Beggar my neighbour - or merely browbeat him?
This week's statement by the Federal Reserve has achieved all that Ben Bernanke might have hoped it would achieve; stocks are up, the dollar is down, and so are most US bond yields. We can't say for sure that it will "work", but all of these developments ought to be net positive for the US economy. The question I raised yesterday was whether it would be expansionary for the rest of the world.
After all, the US is supposedly engaged in competitive devaluation. At the very least, it is pursuing a policy of "active dollar neglect". Talk of competitive devaluation conjures up visions of the 1930s, the iconic example of a time when countries beggared each other with depreciation and protectionism as they fought over a diminishing global pot of economic demand.
Is that what is happening today? Is the US simply exporting its demand shortage to the rest of the world?
As I said yesterday, the answer depends, in part, on how other countries respond. The big problem in the 1930s was not so much the depreciation itself, as the way it took place: through domestic price levels, rather than the exchange rate. Because most of the countries "competing" were locked into the gold standard, the only way they could make their goods cheaper overseas was by forcing down domestic prices (and demand). Once you have a lot of countries doing that, you have the ingredients for a shrinking global economy and a lot of beggaring, not just of your neighbours but of your own country as well.
To be clear: that is not the kind of competitive depreciation that the US is after. When you talk to people in the administration, they don't think they are trying to beggar anyone. Far from it. They think that they're trying to get as much growth as possible for the US economy - and if their cheap money (and currency) policies encourage others to do things which expand their own domestic demand, well, isn't that what they should be doing anyway?
Is that what's going to happen as a result of the Fed's move? That depends on whether other countries have a fixed exchange rate or a flexible one. For countries with completely fixed exchange rates, the economic would suggest that more QE by the Fed would be expansionary, because the domestic authorities have to loosen domestic monetary conditions by a similar amount to keep the currency at the same rate.
This is (sort of) what should happen in China - but not if the Chinese authorities have anything to do with it. As I discussed at length a few weeks ago, China's quasi-communist financial system means it has more ability than most both to fix its exchange rate, and to do what it wants to domestic monetary conditions.
But what about the many countries that do not fix their exchange rate? At first glance, for them the Fed's move will be clearly contractionary: their currency will go up, meaning less demand for their exports and tighter conditions at home.
However, America's economic heft makes a difference to the calculation: rising US stock prices and lower US interest rates should push global equities up and interest rates down, as they have today. That would offset the tightening effect through the currency. Also, if central banks don't want demand to go down in their economies, they can and will act to offset the Fed's move, and push their currencies back down again.
That, in a sense, is why the US sees 'competitive depreciation' of the dollar as a win-win. If other countries, with flexible countries, don't respond with QE2 of their own, then their currencies will strengthen, and demand for US goods in those economies will (theoretically) go up. If they do respond, with more easing to counteract the rise in the currency, then global demand goes up, and the US is once again better off.
Put that way, it sounds like a no-brainer. But all of this assumes that the Fed's policy is actually effective, over the medium-term, in lowering US real interest rates and raising US real demand. (It also depends, incidentally, on the policy raising inflation. Critics seem to to think it can be both ineffective and inflationary. That is simply a contradiction in terms, at least when it comes to the US.)
If the policy doesn't work, the calculation shifts: in that case, QE2 won't cause inflation in the US, but it might simply fuel asset price bubbles in emerging market economies without doing much good at home.
It's an open question whether that is contractionary or expansionary for the rest of the world in the short term. But note that it does very little to re-balance the global economy. Re-balancing is supposed to mean increasing consumer demand in the emerging economies, not increasing the amount of hot money invested in domestic real estate.
Charles Dumas, of Lombard Street Research, takes the gloomiest possible view in a paper he has just put out. He thinks the only positive effects from QE2 will come through the lower dollar. (Notably, he doesn't think it will do anything to support house prices in the US, because the Fed is not buying houses or even mortgage-backed securities, as it did in the first rounds of QE.) And that positive effect, in terms of net exports, will happen slowly, if at all.
But, in the Dumas view, the negative impact of QE2 on the US will be significant, and operate much more quickly. A weaker dollar will hit real incomes by raising the cost of food and energy; he also thinks that rising inflation expectations at the 30-year end of the US bond market could actually push mortgage rates up as a result of the Fed's move.
His bottom line? If anything, QE2 will make deflation in the US more likely over the next year or so - and raise the chance that the Chinese will slam on the brakes domestically to curb inflation there. If true, that would be well and truly the worst of all worlds: no inflationary impact in the country that wants inflation, and a deflationary impact in the country where the US most wants to see strong domestic demand.
Now you see why the Fed is playing for such high stakes. And you can see why countries resent the US putting its interests first. If QE2 does what the US central bank wants it to do, it will almost certainly do more good to the global economy than harm. But if it doesn't, some of the biggest harm might be done overseas.
Again, the US isn't trying to export its weak recovery to the rest of the world. It wants a strong recovery, for itself and everyone else.
However, it is possible - some would say likely - that a strong recovery is not available at any price in the US today, especially while the most important dollar exchange rate is set in Beijing. If that is true, the American authorities could end up simply exporting the negative side-effects of a futile expansion effort, while doing very little to raise growth at home. Let's hope it's not.
~RS~q~RS~~RS~z~RS~05~RS~)
I'm 
© MMXI
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Stephanie Flanders.
the US of A is broke (and not just financially), has been for decades; when countries around the world stop using the Petrodollar (Iraq tried, Iran does, others will follow), the proverbial will hit the fan and the US of A will be reduced to open warfare to 'make a living'. can't wait.
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Sadly, Dumas is taking a very-much-real-world view of matters. What Bernanke is doing flies in the face of game theory. He assumes that others will take the altruistic high road instead of looking out for their own best interests. What success he sees will be relatively short-lived (and he will see that fleeting success only because it takes time for the other players to react). What he is doing ignores the fact that others are in his position and what success he sees will only make competitive reaction in kind more likely (imagine a drowning pool filled with rats…this’ll be the same thing only bloodier).
Failing systems fail. It’s folly to try and support them once they do. It leads to a long, agonizing trail (one on which we are just beginning to walk). Eventually, the time to pay the fiddler comes due for all revelry (no matter how much fun it was). Even Europe has come to understand that checks bounce. Time America did, too.
Absorb the bad debt and restructure. Anything less is only a bombastic postponing of the inevitable.
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This piece seems to express the phrase "The road to hell is paved by good intentions" but I am not sure the intentions are at best only confused. Your final remark sums it up "Let's hope it's not". Just how much does the dollar have to depreciate to enable its economy to 're-balance' and while this process was gathering pace the average American would have to face imported inflation putting pressure on interest rates which would.... Of course other countries will react and create uncertainty about outcomes. A period of low growth may actually be the least worse scenario to enable the internal changes to take place but that would demand active intervention in the economy which is heresy for the tea party religion.
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Good blog Steph!
The other alternative might be that things (worldwide) go so bad (one way or another), that one-by-one countries will be forced to readopt fiscal policy over monetary policy, and gid rid of monetarism, and the artificial independence of the BoE. How long before the BoE and Treasury finally merge their balance sheets and pursue full employment?
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Have you seen the silver and gold charts? Thank you Mr Bernanke you are on my Xmas card list. Skip a few trips to the barbers and you could be santa.
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Bernanke is effectively playing 'Double or quits'.
Rather than taking the traditional route after a massive bubble burst, America is trying to keep it half inflated, in the hope they can avoid the really painful recession that would have followed a property price crash.
The ironic thing is that not only does QE look like failing, the end game will be all the worse for having tried to thwart economic gravity.
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By tanking the US dollar both the Euro and sterling will appear relatively strong. That does not help us and what it could do to Ireland, Greece and the others makes me want to look away.
This has to be the last throw of the dice. After this there is nothing left in the locker.
I have said before that both USA, UK and Europe must restructure their economies back into manufacturing. This creates value, which creates wealth, which makes a resilient economy.
The fact that the prevailing economic elite are unable to perceive what is blindingly obvious reminds of the Bourbons in France and I don't mean the biscuits.
Mind you, perhaps this time round we might get some tea with our cake.
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Bernanke has completely overlooked the effects on the US consumer of import inflation, namely energy. The US domestic consumer is acutely sensitive to oil prices, much more so than in any other country. He has actually reduced the ability of his own consumers to spend by reducing their disposable income.
He can only be acting on behalf of the banking lobby keen to shore up dodgy balance sheets stuffed with over priced housing loans. Why didn't he do something akin to the new deal and undertake some worthwhile infra structure funding? The US energy generation, distribution and road systems are pretty dire in many places.
If China has any sense it will run down it's mountain of dollars to buy the oil it needs for the next few years and not buy anymore US debt. Then push for oil to be priced in Euros once they have used up the dollars.
The US financial establishment is completely out of touch with reality, let's hope we don't follow suit. I fear we will though.
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7 stanillic
I would suggest that there are clear rules to engaging in manufacturing in this environment and it requires more in the way of smarts than have been shown in the sort of mass manufacturing which has left these shores in the last few decades. Essentially it has to be high tech - or novel - or culture driven. So mass employment through manufacturing is not likley. For all its problems the financial sector remains important. As far as resilience goes large sections of UK manufacturing have not been resilient so recreating them is pointless. Sorry.
This looks to be all about poking a long term debt around with a stick and simply because it is long term it will linger with a bad smell for some considerable time. I have yet to have anybody explain to me what QE is other than apparently a way of shoving money into the relevent government coffers to keep them spending - or bunging something the banks way to stop them folding. The whole issue is the 'too big to fail' model and the desperation to try to avoid massive debt in the system crystalising - and amongst anything else collapsing the property market overnight.
Capitalist processes are designed to recursively increase efficiency which in turn increases redundancy unless consumption somehow rises faster. Redundancy is showing up in the system. To reduce redundancy you have to have novel developments or to allow things to become relatively more expensive. This is a lifestyle expectation and cultural problem and all the fudge in the world cannot conceal it.
If you reduce consumerism - whether by overhanging debt - or credit denial - or reduced wealth - then the only outcome can be a reduction in Captialism - and that cycle is in place.
The whole system is weakened because so much effort has gone into stripping asset and money out of the chain which reduces response flexibility.
When clever people have spent so much time being stupid it is going to take time to deconstruct.
QE seems to be a bizarre form of cannibalism where you dilute the pool of money to provide a bit which can be extractedin abig bucket. So the extracted amount can be used to keep the spending going to prop the system up a bit longer. This is the amazing shrinking economy where you start with a bigger economy and just wait and wallah - you will get a smaller one. The trick is apparently to keep the game going long enough to deal with the long term debt. At some point the debt is reduced to a level where consumerism can be provoked, providing cultural change, in the form of the populace dealing with the failing high priests, does not occur.
Regards
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What is the point of society?
Exactly what are we endeavouring to do?
Well for me, (who for the avoidance of doubt is a complete nobody in the overall scheme of things), it’s this:
Primarily to provide for a family
Secondly to do that which is right by the next generation
And finally to hopefully enjoy life whilst undertaking the above.
There’s been more ‘armchair economists’ bleeting on about how things are, or are conversely not being done, than your average Joe could argue with in a lifetime.
And up to press the only thing that seems to have been missed in all this is: Exactly what can we do now, that will have a positive impact on those who come after us?
The main point of society is to create a future for the next generation, ultimately that’s all that there is, it’s all that there ever can be. And to not even consider it, beggars belief.
Until such time as those making the decisions open up discussion on the impacts of them on the next generation, there will be no hope of any reasoned or sensible outcome to the current financial debacle.
So far we have managed to prop up financial institutions, and evidence suggests to the detriment of all else.
Is there no one out there that can open up some discourse on what is best for the next generation, or are we to be saddled with continually bailing out the failed, to the detriment of those who have yet to attempt to succeed.
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Wall Street will be delighted if the FED prints more money....More money to invest abroad. Obviously the USA agenda is to own the world...Print more dollars and buy/invest wherever there is profit to be made...China and the UK are doing the same, but they do not need to print more money.
These extra dollars will never reach main street USA and that is where the danger lies...If unemployment keeps on rising, there will be a point where social unrest is reached.
If main street USA is abandoned by Wall Street and it seems to be the case(Greed not social conscience is the order of the day), then unemployment will keep on rising.
Just exactly where are the jobs going to come from...There must be a limit to the number of people just employed to be chained to a desk...Millions are now just sitting in front of computer screens...This must be an attempt to have people occupied rather than sitting idly at home...Idle hands make the devil's work as they say....But putting faith in the free market to create sitting jobs is stretching belief a bit.
The biggest threat to the free world will be unemployment and the sooner this is realised the better. Wall Street and The City seem to be a huge barrier to the creation of jobs, in that these institutions which have grown so powerful (more powerful than the Governments of the day) only understand profit and the now Global Markets.
If Wall Street and The City do not provide jobs in their countries, then who will.?...The governments of the day?..Not at this time, with the governments we have at the moment. At least Gordon Brown atempted to keep the unemployment figures down.
We are still at a transition in human history with the advent of Computers, Internet, Technology, Peak Oil etc...What happened to the leisure society.?
It seems we are going backward or at least have gone into a cul-de-sac...
Or I could be wrong and the Free Market will be our saviour...Amen
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http://www.youtube.com/watch?v=tGy6cP7sg5w
Ron Paul and "The Judge" discuss QE and the Fed on the "Evil" Fox News. I can't imagine any discussion like this on Newsnight.
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The USA and indeed all Western democracies that thought it was smart to "offshore" manufacturing to China in particular must now reverse that policy.
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12. At 9:59pm on 04 Nov 2010, coplani wrote:
"The biggest threat to the free world will be unemployment and the sooner this is realised the better."
I have to disagree. In communist Russia there was no shortage of employment, it was just the nobody was free.
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11 dempster
The culture of consumerism is the device of capitalism to reduce the influence of society and therefore the family. Capitalism is primarily interested in consumers, society is of passing interest.
When in Rome.
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Stephanie wrote:
"these developments ought to be net positive for the US economy"
I disagree with your assessment and I believe it is fundamentally flawed and based upon a faulty education in economics from Harvard that you share with Ben Bernanke and Mervyn King. None of you seem to understand the need to maintain the idea of the price of money and how vital this is to a functioning capitalist system. The really dreadful economics that does not seem to comprehend the apocalyptic consequences of ignoring the price of money and in particular the need for money to have a positive price or the system collapses.
Try to look at this way in all the normal economics of the last 300 years the price of money was arranged so that savers received less than borrowers paid - with base rate in between. What you and your fellow Harvard travellers have done is broken this paradigm of economic management and have base rate less than savers get and far less than borrowers pay. That is you and they simply do not understand that the economy has been pushed over a disastrous cliff and there is no going back until the over priced assets can be brought back into the market and the economy at substantially lower prices!
You and they are trapped in bubble economics and the inevitable is unavoidable! Your mindset is that of the drunk who thinks that the hair of the dog will cure him! Or of the Heroin addict - just one more fix and everything will be OK - it will not! We have to have economic cold turkey or everything is downhill!
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Hey, Steph!
You think they're taking notice of us, Mervyn and the MPC members?
Us saying:
'QE is the rich people's route to affluence - affluence for them and them alone as they use it to bid up their assests'.
is not what's motivated them.
Us saying:
'Stop making the rich richer. You saved every last one during the credit crunch, as if thir erstwhile wealth was a measure of their value'
has left them cold.
Us saying:
'Your account 'QE lowers interest rates and so weakens the currency and so increases competitiveness as capital inflates the economies of Asian competitors' is nonsense. The currency is weak anyway and exports are unresponsive and imports booming. Anyway, the initial impact is inflationary at home'.
has gone unheeded.
What's motivated them to hold off from further QE (which WILL come) is the effect the US QE is having HERE, anyway.
Just on 2 percent on the Ftse in a day.
The rich get it all, the poor suffer.
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JFH,
I think when Steph says "ought to be", she is probably reporting the fact that this is (normally) the mainstream logic, not necessarily her view.
As you know I don't think much of monetary policy, and I agree with you about the distorting affect QE might be (and probably is) having. Basically investors are running from the dollar, and investing in anything that generates a yield - gold, houses, foreign currencies, bonds - you name it - everything except the real economy.
They need to reverse their QE as much as possible, and focus on fiscal policy (with no corresponding government debt issuance). Although this is 'free-money' so-to-speak, if invested/spent correctly, it will generate demand and growth in the real economy. Due to the power of direct government spending to generate growth, you do not need to increase the money-supply very much to have a very large effect on output and income - so we would be talking about £10s of billions, not £100s of billions.
Foreign countries would not have a problem with this because, although we are increasing the money-supply and lowering (very slightly) the value of the £, we are spending it on increasing aggregate demand and therefore increasing imports.
As for the interest rate, it should be set at a sensible level and just left there! I think the over-night rate should be zero - but you probably disagree with that.
Kind Regards
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re #17
Clearly and well put, sir!
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Stephanie wrote: "Is that what is happening today? Is the US simply exporting its demand shortage to the rest of the world?"
Is it demand shortage the USA are exporting or is it watering down their debt and transferring it elsewhere? By creating more money through QE2 are the USA creating the situation where hot money will flow randomly to wherever assets are cheap and cause asset inflation in those countries.
I presume we can expect the Asian and other emerging markets to erect barriers or retaliate. In the meantime the Middle East will probably pencil in a rise in oil prices so are we getting a mini rerun of the seventies - i.e. worldwide inflation, which coincidentally will dilute USA debt - well done Bernanke.
In the meantime, the 80% of the US population, who have seen their incomes and prospects fall in the last decade, have expressed their disenchantment with Washington, so who gains from all this QE2. No doubt the 20% of Americans who have done nicely in the last 10 years and of course Wall Street!
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This is somewhat disappointing as a piece of analysis and again veers towards politics with its assertions about US intentions.It is very weak to argue that "When you talk to people in the administration, they don't think they are trying to beggar anyone." To quote Christine Keeler they would say that wouldn't they? If you devalue your currency someone else has to revalue theirs. This is a fact however the US administration tries to spin it.
Also if you are going to make statements about US government bond yields please get them right. Some are up rather than down.
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Coplani's point, that more money on investments abroad means more US ownership abroad is SO true!
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Wanna know what it’s really all about?...then read this...
Why the U.S. Has Launched a New Financial World War -- and How the Rest of the World Will Fight Back
http://www.alternet.org/story/148481/why_the_u.s._has_launched_a_new_financial_world_war_--_and_how_the_rest_of_the_world_will_fight_back/
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22 LadyEcon,
Steph's not talking about party politics though - It's valid to talk about how other nations might view the monetary policy of the US because all our economies are connected. You can't avoid politics in life - its all around us, but party-politics is another matter.
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"The big problem in the 1930s was not so much the depreciation itself, as the way it took place: through domestic price levels, rather than the exchange rate. Because most of the countries "competing" were locked into the gold standard, the only way they could make their goods cheaper overseas was by forcing down domestic prices (and demand)."
