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Bossybabe

Pookie Puts The World Right

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I'm a dedicated Off-Topicer, so I won't post to the rest of the forum.

Extremely interesting article by Matthew Parris in today's Times. It rather encapsulates how I feel about the current world economic position.

What do you all think of Lemsip Economics?

http://www.thetimes.co.uk/tto/opinion/columnists/article4660469.ece

Keep calm and carry on. Quite possibly this is just an adjustment. Quite probably the tremors from the Shanghai stock market will calm and trading will have returned to normal by next week, though reset a good few pegs down from before. But have you not sensed the fear (George Osborne clearly has) that in some underlying way, all is not well? Traumatised by the 2008 crash, we now start at shadows. We have ceased to trust normality.
Why? Let me propose the Lemsip theory of economic management. Could it be that in modern economics weve become so clever at pain control that were losing touch with our own body, and suppressing what it might be trying to tell us; and that, subliminally, we know this and worry about it?
I should begin with two warnings. The first is that Im no economist. I still wince at the recollection of a two-column, point-by-point dismantling of my argument by the economist Anatole Kaletsky in 2004 after I had suggested on these pages that we might be headed for some kind of financial meltdown. What follows will contain elementary economic howlers and cause any serious economist or banker to roll their eyes in embarrassment.
The second is that we are none of us immune (Im certainly not) from the lure of apocalypse: the exciting, lurking fear that haunts Greek tragedy, ancient and modern: that something terrible is going to happen. The ineluctable force of destiny surfaces again and again in literature and always taking us somewhere bad, never good. This must be a truth of human psychology, not market economics, and we should beware of reading across from the former to the latter.
Yet, the feeling is very widespread that the 2008 crash was trying to tell us something but that since then weve blithely hit the road again, without really changing our ways. Its worth asking how we achieved this.
There appear to have been three main strands to the policy response, in Britain at least. First is QE quantitative easing to recapitalise the banks and (indirectly) pump more money into our economies. Second is monetary loosening slashing interest rates to almost zero or less to make it easier for people to borrow and to service existing debts. Third has been to cut government spending so we live more within our means.
Only the third strikes me as addressing any of the underlying problems of the developed economies, and progress in cutting debt and deficit has been modest. Im still at a loss to explain how in a healthy economy our GDP could be growing at between 2 and 3 per cent annually, yet our debt is still mounting.
As for QE and a near-zero basic rate of interest, the first feels (at least to the uninitiated) too good to be true: a stimulant in the way that a drug can be a stimulant without actually making mind or body stronger. I suppose economists would argue that allowing banks to build up their reserves injects confidence into the system but printing money (which in a way this is) used to cause inflation and if it hasnt this time, thats surely only because cheap imports have kept prices down? And how long can that go on?
For how long, too, can the balm of low interest rates be applied? And isnt that depressing savings? And if silly interest rates encourage more people to borrow, how will they manage when rates go up?
And what will property prices do when that bubble bursts, as surely it must? Almost every day now, letters from estate agencies come through my door in London advising me that there are people out there queuing to pay a stupid price for flats like mine. But one of the reasons for rising property prices is that people like me (and, Ill bet, hundreds of thousands of Times readers) have stopped saving and put money into property instead. One gets this uneasy feeling that its all a kind of carousel, with political economists hoping theyre not here when whats now going around, comes around.
As a little boy, I was addicted to the Pookie series of illustrated childrens stories about a little white rabbit. My favourite was Pookie Puts the World Right. Our eponymous rabbit became angry that winter was so mean and destructive, and travelled to the North Pole, successfully persuading Winter (an ice giant) to stop coming. All the animals in the wood were at first delighted the seasons had stopped; but Pookie got a worrying feeling in his tummy when autumn turned straight to spring; and soon everything went wrong. The animals realised that the cold, even the destruction, served a purpose in nature. Pookie had to return to the Arctic and beg Winter to return.
I loved frightening myself with the picture of Pookie confronting a giant iceberg with human features and icicles for fingers and kept the book under my pillow, open at that page, to look at in the night until I was too scared to look any longer.
Perhaps we apocalypticists are doing the same thing now, thrilling to imagined horrors. But the book taught me a lesson about the need for cycles in nature.
And perhaps cycles in economics too? Gordon Brown was not just babbling when as chancellor he announced that boom and bust had been abolished: he reflected a growing confidence (in which he was not alone) that in economic management were learning to exalt every valley and lay every mountain low, flattening those choppy graphs of national and global prosperity.
A new generation of politicians and bank governors now say Mr Brown was wrong, yet act as though he was right, seeking to stave off bankruptcies, dull the pain of downturns even, in China, introducing a circuit-breaker into share trading, which was suspended this week after it only exacerbated the panic.
Commentators are saying that the circuit-breaking idea just needed a bit more sophistication; and doubtless there are algorithms that could act as shock absorbers within trading systems, suppressing the indicators of sharp changes of market sentiment as Valium does, and thus anaesthetising the sentiment itself for a while. But only for a while. When you cant feel your feet any more you lose confidence in the road.
I dont quite believe in this recovery. And with every new improvement in Lemsip economics I grow more suspicious that the malady lingers. Autumn may seem to turn to spring, but, like Pookie, Ive got a funny feeling in my tummy.

