessman in charge.

I'm the type of hippy guardianista (now corbynista) in the Public Sector you'd happily punch in the face.

Believe me, if the public sector is to be reformed, rightly, to make it more efficient and stop it being too large like you say it shouldn't be, many jobs in management for Olivia, Tarquin and Oscar would be lost.

And for those reasons, their jobs will stay safe whilst the frontline public sector worker is either sold off, de-moralised, overworked or has no resource to do the public job we as a society need.

That public service turns to shite.

Costs remain high as more and more managers fling the fecal attempts at reform at the metaphorical wall and all funded by our tax.

Then you get pissed off and blame the "Public Sector." or the "Public School Sector," going by the folks that actually run it terribly.

[FreeTrader]

Financial journalists (and even some members of this forum) continue to take it for granted that the OBR's projections for UK household debt have any credibility.

The plain fact is that the OBR's forecasting record in this area has proven thus far to be beyond pitiful. In March 2014 they projected that household secured borrowing would rise by over £150bn by Q3 2015, but in fact it only rose by £42bn.

Just a year ago they were projecting that total household financial liabilities would rise to £2.64 trillion by Q1 2020. In November they chopped this sum to £2.26 trillion - a cut of almost £400 billion in just 12 months.

UK households have not been borrowing at anything like the rate that the OBR has been projecting over the past few years, and so their forecasts are constantly having to be revised down. Even so, the projections still look unrealistic.

Here's the net quarterly increase in loans secured on dwellings over the 8 quarters to Q3 2015 (in £billion):

6, 4, 6, 6, 5, 4, 6, 9

And the OBR forecast for the next 8:

14, 12, 18, 20, 16, 13, 20, 22

[Bland Unsight]

Financial journalists (and even some members of this forum) continue to take it for granted that the OBR's projections for UK household debt have any credibility.

+1

As best I can understand they have a model that says that HPI continues at a rate in excess of wage inflation forever. The massive private debt forecast is therefore under one analysis a consequence of the model and under another a confirmation that the model's outputs are to be taken with a lot of salt over a 5 year horizon, let alone a 10 year horizon. The OBR are asked to predict the future, so they have to try. I'm sure that even they aren't so silly as to believe that they can.

Edited December 24, 2015 by Bland Unsight

[FreeTrader]

As best I can understand they have a model that says that HPI continues at a rate in excess of wage inflation forever.

Not quite forever as I recall. Under the assumptions of the model, in the year 2142 household debt servicing costs finally exceed household income, at which point the DTI ratio is just over 2000%. At that point borrowers are not eating, drinking, driving, holidaying etc. - everything they earn is servicing the mortgage.

A tad unrealistic methinks.

[billybong]

Didn't the "independent and authoritative" (from its own website) OBR start off originally with some reasonable predictions - when they were first established in 2010.

Now their predictions seem to be almost as wild and inaccurate as the "independent" BoE's Fan Charts and Forward Guidance.

Edited December 24, 2015 by billybong

[zugzwang]

Didn't the "independent and authoritative" (from its own website) OBR start off originally with some reasonable predictions - when they were first established in 2010.

Now their predictions seem to be almost as wild and inaccurate as the "independent" BoE's Fan Charts and Forward Guidance.

Chote uses the same quasi-static Computable General Equilibrium (CGE) model as the Treasury. Originally developed in the early 70s, and with a five year horizon. It's of little value in understanding the behaviour of real markets and economies since these are inherently dynamic and generally operate very far from equilibrium.

[Errol]

The OBR is a joke. I thought everyone already understood that?

[EssKay]

At this point the whole thing has become an international game of musical chairs- no indebted government/country wants to be caught out when the music finally, inevitably stops. So they extend and pretend - continuing to inflate their debt bubbles - both public sector and household.

The U.K. seems to be marginally better off than some of the other players though and Osborne has spinning this for all he's worth as a testament to his economic genius - like Broon before him.

Most people know it's all smoke and mirrors though and we haven't really got a pot to piss in. The North Sea oil income has been squandered, all the "family silver" has pretty much been sold and the real, productive economy is on its knees.

Like the Titanic though, the band will keep on playing for a while longer, so we'll keep keep the plates spinning, keep paying those tax credits and keep pretending we're a country that matters on the world stage.

Events will eventually take over one way or another though - either through an escalation of the war in the Middle East or through a full blown global debt crisis.

Merry Christmas

[jiltedjen]

It's incredible they have kept the feckless consumers going for so long consuming debt. people are going to learn really quickly that you can't borrow yourself rich.