So in the 30s countries had to borrow gold in order to maintain exchange rates if they had no reserves and wanted to run a deficit.
Now the floating exchange rate does the job, but we are still told that the Govt needs to borrow to finance deficits.
This is the neo-liberal lie that is designed to kill off the welfare state and transfer spending power from ordinary people to the wealthy.
This is the neo-liberal lie that is taking your jobs and your houses and kids education, training and your standard of living from under your noses.
Stop falling for it.
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ps its not your neighbor who's being beggared
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#19. Charles Jurcich wrote:
"As for the interest rate, it should be set at a sensible level and just left there! I think the over-night rate should be zero - but you probably disagree with that."
Too damn right I do!
What is the economic virtue of making money worthless? It is simply insanity. Even in the worst of times money must have some positive price or the prospect of some price. If this is not the case there is never any point in investing or saving or building anything for future benefit. It is an absolutely central tenet of money that it both is a means of exchange AND a store of value. When throughout the ages this fails then anarchy, hyperinflation is the inevitable consequence - we have to draw back form the cataclysm and that means money must always have a positive cost. Never in modern times (the last 300 - 1000 years) has money been free. It is the antithesis of money to make it free. Yet the idiots of economists charged with regulation (MK, BB etc) have done this and hope we haven't noticed - we have these appalling idiots are destroying a thousand years of civilisation and they are doing it deliberately - they will reap the economic armageddon that will come down on them (and us) like the wrath of God (for those that believe in such things - for the rest of us just imagine the worst possible combination of bad things and multiply them ten fold.)
Yes, Charles, I disagree with you! and fortunately so do the markets!
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#26. MetalGasket wrote:
"...we are still told that the Govt needs to borrow to finance deficits. This is the neo-liberal lie that is designed to kill off the welfare state and transfer spending power from ordinary people to the wealthy. This is the neo-liberal lie that is taking your jobs and your houses and kids education, training and your standard of living from under your noses."
I am not suggesting that we should wait to the end of this Depression to assess the impact of policy (as many of us will most probably not live that long) but the test of success must surely be that the present inequality in society is dramatically reduced. We must I think campaign for policy options that will directly bring this about. In this Depression it must be the chief aim of policy to reduce inequality even before engendering a capitalist recovery where the policies are in contradiction. Hence we need a National Maximum Income set at 20 times the National Minimum Wage as was suggested by David Cameron. The good and the great said that a National Minimum Wages would destroy the country and they were wrong and they are wrong now when they pooh pooh a National Maximum Income. Listen the the Prime Minister not the banker or the football agent! If David Cameron sticks to his words he will become on of the greatest socialist and one-nation tory leaders we have even had.
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Enjoy the strike guys. That program on birdwatching this morning was more relaxing than the Today program.
At least you won't be accused of hypocrisy on your reporting as you guys write like everyone should have a massive gold-plated pension.
I can see Stephanie now shouting "scum, scum" as Wogan crosses the picket line...
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John
I've no problem with successful people hoarding cash if it makes them feel good.
What we can't have is them bringing about job cuts and austerity on real people as a by-product of their trying to hoard more of the stuff
Govt has to stop rewarding the hoarding via the gilt market which underpins the whole useless financial economy.
It also needs to stop lying about the need to reduce the deficit by imposing austerity. It's either pure ideology or plain ignorance.
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@25 Charles Jurcich
When you talk about the US administration it is currently Democrat led and advances a set of policies accordingly. For example I cannot see the Tea Party supporting any of this. Accordingly it is a political line.
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• 11. At 9:58pm on 04 Nov 2010, Dempster wrote:
What is the point of society?
Exactly what are we endeavouring to do?
Well for me, (who for the avoidance of doubt is a complete nobody in the overall scheme of things), it’s this:
Primarily to provide for a family
Secondly to do that which is right by the next generation
And finally to hopefully enjoy life whilst undertaking the above.
There’s been more ‘armchair economists’ bleeting on about how things are, or are conversely not being done, than your average Joe could argue with in a lifetime.
And up to press the only thing that seems to have been missed in all this is: Exactly what can we do now, that will have a positive impact on those who come after us?
The main point of society is to create a future for the next generation, ultimately that’s all that there is, it’s all that there ever can be. And to not even consider it, beggars belief.
Until such time as those making the decisions open up discussion on the impacts of them on the next generation, there will be no hope of any reasoned or sensible outcome to the current financial debacle.
So far we have managed to prop up financial institutions, and evidence suggests to the detriment of all else.
Is there no one out there that can open up some discourse on what is best for the next generation, or are we to be saddled with continually bailing out the failed, to the detriment of those who have yet to attempt to succeed.
………….
Great point Dempster. We are being led down the path of self interest by the lords and masters of money, as they make desperate attempts to preserve their fake monetary wealth by propping up a failed system, a system which is nothing more than a man made construct. Personally I think they are scared, as most are, of change. But change will come anyway, the system is failing, and the masses will be effected first, and they will see their standard of living erode very quickly, and then they will get angry, and then WOTW may be right afterall. I’m optimist, there are plenty of us who can see things for what they are. Hopefully we will get a chance to make the necessary changes, to find a way forward
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17. At 10:35pm on 04 Nov 2010, John_from_Hendon wrote:
Stephanie wrote:
"these developments ought to be net positive for the US economy"
I disagree with your assessment and I believe it is fundamentally flawed and based upon a faulty education in economics from Harvard that you share with Ben Bernanke and Mervyn King. None of you seem to understand the need to maintain the idea of the price of money and how vital this is to a functioning capitalist system. The really dreadful economics that does not seem to comprehend the apocalyptic consequences of ignoring the price of money and in particular the need for money to have a positive price or the system collapses.
Try to look at this way in all the normal economics of the last 300 years the price of money was arranged so that savers received less than borrowers paid - with base rate in between. What you and your fellow Harvard travellers have done is broken this paradigm of economic management and have base rate less than savers get and far less than borrowers pay. That is you and they simply do not understand that the economy has been pushed over a disastrous cliff and there is no going back until the over priced assets can be brought back into the market and the economy at substantially lower prices!
You and they are trapped in bubble economics and the inevitable is unavoidable! Your mindset is that of the drunk who thinks that the hair of the dog will cure him! Or of the Heroin addict - just one more fix and everything will be OK - it will not! We have to have economic cold turkey or everything is downhill!
..........
Hi John. I agree that obsession with neo-classical economic theory, is whats leading these fools down the wrong path. I urge you to have a read of an excellent article by Steve Keen on this issue. http://www.debtdeflation.com/blogs/2009/01/31/therovingcavaliersofcredit/
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There is only one point that keeps on coming back to me and that is what if Kinsey was wrong and the only reason the US came out of the depression was the second world war. After all they had experienced a mini boom leading up to the first world war prior to their late entry only to let all they had made slip away. They did not make the same mistake during the second world war. Once again their late entry enabled them to make a considerable amount for the nation as a whole by way of supplying arms and equipment to those nations engaged in the war. Is it a fact that was it a net gain for them while leaving the rest of the World to pick up the tab.
So does QE work, well there are little in the way of examples to support it. In fact if you look at Japan it points to delaying the issue rather than rectifying it. Japan since embarking on its epic QE programme has bumbled along and never quite got over the downturn.
After pumping in Billions we along with the US and others are still not out of the woods. So will QE bring us out or will it be trading. My bet is on the latter for we will still have to pay the Piper at some point if we take the first.
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"Hence we need a National Maximum Income set at 20 times the National Minimum Wage as was suggested by David Cameron. The good and the great said that a National Minimum Wages would destroy the country and they were wrong and they are wrong now when they pooh pooh a National Maximum Income."
Yes - far too good an idea to confine to the public sector. But people at the top need incentives...
http://bit.ly/91lbGz
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24. At 11:58pm on 04 Nov 2010, DebtJuggler wrote:
Wanna know what it’s really all about?...then read this...
Why the U.S. Has Launched a New Financial World War -- and How the Rest of the World Will Fight Back
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One small problem with this is that China holds vast amounts of US Debt and could pull the plug at any time which in turn would cause a global economic crash.
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28. At 08:07am on 05 Nov 2010, John_from_Hendon wrote:
What is the economic virtue of making money worthless? It is simply insanity. Even in the worst of times money must have some positive price or the prospect of some price. If this is not the case there is never any point in investing or saving or building anything for future benefit. It is an absolutely central tenet of money that it both is a means of exchange AND a store of value. When throughout the ages this fails then anarchy, hyperinflation is the inevitable consequence - we have to draw back form the cataclysm and that means money must always have a positive cost. Never in modern times (the last 300 - 1000 years) has money been free. It is the antithesis of money to make it free.
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The problem we have in society today is that money is issued as credit, or debt. In fact 97% of money in the economy was issued by private banks as debt. To pay the interest on the debt the money (issued as debt) supply must constantly expand and the interest on it is compounding causing debt to grow exponentially. If it does not due to defaults there is simply not enough money to service the interest and you get a banking crisis, or more correctly put a monetary crisis. The purpose of money is a medium of exchange and a temporary store of value, to allow real items of wealth to be exchanged, eg your labour for food on your table. This medium of exchange could be issued, interest free by the state, and therefore itneffect it would be worthless. Banks would no longer be able to create money through fractional reserve banking, which would stop the perpetual expansion of debt/credit based money supply. Banks would still offer interest on savings, as you favour, as they would need to attract savings, in order to lend, akin to credit unions. This way forward is the only solution to the current banking crisis, anything less will fail as it will not stop the debt growing. Money supply would grow in a stable maner to service the needs of a growing economy, but no further. So my point is money can be issued free, but that does not mean it would not result in interest occurring. http://www.positivemoney.org.uk/
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12. At 9:59pm on 04 Nov 2010, coplani wrote:
Wall Street will be delighted if the FED prints more money....More money to invest abroad. Obviously the USA agenda is to own the world...Print more dollars and buy/invest wherever there is profit to be made...China and the UK are doing the same, but they do not need to print more money.
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Two points, a vast amount of US debt is held by China so there may be US owned but are they just in proxy.
Secondly the UK has had the same policy so you could say are on the same path. Unfortunately I disagree with your outcome, I fear that it will be a path to ruin rather than that of victory. Also China has to grow by at least 10% PA to stand still, IE just to pay for its development. If it does not there could be civil unrest as was the case when the slide occurred in 2008 / 09. Now they are manipulating their currency value which is annoying the rest of the world and have committed to stop this. However this will for the first time open them up to the full market forces which may well see their economy start to falter. If so they could start calling in their markers which in turn would effect the global economy.
We have to be carefull in what we pray for.
Cominisum does not work? Capitalisum does not work? So what next?
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Creating more socks reduces the price of socks
Creating more money increases the price of socks
Creating more money will not increase the production of socks
Writing off unsustainable debt increases the demand for socks
Writing off unsustainable debt increases the production of socks
Writing off unsustainable debt increases employment
So for those needing new socks, writing off debt is the answer.
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17 JFH and Snuffie @20
You are well intentioned misguided in this. The objective curently is to avoid foreclosure on the economy. If long term debt is brought to book overnight then the system fails, it can do nothing else. All efforts are being made to secure deferrment of the overnight crystalisation of debt. Quite how you think triggering collapse helps is beyond me. Long term debt can only be dealt with in a practical timescale. The outcome can only be what you want in time, asset price dropping and real interest rates rising. The rules for operating in adminstration are not free market rules and effectively things are in administration. It is all very well talking about what you want but in this we are all creditors and creditors usually only get a fraction of what is due following a collapse. At present you are simply one of a few noisy creditors in a huge crowd of creditors. Most of the creditors are unhappy. The solution is getting credit back into the system at a reasonable price and that is going to take time when the banks are unilaterally setting the price to pad their bottom line. Most business, ie trading activities do not fail due to a lack of profit they fail due to a cashflow problem. That is the symptom that is in place at present on a wide scale. The issue of cashflow is why my business is set up to demand payment before goods and services are supplied and before goods and service provision is initated. To do this you have to be supplying something which is in high demand or hold a monopoly. Most cannot operate like this so most are having problems. It is quite clear to me that you are detatched from trade and trade is the only solution. The only quick solution is to break the monopoly on the supply of credit, ie break the banks and the government either does not have the money to do it or does not want the job so the route we are on will have to be followed.
Incidentally as positive cashflow is clearly essential to maintain trading independence, ie control of your activity my opinion is prepayment for any goods or services before any meaningful resource is committed to supply is essential but most businesses cannot operate this way simply because they are not supplying anything distinctive, unique, or do not hold a monopoly. So most businesses are locked in the thrall of cashflow, ie working for the banks. This was their choice.
It is all about strategy and postions taken prior to conflict. Which looks to have been poor.
Essentially this is a picnic at Pascchendaele. Merv King has as far as I am concerned acknowledged the situation from what I see of his comments.
Regards
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39. At 09:24am on 05 Nov 2010, Chris London wrote:
‘We have to be careful in what we pray for.
Communism does not work? Capitalism does not work? So what next?’
Commonsense ‘ism’?
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40 Dempster
You assume people need socks
Writing off 'unsustainable' debt is a form of subsidy.
The socks are not produced here.
Next stop people asking for active subsidy of UK socks
Look up the UK textile trade post WW2, or perhaps the UK knitting trade 19th century. Supply and demand, unit price, wage levels. Growth, oversupply, ineffieciency failure to modernise, profit taking. Strategy. Imports.
You have to produce something people want that can be made competitively.
Put a sock in it. Where have I heard that.
Employment follows trade not the other way around.
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#41. Not Buzz Windrip wrote:
"The objective currently is to avoid foreclosure on the economy"
But it has already happened - it is just the buffoons don't realise it. The real key is put in place the conditions where the economy can return to a condition where trade and employment can return not impeded by the catastrophic existing debt without destroying exiting property rights.
What King and his cronies are now doing is making things worse - this was exactly what the authorities did in the 20s so it is to be expected - but the rest of us will be hugely in error if we think that what they are doing is fixing anything - it is in reality making the crash and depression far worse.
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10 Not Buzz Windrip
Mass employment through manufacturing might not be likely under prevailing arrangements but it is very necessary and long overdue.
To say we can't do it is not an argument, we simply have to find a way we can.
A CEO once said `don't give me problems, give me answers'. Well, I am now saying this back to all the CEOs. I might even enjoin them to get on a bike or even a bus so that they can see what is actually going on in Britain today.
Welfare is no longer an option; it is an expensive cruelty we can ill afford.
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40. At 09:31am on 05 Nov 2010, Dempster wrote:
Creating more socks reduces the price of socks
Creating more money increases the price of socks
Creating more money will not increase the production of socks
Writing off unsustainable debt increases the demand for socks
Writing off unsustainable debt increases the production of socks
Writing off unsustainable debt increases employment
So for those needing new socks, writing off debt is the answer
Good point, also if we all grew a lot more pears that would help, then we could all invest our money in ....Socks and Pears....sorry about that, just trying to lighten the mood.
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The dream ticket would be a form of QE which I call Quantitative Release, where every G8 or G20 country's central bank is permitted to QE say a year's public spending at zero interest.But some in the G20 are trying to curtail their own boom by raising interest rates while others are slumping, so there could be no uniformity.
As for stimulating our economy to export more....I used to buy nice English Clark's shoes .....now I go there and find cheaply made foreign rubbish ....... I wouldn't mind paying one hundred quid, even one hundred and fifty ..... but they don't have the ones I used to buy two pairs at a time.
The young pay massive premiums for trashy design labels rather than well-made things .......so why do we not concentrate on quality and design and originality rather than on trying to be bargain-basement?
Because we all love buying fifty pence socks from Primark.
Can we not be a bit more Continental?
A five Euro cafe au lait stops Pierre buying nine pairs of socks from China.
A friend of mine had his heart set on a diesel Mercedes estate but when he drove it he thought it was crude and noisy, so he bought a new Discovery 4 and it was quieter,nicer, better made and much roomier than the Merc.
Let's do a survey of what our MPs drive.
The other subject which is taboo is how Greenism has been at the heart of our recent financial decline...... for sure.
THE TRAGEDY IS NO-ONE HAS THE GUTS TO DITCH THIS ENVIRONMENTAL OBSESSIONALISM ....... THE COALITION , LABOUR, NO-ONE HAS INTELLECTUAL RIGOUR TO ADMIT THAT THE CLIMATE CHANGE AND CARBON TAX PALAVER IS POINTLESS .
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There is mention above of the need to restructure the economy and effectively start again by getting the debt into a form that can be 'handled'. Perhaps I am being a bit slow on the uptake here, but what does restructure mean in this case?
If there were a company with too much debt, the creditors may agree to a re-structuring that involved current shareholders effectively loosing some or all of their investment in the company. The creditors would become owners [in whole or part] of the company. There are real assets in the company that the creditors can see.
What's the equivalent process for a whole economy?
Or is this a meaningless question?
If the economy is re-structured in some way, how can we the citizens ensure that the aim is to re-structure for everyone's benefit? It should not, and must not, benefit just one section of the community. [But I fear it could and will benefit the money men first and last]. To me the basics are full employment, help for those that need it and ensuring that society is inclusive by removing deprivation. I do not mean everyone is equal.
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I struggle to see how the Fed's move will have a positive effect on job creation - more downside than upside - for two reasons - wealth effect and exporting jobs.
a) Wealth Effect - The Fed's move may have a positive effect on the stock market but could be more detrimental to housing - an American families largest asset. Rising inflation will take more away from already shrinking paychecks to pay for essentials, which leaves less for house payment. Houses become less affordable lowering already depressed prices and leaving American families feeling less wealthy!!!
b) Exporting jobs - The lower cost of borrowing entices large corporations to borrow more in the U.S. and invest abroad exporting more jobs overseas. With some smart accounting gimmicks they can lower effective tax rates as well - claim interest charges in the U.S. and not repatriate profits. Net effect - fewer dollars coming into U.S. treasury, larger deficits down the road, and fewer jobs!!!
A much better alternative to job creation - reduce taxes. We would all be much better off - the world needs the American consumer and the American consumer needs the world.
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45. At 11:00am on 05 Nov 2010, stanilic wrote:
................. Welfare is no longer an option; it is an expensive cruelty we can ill afford.
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So we are back in the victorian era of extreme poverty, cruelty and deprivation are we or do I misunderstand your point?
For me welfare is an essential aspect of our society wherever and whenever it is needed. To me its a sign of a civil and moral society.
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I think this guy’s got it right when he calls it one big experiment. http://www.mindfulmoney.co.uk/2219/economic-impact/qe2-is-a-big-experiment.html And a worrying one at that. Yes it’s done great things for the markets etc for now, but what about the longer-term impact? You’ve got the shift onto emerging markets and then that’s bad news for everyone.
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45. At 11:00am on 05 Nov 2010, stanilic
'Welfare is no longer an option; it is an expensive cruelty we can ill afford.'
