Wednesday, Feb 04, 2015

Perhaps it wasn't different this time after all.

Telegraph: IFS: Britain spending squeeze to be bigger than any advanced economy

Britain faces a spending squeeze larger than any advanced economy over the next five years, according to the Institute for Fiscal Studies, which warned that tax hikes were likely if the Government was to meet its target of balancing the books.

Posted by hpwatcher @ 10:27 AM (4328 views)
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1. hpwatcher said...

And that includes Greece.

We ALL know the UK is thoroughly insolvent.

Wednesday, February 4, 2015 10:28AM Report Comment

2. mombers said...

Spending squeeze won't be on anyone over 65 or landowners, I can guarantee

Wednesday, February 4, 2015 11:06AM Report Comment

3. hpwatcher said...

Spending squeeze won't be on anyone over 65 or landowners, I can guarantee

Not sure about that. What about all those on state pensions? Or the over 65's who rely on the NHS?

Wednesday, February 4, 2015 11:53AM Report Comment

4. khards said...

So that leaves renters, therefore rents will be falling as they absorb all disposable income. The only thing that can prevent that is help-to-rent-2 (aka housing benefit top ups for 'hardworking' families)

Wednesday, February 4, 2015 01:55PM Report Comment

5. mombers said...

@3 State Pensions are guaranteed by the 'triple-lock' - will rise by the highest of earnings growth, cpi or 2.5%. Now that inflation is looking so low this is a particularly juicy handout! No such talk of a triple lock on tax bands as the IOD suggested ( so those who work for a living face an ever increasing tax bill. NHS spending is ringfenced and every year more and more of it gets spent on the over 65s as the population ages. And landowners get a juicy council tax freeze and no doubt business rates are going to be reduced, allowing commercial rents and values to go up.

Wednesday, February 4, 2015 02:13PM Report Comment

6. hpwatcher said...

@3 State Pensions are guaranteed by the 'triple-lock' - will rise by the highest of earnings growth, cpi or 2.5%

I understand the government are trying to end this, via a method of a single cash payment.

Wednesday, February 4, 2015 04:50PM Report Comment

7. libertas said...

As said, negative rates will help balance the books. This is a market let global debt default. For the cynical, government's just discovered how to have the market invest in a default and improve their credit rating in the process, with abnormal and dysfunctional becoming the new normal.

Wednesday, February 4, 2015 09:55PM Report Comment

8. khards said...

Negative interest rates will hasten the rate of deflation.

The reason the financial system is deflating is because of the distribution of the wealth that is being generated going to a tiny percentage of the population wo then hoard the wealth essentially destroying any gains that are made.
Reducing rates or even making them negative will give ashort term boost to consumers, but due to the distribution of the system it will hasten the deflation.
Only a fundamental and systematic reform will stop the underlying monerty deflation.

What happens in the longer term? Lets say rates hit -0.5%, then -1%, then -2%, then -4%... What next?

Thursday, February 5, 2015 07:45AM Report Comment

9. mombers said...

@8 Khards I hear you. As I've said before, interest rate reductions don't benefit renters as they have no effect on rents. London is 55% renters at last count so the fruits go to a minority, especially considering how many mortgage free (poor widows in mansions!) folk there are. Their incomes are more likely to go down as a result of rate cuts. The transmission system of interest rate cuts is so broken...

Thursday, February 5, 2015 09:41AM Report Comment

10. libertas said...

No. Negative interest rates reduce the amount of inflation by increasing liquidity. It is part of a self-regulating system that is our economy.

No. Deflation is occurring WORLDWIDE due to advances in technology. Particularly IT, networking and new manufacturing and mining techniques. Also, greater labour mobility, primarily due to information technology breaking down national boundaries in workforces.

There has always been inequality. It is a reality of living in the world. Nature has inequalities. A salamander in the Sahara has less water than an Elk in Lapland. Looking wider, amino acid building blocks in comets have less warmth and air than amino acids on planet earth. Humanity reflects that natural state of things, and it is the dynamic movement of divergence and convergence that drives personal and social change.

Yes, we should not have government actively promoting monopoly, but only a moron like Carl Marx would blame ambient inequalities for everything and have an ego big enough to think that we can absorb everybody into the borg to become the same, like androids.

What happens when rates fall is immaterial. The issue is that this is a global phenomena based upon what happened before and it is leading to what is to happen next. The only relevant issue is, what to do about it. How are you as an individual going to adapt to the new situation for your benefit and for the benefit of your loved ones.

Try to ignore the social impacts of the change, they are irrelevant to your decision making and you cannot change what is going to happen on a societal level. Central Banks will REACT to the deflation and have no real control over rates, which are determined in the long term by the market. That is why technology becomes the principal driver. It would not be possible for government action to destroy that except if it creates a war.

Thursday, February 5, 2015 09:55AM Report Comment

11. libertas said...

Mombers, "The transmission system of interest rate cuts is so broken"

EXACTLY!! Infact, it NEVER worked, and is simply doing more of the same. THE only solutions are TAX CUTS and REDUCED / STREAMLINED / IMPROVED REGULATIONS.