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I'm a dedicated Off-Topicer, so I won't post to the rest of the forum.

Extremely interesting article by Matthew Parris in today's Times. It rather encapsulates how I feel about the current world economic position.

What do you all think of Lemsip Economics?

http://www.thetimes.co.uk/tto/opinion/columnists/article4660469.ece

I would hardly call it lemsip

economic laudnum perhaps....opiate based and a bit more-ish as far as the masses go.

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I liked this article. Liked how he said he was no expert after getting a bashing for his comments re an economic crash pre 2008 :lol:

Pre 2008 I believed that the world economy was very rocky but kept it to myself as I didn't come across much real life company who shared my view. Thank goodness for HPC forum and all the interesting topics!

However I find myself increasingly having discussions with real life company who feel uneasy about the economy post 2008. I'm finding that more people are beginning to believe the UK is not in a phase of economic recovery; they're saying UK is going down the pan, everything's getting worse, not knowing who to vote for, worried how offspring are going to fare compared to them. These are mainly people I've known for a long time who are changing from carefree, all is well, nothing to worry about types to worrying about their and their families' future. Immigration often comes up too and folks are worried about it.

Even comments on online news articles have IMO changed as there are increasing comments which articulate stuff that I wrote in the previous paragraph.

I just don't know what will happen in the world economy and I feel the article author's unease regarding it. I'm completely unable to envisage a rosy future on planet earth so just make the best of each day.

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I liked this article. Liked how he said he was no expert after getting a bashing for his comments re an economic crash pre 2008 :lol:

Pre 2008 I believed that the world economy was very rocky but kept it to myself as I didn't come across much real life company who shared my view. Thank goodness for HPC forum and all the interesting topics!

However I find myself increasingly having discussions with real life company who feel uneasy about the economy post 2008. I'm finding that more people are beginning to believe the UK is not in a phase of economic recovery; they're saying UK is going down the pan, everything's getting worse, not knowing who to vote for, worried how offspring are going to fare compared to them. These are mainly people I've known for a long time who are changing from carefree, all is well, nothing to worry about types to worrying about their and their families' future. Immigration often comes up too and folks are worried about it.

Even comments on online news articles have IMO changed as there are increasing comments which articulate stuff that I wrote in the previous paragraph.

I just don't know what will happen in the world economy and I feel the article author's unease regarding it. I'm completely unable to envisage a rosy future on planet earth so just make the best of each day.

Reading "Earth Abides" by George R. Stewart just now, only about 50 pages in, but the main character is more or less glad that the majority of his fellow humans have been wiped out by a plague :P This classic inspired Stephen King`s "The Stand", and probably "I am Legend" by Richard Matheson plus many others, it will take more than numbers on a screen going red to make the future really bleak though.

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Reading "Earth Abides" by George R. Stewart just now, only about 50 pages in, but the main character is more or less glad that the majority of his fellow humans have been wiped out by a plague :P This classic inspired Stephen King`s "The Stand", and probably "I am Legend" by Richard Matheson plus many others, it will take more than numbers on a screen going red to make the future really bleak though.

I really do hope that the future isn't really bleak for a lot of the human race but when I look back in UK and world history it does make me feel cautious about entertaining such a hope!

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Those born today will accept a less rosy-looking future than us baby boomers. And so, the decline will be slow, but it's certain.

Carpe diem. You're a long time dead. ?

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I liked this article. Liked how he said he was no expert after getting a bashing for his comments re an economic crash pre 2008 :lol:

Pre 2008 I believed that the world economy was very rocky but kept it to myself as I didn't come across much real life company who shared my view. Thank goodness for HPC forum and all the interesting topics!

However I find myself increasingly having discussions with real life company who feel uneasy about the economy post 2008. I'm finding that more people are beginning to believe the UK is not in a phase of economic recovery; they're saying UK is going down the pan, everything's getting worse, not knowing who to vote for, worried how offspring are going to fare compared to them. These are mainly people I've known for a long time who are changing from carefree, all is well, nothing to worry about types to worrying about their and their families' future. Immigration often comes up too and folks are worried about it.

Even comments on online news articles have IMO changed as there are increasing comments which articulate stuff that I wrote in the previous paragraph.

I just don't know what will happen in the world economy and I feel the article author's unease regarding it. I'm completely unable to envisage a rosy future on planet earth so just make the best of each day.

That's been my feeling exactly, post 2008. The government has to talk up the economy or confidence in our markets will dwindle. But to overdo it is to cause a bubble...and so it goes.

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I suppose economists would argue that allowing banks to build up their reserves injects confidence into the system but printing money (which in a way this is) used to cause inflation and if it hasnt this time,

Hasn't it?

I think the trouble is economists only look at nominal inflation. They see price's (well, RPI...its own validity being questionable) rising at less than 5% and deem inflation to be low. Look at real inflation, ie price inflation vs wage inflation (purchasing power), and you see that peoples actual earnings have fallen more than in living memory. 3-5% inflation over the last 5 years has eroded peoples incomes far more than 15-20% inflation did in the mid 70s.

UK_real_wages_1862_2014.jpg

Even if inflation was running at a negative 5%, if peoples wages were dropping even faster i'd suggest there is still an excess of credit in the system. Nominal inflation as a method of analysing money supply should be ignored. Its real inflation that impacts peoples lives.

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