Are you suggesting that we abandon capitalism or did you have something else in mind? Is there some specific model you think we should be following here or are you refering to specific aspects of welfare rather than welfare state capitalism in general?
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Staphanie
'Let's hope it's not.'
Yes, this is what we are all reduced to - crossing our fingers!
Why doesn't he ju get down on his knees and pray - would achieve about as much!
What really grates is when it all falls apart, Merv and Ben will retire to (by then) their Quintillion dollar pensions - whilst the rest of us join the queues for the soup kitchen.
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Currency war, here we come.
I refer you, Stefanie, to the BBC site at
http://www.bbc.co.uk/news/business-11697483
There is the response. No one is happy with Bernanke's attempt to cheat his way out of American debt. If Britain tries it, the UK will be toast within a fortnight.
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52 squarepeg
This is an argument for work as it is good for people.
How society chooses to organise itself is another matter, the psychological benefits of work have been well known for a long time.
Sure we then get into debates as to the quality or the work, how it is organised and so on but let us at least establish the principle that work is better than welfare. Leaving people to rot on welfare is just a waste of people and money.
In that I appreciate that there are some people who may be too frail to work which is another matter but they are a responsibility of us all in one way or another.
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Beggar thy neighbour is right on!
American achievements: stocks up (artificially), dollar down (artificially), and so too US bond yields (artifically).
This latest American Q.E. hasn't a snowball's chance in Hell.
Since when can you balance a real economy on artificial legs?
It won't work for the global economy, and it won't work for the American economy, though the Wall-Street Boys will make yet another killing with their stock-profitting toys: front-ending loading, beating trades and accumulating profits for bonuses.
This Q.E.2 was meant to "beggar thy neighbour". It will definitely not be expansionary for the global economy; nothing ARTIFICIAL can be expansionary for the global economy because when the ARTIFICIALTY ends, when the Wall-Street Boys have sucked out billion more in stock profits, who do you think will be left filthy rich, the common folk?
Is the US simply exporting its demand shortage to the rest of the world?
The critical piece is missing: What is the motivation of the United States? I'm not sure, but history speaks for itself: American bundled derivatives (hiding worthless bad debt) are still causing havoc, negative credit default swaps, betting against soverign debt are still causing havoc - when was the last time the United States of America did anything economically that was not, plain and simple, for the benefit of the Wall-Stree Boys.
So, look for an American-elitist motive.
Look for the negative consequences on other countries.
As far as possible STOP DEALING FINANCIALLY WITH THE US.
The crux is, as you say, dependant on how other countries respond, and if I could control the world, I would slam the financial door on the United States. Go and play with your FALSE money, and do it by yourselves!
The United States has set in motion
- completely ARTIFICIAL inflation on commodities,
- completely ARTIFICIAL delation on the dollar and
- when the dust settles, the United States common folk will be poorer, for the most part pensionless, homeless, unemployed and ready for rebellion. Obama's ready too. There is already signed the legislation needed for the declaration of Marchall Law.
Ask yourself: "What value do the American bonds have? Do you think China should not be irate? They bought American bonds on good faith, and this is how the Americans repay them. Do you think Germany should not be irate; it's already on to the American shenanigans; this is why it outlawed negative credit default swaps.
We are watching history: the death throes of the United States of America.
All will be roses for a very short while. The stock market will climb; but suddenly and without warning, the stock market will tank. And their will be worldwide consternation!
How can the American economy grow? What does it produce? All the production has been exported to countries like China and India. American manufacturing is dead. Lending is dead.
I put great hope in the G20 where I expect the United States of America to be lambasted.
The US sees competitive depreciation as a win-win for them.
Oh?
I hope they are prepared to buy all those bonds themselves because any country that comes near these bonds is damned fool. Lowering US interest rates? How much lower can you go than zero, and still the banks just aren't lending.
Good on Charles Dumas: In the Dumas view, the negative impact of QE2 on the US will be significant, and operate much more quickly. A weaker dollar will hit real incomes by raising the cost of food and energy; he also thinks that rising inflation expectations at the 30-year end of the US bond market could actually push mortgage rates up as a result of the Fed's move.
As I said, the American economy is in its death throes.
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50. At 12:20pm on 05 Nov 2010, SleepyDormouse wrote:
So we are back in the victorian era of extreme poverty, cruelty and deprivation are we or do I misunderstand your point?
For me welfare is an essential aspect of our society wherever and whenever it is needed. To me its a sign of a civil and moral society.
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Welfare has to be paid out of the value created by the economy. My question is how can you compete with 2 billion Asians who can outproduce you, undercut you and do everything at a third of the cost.
Welfare has to be earned before it can be paid.
It's not good enough to say, 'a civilised society' etc, etc
Economic reality says, party over, start working and make things.
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56. At 1:13pm on 05 Nov 2010, BluesBerry wrote:
As I said, the American economy is in its death throes.
Don't think so. Its merely defaulting on its paper.
It still has a big economy.
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These mods are good.
If this is asa result of the strike, any chance we can keep the newbies?
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First the crash
Then the bank failures
Then the bail-out
Then the mass unemployment
Then the Quantitative Easing
Then the Trade Wars
Then the rising inflation
Then the unrest begins
No, I'm not talking about the Credit Crunch, but the Great Depression of the 1930's. And we all know where that path leads. History is repeating itself.
http://en.wikipedia.org/wiki/Great_depression
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China and Germany are just miffed that their exports to the US will be more expencive, which will in turn affect their economies.
Maybe the US ultimatly wants to get to 1 to 1 exchange rate with China which means US citizens will not buy Chinese goods because they are too expencive, then said goods are manufactured in the US creating jobs.
At the end of the day the only reason for job outsourcing to the China's and India's of the world is the cost of labour, something which is partly decided by exchange rates. Housing costs also have a huge influence on your labour costs which is why they need to be significantly reduced in the UK, Europe and the US.
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Exactly twelve months ago this was posted on the BBC blogs under the article ‘Boxed in’ @ 4:31pm on 05 Nov 2009
I note that the UK treasury issues gilts via the Debt Management office, only to have the Bank of England buy them back.
Why one would ask is this the case, why can’t the treasury borrow directly from the Bank of England?
Well oddly enough the Maastricht Treaty Article 104(1) forbids this, the purpose being to prevent debt happy governments causing inflation in the Euro Zone.
Given that so far the Bank of England has spent £173 billion buying gilts and only £2 billion buying commercial paper, it is now abundantly clear that Quantitative Easing is a method of funding Government without officially breaking the rules.
When Quantitative Easing pauses, (I say pauses as opposed to stops, because if it has been done once it can be done again), how will the government fund its debt?
I find it difficult to believe that any investor would buy fixed interest Government debt, predominantly because there is a significant risk in the Bank of England watering down the real value of such an investment by more quantitative easing.
But of all the things that have surprised me the most, is why the above has not been voiced by the various economic and political commentators.
Can a conspiracy of silence on this issue, actually convince institutional investors that all is still well in the world of funding government debt?
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Smog in Warsaw (61) dismissed China and Germany's concerns as being 'miffed'.
Well, judging from the most recent G20 communique, it looks as if 19 out of the 20 will be miffed.
From the communique:
"Advanced economies, including those with reserve currencies, will be vigilant against excess volatility and disorderly movements in exchange rates."
http://www.bloomberg.com/news/2010-10-23/g-20-communiqu-on-currencies-financial-supervision-imf-full-text.html
The QE Devaluation was a unilateral American move in the face of all the world's leading economies.
They are all entitled to be miffed.
So should each and every one of us.
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#50 & #52 SleepyDormouse & Squarepeg,
Whilst stanilic will have to explain his true meaning, I think you have to take the quotes that you highlighted in the context of the rest of his post. I believe that stanilic was saying that you have have to find a way of putting people back to meaningful and valuable work rather than exapnd welfare provision. I totally agree with that proposition.
It is not just a question of cost. We desperately need to give people far more than income. We need to give our population the ability to create some true pride in their efforts and thereby promote their self-esteem. We need to rollback the need for welfare (NB that does not mean rollbacking the State). We need a whole new view of both politics and capitalism.
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45 stanillic
I'm sorry but you are the one who has to come up with the answers. There are only two types of work. The first is where you provide something that people value and are prepared to pay for. The second is in the provision of services by the state judged best provided by the state. The second is based on the fitness of the first. The first has to operate in a competitive marketplace. The objective of the Henry Ford production approach is to de-skill operations wherever possible. That means you do not need as many skills available in the economy to produce goods. However once that is in place as a process then the production unit moves to a low cost labour area. There are clear pointers from this as to what area people should seek to work in. They are either high tech - or specialised skill - or protected by Health and Safety or professional criteria (You dont want a DIY surgeon do you, anymore than you want a unqualified Thatcher doing your roof) - the specialised skill can be high or low tech related it does not matter the key word is skill. Mass manufacturing has gone and relatively low skill high paid jobs have gone with that movement. You are not looking at history. The EU put substantial grant money ie subsidy into Spain to establish car plants in direct opposition to UK facilities. Auotmakers, unnamed to avoid moderation then gratefully trained grateful locals to work at less than 1/2 the UK rate. Ford has now moved some Transit van production to Turkey. What rate do you think the grateful locals get in Turkey. That work is not coming back. I could spend all day saying why you are wrong, example after example. century after century. If anybody wants to operate in an environment they have to adapt to the environment. There are rules and in most cases people simply do not want to know the facts.
There are great opportunities at present, right here right now. Change brings opportunity. But if you dont look for it then it is not there.
The blog basically splits into 3 types. 1 Doomsters, 2 Wheres-the-reset-button-hit-it-please, and 3 Pragmatists, then Miscellaneous Others. As I am operating in this economic environment I consider I am a Pragmatist.
I am quite happy to leave the East to mass producing stuff with low cost labour. They are remote from market with a cumbersome supply chain. They are also by-and-large very good at what they do, it is just they are self-limiting due to their strategy. If you reallty want to worry then the time to do so is when they get smarter but by then we will have had a chance, at least some of us, to get smarter again.
As for your CEO. I dont take any notice of conventional corporates. Lobotomy jobs in suits or bit-part actors selling a corporate line.
@55
Stanillic my man, as you must be acutely aware as AVO sector there is no shortage of work. I seem to think you are in that area. The issue is paying for it. If people want to work they can do. If this thing called work is so beneficial that is a good thing surely. Therapeutical even. No? Then the issue is pay and expectations. Arh. So how do you expect to compete with countries that do not have these luxuries called UK minimum wage(in the top band in the world) and welfare (developed country standard). Only by being smart and keeping it local or cultural or skilled. Guess there must be cultural problem then or just not smart enough or wrong skills.
Sorry I have to go.
Regards
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If assets are overvalued the longer they are prevented from reaching their new true value the longer any real recovery is put off. QE is just an attempt to delay the inevitable.
As Merv said the money from QE seems to get stuck in the system. By the time ordinary folks get to see it - if they ever do - its value has diminished.
One economist was asking even if elements of QE worked, what is the exit strategy? Sounds familiar?
As has been previously quoted from Albert Einstein
Insanity: doing the same thing over and over again and expecting different results.
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63. blefuscu
I didn-t 'dismiss' them as simply being miffed, just stated that they obviously were, and as you say 19 out of the 20 will be miffed.
The US seems to be putting its own intrest first but is it doing anything that, say, China hasn't been doing for a long time?
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Not read the blogs for a few days.
Very glad to see Fathom get it although they can't get over that "bank bond holders must be protected at all costs" BoE nonsense.
House prices are holding back the recovery not protecting jobs. There are millions with jobs who want to buy but can't afford these prices or won't invest in a loser. A million new homes are needed today and the builders, suppliers, etc want the work. The whole east coast is crying out for development, for new commercial ports, railways, roads, factories, homes. Liverpool and Wales are ripe for the creative and research industries, for academia at a cost we can afford. There isn't a UK MBS worth the name at the moment but there could be a 100s of billions of new ones to get the city flying on real banking business.
The banks and negative equity mortgages need to be handled. I suggest doing the above, house prices will collapse, Use QE to buy the poor mortgages for huge discounts and turn them in to BoE mortgages fixed for term at the current gilt rate.
I don't like it because it is buying votes with our money. But Labour put us in hock to the poor mortgages and we have to get out and get as much of our money back as possible.
But not for BTLs. They wrote off income against tax like a business, they can fail like a business.
Cameron, do the above and you will unleash us.
As for the FED. Consumer capitalism needs efficient business' with a well paid workforce and canny investors. The US economy has a serious structural problem. It's income differential has lowered the living standards of the workforce, created a proportion of investors who aren't canny, and it's political decision making is dominated by corruption.
Healthcare and progressive taxation are the correct policies but not enough on their own. It's a 1-2 generation project for the US and they don't have the will.
US QE is pointless, it just reinforces the same structural problems. Old fashioned fiscal infrastructure stimulus would work better but the corrupt politics won't allow it.
As for the currency manipulation problem, just add a tariff across all imports that reflects the difference between the real currency value and the manipulated one. Make it public. Set it everyday based on a basket of non-manipulated developing economy currencies. China will fold very quickly because Europe will do the same.
The euro problem can't get around the fact that it's not the fault of Greece, Italy and Spain that their trading partners of 4-5,000 years in the eastern and southern Med are subject to EU exclusions and tariffs, are the playground of US and UK military adventures and strategic posturing for UK and US domestic political reasons. Northern Europe needs to drop the tariffs, exclusions and military adventures or make transfer payments of 100s of billions pa in compensation to the Med members.
You want honesty, there you go.
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Unless surplus countries (particularly China, but also Germany which clearly has a structural surplus)do something to address their surpluses then deficit countries are going to take actions like this QE2. The effectiveness of such policies is questionable because you soon lose track of the channels of effect -especially as I no longer have faith that current asset prices bear any resemblance to what might be termed long term values. It is hard to know what the (income) redistributive effects of these policies are (beyond short term gains for some in finance sector, and losses for those holding lots of dollars)but I imagine long term they will be significant, but I would bet Bernanke has no very clear estimates of what they will be, and there is a lot of anger in the US already about dispossession (Germany was there in 1920s).
US can try this because it is big and can still borrow but I fear that some small economies like Ireland already in death spiral beyond their own control -perhaps Germany will buy a lot of their stuff -not holding my breath!
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QE1 and QE2 can have no impact on the American Economy, neither can it create jobs. Ben Bernanke knows this or he is a fool. The honest truth is that Bankers have created and marketed products like CDO's, CDS's and other hybrid cocktails that can be terribly disruptive and destructive. The premise for their creation is that asset prices will only rise and never fall. Central Bankers know that a lot of Banks Assets is junk so while they cannot create jobs they are doing what they can - sterilize the junk, make money cheap and inflate Asset values in the hope of changing social mood thereby stemming an eventual run on the banks.
What this does is postpone the inevitable from today to tomorrow, rest is left to hope and prayer. In any business cycle the strong survive and the weak fail, from the rubble will come rejuvenation. There is a major moral hazard in the US strategy as it protects the wealth of the wealthy with the earnings of low wage Taxpayers. Catastrophic financial failures are a natural feature in Economics history - natures way of pauperising speculative rich and redistribution of wealth. Massive failures are always welcomed by the poor as it is Gods way of leveling the playing field. When we tamper with the natural course of events we pay a price. This price is now going to be huge whenever it comes due. I foresee either hyper inflation or total deflation, maybe both but I am not sure which comes first.
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64. At 2:36pm on 05 Nov 2010, foredeckdave
I would certainly agree. Welfare as an intentional political alternative to work (I don't mean the life-style choice nonsense) seems to have very little to recommend it. It seems the difficulty is creating any kind of meaningful work in the context of the current form of globalization (free international capital markets).
I find some of the ideas of neo-chartalism quite interesting in terms of full employment and job guarantees but can't claim to really understand it clearly yet.
I do feel (at heart) that we live a privileged lifestyle in this country which is generally under-appreciated and unsustainable in the long term (even without the current financial crisis). So, yes, a new view of both politics and capitalism and also a new cultural view point. That last one might prove even more difficult than the other two.
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64. At 2:36pm on 05 Nov 2010, foredeckdave wrote:
"#50 & #52 SleepyDormouse & Squarepeg,
........... We need to rollback the need for welfare (NB that does not mean rollbacking the State). We need a whole new view of both politics and capitalism."
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Yes, I think you have summarised much of what I have been writing in these two sentences. I cannot dispute this. However, it is easy to state the need, far less easy to define where we are going now and what any new 'stability' might look like [or what we all want to see]. This is where the problems start.
The aims need to be clearly defined as they set the framework for this new 'stability'. The objectives would be recognisable stages along the way and when each is achieved it would show that we are progressing. [The alternative of a humungous revolution to achieve all in one go is not an acceptable/tolerable way forward].
At the moment the aims and objectives [A&O] are not even on the table. We are definitely morphing into something different - but what? Is this a random walk, or do some people actually have a controlling vision [a set of A&O that they are keeping to themselves]? I do hope not. The implications would be horrifying.
So what should our country become?
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At 3:04pm on 05 Nov 2010, TSArthur wrote:
Unless surplus countries (particularly China, but also Germany which clearly has a structural surplus)do something to address their surpluses then deficit countries are going to take actions like this QE2.
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Germany's surplus re the Dollar is irrelevant in that the currency is the Euro and the Euro is running a deficit itself. Think of Germany as the Black Country of 80 or 90 years ago.....it produced goods but was esconced within Sterling which was in deficit.
China is, of course, different (as is Asia inc Korea and Japan).
The 'war' is between US and Asia as a whole. China is clearly the biggest single player.
The American QE is very damaging to UK real prospects (except the City who will play the currencies for the banks to cream more profit)
Germany's exports are, of course, not so good within the EU Eurozone...see Ireland, Greece and Co. But that's another story.
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Western countries could restore competitiveness and trade balance with China and India through investing in the automated mass-production of mature consumer and other tradeable goods.
Ford had advanced plans many years ago to fully automate car production so totally liberating manual labour from repetitive tasks.
The labour released would, when reemployed and retrained, facilitate the development and manufacture of novel products and services.
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I am always amazed at how one part of a post is seized upon out of context so that a heap of damoclean filth can be dumped on the head of the poster.
My comments on welfare have been made in the context of trying to create a sustainable economy based on manufacturing in this country which provides full employment. This is the world in which I grew up and which this country should seek to revive in principle.
I know it won't quite work like it used to but it is a model to which we need to aspire. Yes: forward to the past, if you like. Sure, there was a lot wrong with it but there was at least the basics: a job, social housing, public transport, good music and decent beer.
For my part I have put all ideologies to one side for fear that they only serve to confuse. I can understand that a lot has gone wrong but we need to put in into a context so that we can go forward to a better future.
I can't see that better future yet but I certainly know what I don't want and that is what we have had this last few decades. Decent people have been dumped on the scrap-heap and abandoned because the economy can afford the welfare payments: it wasn't right then and it is even less right now as we are having to borrow the welfare money. The whole this is mad: utterly barking. The only way we are going to turn this round is with work for everyone.