My theory is that negative rates are the market signifying that it cannot take any more tax and regulation. Negative rates do the equivalent to a debt default in supercharge. They WILL result in government surpluses. Governments will find that if they spend that on infrastructure and tax cuts that the economy grows without much inflation.

As a result of this I fully expect finding to be in place for HS2, HS3, Crossrail 2 and Barkerloo Line Extension. These will be the future assets that the cash floating around will want to invest in. I also believe that if the Tories get an overall majority, Boris could be a key Cabinet figure and they will push through the Boris Island. Too many Tory votes in West London and they cannot loose it. Heathrow then becomes the biggest housing development in Europe.

Thursday, February 5, 2015 10:11AM Report Comment

12. mister ed said...

@10 "Yes, we should not have government actively promoting monopoly, but only a moron like Carl Marx would blame ambient inequalities for everything and have an ego big enough to think that we can absorb everybody into the borg to become the same, like androids."

You obviously have no idea what Karl Marx (or Carl Marx as you call him) actually said. Libertarian ideas took more from Marx than you could ever imagine.

Thursday, February 5, 2015 10:14AM Report Comment

13. mister ed said...


The crystal ball is working well this morning.

Thursday, February 5, 2015 10:32AM Report Comment

14. libertas said...

Mister Ed, you are a clear idiot. Marx believed in the use of force to redistribute wealth. His public face was seeking inequality. The unknown face is that he was funded by the bankers and aristocracy to create a system of class warfare, to have the workers fighting the new rich entrepreneurs, with the old establishment stepping in as arbiter and government taking over vast swathes of industry in an artificial Socialist mandate.

If you misunderstand libertarianism or traditional liberalism, then sure, you can make anything fit any model, but this is just a Jedi mind trick on yourself and it does not exist. Marx was simply a ruthless authoritarian with jacobean leanings who would have incited a bloody revolution and slaughter like in France if he could have. In the end, only the Russians put up with that level of crap. Left vulnerable more by the marginal nature of existence on the boreal steppe than anything else.

Thursday, February 5, 2015 10:47AM Report Comment

15. libertas said...

@13, indeed:

UK Treasury fast-tracks consultation on North Sea tax cuts
BBC News-22 Jan 2015
The UK government has announced it is fast-tracking a consultation on a new tax incentive for oil and gas firms. The investment allowance ...

Thursday, February 5, 2015 10:49AM Report Comment

16. debtserf said...

"No. Deflation is occurring WORLDWIDE due to advances in technology. "

Well, you learn something new every day on this site - and there i was labouring under the delusion that deflation was due to the bursting of a.massive credit bubble. Turns out it has nothing to do with that after all.

Central banks have no control over rates? Again, i am humbled by your astute and subtle grasp of macroeconomics. It makes you wonder wonder just what the BOE MPC really get up to in their monthly meet-ups.

Thursday, February 5, 2015 11:04AM Report Comment

17. mister ed said...


Sorry Libby, but your view of Marxism seems to be

1. Taken from other people who know nothing about what he actually said
2. Stuck somewhere in the nineteenth century

On point one, Marx believed in the supremacy of a system built on personal economic worth, one in which all aspects of life could be boiled down to economics — much as libertarianism does.

To quote old Karl himself on how society should be organised, that life: “has resolved personal worth into exchange value,” and “has left no other nexus between man and man than naked self-interest, than callous ‘cash-payment.’”

Sound familiar? As an alleged free-market Libertarian (though one who, ironically, works for the government), you could have written it yourself.

On point two (which also relates to point one), since the early part of the twentieth century, Marxists (at least those who actually understood what Marx was on about) have turned their revolutionary ideas to cultural attacks rather than economic ones, to undermine society by destroying institutions and cultural norms rather than a violent overthrow of the state.

This is the real danger of Marxism (and also the real danger of Libertarianism), in that both philosophies believe (as mentioned in point one) that human life can be boiled down to economics. Unfortunately, once you take away people’s humanity, you end up with nothing, as those unlucky enough to live in the Soviet Union found to their cost.

And, by the way, traditional liberalism and the kind of stuff that passes as “libertarianism” are miles apart. I understand both, and I know that both Marxism and fully-fledged Libertarianism have their roots in utopian thinking, and both are intellectual frauds.

Of course, you’re not a fully-fledged Libertarian, because, as mentioned, you work for the government.

Thursday, February 5, 2015 11:39AM Report Comment

18. britishblue said...

Khards @8. Rents appear to be falling where I live in South West London. I can only go by personal experience but we have been looking to rent for three months. We have been looking for a modest house in a safe area for the 2k mark. Most properties in this range have been reduced over the last few months. We did a deal on our one which was £300 less than the asking price. A few agents have moaned that renters don't have so much money and people are downsizing to flats (which are evidently rushing out of the door). But when it comes to houses, less people can afford them. We have rented in London for the past few years and have always moved around this time, so it isn't just the time of the year. The prices we could rent for are no greater than they were 2 years ago, despite property prices rising 40% in our area in that time frame. I have kept my alerts on Rightmove, but I am now getting more alerts through for properties with reduced rent, rather than new properties. It might just be a fluke, but I was expecting to pay significantly more and have been very pleasantly surprised.

Friday, February 6, 2015 08:13AM Report Comment

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