Thursday, Oct 08, 2009

The forex markets see it differently...

Independent: Britain's not bust. So don't use it as an excuse to impose cuts

Our entire political class has taken to their beds with National Debt Hysteria. Let's start with a few facts that have been forgotten. Britain went into this recession with one of the lowest debt levels in the developed world. To claim, as Cameron does, that Gordon Brown had "racked up debts in the good times" so we "can't afford more" is simply untrue. Britain has been "bust" for almost its entire history since the 1750s if Cameron's standard is right. From 1750 to 1870, Britain won wars, assembled an astonishing navy, built an empire and launched the Industrial Revolution to become the envy of Europe, yet the national debt was consistently above 80 per cent of GDP. Nobody cared. Osborne's cuts could well send unemployment soaring to five million.

Posted by drewster @ 11:30 PM (2043 views)
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33 Comments

1. paul said...

I'm no fan of Labour, but I do wish more people would understand just how much worse we would be under a conservative govenrment.

Especially with Boris and Dave in charge.

Thursday, October 8, 2009 11:41PM Report Comment
 

2. devo said...

Hilarious article drewster - a real 'saver'.

Spend!
SPEND!!
SPEND GODDAMMYOU!!!

Thursday, October 8, 2009 11:45PM Report Comment
 

3. stillthinking said...

This is a bit like the previous posted article in that it ignores a hugely relevant fact. Government debt only has indebted taxpayers behind it who are struggling with their own bills. The total UK debt is the problem, not just government. If everybody wasn't already in hock then additional gov. debt wouldn't be such a killer.

The previous article looks at gilts in isolation and ignores the indirect funding of government debt with QE. -If- QE was only temporarily buying back gilts then that wouldn't be so bad, BoE has the gilts, market has the cash, but really BoE has the gilts, government doesn't have the cash because its already spent. Instead of gov. flooding the gilt market now, the BoE does it later.

Friday, October 9, 2009 12:00AM Report Comment
 

4. mark wadsworth said...

"Osborne's cuts could well send unemployment soaring to five million"

For a start the Tories will only trim a bit at the edges (and replace Labour quangoes with Tory quangoes). But what is the difference between a properly unemployed person getting £3,000 a year dole and one of the "salaried unemployed", all the bl00dy meddlers and pen-pushers and quangista and snoopers on £30,000 a year?

The answer is £27,000.

Neither is contributing much to society, but the latter cost the taxpayer ten times as much. Me, I'd rather pay for six chav families to sit at home drinking beer and watching Jeremy Kyle (and otherwise minding their own business) than have one Trevor Phillips (with his crack team of back office staff and commissioners) sticking his nose in.

Friday, October 9, 2009 12:02AM Report Comment
 

5. devo said...

@3. stillthinking

I agree with your first paragraph. Your second paragraph may also be true.

Friday, October 9, 2009 12:09AM Report Comment
 

6. devo said...

4. mark wadsworth said... Me, I'd rather pay for six chav families to sit at home drinking beer and watching Jeremy Kyle (and otherwise minding their own business)

Ah, but will they continue to mind their own business once their standard of living drops?

Friday, October 9, 2009 12:14AM Report Comment
 

7. jonb said...

The Independent is forgetting about the PFI loans, the pension liabilities and the debts taken on in the nationalised banking sector.

Friday, October 9, 2009 12:49AM Report Comment
 

8. drewster said...

stillthinking,

I agree entirely, it's total debt that matters now: personal, corporate, and government. By that measure we're one of the worst-placed countries in the world.

Mark Wadsworth,

For once I'm going to disagree with you a bit. If somebody is at home drinking beer and playing xbox all day, their motivation fades, their skills fade, and their employability decreases. Would you rather hire a fresh college graduate who has spent the last five years studying hard for exams, or somebody who has spent the last five years fighting warlocks in World of Warcraft? Massive lay-offs would lead to a lost generation of unemployables. It's a social issue as much as an economic one.