On the subject of forward to the past and the uttery barking we were brain-storming the Tea Party in the office this morning. Did you know there might be a fruit cake faction, a sponge cake faction and the madiera group which is split between cherry and plain? Those who go to protestant churches will of course be drinking Orange Pekoe whilst the nationalists will stick with green tea as always. There is a militant faction that drinks black tea and a travelling group that it partial to Russian Caravan tea. The debate broke up over cucumber sandwiches in that there are those who cut the rind off the cucumber whilst others leave the crust on the bread. Once you add in the different sorts of bread and the option of margarine and butter, we have more versions of the Tea Party than Mr Trotsky's 57 varieties.
Dean Swift is not dead: his spirit lives on! There is hope.
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Dempster :
"I find it difficult to believe that any investor would buy fixed interest Government debt, predominantly because there is a significant risk in the Bank of England watering down the real value of such an investment by more quantitative easing."
I'd buy sterling fixed interest govt debt. Can't you see that QE drives bond rates down. Too many reserves whilst they are removing their own long term debt. Its a license to print money. Oops.. wrong phrase there but you know what I mean.
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The average intelligent investor - what is he to make of all this?
The reason I ask is because the key to the success of this QE policy lies within the brain of investors and what they decide to do. You can see that the printing of money does not do anything if the QE money released is spent in buying bonds or finanacial assets. It merely pumps up the prices of these assets. The cash released does not go into consumption or increase demand, because out there we have western economies who are in hock up to their eyeballs and are making cuts to try to rebalance the books. These cuts effect public spending and public sector jobs. No one who thinks their jobs are at risk is going to run out and buy a new car or make any major purchases in these circumstances. Lets not forget there are a huge number of public employees who are likely to be unemployed shortly. This will also have a negative effect on some jobs in the private sector. In Britain the banks are not anxious to make mortgage offers unless there is a very stiff deposit available, the only reason for this I can see is that they think that in the longer term houses are likely to depreciate substantialy. So in a world of the bubble, low interest rates and low consumer demand where is that QE money likely to go? Just look at the stockmarket.... BOOMING. Gold.... BOOMING Emerging markets both sovereign bonds and equities...... BOOMING. And why not? after all there seems to be a constant demand from very well healed investors (governments) and it is keen buyers who pump up prices.
Everyone is jumping on the bandwagon - how can they go wrong?? That is where all your QE money is going. This can go on for a long time, but beware, for as soon as investors observe a possibility of change of policy and the QE/easy money falters, then they will bail out with such speed that the deflationary results and the hot bubble money looking for another target may cause another crisis.
This policy is not going to make jobs or increase demand which is what western economies need to maintain growth.
The only thing that could help would be the invention of some new 'must have' thing similar in scope to the internal combustion engine.
Anyone for another tulip buying bubble??
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75 stanilic:
'My comments on welfare have been made in the context of trying to create a sustainable economy based on manufacturing in this country which provides full employment. This is the world in which I grew up and which this country should seek to revive in principle.'
Sounds like a living museum. This happy land was after WW2 I presume, just after rationing stopped, yellow things called lemons were suddenly available, and following a cull of manpower in the war, and when infrastructure development like the National Grid, National Gas a strange new thing called Motorways and not many had a novel device called a car. Oh yes water mains were often made of lead and outside privvies existed. Guess the only way was up. I'm sorry dude I've just gotta build me a time machine.
Is Dean Swift related to Jonathan.
You will definately be disappointed if you put your faith in everyone.
There are Sunrise industries and Sunset industries. You cannot turn a Sunset into a Sunrise. They are in different directions.
We would all like to stay forever young, except maybe some - eg perhaps the Australian Aborigines who where classified as wildlife in the Austalian 1969 Wildlife census and listed as population figures alongside kangaroos and suchlike. Like most things it depends where you are in the scheme of things.
You're still are not looking at the facts. 'If you dont know where you are going any road will take you there.' Lewis Carroll (aka Deacon Dodgson)
Enjoy your weekend.
Regards
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#62 demptser
Thanks for the explanation regarding the Maastricht treaty. That certainly helps clarify things. So QE (at least in the UK) is simply the Government printing money by another name. Which of course means that all the arguments about needing public spending cuts because of the unaffordable cost of servicing public sector debt are pretty bogus - but that's another matter...
Personally I think QE2 is absolutely necessary. The financial sector had effectively been printing money in vast quantities throughout the past decade by using CDOs etc to work round the constraints on FRB. That form of money creation is now more restricted, so the Government is creating it instead. This is better I think. The interesting question is how has all this money creation happened without causing inflation (answer - it hasn't, it's just that the inflation has been limited to asset prices rather than consumer prices).
What QE doesn't do is address the main underlying faults in the system.
1. a highly uneven distribution of wealth (both internationally and individually)
2. far too much money being saved at least by some people/countries (partly caused by 1, also through mis-designed pensions systems)
3. vast asset bubbles (particularly in housing) - largely caused by 1 and 2.
We need QE2 just to keep the system ticking over, but we also need to redistribute wealth (though taxation, or through letting banks fail - take you pick), discourage excessive saving (abolish ISAs, tax relief on pensions, etc?) and to burst the housing bubble (abolish planning constraints on land use except where land has specific environmental/recreational/scenic value?)
It's the likely failure to address these underlying issues which may cause this recession to last a decade or more.
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76. At 4:16pm on 05 Nov 2010, MetalGasket wrote:
'I'd buy sterling fixed interest govt debt. Can't you see that QE drives bond rates down. Too many reserves whilst they are removing their own long term debt. Its a license to print money. Oops.. wrong phrase there but you know what I mean'
Fixed interest gilts are giving a 3% yield
RPI is 4.6%
Index linked government debt pays RPI + 1% = 5.6%.
If you're buying it as an investment as opposed to trade it, long term the fixed interest debt must be devalued by QE.
I reckon sooner or later if there is more QE you will see overseas investors off-loading fixed interest gilts.
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#77 DemoDave
"The only thing that could help would be the invention of some new 'must have' thing similar in scope to the internal combustion engine."
Surely we have had a succession of these already?
Foreign holidays for one. How many people are employed at the airports and the aircraft manufacturers etc?
Then there is health care.
Call centers briefly took up the flame before they were moved offshore.
The governments hope that Green energy will be the next big thing. Employing millions.
Me? I think I will invest in some thermals..
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#75 Stanilic
Will the Tea Party realise that Earl Grey (with apologies to Viscount Grey) enhances forward thinking..."The jobs are going out all over Europe. We shall not see them filled again in our time". Then again they could drink Chinese gunpowder tea for a taste of the future.
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"That, in a sense, is why the US sees competitive depreciation as a win-win for them. If other countries, with flexible countries, don't respond with QE2 of their own, then their currencies will strengthen, and demand for US goods in those economies will (theoretically) go up. If they do respond, with more easing to counteract the rise in the currency, then global demand goes up, and the US is once again better off."
That doesn't add up. Ignoring the possibility of countries giving up on a reserve that loses value overnight, cutting their losses and demanding a solid global reserve, there is a flaw in the second part of this paragraph
Mutual devaluation isn't a victimless crime. There is a reason the whole world hasn't stuck an extra zero on their currency and celebrated a 90% reduction in debt. Two, in fact. It would take more than one zero to rid ourselves of this millstone, and the people who lose the zeroes have an advantage. To wipe out the debt is to deconstruct the value of money. No-one is prepared to do that.
You can't see-saw the world currencies out of debt. The debt is of labour owed. One way or another that will be repaid.
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78 Not Buzz Windrip
Deaning is what Jonathan Swift did.
Yes, I am looking back from where we are, asking myself what went wrong. It wasn't just Thatcher nor the Unions. It was also because we failed to adapt to changing conditions.
We are doing the same thing all over again being pulled along by events in the hope that something will turn up. The vision has gone: the attitude seems to be that so long as most are getting by nicely what does it matter if life is bad for someone else. This wasn't right in 1970 and it isn't right now.
I am trying to find the right vision so that we can start to move forward. My old fellow puritan Oliver Cromwell was asked in 1640 what he wished to see. He replied that he did not know what he wanted but he certainly knew what he did not want. This is where I am now.
All the ideologies have failed in one way or another so we have to start over and find our own solution. We must begin to build our own Sunrise otherwise there is no future. For that we must first get those fields, factories and workshops back into producing things. This is the only way we will generate the value to clear down our debts and give the kids a better tomorrow. How are we to marshall our resources?
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47. At 12:14pm on 05 Nov 2010, onward-ho wrote:
I used to buy nice English Clark's shoes .....now I go there and find cheaply made foreign rubbish ....... I wouldn't mind paying one hundred quid, even one hundred and fifty ..... but they don't have the ones I used to buy two pairs at a time.
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I suggest that you get some Loake's shoes. They are mostly made in England, except the slip-ons and last for a long time. And they cost less than £100.
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82 tonyparksrun
Thanks: you have given me a good chuckle after a day with HMRC.
I must confess to being a bit partial to gunpowder tea: it has a nice strong flavour that boosts the brain.
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72. At 3:37pm on 05 Nov 2010, SleepyDormouse wrote:
64. At 2:36pm on 05 Nov 2010, foredeckdave wrote:
"#50 & #52 SleepyDormouse & Squarepeg,
........... We need to rollback the need for welfare (NB that does not mean rollbacking the State).
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We should remember that the state is there to serve the people and not the other way around. The same goes for our politicans. I fear that is where we have been going wrong for the last decade or so. The state is becoming all encompassing while our politicans acted as if they were above the law.
The state should be there to provide a safety net and not a way of life. We have now in the UK a state that is almost dictatorial in the way it tells us what to do. It also allows people to make a life style choice and live off the state.
Should we go back to the work house, NO, but neither can we stay the way we are. The big question is how do you break the cycle.
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84. At 5:40pm on 05 Nov 2010, stanilic
I would suggest the vision should be of democratic equality. You may have read (and been bored by) my posts before on this subject. A totally free market is where we fight each other for what we want but, in choosing democracy, we have decided to put down our weapons, both physical and mental, and to live together peacefully on the understanding that we will all get our fair share. It is the duty of the government that we vote in to design and run a form of capitalism in which each and every individual can work using his/her talents to obtain his/her fair share.
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With referece to the post by PrudeBoy at 5.15p.m. today 05/11/2010, I regret that he has completely misunderstood my meaning of the phrase of 'inventing some new must have idea' (sic)
By 'must have' I gave the example of the internal combustion engine. That is 'must have' because it transformed whole transport sytems worldwide. In effect 'must have' meant exactly that - evey country, every person had to have it to continue to belong to the modern world. Indeed countries which were third world were able in some cases to transform their fortunes by being able to access import and export as well as produce oil, minerals, agricuture products etc. etc. The impact of the internal combustion engine created hundreds of millions of jobs and wealth beyond comprehension both directly and indirectly.
The nonsense of trying to compare a 'must have' item to foreign holidays health care and green energy schemes should now be transparent. (I hope)
You invent something transformational and it has exactly that effect.
We don't need more foreign holidays, flat screen tv's or ipods for these purposes also I would add.
So if you could let me know your ideas I promise not to copy them.
I think I'll go out now to play with the fireworks.
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Trains and Property Prices.... (indications)
The High Speed Link cost 6bn - sold for 2bn - a 67% write down - about right for all of UK property! The tragedy is that the fools of Threadneedle Street don't understand! (or are unwilling to admit that they do!) Get the right-down into the market, do the repossession, bail out the banks and then and only then can the country recover.
We need to take steps to get the country working again at, making and selling things - the only way that this can happen is that the debt is deleveraged and property assets repriced to make us internationally competitive again. Our biggest resource is our talented and hard working workforce and nothing else, and especially not, the dead weight of overvalued property. Up with interest rates and use QE to fund rebuild infrastructure - whatever we do we must not seek to inflate property again just to rescue the stupid lenders and the members of the council of mortgage lenders. They have strangled the country at the behest, and with the connivance, of the Bank of England and it must stop!
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I'm so immensely happy with Europe at the moment. They've basically managed to fend off every attack so far: speculative attacks on Greek bonds, media attacks on the Euro, US attacks on banking stability, frauds from rating agencies and so on. Now all that's left is to deal with the mess in Belgium. Those guys are about to get reverse eaten by CEE. What a gore-fest that's gonna be.
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Why don't we collectively throw off the millstone, the albatross of debt off our necks? Why?
Because there is no representation of the collective that exists outside of that debt. Society has chosen to organise itself in a way that limits itself, inhibits itself, freezes itself, kills itself. Everyone, in the name of freedom, has adopted debt - and thus shackled itself.
This self organising society has basically achieved for itself something far worse than any totalitarian authority could have hoped for.
So, welcome to the end of neoliberalism.
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85 AnotherEngineer
Thanks for the suggestion, which I will try.
My feet are needing Qualitative Real Ease!
I will report back on how they get on.
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84 stanilic:
'All the ideologies have failed in one way or another so we have to start over and find our own solution. We must begin to build our own Sunrise otherwise there is no future. For that we must first get those fields, factories and workshops back into producing things. This is the only way we will generate the value to clear down our debts and give the kids a better tomorrow. How are we to marshall our resources?'
A typical UK made product will end up on the high street between x3 and x4 on the hourly rate paid pre tax to the guy making it. It does not take a rocket scientist to work out that shipping something around the world is currently not that expensive and if the guy elswhere is prepared to work for considerably less than the UK worker that there is considerable opportunity to import. Nearer to home in Europe wages are also lower than in the UK. If something is to be grown - food or otherwise - it usually grows faster if it is warmer. Japanese maples grow x2 in Italy compared with the UK. So you have to look at what is left. There is actually a great deal left. But it usually needs some smarts to make it work. It doesnt have to be high tech though high tech helps. There is a big advantage in being local to market. It will take time simply because new skills and some lost skills will have to be learnt. The fact some are adversely affected is very hard for them but overall things still move on.
I am not quite sure what you mean by getting the fields producing things. They are producing things. Unfortunately there is some evidence that locals do not want to work in them, it all seems to rely on immigrant labour. Farms are under the squeeze of the supermarkets but this is the fault of the farmers, there is nothing stopping them getting together and organising their own distribution, but oddly enough they get a subsidy and that tends to change the dynamic.
You have to have the situation that there is some benefit from being in work rather than it works to be on benefit. Much of the problems are related to the stupid encouragement of the UK property market. That has fed through into everything including housing benefit, and the cost of living. What motivation is there to work when you get a subsidised house which you could not afford if you had to earn the money to pay for it. Sounds good to me, all the advantages of ownership with none of the downside of ownership. And if you are the right type and trash it you get a refit handout.
It is government which has failed, not ideas. It is big business that has failed, not the customers. The customers are still there. This is still a consumer society.
A great many corporate suit people think that they are the reason things work. Actually the reason they generally work is because the corporation has a dominant market position and the customer likes the reassurance of dealing with a corporation. In many cases the suit is pretty much irrelevent. Take these so called achievers out of the corporate environment and they often flop. That is one of the reasons unemployment will remain a problem. Corporations are leaving or downsizing. Suits are being shed, Ex corporate suits are not a lot of use, they need a corporation to carry them. I knew one unemployed corporate director who applied for a job and asked how many staff he would have, he expected 8 or 9 to do his work for him, 6 minimum. So he wasnt applying for a salary he was applying for a departments salary. He didnt get the job.
My guess is you talk to far to many corporate types. BTW LAs are corporations, amongst the worst because they dont see locals as customers, just a monoploy income opportunity, no market force in play. There is no need to marshall anything. It is marshalling that is part of the problem, marshalling prescribes outcomes and proscribes flexibility.
I'm not trying to shoot you down but it is actually quite simple. People have to fit the opportunities. If they dont want to it doesnt matter how much they bellyache the world will move on and they will sit on their hands moaning how unjust it is. Being ill is a different matter. People who are ill need support.
You only add value to something if the result is valued by the potential purchaser and sought after. However in a world of bland this is not exactly hard. Perhaps we should start a corporation support scheme, just 3 pounds a weeek will help a bland corporate near you, it could be called BlandAid. Opps its being done already and at more than 3 quid a week - QE and scrappage schemes and grant handouts.
Blandtastic
But none of this is new really is it. Some people say I wonder how it works, some say I wonder why the universe works and some say would you like fries with that.
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My thought of the day, the US is looking after itself in the same way as the EU is carrying out protectionism on imported goods and China is re foreign ownership.
The all for one ethos always disappears in the thick of it. We are now going to enter into the me phase.....
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87. At 7:13pm on 05 Nov 2010, Chris London wrote:
...................... Should we go back to the work house, NO, but neither can we stay the way we are. The big question is how do you break the cycle.
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How to break the cycle, I don't know; but here is a suggestion for you all to decry and shout down ......
Much of the developed world has used debt as the basis for economic expansion for many years. Now, this particular chicken is coming home to roost. The level of debt in the non-government sector is just too high. QE seems just to be allowing the banks and other financial institutions to be the main beneficiaries by re-working their balance sheets. But is this altering the total debt on their books? I have no figures, does anyone really know? I suspect the answer is really that not a lot has changed for them if there were a major downturn in the economy. They can cover more losses, yes, but will it be enough? This seems to be the gamble. The UK government is kicking the economy down with its austerity measures. They seem confident of avoiding a double dip recession, but it does seem to rely on the private sector investing and selling.
Government debt is only a part of the problem, private sector debt needs to be reduced. This doesn't change the system; it only allows for a restart in the game. Really we need to be moving away from a debt based economy. There isn't a figure at which one can say can be handled and, go above it, and its not OK. Its a multi-variable problem and its dynamic; the answer will alter continuously. Debt needs to cost more, the more you borrow. For someone to borrow £100 when they have no debt is likely to be sustainable. Borrow the same amount when debt is already absorbing a significant percentage of income would be foolish.
So, how about, in the non-government sector, debt is taxed at a rate which increases with the total debt to income ratio and is also proportional to it. If a private individual looses his job, the increased tax costs fall on the lender, not the borrower. This is to encourage more responsible lending by raising the costs. It will cut demand and reduce the size of the economy, yes, but maybe our economy would be more stable.
As government debt need to work in the same way, there should be no need for the same restrictions. Other ways are needed to control public sector spendthrifts.
Re-reading, do I believe this? Not sure, but what do you think?
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End the war and cutting war budget could help?
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Beggar my neighbour
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Or WORSE to that effact more like ,Once the Bernanke puttar's out he'll be onto the soilent green with his chopper for an errly birdy twoer.
What about the revolting sos age consumairiat wums, are they heading for a blowout?
Or should they rise up ,take over the means of consumption [the ATM'S]and abscond with their oweverdraft sumwhere over the rainbowayuppie.
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#100 SleepyDormouse
What level of private debt is a sensible level ?
