Wednesday, August 22, 2012

“cut or spend”: a nonsense dilemma

Still out their depth

We won't get out this crisis unless and until the financial system is sorted out, banks start working as banks and not as giant pyramid schemes sucking money out the economy as they currently do. Cut spending or increase spending is a nonsense dilemma. None of it will work until the pyramid scheme is liquidated and the financial system starts working normally. Expert and politicians have to get real otherwise things will just keep getting worse.

Posted by ant @ 08:32 AM (1308 views)
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13 thoughts on ““cut or spend”: a nonsense dilemma

  • Politicians:
    1). Haven’t the intelligence….”Don’t worry dear voter, George knows his stuff”.
    2). Are undermined by gifts and support from the Finance Industry.

    Chances of a change anytime soon…about 2%. Prognosis: more cash sucked in.

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  • …the question is how long people are going to put up with it. It still can go on for a very long time but it can’t go on forever. Or maybe it will all collapse in a spectacular way. At the end Roman Empire collapsed, Spanish, British and other empires collapsed. So the present “distributed” empire effectively run by the financial industry will also collapse at some point.

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  • It’s not a dilemma: spending is the way to deal with a slump, which is how Roosevelt ended the great depression (this one, though less severe, has gone on longer). But the finance system does need reform (the same reforms that followed the 1930s), which must then be kept in place. But this is not in the interests of the ultra-rich who benefit from the current system, so the current govt will never solve the problem.

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  • Gregs “Largest Heist in History” should be mandatory reading for everyone. The logic is so simple and so clear it dfrives me mad that people/politicians still don’t get that the >100% loan to deposit funding ratio is the problem. Thing is the Banks do know this. They are all deleveraging like hell (£545bn destroyed since 2010 and counting).
    LTF I don’t disagree that we need to spend our way out of a slump, but UK gov can’t borrow it as the banks don’t have it, the only way is for the BoE to print it, but that creates its own problems.

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  • they are all idiots you only need to read when local councils use anti terrorism laws for spying, someone dropped a fag lets spend days of resources following them after all it is taxpayers money why should we care

    http://www.dailymail.co.uk/news/article-2191757/A-town-hall-spy-corner-Pursuing-smokers-stalking-dog-owners–9-600-missions-council-snoopers.html

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  • general congreve says:

    Personally I lost faith in politicians and banksters long ago. Rather than sit around bemoaning the situation, which will change nothing, I took matters into my own hands and have made a tidy sum, thanks to their incompetence, and I’m in line to make considerably more.

    In fact, my view of the crooks has now changed to a far more favorable one in the last few years. I couldn’t have made my free investment returns without their greed and idiocy.

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  • ant
    I disagree with the article. If govt spending goes into infrastructure projects, which are needed at present (houses for instance), this would not lead to white elephants, it would employ people and put money into their pockets; cuts in spending on social services, libraries, public sector salaries should be reversed, also putting money into peoples’ pockets. Money circulating through retail banks does not disappear; yes, it may get sat on more than usual (building those reserves), and yes, reform is needed, particularly ring-fencing retail banks and controlling speculation. But austerity doesn’t work, as we’re seeing, and it hasn’t in the past. I’m with Keynes and Krugman.

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  • bankster
    Of course the govt can borrow – from its people, overseas investors, etc. Everyone wants to lend to the UK govt. That’s why gilt yields are so low. Debt has never been so cheap.

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  • @LTF: have you read this: http://gregpytel.blogspot.co.uk/2012/06/keynesian-approach-would-not-work.html ? Do you understand an argument that Keynesian method would not work as the financial system does not perform the money multiplying function? Keynes did not envisage such situation.

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  • ant
    Yes I read it – quite quickly so may miss something – but I don’t accept the premise. Money spent by govt is spent; that has a benefit. The argument seems to be saying that banks will sit on increasing amounts of money the more the govt spends, thus ensuring continued depression, or lapsing back into it. Theoretically possible I suppose but doesn’t make sense to me. And previous experience doesn’t bear it out either. I note the author gives no specific examples of such an event. Indeed his whole economic outlook seems predicated on a single theoretical argument, and these never hold good in economics, or not for long.

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  • @LTF: you clearly do not understand the money multiplier effect. “Theoretically possible I suppose but doesn’t make sense to me.” It actually happens in practice NOW: banks are not lending.

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  • No, and I’m not sure there is anything to understand. This chap is a bit of a one-track blogger who seems to have a limited amount to say, repeating a somewhat obtuse notion, and capital letters won’t change my view. Perhaps you’d elucidate

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