A compromise might be to shift them onto 3-day weeks; keeping much of the social benefit of work while also helping to balance the budget.

Friday, October 9, 2009 12:51AM Report Comment
 

9. Wilf said...

and whats wrong with watching Jeremy Kyle and drinking beer? I hear very little comment on yet another monthly rise in house prices - must be hard being a doomonger now that we have turned a corner!

Friday, October 9, 2009 03:47AM Report Comment
 

10. nopensionnohouse said...

Yeah. Well just for starters this time round there are 2 Massive differences:

1. We don’t have the massive riches from our colonies to support our spending habits.
2. There are too many people with an entitlement attitude taking from the pot rather that contributing to it.

Rule Britannia /s

Friday, October 9, 2009 07:20AM Report Comment
 

11. nopensionnohouse said...

4. mark wadsworth said... Me, I'd rather pay for six chav families to sit at home drinking beer and watching Jeremy Kyle (and otherwise minding their own business)

Blimey Mark I can’t believe my eyes! I’d rather none of my head earned tax was wasted thank you.

Friday, October 9, 2009 07:23AM Report Comment
 

12. sold out said...

i believe the politics is just a sideshow now.
The country is going to be in a mess for a decade at least, may be more.
Who wins is irrelevent now.

My only wish for the upcoming election is to see Brown, Darling,Harmen,Mandelson,Balls,Cooper etc to take a real beating,and see them booted out, humiliated a rout.
Silly and childish of me i know but that is the way i feel.

Labour, Conservatives, Lib Dems......Whats the differance?

Friday, October 9, 2009 07:34AM Report Comment
 

13. ketha said...

Maybe all economics is politics, maybe some is actual science.. but certainly a great deal of 'economic theory' is ideology pretending to be science using numbers to hide behind. i agree with this article but it's not maths, it's a view of how to run society... the arguments for capitalism are not less biased towards certain values and goals. Economics can be wrong, as in plain wrong, but is hardly ever definitely 'right', more often lucky guesses or actual lies.

Friday, October 9, 2009 07:41AM Report Comment
 

14. alan said...

Interesting article, but ....PFI, and private debt? How about big losses by the banks?

We were encouraged to borrow to the hilt..and then more. Lenders were falling over themselves to dole out cash and house prices rose.

It is going to take a superman (of any political colour) to get us out of this one. Therefore many postings to this site have been focussed on blame and consequences over the past year - not much else to do! Nobody on this site has a quick solution because there isn't one.

Friday, October 9, 2009 08:59AM Report Comment
 

15. tyrellcorporation said...

Paul, I'm shocked!! Do you really believe that?

Friday, October 9, 2009 09:01AM Report Comment
 

16. cat and canary said...

@3. stillthinking ...hit the nail on the head. The banking losses have been dumped on the taxpayer, but the taxpayer is already in debt, servicing their cars, £30K credit card bills and £300K house.

The Independent's author misses the point... that somewhere in the late 80's a majority of Brits changed their attitude to debt and it became 'ok, to pay for a few things on credit card' (for example). That's something that never happened before IMO.

Now the mind of the people is changing (I hope!?) and the appetite for debt is diminshing. Certainly people I speak to are 'sobering up' to the fact that at the end of the day, they've got to pay their own way.

So the rampers, and vested interests from the "spend spend spend brigade" are becoming a sideshow as @11 sold out says. Sentiment amongst the critical mass of people is hopefully changing, which is at the heart of any recession.

Friday, October 9, 2009 09:11AM Report Comment
 

17. str 2007 said...

Re: the debt and change of attitude.

I'm not sure how the 'vehicle' element of debt is counted.

There has been a significant change here.

I'm still in the buy my car each time (second hand) and watch it depreciate further group.

Alot of people now buy new, but only tie up the depreciating element in repayments. IE the small deposit monthly repayment and then a balloon. The balloon never gets paid, the keys get handed back and a new car ordered and the monthly repayments continue.

Owning the car outright puts you in control of when you change it.

Once you go down the route of leasing it would be very hard to change back to purchasing outright.