If the debt has been used for future investment (a man borrows to buy a van so he can be a courier) and the model shows that it is better serviced over a longer period due to historically low interest rates, should it be repaid ?
If the debt has been aquired to subsidise ongoing expenses then first the over spend has to be reduced which reduces demand and spending must be tightened again to start to pay down the debt.
If everyone gained a 15% payrise then the shock of debt reduction would be lessened, a national payrise would normally be inflationary but disinflation is the major worry internationally at the moment.
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Cheaper than creating massive toxic banks is to suspend capital gains tax on hitherto aborted building developments for say two years and to make flats in those those developments rentable or mortgageable by first-time buyers, students, pensioners,asylum seekers granted residential stsatus on condition of zero benefits,and other former housing benefit recipients.
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104. At 09:19am on 06 Nov 2010, BobRocket wrote:
#100 SleepyDormouse
What level of private debt is a sensible level ?
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It will vary for a family dependent on circumstances. But when I first bought a house on a repayment mortgage, the BS manager advised that my total outgoings on house and any other debt should not exceed ~40-45% of monthly net income as a maximum. As interest rates can only go up and jobs are uncertain at present, I would suggest a lower figure at the moment. This is where personal preference comes in ~30-35% would be the most for me now.
For industry, their debt will be highly business dependent and they will need to reach their own assessment. But paying off some debt should be given preference over paying dividends until the level of interest payment is less than the annual dividend payout.
Clearly a personal mad view - but getting out of the debt habit is vital, so in reality, the actual figures are less important than the attitude of mind.
For example credit cards have a real use now, but the limits are far too high for the spend on them. The limit, should in my view, be no more than 50% of monthly net take-home pay. Higher limit for special purchases to be arranged as needed and to be time limited. Let's get out of the 'I want it, I have it now' mentality.
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"That’s the great beauty of a real economy! It rarely takes you where you want to go... especially if you’re an activist central planner or an interventionist finance minister. But no matter how much you struggle with it... no matter how badly you manipulate it... no matter how much you try to stitch it up with rules and regulations...
...it ALWAYS takes you where you deserve to go."
Bill Bonner
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100. At 11:56pm on 05 Nov 2010, SleepyDormouse wrote:
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For the global economy to be realigned into one with only sustainable debt will take decades. This is due to the fact that we have all lived well above our means for the last fifty years or so. The baby boom generation and their parents started the have it all and have it now culture. The definition of poverty in the developed world has gone from not having enough food and heat to a definition I heard a few months ago from a senior civil servant in the DWP of poverty is someone who does not have a flat screened TV.
How can you break the cycle of a couple of generations or more who now believe they have a right to a life style equal to that of the average wage earners in the UK. It is no wounder that people are becoming more disillusioned if they are working for the minimum wage up to and including the average wage.
I will restate the point that the state is there to provide a safety net and not a life style choice.
I can be a little more controversial to prove a point. Can the NHS provide a free at the point of delivery service for everyone in the UK. No is the answer unless you increase taxes dramatically. What it should be is a service that supports those who can't afford their own private medical insurance. The US will realise this as Germany has already. Only France appears to have a system that is working but there again it accounts for a significant proportion of their tax and even they are now starting to squeal due to finacail pressures.
I will restate the point that the state is there to provide a safety net.
The state should be fit for purpose and that purpose is to give support and not control.
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At certain times in history, people have claimed they have seen the Abominable Snowman and others speak of a Real Economy. There is never any proof of either.
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The US QE2 would possibly work except it is paralleled by the banking sector undertaking their own quantitative easing in the form of credit creation through fractional reserve banking. All the US has done is compounded a global problem that is likely to impact the US economy more than the rest of the world.
US Corporations, on advice from US Banks, outsourced much of the productive capacity of the US economy to places which were intended to do it cheaper but turned out to do it better. The US had no future economic strategy. The US had not imagined what would replace all of those outsourced activities. In short, the US was living in hope of some miraculous innovation kick starting a new industrial revolution that would keep the population economically active.
Instead they handed over the economy to the free market and banks. This handover allowed the banking sector to manage a strategy of "Quantitative Easing though Fractional Reserve" for decades. When the first round of quantitative easing happened, it bailed the banks out as it transformed private profit into public losses. In short, the global banking system effected a land grab on currency.
The outcome is, as it was in the 1930's, that economies are now being managed by the markets not the politicians. And the markets are doing incredibly badly at it. Markets, for all their vaunted advantages, are mechanisms of exchange not innovation or management. Markets like "soft touch" regulation because it reduces costs. Which leads to markets doing as little as possible. Managing the economy would extract too much from Markets for "unprofitable" activities.
Hence regular, large, sustained Quantitative Easing. It ensures that the US is soft money and can, therefore, compete for the limited amount of management ability in the financial sector. The soft money should beggar thy neigbour for available market management skills by exporting lack of demand to other national economies and thus leaving the financial sector with nowhere to go other than the US National Economy.
However, the flaw is that there is - by demand of the US - only one economy now. The Global Economy. On a market basis, it would seem that the US is now a failed economy (India, Brazil and China are much better investments) and should be bypassed for a decade or so. Like Japan. Once non-US economies understand the nature of the US Dollar as the source of Quantitatively Eased Fractional Reserve Credit, then it becomes obvious that the US has little value beyond trading tokens for Banks to correct their balance sheets.
The US as wholey owned subsidiary of the invisible hand of the marketplace is what the Tea Party, Republicans and the Right Wing pundits of the US demanded for decades. Since Bush in 1999, that transformation has taken place. Obama, as the hate figure for the Right, distracts from the fact that the US economy is being mismanaged back to the levels preceding the growth of the 1890's. The US share of world GDP peaked in 1999 with 23.78% of global GDP. The share has been declining each year since then. Quantitative Easing is simply a civilised mechanism for the Financial Sector to disengage - without much unprofitable management of their mess. Obama, had he managed to create a national health service, might have delayed that disengagement by fifty years.
The US might well suppose that it is looking after itself. It is not. It is looking after US Business Interests that have - for quite a long time (at least since the sign up flurry of to the WTO in the late 1990's) been independent entities that do not give a damn about nations at all. Just profit. Providing the numbers are big and growing (and quantitative easing certainly gives that) then those businesses are content that the Markets are working.
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Stephanie I recommend you watch Peter Joseph's lecture called, 'Social Pathology' you can find the whole University lecture in one video on Youtube. You will have a far better understanding of the world and the monetary system if you watch that.
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34. At 08:49am on 05 Nov 2010, Averagejoe wrote
Average Joe ...thank you for posting the link to Steve Keen's very interesting analysis i've only just skimmed and will return to it later to digest in full. However, given the ineffectiveness of QE to drive up consumer demand what do you argue are the policy options available to overcome the current dire situation if we accept the premise of Keen's argument that we live in a Endogenous Money system and not in a fiat money system?
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#89 DemoDave
I agree with you that I misinterpreted your phrase "Must have".
Surely there have been a whole succession of your "Must Haves" during mankind's short tenure of the Biosphere. Starting perhaps with Fire and most recently perhaps an Internet connection. External combustion engines were a must have from the start of the industrial revolution until fairly recently.
You may mock at Green Energy but I can assure you that in many many years to come once oil has ceased, due to non-availability, to be a Must Have then we will be left with Green Energy and Nuclear in one form or another.
If I was wanting to copy anything at the moment I would be looking at thorium as being the next big thing. No good for fireworks though!
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Let's hope Stephanie Flanders .... as a serious investigative journalist ..
..... that you don't miss that Andrew Lansley is quietly and ruthlessly selling off many NHS services, (under the journalistic radars) to American companies at the tax-payers' expense.
If that's not beggar my neighbour, I don't know what is? Just a thought.
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The international ramifications of the Federal Reserve's latest round of monetary easing are huge to put it mildly, yet Germany's finance minister among others calling the programme clueless shows two things; one is how the G20 consensus really has broken down. But the second thing it shows is just how clueless a whole economic viewpoint is of the enormity of what's happened. Quite soon Charles Ferguson's documentary 'Inside Job' will come to cinemas giving large sections of the population the chance to try to come terms with it for themselves. Not only is this about trying to recover from the worst recession since the Great Depression; it's about trying to cope with a rogue industry governance which has corrupted politics, regulation and academia for decades.
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108. At 12:07pm on 06 Nov 2010, Chris London wrote:
"............... I will restate the point that the state is there to provide a safety net and not a life style choice. ................."
----------------------
I suspect we are, in large part, in agreement over most of what you have written. The state should not support a lifestyle choice. But as time passes, what was a luxury becomes first an everyday object and finally a necessity to be able to take part in society.
Change to a different system will take time although maybe, just maybe, those alive today will learn reasonably quickly that debt is not good. As we consume less, our economy will decline as some much has been predicated on debt. We will all need to accept that we use what we have for longer; products with a reputation for longevity will outsell the short-lived equivalent items.
But about your statement above - all the safety nets I have seen have holes. Its the size of the holes through which people can fall that is important to me. This is where we may differ. I believe the holes should be very small indeed. I abhor the idea that, in the UK it is acceptable to allow individuals to fall out of society and on to the scrap heap - what do you think?
"The state should be fit for purpose and that purpose is to give support and not control. "
Yes, the state should be fit for purpose. I believe that the state does have a role in controlling all that happens. If the state is not in control, who is? I do not like the idea of even a self-regulating industry - it seems to me to have proved itself in enough incidents not to be working for the best interests of us all and society.
Why does Obama want health care reform in US; because he can see that their current paradigm is unfair and does not work. The NHS has many faults, it can abitrary in the way it operates, but it is far more than just a safety net. It should be better than it is. Given the equivalent resources to those spent in the US and we would have a service far better; So here we must differ.
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Just glad to see the BBC journalists have called it just so, go on strike for your gold plated pension when the rest of the UK are going down the pan. I'm alright jack all over again..... pity peter sellers and Co are not around to see fiction turn into reality......
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108. At 12:07pm on 06 Nov 2010, Chris London wrote:
I will restate the point that the state is there to provide a safety net.
===================================================================
The state is there to enable every citizen to use his/her talents to obtain his/her fair share of the output of the country. If it does its job properly, there should be no need of a safety net.
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If there‘s too much debt, get rid of it, write it off.
But don’t disable the next generation with it.
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#104. BobRocket and #100 SleepyDormouse
"What level of private debt is a sensible level ?"
Try this set of considerations: OR some practical advice that 'they ' will not tell you!
Anyone that can't live on 70% of their present income will be in serious trouble before this depression/austerity is finished.
On the basis of, if the country needs to cut this much then so do you!
If you cannot make ends meet on 70% then you should take active steps to do so before you find it impossible and the system takes over from you and forces this reduction in your income.
In particular anyone who has a mortgage and can't make ends meet on just 70% of their present income should take immediate active steps to get to that position. It is better for you to sell your house now than to wait till it is repossessed.
I think this defines a sensible level of private debt in the current dire circumstances!
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#119. Dempster wrote:
"If there‘s too much debt, get rid of it, write it off.
But don’t disable the next generation with it."
Debt has to be deleveraged, but existing property rights must remain - that is debts that are secured must be repossessed and the assets sold into the market at what ever they will fetch.
Lumbering the children is insane as a strategy: so cut back the number of university students to the number that the state is prepared to fund out of general taxation - give this reduced number grants, not loans, and pay their fees.
And bail out the banks again - a necessity I am afraid, as their books are jam packed full with over valued assets as security that will not meet the outstanding loans upon which the asset is secured.
Also spend QE on public infrastructure works that employ the unemployed and build new or replace expired public assets. What even you do do not give it to banks! It is critically essential that QE does NOT go into equity or property prices as that will only lead to destruction (as has been proved time and time again in economic history).
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121. At 10:49pm on 06 Nov 2010, John_from_Hendon wrote:
119. At 10:24pm on 06 Nov 2010, Dempster wrote:
----------------
We will disable the next generation if there are no jobs and no productive economy. Maybe we as individuals have borrowed too much, but the lenders have a responsibility here too. They must pay their share of losses, any business [thats what being a bank is] is a risk business. You can loose your investment, its part of the system - if it becomes a oneway bet, its the totally corrupted and the vile face of capitalism, not sure there's a lot of difference then with communism. The only way the banks can be bailed out is by state take over; continue bailing them out and for them to carry on behaving as they are is totally unacceptable.
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121. At 10:49pm on 06 Nov 2010, John_from_Hendon wrote:
"Also spend QE on public infrastructure works that employ the unemployed and build new or replace expired public assets. What even you do do not give it to banks! It is critically essential that QE does NOT go into equity or property prices as that will only lead to destruction (as has been proved time and time again in economic history)."
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I agree with the sentiments about QE. But this is because I would like to see the state create money just as it has a perfect right to do, in the way advocated by MMT. This seems to be the same as you are stating in this paragraph.
I'm delighted that you seem to now be agreeing with me. In previous posts I thought you didn't like this idea. [or have I got this wrong}
Property rights - we could all get into such a mess here. The US are creating their foreclosure crisis and it will spread, or its effects will. I just hope that here in UK, everyone remembers that houses are not investments, pension funds or a way of leaving money to the next generation. Houses are homes - that is all they should ever be. We should be building enough so that all have shelter and warmth. They should be affordable to rent for everyone; those who can afford to should be able to buy. If the private sector cannot build the homes needed, then the only other entity that can is the state. In the end its their responsibility. Since Mrs Thatcher, the state has ducked this issue. Its time it was tackled properly, we don't want to see the slums of 20-30 years time being built!
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I hate that term "Quantitative Easing" or QE2. I call it for what it is, printing money. An infusion of several trillion dollars are needed.
What was said here is not what is going to happen at all. As money enters the economic bloodstream of the US economy to replace the lost credit (which should be part of M4 or M5 or M?whatever in their calculations) the economy will come back to life. What we need is inflation and easy money so that average Americans can acquire it to pay off old debt with cheap new dollars. I've been saying that here for years.
As the dollar weakens, US exports will be cheaper overseas and imports into the US will be more expensive here. That will spur investment at home and purchase of domestic goods instead of imports here.
This week the American voters gave the government a strong message this week, stop protecting the banks and start protecting us or you will be out looking for jobs yourself soon enough. Has the government gotten the message? We'll see. What's needed now is exit from the WTO and high import tarrifs to protect American producers in their own domestic markets. Import taxes should be used to subsidize startup companies that will compete with importers under favorable competitive advantages created by those import duties. They should be high enough to discourage imports.
As America's domestic economy improves at the expense of the rest of the world and inflation appears to be in the forecast, the US will attract foreign investment and immigration like a magnet. The US is set to grow to 420 million by mid century or about 3 million a year on average due entirely to immigrants. That according to the census bureau. This should eat up the surplus housing within a few years especially in the most desirable regions. Increasing the population by 1/3 in forty years will mean we will need to build one third again as much as we have now not including repair and replacement of what is worn out and needs replacement. This means new cities, new megalopolises, vast new opportunities that have yet to even begin to be seen. The long term future for the US is very bright IMO.
I don't think most Americans care what happens to the rest of the world anymore. I know I haven't for a very long time. European and others' incessant America bashing has borne fruit. The chickens are coming home to roost. I don't see a very bright future for the rest of you. Stagnation at best, long term decline far more likely.
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118. At 10:09pm on 06 Nov 2010, Fairsfair wrote:
108. At 12:07pm on 06 Nov 2010, Chris London wrote:
I will restate the point that the state is there to provide a safety net.
===================================================================
The state is there to enable every citizen to use his/her talents to obtain his/her fair share of the output of the country. If it does its job properly, there should be no need of a safety net.
____________________________________________________________________
You are both right. Only one of you is a neo-liberal.
In 1948 the UK signed up to United Nations Charter.
Articles 55 & 56:
All Members pledge themselves to take joint and separate action in co-operation with the Organization for the achievement of:
a)higher standards of living, full employment, and conditions of economic and social progress and development;
b)solutions of international economic, social, health, and related problems; and international cultural and educational cooperation; and
c)universal respect for, and observance of, human rights and fundamental freedoms for all without distinction as to race, sex, language, or religion
Remember the welfare state?
The oil shock in the 70s was used as an excuse to abandon full employment altogether and to adopt Friedman's idea that controlling inflation was paramount and required a smaller state, less welfare and a 'natural rate' of unemployment.
Most people appear to have bought into this rubbish now.
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123. At 11:26pm on 06 Nov 2010, SleepyDormouse wrote:
121. At 10:49pm on 06 Nov 2010, John_from_Hendon wrote:
"Also spend QE on public infrastructure works that employ the unemployed and build new or replace expired public assets. What even you do do not give it to banks! It is critically essential that QE does NOT go into equity or property prices as that will only lead to destruction (as has been proved time and time again in economic history)."
---------------------------------
I agree with the sentiments about QE. But this is because I would like to see the state create money just as it has a perfect right to do, in the way advocated by MMT. This seems to be the same as you are stating in this paragraph.
I'm delighted that you seem to now be agreeing with me. In previous posts I thought you didn't like this idea. [or have I got this wrong}
Property rights - we could all get into such a mess here. The US are creating their foreclosure crisis and it will spread, or its effects will. I just hope that here in UK, everyone remembers that houses are not investments, pension funds or a way of leaving money to the next generation. Houses are homes - that is all they should ever be. We should be building enough so that all have shelter and warmth. They should be affordable to rent for everyone; those who can afford to should be able to buy. If the private sector cannot build the homes needed, then the only other entity that can is the state. In the end its their responsibility. Since Mrs Thatcher, the state has ducked this issue. Its time it was tackled properly, we don't want to see the slums of 20-30 years time being built
This is a very good post, affordable housing is the answer to the UK.s problems, unless of course you are already over mortgaged. Why are houses not being built ? We need them, the majority of people can not afford the existing ones. So what's problem ?
If I stood in front of you on your door step and said to you, an existing home owner, 'vote for me, I will build hundreds of thousand of affordable homes which the country desperately needs, we have the money, we have the builders and we will slash the value of your home by fifty percent....You would probably set the hounds on me for darkening your door.
This the problem, New Labour only built a tiny number of affordable homes in all the years they were in power, but their housing ministers spent billions on consultant fees,salaries and every other dodge they could think of except building new housing.
They did not want to lose home owners votes.
It would be nice if one or two of those clever journalists who exposed the expenses scandal of MP'S at the Daily Telegraph. could find out where all the tax payers money went that was destined for affordable housing. They might even have the pleasure of dragging Lord John Prescot over the hot coals.
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#126. AudenGrey
#123. SleepyDormouse
On Foreclosure
Foreclosure is necessary when debts are secures and the borrower fails to meet repayments. It is unfortunate, but necessary fro the recovery.
On Second Homes
A small start should be made on preventing (or making the local tax situation diabolically onerous - say 5% of the house price per year) the ownership of second homes and the forced sale thereof - this is not draconian but also necessary to catalyse the reduction in housing costs outside the cities. The contagion of unaffordable house prices is destroying the structure of everywhere outside the major cities. We need to move towards the situation where second homes should be seen as an abomination!
On QE to Build Homes
QE to build homes yes - the notion of affordable is aberrant as homes must be affordable, which are affordable at 3.5 times average earnings of the area - land should be priced appropriately and all profits above that should be taxed at 100%. So the site cost would be the areas average earnings times 3.5 minus the cost of the build and the rest taxed at 100%. (Perhaps people will object to the confiscatory nature of this but there is no point in building affordable homes that immediately become unaffordable on resale.)
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88 fairsfair
Greater equality is essential to broad social improvement. To paraphrase a well known sentiment: it is not what society can do for you but what you can do for society. The individual can only define themselves from within a broader social context. Elites restrict the definition of that social context and can become a conspiracy against broader society.
96 Not Buzz Windrip
I agree with a lot you say.
Shipping stuff around the world is more expensive than ten years ago. It is at about the same price as twenty years ago, so obviously it does cost less than previously. However, the vagaries of that market place are requiring that just-in-time operators are paying a clear premium for predictability. We have to ask with growing labour costs and shortages in places such as China, how long before such extended supply chains become inoperable? I have heard of production being repatriated from the Far East so this process is already in train.
What is often forgotten about global supply chains is the costs of finance, lead-time issues and domestic warehousing and distribution that all add to the price of imported goods. If mismanaged, which is often, these can easily out-weigh any labour cost gain derived from manufacturing overseas.
With regard to farming I know that some farmers are organising their market place but it is early days yet. This is helped by consumers demanding more locally produced food. Again the supply chain issue, which is tied to greener products, becomes relevant. The decimation of Uk agriculture following the BSE scare and the importation of foot and mouth because we did not employ enough port health inspectors to stop illegal meat imports has been quite evident. I know people who went out of business. All of that was easily avoidable. Also can someone tell how can it be cheaper to truck tankers of milk from Poland and Italy to the UK than produce sufficient of such a staple domestically?
We have experienced in this country monstrous failures of government together with the ideas that define a conception of a broader economic interest. If local factories close, so does the local economy. Replacing factories with shopping centres just compounds the problem.
However, the fact that the consumer is still out there could be the salvation of us all. With a careful evaluation of all costs an advantage will soon be seen for domestic manufacture not so much for the product itself but all the other advantages that come from local people earning a decent wage. This wider aspect has to be considered and government's role is to facilitate the development of those ideas. But at the other end of the scale more and more guys are working from their garden sheds and selling their product together with their expertise off market stalls.
As for the corporate types I am as an honest man fallen amongst thieves and I make no apology for the use of that word. We are an SME that was taken over by private equity. Like all servants, the appointed directors are worse than their masters. Not so long ago one told me that the object of the business was to sell more goods. He did not like me reminding him that the object of the business was to provide a return on capital. Not even capitalists seem to understand capitalism anymore.
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re Post 78, Not Buzz Windrip states that 'there is nothing stopping farmers from co-operating to carry out their own distribution' (in order to obtain proper prices- my brackets and comment)
This is known as 'price-fixing' and cartel activity.The very successful Milk Marketing Board was declared illegal by our lords and masters in Europe. It is true to say that a totally free market should work in theory, but in practice, the results are always unsatisfactory-to say the least.What is lacking is clever, long term management, whether we are talking about management of raw materials, production capacity, skills, motivation, banking services, etc. All we see is greed, short termism, lies, corruption, diluted justice, injustice, selfishness, etc. As a certain Basil Fawlty announced 'Apart from that, OK, then'
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#124 MarcusAureliusII,
Looks like your thinking is stuck back in 2006/7! I remember having to listen to hours of US news and political debate programmes stating platitiudes like "we'll just have to work harder" and "nobody can out-produce the US workers when we put our mind to it" etc. etc. Didn't work though did it?
QE2 will not explode as stimulous for the US economy. The effects on 'Main Street' will not be more jobs and less foreclosures. You are simply deluding yourself. Nobody over there will dare to make any public comment upon just how much of it will simply disappear overseas!
If you stopped to look and/or listen for a while you will note that the rest of the world is already thinking about protecting themselves from a US implosion.
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129. At 09:51am on 07 Nov 2010, stopmeandbuyone
Is it stop me and buy a free market?
Even in theory, if you could start a free market, it would only exist for 'micro-seconds' before it disintegrated. So many people, not you, keep on extolling the wonders of this mythical beast when it can never exist other than as a fleeting state.
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Some shrewd comments Stephanie but how can you possibly NOT think that QE [correct English - ´debasing the currency´] must lead to inflation. Is there any historical precedent - Henry VIII ? - where this has not been the case ? Of course, some theoretical economists and even short-sighted BBC Editors, regard inflation[synonym for ´the plunder of savings´] as ´desirable´ but the German 1923-4 experience should make them pause, if not memories of what happened to the UK economy in the 70s.
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#124:
Brilliant economic proposal. Too bad it's based on the premise that everyone outside the US is stupid. In economic matters, the US has lost all credibility. For capitalist economies that is, for admirers of socialist or communist economies it probably gained status.
Helicopter Ben is making it rain for desperate US-politicians. Forget the nonsense about inflation or stimulus, he's just hanging on to get that cushy US-government pension. He will be about as beloved and revered as Greenspan (pop!) once he retires.
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#124; #132; #133
Bernake's money is just the lagging base for trillions that western banks have already ploughed into developing world.
Money is a dual concept (with water you got volume and flow, with electricity you've got current and static load, with money you've got cash stack and money flows). Inflated flows in currency markets and other instruments don't translate itself into CPI inflation - they prevent it! They drive money into assets - medium to long term stacks (like overflow vessels and retention reservoirs). Is there a risk that the dam will give in to the pressure? Yes, but as long as there are vast areas of the globe with an "undershare" of high rise commercial real estate, top notch residential real estate, with "undersecuritized" companies and banks we will keep pumping!
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I find these bloggs adictive.
I think many other contributors who appear frequently here will agree.
If only there was/were a spell checker and a gramar/grammer/grammar checker available I would feel more confident in contributing.
So in order to save the world, stimulate the global economy and make all non english lit degree holders happy bunnies, I would suggest consideration to be given to this request by the BBC. After all it should only take an IT team a couple of years to do.
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DemoDave - if we could just sort out lose and loose, their, they're and there, and your and you're, the other spelling issues would not be an issue for me.
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129 stopmeandbuyone:
're Post 78, Not Buzz Windrip states that 'there is nothing stopping farmers from co-operating to carry out their own distribution' (in order to obtain proper prices- my brackets and comment)
This is known as 'price-fixing' and cartel activity.'
Not at all. It is a matter of marlet share, domination. Anyway when supermarkets seek to enslave the supplier by paying less than the cost of production the its time to kick the game over. The objective of any business is to gain monopoly if possible. The objective of government is to prevent monoploy, it is it's most important commerce related role. The drift to partnership between business and government as government seeks to ditch its historical infrastructure activity continues to compromise its role as regulator.
Stanilic @128
'extended supply chains become inoperable? I have heard of production being repatriated from the Far East so this process is already in train.
Yes but this is pulling both way. As labour costs rise in China the next stop is Cambodia etc. eg India is undermined in some areas by Chinese activity in some textile weaving, can't compete. Some activity has moved back to the West but on balance the flow is away from the West. Transportation has to be green taxed to reflect its true cost.
The problem is that once activity has gone only a limited amount can be expected to come back. One of the tricks is to undermine the UK producer so the home grown supply base collapses and then control of supply is with the importer. The Japanese did this with a number of products in the 70s. Once competition is removed then prices can rise.
'global supply chains'
Yes, inflexible, big weakness. I wont cry if they have a problem. Flexibity and rapidity of response is a big advantage.
'Also can someone tell how can it be cheaper to truck tankers of milk from Poland and Italy to the UK than produce sufficient of such a staple domestically?'
Poland, land cheaper, labour cheaper. Dont know figures for Italy. If labour rates move towards parity the flow of milk stops. I did look vaguely at Poland at one stage but didnt fancy marrying a Pole, didnt think the existing spouse would have liked it either. At the time it was marry a Pole or find a 51% Polish partner, dont know what it is now. (PS Bigamy is the same as monogamy, it is one wife too many).
'We have experienced in this country monstrous failures of government together with the ideas that define a conception of a broader economic interest. If local factories close, so does the local economy. Replacing factories with shopping centres just compounds the problem.'
The idea with supermarkets appears to rip the High St out of the town and put it in a shed. Bizarre. Cannot ubderstand why it is allowed, Oh, yes I can when I see LAs entering commercial pertnerships on shopping mall developments. Is this what local Government is supposed to be about.
People do not have to always buy imported goods or always use supermarkets.
'However, the fact that the consumer is still out there could be the salvation of us all. With a careful evaluation of all costs an advantage will soon be seen for domestic manufacture not so much for the product itself but all the other advantages that come from local people earning a decent wage. This wider aspect has to be considered and government's role is to facilitate the development of those ideas. But at the other end of the scale more and more guys are working from their garden sheds and selling their product together with their expertise off market stalls.'
Yes, the unwinding of the industrial revolution. As big fails smaller has to be the case. Small however does not have access (usually) to the funds in the same way which limits targets.
'As for the corporate types .... Not even capitalists seem to understand capitalism anymore.'
Arh, you are showing the brainwashing programme is not working. More on the spin cycle for you. 2 soap tablets and conditioner. There are very few capitalists about. It is a result of business structures becoming too large, dysfunctional. When too large the complexity of communication impedes understanding and the perception of value of actions fails. However in the short term profit can be stripped simply by culling the manpower bill. The cull cannot be anything other than arbitary because management understanding and value have failed. Arbitary acts then result in a business that remains relatively large but with inbuilt structural weakenesses. The dysfunction compounds. The business promotes the matching mentality. Successful businesses big or small use people and network systems. Its all about people. Customers are people.
131 Fairsfair
'Even in theory, if you could start a free market, it would only exist for 'micro-seconds' before it disintegrated. So many people, not you, keep on extolling the wonders of this mythical beast when it can never exist other than as a fleeting state.'
I dont disagree. There is no such thing as a free market. All markets are regulated. The regulator is the government. Regulation failed because due diligence of government failed.
However, how do you regulate a multinational market. It can only be done by domestic effort and cross-national co-operation, which demands equal interest and objectives across countries. As business moves to larger scales the business has more resources available to it than the regulator. (look at the mismatch between HMRC resources and corporate resources on tax avoidance). The only way to gain more regulation resources is to tax more which leads to multinationals seeking greener grass. I wont name names becasue the parties lackeys normally refer to mods. Youve gotta chuckle when you stop a advertising campaign though.
Regards
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re 137. Not Buzz Windrip
I stand by my cartel comments as they relate to the real situation faced by food producers in this country. I swoon at your multi-reply, all at once, on the various facets of the problems building up from the natural progression of big business.
What is clear, is that the 'end game' is close for the majority of agricultural commodity producers in the UK. Food producers have to take a long term view, and are often prepared to withstand gross abuse by their customers for a number of years, including the contrived so-called assurance schemes imposed by supermarket buyers.
As far as the dilution of the Dollar, by printing yet more of them,this causes yet more cost increases here, chiefly oil, so that transport of agricultural commodities becomes very nearly impossible.
There is now too much baggage for this situation to improve without a major catastrophe coming to the rescue, eg a major war, asteroid, plague, etc.
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135. At 4:49pm on 07 Nov 2010, DemoDave wrote: I find these bloggs addictive. If only there was/were a spell checker and a gramar/grammer/grammar checker available ..........
DemoDave, nice to see someone trying to get their spelling correct. If you have a problem, why don't you type your comment into MS WORD or similar software, spell/grammar check it in Word and then copy/paste it into "Your Comment".
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To DemoDave #77; #89; #135 Sorry, I didn't read your comment, it makes mine redundant. Sorry again. Deflating the bubble though would be another interesting game.
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#135 DemoDave
I am typing straight into the BBC supplied box.
I get an automatic spell checker, in that very self same box, courtesy of my browser - Google Chrome. A mis spelled word is underlined in red.
Apart from having to watch out for Americanisms it is good.
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118. At 10:09pm on 06 Nov 2010, Fairsfair wrote:
The state is there to enable every citizen to use his/her talents to obtain his/her fair share of the output of the country. If it does its job properly, there should be no need of a safety net.
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No it is not for the state to enable anything it is there to ensure that there is a level playing field only. To use a well worn quote "Ask not what your country can do for you; ask what you can do for your country".
I am afraid that it has not been the case for some time.
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116. At 9:44pm on 06 Nov 2010, SleepyDormouse wrote:
The state should not support a lifestyle choice. But as time passes, what was a luxury becomes first an everyday object and finally a necessity to be able to take part in society.
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So where do we draw the line, a flat screen TV, a lap top, a microwave/grill/oven, mobile phone, Etc. Etc. all of which are now seen as a necessity rather than a luxury.
This is what I mean when I ask how can you break the cycle?
The problem I have is there are those who deserve all that is currentley given, such as the disabled unfortunately there are those who are lets say less than deserving who are are using the system as a life style choice. How can we ween these off? It may take tough love, but that will be unpopular as they can all spin a yarn as good as the spin doctors.
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Chris London,
"The problem I have is there are those who deserve all that is currentley given, such as the disabled unfortunately there are those who are lets say less than deserving who are are using the system as a life style choice. How can we ween these off? It may take tough love, but that will be unpopular as they can all spin a yarn as good as the spin doctors."
How many of these "undeserving" claimants are there?? Do you know any personally? Is there a detailed study backing your claims? Or are you just rehearsing what you've read in a newspaper, or just guessing?
I can imagine that some young people might find benefits a novelty for a while, but that does not last long in my experience. I can also imagine that there will be many cases based on identity theft / organised crime.
One thing I have learned is that benefits do not give anyone a "lifestyle" (you EXIST on benefits, you do not LIVE), and most people I know on benefits can't afford most things that ordinary people might consider normal, let alone luxuries, unless it is as a result of the charity of others.
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foreskinDave;
"I remember having to listen to hours of US news and political debate programmes stating platitiudes like "we'll just have to work harder" and "nobody can out-produce the US workers when we put our mind to it" etc. etc. Didn't work though did it?"
Nope, didn't work at all. 235 years ago America was 13 colonies of small towns, villages, and small farms. After all that work we're just fifty states of small towns, villages and small farms. Not much changed except now we have more of it.
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142. At 10:15pm on 07 Nov 2010, Chris London wrote:
.........So where do we draw the line, a flat screen TV, a lap top, a microwave/grill/oven, mobile phone, Etc. Etc. all of which are now seen as a necessity rather than a luxury. ...
-----------------------------
I agree this is difficult. Let's take your examples TV of some sort maybe, a radio certainly; age of the item is important and the date of change to digital transmission. I don't mean a 50" monster, a cheap 22" would do (no Sky connection). Laptop and internet yes, these are becoming essential as the government is demanding so much in the way of on-line contact. You can do only so much in libraries etc, also there is very little privacy in the public places. Cooking, whats wrong with a normal oven, it doesn't have to be a microwave. Landline phone - yes, but a Mobile phone, probably, a pay as you go phone[you then have to decide who to call and how often] - a basic phone, not an expensive model, again almost essential for people to keep in touch with you; it enhances your ability to get a job.
I hope you see where I am coming from - if it enhances employment prospects and/or keeps you as a member of society then probably a yes. Difficult to draw a line, but not impossible and always liable to argument. It is important to keep individuals wanting to work.
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143. At 10:56pm on 07 Nov 2010, Charles Jurcich wrote:
Just seen your comments and almost entirely agree with you and the sentiments you express. There is one problem, there are a few who have benefited unduly from the current system and this has been published in newspapers etc Its given 'benefits' a bad name, in turn this gets questions aked of the sort Chris London is asking. Once asked, they become legitimate things to discuss and people want to draw lines. I have tried to answer, but it is really the general principle that needs to be articulated, not specifics. The allowances should be tailored to meet the real need of the family or individual concerned. There should be humanity in the system, not just tick boxes, mechanical churning of a computer and a spat out answer that satisfies no-one.
The government ought to be considering how it can ensure there are jobs for all; right standard to match educational attainment and right number to meet the needs of the population. Unemployment was recognised as something to be abhorred in the UN Charter, UK is a signatory, but we have had excessive unemployment since the early 70's. No government has given it sufficient priority to dent it. That is where the real scandal lies.
Cameron et al have whipped up anti unemployed fervour in the press. Sadly, they have mostly fallen for it.
The population should demand a return to full employment - then many of our problems would reduce. Personally, I wonder at the poor economic decisions made over the last 40 years and I really do question the value of globalisation. I like being able to buy cheaply, who doesn't, but I look at the cost to our society and I wonder if its worth it, but I continue to read and think to try to make up my mind ......
Convince me that the costs of globalisation [this includes the present on-going crash, its part of it] are worth it ...... I'm happy to listen and will respond when I can.
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#144,
How do you know if I have one or not?
Now the British are often accused of living in the past - looks like its contageous.
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138. At 7:12pm on 07 Nov 2010, stopmeandbuyone wrote:
're 137. Not Buzz Windrip
I stand by my cartel comments as they relate to the real situation faced by food producers in this country. I swoon at your multi-reply, all at once, on the various facets of the problems building up from the natural progression of big business.
What is clear, is that the 'end game' is close for the majority of agricultural commodity producers in the UK. Food producers have to take a long term view, and are often prepared to withstand gross abuse by their customers for a number of years, including the contrived so-called assurance schemes imposed by supermarket buyers.
As far as the dilution of the Dollar, by printing yet more of them,this causes yet more cost increases here, chiefly oil, so that transport of agricultural commodities becomes very nearly impossible.
There is now too much baggage for this situation to improve without a major catastrophe coming to the rescue, eg a major war, asteroid, plague, etc.'
It is in the hands of consumers and suppliers. With intent from consumers and intent from suppliers it can happen. If you are saying that it is likely not to happen thats a different thing. There is a consumer backlash in progress. If people collectively stop buying from a business the the business will be gone in 6 months.
Fed QE - The US is clearly doing the right thing for the US because the rest of the world are bitching about it.
Oil, well its going to run out anyway, time to sort something out. Thing is things dont get sorted unless push comes to shove. So shove it may well be. The main problem is not oil anyway it is a mix of low wage manufacturing imports, big business manipulation of markets, ineffectual regulation, and just over the horizon .... environmental degradation. Those are all man made.
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146 Sleepy,
Agreed - I think that globalisation was always about the rich getting richer by employing as few people as possible, for as low a wage as possible - they didn't get that it just meant collectively we could no longer afford to purchase their products and services. So we were forced to buy cheaper products from abroad instead (which we could afford).
When real wages got so low that even these were getting too expensive, producers in East Asia had to manufacture poorer-and-poorer quality products, just so we could afford them - crazy.