However, it does make me wonder if in actual fact you're better off not committing capital to a car and using the above finance method for this particular purchase.

My point (if a little off topic) is that sometimes the use of finance can be justified. This particular use I'm sure weighs far heavier on the numbers quoted for the 'debt mountain' than it's given column space.

What I mean is this figure will be at least equivalent to if not greater than the Credit Card element of the debt mountain.

Friday, October 9, 2009 10:47AM Report Comment
 

18. letthemfall said...

Even taking into account the total debt, Govt and individual, the point is that the UK is not in a fundamentally worse position than other developed nations, especially the US, which belies all the arguments for a collapse in the pound. In any case, national debt is a complex animal, which the Conservatives love to simplify.

Cast your mind back to 1979 and what happened then. In some respects the economic situation was similar. The Tories imposed big public spending cuts, unemployment soared, there were street riots. The country endured a recession, then exploded in a credit boom. I find their current arguments totally disingenuous.

There is a strong prejudice displayed against the public sector in some quarters here. The view is that it consists of a bunch of quangos that consume money and create no value. This is just ridiculous and, if I may say so, a 6th form politics outlook. No doubt one could examine certain publically funded bodies and find them pretty poor value, but then consider those such as the British Museum, Environment Agency, Ordnance Survey - all of which I believe are defined as quangos. They perform services of immense value, and often employ PhDs at salaries little more than the national average. One could say they represent outstanding value for money.

It is not even as if the private sector provides great value in comparision. Plainly it doesn't. Even if you ignore the great wealth destruction of the banks, you only have to look at some of the stuff and the quality of service you get elsewhere from private companies. Some if it is awful; and these awful companies do not always get weeded out by the market, either through their sheer size, lack of alternative, or just public apathy.

I agree with paul. Labour have made some bad errors (though the financial inequalities are as much about allowing globalisation to career unhindered through the world's economies); but the Tories, with their "traditional" outlook would be far worse. (Bear in mind that many world leaders have praised Gordon Brown for his leadership during last autumn's crisis.) Pay freezes for workers earning £18000, and cuts in inheritance tax for the rich? Is that a progressive policy?

Friday, October 9, 2009 10:54AM Report Comment
 

19. waitingfor hpc said...

get labour out!! they are useless.
rather see the new ideas from the Tories than this present shambles.

i will dance naked in the streets if we get rid of this pathetic excuse for a 'prudent' labour party

Friday, October 9, 2009 11:08AM Report Comment
 

20. Soldintime said...

UK pension liabilities are at 85% of GDP vastly exceeding those of the US and many other countries. Throw in the massive bail out of banks plus the underwritting of toxic assets and the UK has a massive problem. Running a 17% defecit this year is enormous and that needs to be tackled. You can only do that with spending cuts.

Friday, October 9, 2009 11:08AM Report Comment
 

21. rumble said...

"chav families to sit at home drinking beer and watching Jeremy Kyle"

What's wrong with placing them on a bit of rural land where they grow their own food, etc, receive no cash to buy beer, tv, etc. If they don't want to participate in the economy, fine, enjoy the middle ages.

Friday, October 9, 2009 11:35AM Report Comment
 

22. mark wadsworth said...

@ Rumble and others, that is a fine plan, I was just saying, the quickest way to save money is to get rid of the three million-plus paper shufflers on £30k a year plus pension etc, so let's do them first. After that we reform the welfare system (i.e. have a Citizen's Income scheme) or give them plots of land or something.

Friday, October 9, 2009 12:06PM Report Comment
 

23. Magol said...

Britains debt did not start out from such a good position as Hari maintains. Brown has long used altnerative sources of borrowing such as PPP to keep UK debt off balance sheet so the actual debt number is higher. In addition the UK consumer started out from an exteremely indebted position far worse than in many comparative nations. Trying to solve a problem of too much debt (public, private and corporate) to gdp with more debt is destined to end in failure.