I notice that the BBC have reported IDS's current workfare scheme in quite a balanced way. Today I have heard two independent people interviewed criticising supply-side economics (in layman's terms), and that is heartening. One of them even mentioned 'full employment'. I think that slowly the message is getting out.
Kind Regards
Charlie
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If President Obama was serious about sending a message to the bankers, he would not have reappointed Ben Bernanke and appointed someone who believes in sound money. As a student of the Great Depression Bernanke should know that it wasn't the phoney demand created by the New Deal that brought the country out of the depression, it was the real demand created by WW2 that was centred on the mid-west manufacturing heartland. The US manufacturing heartland is no longer in the US. That new money he just announced is going to end up in financial appllications.
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All this manipulation is all right, but ...
Just yesterday I was watching Animal-Plannet/Discovery after
a hard days work (Yes, Sunday, a working day).
There in the harsh East Afrikan terrain there was a lone Jackle.
Alone searching for a family. She crossed a 4000 Meter dry mountain
range for two days without a bit of food in her mouth.
Exhausted, she took rest in the valley. Still no food.
She got a mountain Rat like animal she was able to catch on the
THIRD day. I could see how happy she was with that meal after three
days.
I was also happy to think that thankfully, my Sunday dinner came
after full Eight hours of work. No problem at all.
Then when I was about to sleep, a thought came in to my mind.
Is there something that all of us can learn from that mountain
lady Jackle even while she is not having formal course in Economics ?
How long will we keep on fooling ourselves ?
Each time I think about that Jackle, I learn an alltogether new
lesson from that animal.
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" However, it is possible - some would say likely - that a strong recovery is not available at any price in the US today, especially while the most important dollar exchange rate is set in Beijing. If that's true, the American authorities could end up simply exporting the negative side-effects of a futile expansion effort, while doing very little to raise growth at home. Let's hope it's not."
It appears the majority above believe this is the case . It's a massive gamble that does not need to be taken.Cheap money (especially by private individuals) will be taken abroad where the return is greatest- Investment in Las Vegas v Macau is a striking example ,of one industry winding down in the USA.
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Oh, I always start my comment by praising Stephanie Flanders.
In my last comment for this wonderful article, I accidentally
forgot to praise her in the begining.
Now I am correcting my mistake.
Stephanie Flanders, please accept my praise.
(and assume that this is the true begining of comment #151)
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There is an article at:
http://www.techeye.net/business/uk-big-business-exploits-visa-loophole-to-decimate-it-jobs
It is entitled:
UK Big Business exploits visa loophole to decimate IT jobs
If this article is accurate to any significant extent:
1 We will loose the jobs for many indigenous UK nationals in this country. These are high skill, degree level jobs.
2 Why will children aim to go to university and run up debts that they then cannot repay.
3 Government policy is not properly controlling immigration and is helping the rest of the world's population to the detriment of our own citizens.
When everyone wakes up and realises this, I cannot think of a more explosive mix. Business may not care [shame on them] but the people will. Government policy needs to be for our benefit, not everyone else. This may breed extremism very quickly. The government needs to listen to the population it serves because we elected them. If this report is any truth behind it, Business has become too powerful by far.
Please read it, think about it, and then lobby locally and nationally to stop this practise.
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145. At 11:20pm on 07 Nov 2010, SleepyDormouse wrote:
I hope you see where I am coming from - if it enhances employment prospects and/or keeps you as a member of society then probably a yes. Difficult to draw a line, but not impossible and always liable to argument. It is important to keep individuals wanting to work.
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So here is the big question, do you supply driving lessons and pay towards a car or insurance. That surely would assist with employment. For that is what has been happening, I have first hand knowledge of this.
With regards to laptops, there is concern that they are being sold off, an estimate is that over 33% have found their way onto the market not too mention their free Internet connection.....
Once again, the state should not be a life style choice as it appears for so many, but how do you break the cycle?
I feel for those who struggle on a daily basis to make ends meet and don't look for a handout or a free ride. I also fear for those who really need the help as they are likely to be bundled in with the shirkers and lurkers....
You can see why someone who has got on the benefits train would find it difficult to get off when they can claim DLA which can give them up to £121.25 per week and also claim the following:-
•income-based Jobseeker's Allowance
•income-related Employment and Support Allowance
•Income Support
•Housing Benefit or Council Tax Benefit
•Working Tax Credit
•Child Tax Credit
On the radio the other day a person phoned in and commented that she would need to earn more than £35k to be better off than she is currentley on benefits. She then went on to say why would I bother to work even if I could earn more for I have a good life without having to get out of bed and have no hassle. How do you break that cycle?
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152. At 08:42am on 08 Nov 2010, hughesz wrote:
It appears the majority above believe this is the case . It's a massive gamble that does not need to be taken.Cheap money (especially by private individuals) will be taken abroad where the return is greatest- Investment in Las Vegas v Macau is a striking example ,of one industry winding down in the USA.
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Bad choice a Macau is no longer as cheap as it once was, here are some examples;
Food and Drink
Milk 1ltr./2.11pints £1.53 €1.75
Butter 500gr./1.10lbs £2.30 €2.63
Plain yoghurt 180gr./6.35ozn £0.31 €0.35
Cheese 500gr./1.10lbs £2.30 €2.63
Eggs 12 (large) £0.92 €1.05
Bread (white loaf) 1 kg £0.61 €0.70
Bread Whole (wheat loaf)1 kg./2.20lbs £0.77 €0.88
Spaghetti 1kg./2.20lbs £1.15 €1.31
Sugar (white) 1kg./2.20lbs £1.15 €1.31
Cornflakes (packet) 375gr./13.23oz £2.68 €3.07
Coffee (instant) 125gr./4.41oz £1.91 €2.19
Coffee (ground) 500gr./17.63oz £3.06 €3.50
Tea bags (pack 25) £1.53 €1.75
Coca Cola 1lt./2.11pints £1.15 €1.31
Mineral water (still) 1lt./2.11pints £0.61 €0.70
Mineral water (sparkling) 1lt/2.11pints £1.15 €1.31
Orange juice 1lt./2.11pints £1.38 €1.58
Margarine 500gr./1.10lbs £2.30 €2.63
Olive oil 1lt./2.11pints £2.30 €2.63
Ketchup 340gr./12oz £1.53 €1.75
Milk chocolate (bar) 100gr £1.15 €1.31
And you know what, if you put these items into a price comparison for our supermarkets it works out cheaper in the UK than there. Perhaps we are already well on the way to being a third world country or just enjoying cheap food......
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#154. SleepyDormouse wrote:
"UK Big Business exploits visa loophole to decimate IT jobs"
Perhaps it should be a requirement that British Businesses who export their IT department should have to seek UK work visas for their new overseas employees even though they never come to the UK, on the lines of the EU transfer of Undertakings rules?
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155. At 09:14am on 08 Nov 2010, Chris London wrote
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I understand your point of view and it certainly does raise questions of the sort you are asking. It is also possible to find examples where individuals are in poverty, have few prospects and are alienated, in time, from society. This will breed criminality of the sort that has happened recently near where I live; car window smashed and houses burgled. Not good for anyone and increases living costs enormously.
I don't know how to get the right balance. I do know that poverty should be seen for what it is, degrading to the individual and society. From your example however, I can also see that it is unacceptable to the rest of society for someone to take so much - £35K seems a pretty good salary to me and indicates that the allowances are, in this case wrong. What the story does not show, however, are her circumstances, what is her disposable income after essentials have been taken care of [back to that again]; in my view a missing piece.
The internet and access to it will always have difficulties; the only way I can see to avoid your example is for central provision in, maybe, schools and libraries of the necessary facilities. At what cost? Is it cheaper to loose some to the second-hand market? Is there any sanction that can be applied if someone does abuse the system and sell things bought for them by the state?
I wonder if laptops can be identified by their electronic signature like the mobile phones IMEI? If so, they could be tracked. If sold, they might be identifiable when used on the net. Just a thought that others with more knowledge than I might like to comment on.
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Following the several points concerning the disadvantages of the globalisation of world trade for the so-called developed economies perhaps we need to find ways of redefining our needs within the existing World Trade agreements.
Since following the creation of the EU Single Market our international trade policy is now managed by the European Commission we have to consider our circumstances within a strictly European context. Given the existence of the Single Market and the size and potential of markets within Europe we need to think outside simple UK terms.
I suggest that the Commission extend the application of anti-dumping duty across a far wider range of imported product than currently. This uses additional import duties to penalise importers of good from certain nations which are ostensibly manufacturing at below cost. This is often more an opinion than a reality but we should use every tool in the kit to protect our interests of which domestic European employment is the most important.
I also suggest that carbon foot-printing needs to be applied to imported product and an additional carbon tax be imposed as appropriate. I mean we all want to save the planet, don't we?
I also suggest that local supply chains within the domestic market be freed from carbon taxes so that they become the cheaper option for the same reason.
Then there is always the security ticket to be applied.
If we set about to do this with our European partners we can substantially restrict the flow of imported products into the EU thus encouraging more domestic production. In my view, if we are cunning about it, we can do this within existing WTO rules.
Free trade is all very well but it must be conducted to the common benefit. If it does not prove to be a benefit because others are playing from a different rule book then we should re-write our rule book to suit. If any given policy does not promote the interests of the home team then we should seek to change it.
I appreciate that there are risks in such a strategy not least the manufacture of Beamers in Bavaria, but what does Europe do to resolve the massive unemployment, current and growing. Printing money to pay as welfare makes even less sense.
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157. At 09:56am on 08 Nov 2010, John_from_Hendon wrote:
-------------------------
The problem highlighted here is that companies are bringing significant numbers of people into their IT departments here in UK. Its not the job being exported, its workers on low rates of pay being imported. This is why I think it is really dangerous. Exporting jobs is bad enough, the people however are staying in their home environment and being well paid by their country's standards. Coming to the UK, they are poorly paid, UK workers are on the dole. The export of jobs is highly questionable [I am hard of hearing, some foreign call centres are manned by people I have no way of hearing clearly - frustration all round]. Importing people like this is wrong as it is highly detrimental to our population.
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metalgasket do you think we can trust others to provide for us in our old age? if we spend every pound we earn (+ patriotically borrowing some more to spend) on goods and services now to keep the economy going, then we are risking a very unpleasant or very short old age! Indeed this is the way current national policy is heading in this country and others ie to sustain growth we must all keep working and spending till we die.
The policy of growth is one of perpetual enslavement!
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To those on this blog saying it is pointless to manufacture stuff in this country cos its done cheaper elsewhere, you need to remember that its cheapness and availablility depend on cheap and abundant energy (oil)
this will not last forever, so this country needs to be looking to the future. i csnnot see any hope without some form of interventionist policy to invest for the future, in doing a proportion of the stuff here even if it is at the moment more costly (but remember in cost to factor in cost of paying for the unemployed) also of course invest in energy efficient manufacturing.
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#160. SleepyDormouse wrote:
"Its not the job being exported, its workers on low rates of pay being imported. "
Note that in IT there is a 20% unemployment level (highest of any subject) of 2009 graduates too....
"I am hard of hearing, some foreign call centres are manned by people I have no way of hearing clearly - frustration all round"
Sorry about your hearing - but I'd like to add that my very worst communication experience was with a call centre/center in California - I had to stop the woman and ask that she spoke English! I am quite please that there are jobs all round the UK in call centres - but why? We used to be able to communicate to our local bank branch in person - this is virtually impossible - the utility companies also permitted one to communicate locally - now you never get the same person twice and when you get through they never have full information about the reason for the previous call so you have to start all over again - or you have to wait ten to twenty minutes fro them to read the documentation. I am in the middle of experiencing absolutely inconceivably terrible utility service - with an un-repaired fault that is still on-going and has been for over 2 months! Many many dozens of phone calls and many many dozens of emails and still no solution and it is all down to their equipment.
I have found that when you challenge them over their service failure they just pay compensation rather than fix the problem.
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156 ***
You are missing the point, I am talking about investment . One USA company has invested (Borrowed) $5,000,000,000 in Macau on the grounds that the returns there are greater than the USA.
I am in agreement with the general view above that cheap USA money will not be "invested" in the USA but used to invest in developing countries where the returns are higher.
Thus Ben Bernanke logic is flawed.
I also agree with JFH that this valueless money will come back and boite the USA on the a**e ,either through inflation or more likely ANOTHER credit tightening.
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161. At 11:45am on 08 Nov 2010, cark:
I certainly intend to carry on working and spending till I die.
I also intend to do a bit of saving.
I won't be doing any more borrowing though.
Not sure of the point you're trying to make but it sounds like you might be trying to equate Govt with Households when it comes to borrowing.
If I were the Govt and sovereign issuer and sole tax collector of sterling, I would not need to worry about borrowing or saving. The whole idea of either is meaningless.
The Govt should be creating jobs in line with its duty under the UN charter which it signed up to in 1948 to maintain full employment.
Instead it has signed up to Friedman's monetarism which has now failed miserably and resulted in lower standards of living for the majority and lower employment.
Consider the level of National Debt after the war. Yet still the labour government managed to create the welfare state at the same time by creating jobs and as a result increasing aggregate demand for decades. That was probably one of the best moves this country ever made.
Deficit spending IS non-government sector saving.
If there was no public debt there would be no net non-government savings.
Savings create unemployment. If the Govt does not net spend to accomodate this, the economy will shrink.
Finally most mainstream economists are idiots.
That about covers it I think.
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158. At 09:59am on 08 Nov 2010, SleepyDormouse wrote:
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We are not a million miles apart, we both think that those who need it get the help and those who have the capability put something back into the community.
With reference to the woman who called in to a BBC radio show, she did not refer to her circumstances other than to say that she would not take a job no matter what. For she had a life style that she was pleased with. Now if she is not capable and needs assistance that is is OK and those who do need it should get it. It is just those who have now taken a choice to a life on benefits. The reason is all too often that their life is all too cushy.
I would also agree with you that those who do need help all too often don't get it. I read an internal report from the DWP not so long ago with reference to benefits not taken up by those retired. All too often these are those who fall through the gap through pride or just neglect. If the DWP did not have to deal with almost 10% of the UK's population who now claim DLA. This number has risen significantly since the rules were changes for benefits by the last goverment. These people are the ones that are taking from those who are deserving for if it weren't for them then maybe just maybe the DWP would be able to identify and support those truly in need.
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Sorry but I had not realised that there is a mini industry in assisting people with their claims for DLA. There are a number of companies who have sprung up giving advice and filling in forms for those who wish to claim DLA.
Firstly it is sad that people have to go else where to get help with form filling.
Even more sad that those who are not deserving are now using these companies to get DLA and other benefits they are not entitled to. I have been advised that you are almost 100% more likely to have your claim approved if you use one of these companies than if you don't.
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124. At 04:59am on 07 Nov 2010, MarcusAureliusII wrote:
"I hate that term "Quantitative Easing" or QE2. I call it for what it is, printing money. An infusion of several trillion dollars are needed."
"What was said here is not what is going to happen at all. As money enters the economic bloodstream of the US economy to replace the lost credit (which should be part of M4 or M5 or M?whatever in their calculations) the economy will come back to life. What we need is inflation and easy money so that average Americans can acquire it to pay off old debt with cheap new dollars. I've been saying that here for years."
And that's why the US are in the mess they are right now my friend. It's not cheap money you need, it's a complete financial detox. Do you really believe that QE2 will kick start the economy? The reality is that QE2 is just being used as a last resort in the hope that something else will come up soon. It is more money down the drain. The economy is already toast! And cheap borrowing won't help you - it will only delay the inevitable.
"As the dollar weakens, US exports will be cheaper overseas and imports into the US will be more expensive here. That will spur investment at home and purchase of domestic goods instead of imports here. "
So who is going to buy all these goods you say will be made in the US? Unemployment is rising fast and there were 1 million house reposessions in the US last year. Maybe cardboard box manufacturers will do well.
"This week the American voters gave the government a strong message this week, stop protecting the banks and start protecting us or you will be out looking for jobs yourself soon enough. Has the government gotten the message? We'll see. What's needed now is exit from the WTO and high import tarrifs to protect American producers in their own domestic markets. Import taxes should be used to subsidize startup companies that will compete with importers under favorable competitive advantages created by those import duties. They should be high enough to discourage imports. "
.....I was waiting for that. What you don't seem to realise though is that the US, like every other developed nation, is part of the globalised world economy now. It simply cannot act alone.
"As America's domestic economy improves at the expense of the rest of the world and inflation appears to be in the forecast, the US will attract foreign investment and immigration like a magnet. The US is set to grow to 420 million by mid century or about 3 million a year on average due entirely to immigrants. That according to the census bureau. This should eat up the surplus housing within a few years especially in the most desirable regions. Increasing the population by 1/3 in forty years will mean we will need to build one third again as much as we have now not including repair and replacement of what is worn out and needs replacement. This means new cities, new megalopolises, vast new opportunities that have yet to even begin to be seen. The long term future for the US is very bright IMO."
I think you need a reality check my friend. In your opinion, the bubble will continue unabated. All due to immigrants!!! Well I have news for you. Who would want to immigrate to a country where there are no jobs, housing is unaffordable, welfare is expensive and the financial system is in meltdown? The US may not be a third world country yet, but there are many other countries in the world which are much more advanced than the US. Do you think your immigrants would be able to afford to live in the thousands of reposessed houses there are dotted around the US at the moment? Would the state pay for them to live there?
"I don't think most Americans care what happens to the rest of the world anymore. I know I haven't for a very long time. European and others' incessant America bashing has borne fruit. The chickens are coming home to roost. I don't see a very bright future for the rest of you. Stagnation at best, long term decline far more likely."
Read your history my friend. I'm afraid your post is indicative of the mindset many Americans have - stuck in the 80's. The greed in the US is eating your country from the inside out but you cannot see it. The savvy Chinese have been lending you the money to fund your spending sprees (on Chinese goods).
They will want their money back eventually.
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What is sold as economic policy is nothing more than the continued shoring up of the financial sector. Why would the bankers and financial industry care about economic development when they can make large amounts of money lending to governments and trading assets back and forth between themselves. I hope no one thinks that they will act out of a sense of patriotism.
After making the mistake of bailing out the banks without any real reform the governments now continue to justify this mistake.
Governments continue to kow tow to the bankers and the economies will continue to stall because of such actions.
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A good article. The basic problem with the QE2 is much deeper, and goes to the loss of American manufacturing jobs and the resulting trade and current account deficits. I suggest that these jobs, however, did not disappear because of purely economic forces. Rather, a whole generation of American manufacturers, especially of consumer goods, decided that manufacturing was too difficult and dirty, problems with raw materials, unions, etc. They decided to adopt an easy alternative and allow foreigners to do the dirty work, while reaping the profits. (Compare this with Germany.) Right now, Bernanke & Co., and most American economists, think that by allowing the dollar to sink, that US exports will magically rise, imports will fall, and the deficits will shrink. This is one goal of QE2. But this ignores the enormous American dependence on foreign consumer goods that no longer can be made in the United States. It also ignores the most serious threat, which nobody wants to talk about, that foreign investors might stop loaning money to the US to support its current account deficit, now at $430 billion per year. I have no idea how this will develop, but the likely scenarios will not be favorable for American shoppers at Walmart.