Krugman and Keynesian economics is completely unsound. Both play Russian roulette with the economy by insisting that deficits are a good thing, spending not invesment is all that matters, and credit based consumption is real consumption. Unsound economics has been used to underpin Western central banks response to the crisis and the result is a debt trap where more and more debt and stimulus will be required to produce ever smaller amounts of growth in an unbalanced economy. Eventually the level of stimulus will lead to crisis of confidence that destroys the value of money overnight and with it the ENTIRE economy. Every FIAT system has gone the same way because of governmental policy that used Keynsian arguments. The better way is to accept that delflationary deleveraging is the inevitable consequence of too much debt. Bernanke, Mervyn King, and Blanchflower are the modern day equivalent of John Law.

Thankfully common sense appears to be prevailing - suprisingly the conservatives actually get what is patently obvious, that unbalanced economies based on leveraged consumption are unsound, and balancing the books is the only way to REAL LONG TERM prosperity. It is time to put Keynsian sophistry into the annals of discredited economist history where it belongs

Friday, October 9, 2009 12:18PM Report Comment
 

24. letthemfall said...

Isn't that Jobseekers Allowance by another name? No one has suggested a windfall tax on those who've made a mint buying and selling houses. Brick shufflers against paper shufflers.

Friday, October 9, 2009 12:18PM Report Comment
 

25. rumble said...

Point taken, agreed. As far as giving the chavs cash, i don't. Give them shelter, give them food, if they want money they work. No more beer for you!

Re brick shufflers - can we impose a retrospective tax? Justify your brick trading or cough up...

Friday, October 9, 2009 02:48PM Report Comment
 

26. shipbuilder said...

The reaction to Mark Wadsworth's chavs comment @4 is hilarious/depressing - the point he was making was perfectly clear. Even on this supposedly enlightened site, so many happy to take the prescribed government/media reaction to everything.

Friday, October 9, 2009 04:27PM Report Comment
 

27. rumble said...

The point he was making was perfectly clear. I took the opportunity to ask a related question. Don't be sad. I remember someone raising the issue of workhouses as though it were a bad idea, but I think we're onto something.

Friday, October 9, 2009 06:26PM Report Comment
 

28. shipbuilder said...

rumble, not really directed at your response, which was from a different angle at least. Not that I'm any great thinker, but I try to see past the usual smokescreens and spin. What is so depressing is that so many on here can see it regarding house prices but are blind when it comes to anything else. Workhouses, though, eh?

Friday, October 9, 2009 06:55PM Report Comment
 

29. rumble said...

I'm a relative rookie so I'm often feeling enlightened, your posts included, keep de-spinning. Comparing the view count to number of posters I suspect there are many potential posters who could prove really depressing!

Re workhouses, possibly more of an enforced hippie commune. If it's good enough for hippies, it's certainly good enough for chavs.

That said, I believe it's about time for aforementioned beer...

Friday, October 9, 2009 08:14PM Report Comment
 

30. letthemfall said...

So back to the 19th century. Well, the way things are, it feels like we're heading that way. Mark W in a top hat. Bleak times.

Friday, October 9, 2009 08:48PM Report Comment
 

31. rumble said...

Lol. Old is not necessarily worse, could be commendable to concede we've stuffed up and need to backtrack. The stirling engine is making a comeback. And if the chavs must live, and considering their youthful procreation they surely will thrive, then it's homelessness, government sponsorship or self-supporting hippie communes. The first two bother me.

Friday, October 9, 2009 09:23PM Report Comment
 

32. Van Hoogstraten said...

The article is written by Johann Hari. This is a bit of a change for him as his usual subject is rabid paranoia about the perceived lack of rights for fellow homosexuals and other minorities.
Accordingly I’m now waiting (with bated breath) for weighty pieces from other heavyweights of economic theory such as the debate for the return of the gold standard by Peter Tatchell, the perils of unfettered QE by Trevor Phillips and why the government should run a balance budget by Sheikh Omar Bakri Muhammad.

Monday, October 12, 2009 12:26AM Report Comment
 

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