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This comment was removed because the moderators found it broke the House Rules.
http://www.youtube.com/watch?v=Bd6JTYM-GNc
Ron Paul tells it like it is on QE
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171. At 9:44pm on 08 Nov 2010, J__Hobson wrote:
China's best strategy is to reject the West's 'investment' funding, surely, Steph.
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The problem is that the emerging countries and China in particular need double digit growth just to stand still. The cost of their infrastructure programmes alone accounts for a sizable chunk of that growth. China has a difficult balancing act, firstly they have to keep their currency low, secondly they have to maintain growth and finally they have to try and keep home inflation down. The first they are managing presently by not allowing themselves to enter the real world. The second they are now starting to struggle with as the export side has slipped and is showing no signs of picking up, in fact things are looking to get worse. And the latter has caused them some issue for a while with underlying inflation running at nearly the same rate as growth.
With America putting presure on China's currency and attacking their largest market IE their own things are looking bad. And China's imports keep on growing pushing up inflationary pressures things are looking very interesting on the far Eastern front.
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It surely is time for a new topic and I would like to suggest that we return to the EU. There is trouble brewing in old Dublin town. They have to ratify their budget to try and claim the markets and allow themselves the ability to raise money at a sensible rate. However talk in Dublin is now of not whether there will be a rescue but rather who by.
I had the pleasure last night of watching a programme on RTE (Ireland's own TV Channel). The programme was The Frontline, you can still get it on iPlayer I believe. If there is any doubt that they don't still understand about the severity of their own predicament then this should be the wake up call. Sinn Fein had a guy on there and all he did was talk about another way, another way they could balance the books without making cuts. However if anyone bothered to look into their ideas you would see that at best it is just tinkering around the edge at worst it will deliver nothing at all. The other politician was not much better. When challenged about specific cuts such as Pensions, Child Allowance he was unable to answer only to say that they were being considered and that they were not that easy to implement. The consensus did appear to be that something was needed to be done as long as it did not effect anything. The second half was even more enjoyable as their two experts discussed who who would be better to go to for a rescue, the EU or the IMF. They even touched on the idea that Germany and France were looking to normalise Ireland's corporation tax to stop the flow of inward investment. Obviously they have missed the fact that there is an exodus due to their current situation which has nothing to due with the level of corporation tax.
Unless there is a move soon the vultures will swoop as they are already circling. This again raises the issues around the Euro and the EU's stability. Both of which I am sure will hit the headlines in the not too distant future.
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If we apply evolutionary biology to this we have...
"The principle of zero change in success rate, no matter how great the evolutionary progress in equipment, has been given the memorable name of the 'Red Queen effect' by American biologist Leigh van Valen"
-The Blind Watchmaker - Richard Dawkins: continues...
"...arms races can give rise to situations that strike the economically minded human as wasteful"
"Why, for instance, are trees in forests so tall? The short answer is that all the other tress are tall, so no one tree can afford not to be.
IT would be overshadowed if it did."
"...But if only they were ALL shorter, if only there could be some sort of trade-union agreement to lower the recognized height of the canopy in forests, ALL the trees would benefit. They would be competing with each other in the canopy for exactly the same sunlight, but they would all have 'paid' much smaller growing costs to get into the canopy. The total economy of the forest would benefit, and so would every individual tree. Unfortunately natural selection doesn't care about total economies, and it shas no room for cartels and agreements..."
"...As the arms race wore on, the average heigh of trees in the forest canopy went up. But the benefit that the trees obtained from being taller did not go up. It actually deteriorated because of the enhanced costs of growing."
Dudes, we are no better than trees or any other mindless creatures.
Welcome to the jungle.
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Krugman blog, 6 November 2010: "I’m not sure my point on the excess supply of savings even at a zero interest rate got through. The question is: suppose you concede that this is the situation we face; what do you want us to do? If you reject inflation, the only way to get a negative real interest rate, as immoral; if you say that deficit spending is unacceptable; then what is your proposal to close the gap? Are you saying that tens of millions of workers must remain jobless so that you feel comfortably orthodox?
I know the usual answer: it involves denying that we do, in fact, have an excess supply of saving. That’s very much like climate change denial: because conservatives find the implication of the facts — that we need government intervention — uncomfortable, they prefer to deny the facts.
But we do, in fact, face a problem of inadequate demand. And bluster about morality and sound policies as much as you like, the question remains: what’s your solution?
Finally, the shibboleths are undermining actual policy. Even as Ben Bernanke moves to buy some unconventional assets, he feels compelled to deny any rise in the inflation target — thereby blocking one of the main channels through which his policy might actually work."
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175. At 09:42am on 09 Nov 2010, moving_forward wrote:
Dudes, we are no better than trees or any other mindless creatures.
Welcome to the jungle.
Don't think Mr Dawkins would agree with you there.
We are better in one respect, we can actually understand what we are an decide how we want to move forward as a society or a species given that knowledge.
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177. At 11:25am on 09 Nov 2010, MetalGasket wrote:
We are better in one respect, we can actually understand what we are an decide how we want to move forward as a society or a species given that knowledge.
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That "better in one respect" is unfortunately what leads to wars, as we will have several strong opinions. The stronger these are the less likely there is to be dialogue.
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I don't see how knowledge, or understanding, of ourselves leads to wars.
I would have thought that came from the 'survival' programming.
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Talk about beggar my neighbour!!!
Today The Guardian carried a story that asserted that the debt explosion in the UK during the last 'let it slip' years was as much as £10 TRILLION.
All of which was, and is, unaffordable.
This is yet another indication that the primary responsibility for the crash was, and still is, Mervyn King and the Bank of England. We pay them to be on top of credit booms so that they do not destroy the Nation! They failed catastrophically.
The £10 Trillion tells us how much they failed and shows us just how bad the Depression will be and just how many years or decades it will last. A quick calculation indicates that this terrible situation is worse than any previously recorded debt fuelled Depression and will last far longer than the Long Depression of the 1870's. (Which lasted 23 years in the UK, 1873 to 1896.)
Some slip, some let!!!!!.
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Governments and central banks will do the wrong thing (but in different ways). I think that's obvious. I don't believe that revolution or reform are likely to be successful either. Therefore, what can people do? Acting as individuals and looking for alternative value stores will make things worse but is there any possibility of cooperation given the individualism that prevails in the UK? How can people change themselves to fit the circumstances?
I believe that the only way to create value is to work and people need to work harder or smarter, yet unemployment is going to rise in europe. Therefore people need to take matters into their own hands. Without new value, current assets depreciate and the economy is worse than a zero sum gain system.
I think several people on here have analysed the current situation well. The way forward now seems more important.
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Now I know that we need a new thread. If it all comes down to discussing trees then we have no chance!
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174. At 09:30am on 09 Nov 2010, Chris London wrote:
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I would like to support this post, there are real disasters going to happen in Ireland. I just wonder how we will be affected by the panic and subsequently irrational decisions that will be made. I just hope that the ConDems don't believe we have to emulate Ireland!
My reason for this note about Ireland comes from the Irish Times:
http://www.irishtimes.com/newspaper/opinion/2010/1108/1224282865400.html
[where is the commentator who will write the truth about current UK policies. We have so much more freedom to act being outside the Euro]. His logic seems good to me. A genuinely bankrupt state anywhere is appalling, but for the UK, Ireland is a special case - just think about the effects at the border. Can France and Germany afford to let this happen, even if it is then a slow motion crash after an initial bailout? Who knows how their minds will work.
It actually makes me very worried [and then afraid for the future] to think that our future is in the hands of economic pygmies who seem incapable of taking the correct decisions.
For the UK, there is a clear message:
Just stay out of the Euro; If we go in to it, the costs will be far higher in the end
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179. At 12:14pm on 09 Nov 2010, MetalGasket wrote:
I don't see how knowledge, or understanding, of ourselves leads to wars.
I would have thought that came from the 'survival' programming.
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There is not one understanding of the world, one true knowledge or one tribe. Differences lead to conflict whether it is greed for resources, a need to control, a need to "save" people from themselves, a desire to change others to be as us.
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180. At 12:39pm on 09 Nov 2010, John_from_Hendon wrote:
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I've just looked at the article and, from my reading, this is a projection of the debt at 2015. Still a very horrifying debt for the non-government sector. We all need to act to avoid this.
In my view, this makes another downturn/recession inevitable as the money is repaid given current policies from the ConDems. We need everyone to minimise their debt from now on and pay off what they can.
But more than this, we need jobs so that everyone can pay off their debt, we need full employment [not the cuts we are now seeing]. Continue as we are and there can only be a rise in personal and company bankruptcies. Can the financial industry handle the subsequent losses? I don't know
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#183. For the UK, there is a clear message:
Just stay out of the Euro; If we go in to it, the costs will be far higher in the end
Is it that clear? Just imagine if Scotland was independent... RBS and HBOS would have wiped it out as a nation. We may well still suffer by not being fully integrated into Europe. In future decades there are going to be large power plays over worldwide allocation of scarce resources (oil, commodities) and we may well need to be a fully integrated part of a European superstate to make sure we get the muscle in negotiations.
Years ago it was clear that mega businesses would continue to merge until there was roughly six super-sized players in each market. That has now happened. Next up is the merging of countries/regions.
Unfortunately all these steps progressively remove freedom and democracy.
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Metalgasket
my comment was a response to your post at 31 condeming saving 'hoarding'.
It is rational for the individual to save for a rainy day:
a combination of advertising making people think that trash is must buy
and financial institutions getting rich on putting people into debt slavery
seems to have thrown a large section of the populace into irrational behaviour of buy now pay later, condeming them to have to work forever (or go bankrupt if they cant get work)
I am a pessimist by nature and believe things will get a lot worse in this country and that by the time I am old there will not be any state benefits or that they will barely cover cost of food and heating (both of which will dramatically increase in cost).
Governments on the other hand need to provide for the rainy day by investing in things that will make our future tolerable eg building energy efficient houses, cars etc and ensuring that we have a manufacturing skills base and not running down our agricultural base for when we cant afford to import any more.
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186. At 2:08pm on 09 Nov 2010, jonearle wrote:
Years ago it was clear that mega businesses would continue to merge until there was roughly six super-sized players in each market. That has now happened. Next up is the merging of countries/regions.
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Where as I would agree with the theory however there is still a long way to go, the automotive industry which is probably the most global in nature is a good example. Where there was consolidation there has now been a little reversal with companies divesting themselves of chunks of their business. But even so there are still a large number of players in the game;
Company - units sold last year
Toyota 7,234,439
G.M. 6,459,053
Volkswagen 6,067,208
Ford 4,685,394
Hyundai 4,645,776
PSA 3,042,311
Honda 3,012,637
Nissan 2,744,562
Fiat 2,460,222
Suzuki 2,387,537
Renault 2,296,009
Daimler AG 1,447,953
Chana Automobile 1,425,777
BMW 1,258,417
Mazda 984,520
Chrysler 959,070
Mitsubishi 802,463
Beijing Automotive 684,534
Tata 672,045
Dongfeng Motor 663,262
FAW 650,275
Chery 508,567
Fuji 491,352
BYD 427,732
SAIC 347,598
Anhui Jianghuai 336,979
Geely 330,275
Isuzu 316,335
Brilliance 314,189
AvtoVAZ 294,737
Great Wall 226,560
Mahindra 223,065
Shangdong Kaima 169,023
Proton 152,965
China National 120,930
Volvo 105,873
Chongqing Lifan 104,434
Fujian Motor Industry Group 103,171
Kuozui 93,303
Shannxi Auto 79,026
Porsche 75,637
Ziyang Nanjun 72,470
GAZ 69,591
Navistar 65,364
Guangzhou Auto 62,990
Paccar 58,918
Chenzhou Ji'ao 51,008
Qingling Motor 50,120
Hebei Zhongxing 48,173
Ashok Leyland 47,694
I would also disagree with the benefit of closer ties with the EU in its current form as we will see in the next few weeks and months the EU is flawed and so are the economics of it's members and not just the PIIGS. So unless there is going to be a United States of Europe membership may well have it's drawbacks. And this may well take a war to bring about or even bring about a war if it does.
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In the FT today we have a headline of " Merkel warns on rise of protectionism" That is anyone other than Germany that is!
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The FT also reports on the EU and Euro looming crisis
"Sovereign debt concerns weigh on euro"
It states "While the cost of insuring against a default in Portuguese, Greek and Spanish government debt has risen sharply, Ireland has become the main focus of investors’ concerns."
On how many fronts can the ECB take action at any one time. Just when they thought Greece had gone away it comes back to haunt them and now there appears to be multiple targets for the vultures to pick off.
If I were a betting man I would not risk a cent on the Euro surviving this onslaught it could also damage the EU irreplrable.....
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A double header smack-down featuring "the judge" and Peter Schiff
You won't get TV like this on your state controlled broadcaster.
http://www.youtube.com/watch?v=Ap1O5hqtm6c
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188. At 4:08pm on 09 Nov 2010, Chris London wrote:
But even so there are still a large number of players in the game;
What happenned to Mercedes and Audi.
Your data is flawed.
Inputs and outputs (just too start a new thread).
Germany and England more or less (distant or maybe not) cousins - the input.
Performance socially and cultural and economically - the outputs.
Why do the Germans score higher (the outputs) in every category. Me thinks has everything to do with education (state education in Germany - private is not an option) and investment and R&D.
No doubt FDD will repeat his assertion that the cultures are different - they are not.
Incidentally, Merkel is spot on in her recent attack on 'protectionism'.
Join the Euro now - our only hope.
The only thing that stops us is hubris.
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190. At 4:42pm on 09 Nov 2010, Chris London wrote:
If I were a betting man I would not risk a cent on the Euro surviving this onslaught it could also damage the EU irreplrable.....
Do you not understand currencies. They go up and down. The Euro has appreciated significantly against sterling in the past 3 months.
A low Euro can only help German exports.
Too low, granted, it could introduce inflationary pressure.
Greece, Spain, Portugal and Ireland have issues, no doubt, but still want to stay in the Eurozone.
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#192 Richard Dingle,
"No doubt FDD will repeat his assertion that the cultures are different - they are not."
Now you are right that I will make such an assertion but toally wrong in your conclusion.
If we accept, 'the way things are done around here' as a metaphore for culture then it matters not what country or organisation we look at, they will be different. Sometimes those differences may be meaningfull but mostly they are not - they are just different.
When it comes to Merkle and protectionism then I have to agree with Chris London, she is being hypocritical.
As for German export prowess, then we have to ask ourselves why are they also in a precarious financial position? Surely they should be finacially strong and not have to worry about the global financial position? But that is not the case. All of the German financial clout collapses when the Eastern European states fail as their whole banking infra-structure fails (along with that of France).
Now, on this blog we have become very good at ripping to shreds our own economic system. We feel able to speculate upon the likely outcome of US economic policy. However, we are very lax in our endeavours to analyse our comparative position with our European partners (except maybe for Ireland). You do not have to research too much to find that nowhere in western Europe are the fundementals in balance and that we all stand on feet of clay. I hate to shatter your illusions but Germany will fare no better and no worse than the rest of us when the second shock waves of this financial war hits.
BTW, Chris London was really speculating upon the continuance of the Euro as a currency and not its echange rate.
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194. At 00:46am on 10 Nov 2010, foredeckdave wrote:
But that is not the case. All of the German financial clout collapses when the Eastern European states fail as their whole banking infra-structure fails (along with that of France).
'If' not 'when'. The point is that Germany is not over reliant on banking. Ask yourself what is easier rebuilding a nations physical infrastructure or its banking infrastructure; this has always underlaid my point about the bailout being bad policy (it delayed, it did not fix).
As for the Euro its demise has long been exagerated.
Excellent speech on free trade by Cameron in China btw.
Confused voices advocating protectionist measures to 'protect and isolate national inefficiencies' are the greatest current threat.
As for Merkel, hypocracy, free trade, etc. No one can serously suggest that the UK's lack of export prowess compared to you know who has any thing to do with the UK playing to the rules and the other not. Clutching at straws.
It is British exports, not German, to Saudi Arabia, for example, that were done with the help of 'facilitating payments'.
Time to join the DM, er, Euro.
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re #193 & 195: At 07:35am on 10 Nov 2010, Herr Dinkel wrote:
Time to join the DM, er, Euro.
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Do you not consider that Britain currently occupies a very unique, privileged and extremely worthwhile position:
a major trading nation, with a top 3 airport which is THE hub to western Europe and Eastern USA, outside the Euro but inside the EU? We are THE gateway.
I think that position might be extremely valuable throughout this century. Join the Euro and we lose it. Leave the EU and we may also lose it. Thoughts, Herr Dinkel, anyone?
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#195 Richard Dingle,
Now come back to answer your original question regarding culture.
Given the latest moves by the Fed and the consequential damage around the world, it becomes far more likely that the Eastern European economies will not be able to stand the strain. Now neither you or I know just how exposed the French and German banks are but the commentators appear to believe that a domino style default will also collapse their banking systems. If that happens it matters not about the profit contributions of the banking sector in either country. The damage woud be fatal.
In what way does UK export performance have anything to do with Merkle's hypocracy? As for Cameron then it becomes more obvious daily that his staregic ability is somewhat lacking - Cuts and Big Society.
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foredeckdave
Richard Dingle,
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If I may be so bold;
The Euro is under considerable pressure and will be damaged irreplicable no matter what happens with the likes of Ireland. The ECB would need to have such large reserves or commitments from the membership to deal with future issues to stabilise the markets views. This will not happen in the near future and there is little desire for it to do so, for if there was they would have already created legislation rather than the band aid they have produced so far.
I am afraid that there is a lot of truth about the eastern block countries and their current economic situation. The exposure to the EU's banking system is very complex. It is not just say Germany's and France's Banks that have direct exposure but through other banks such as Ireland's who have massive holdings in a number of East European countries. So there is exposure already and that is without the enlargement programme that is still being pursued. And lets face it the proposed new members look like a who's who of countries who likely to fail. It comes to something when even Turkey are now questioning to sense of joining the EU and Euro. A country that has been hell bent on joining no matter what for longer than I can remember.
As far as the protectionism angle, I am afraid that this has already been happening for some time and will continue until there is an upturn when everyone will be best friends again and trade openly or as openly as they feel is beneficial to themselves.
One last point and I know that I have raised it in the past, until the EU gets it's own house in order they have little or no chance of wiping the renegades back into line. If the big players don't follow the rules why should the minnows. Lets face it an organisation that for the last sixteen years has not been able to have its accounts ratified has some major issues. For the auditors would not be refusing to sign them off due to a few ponds here or there. There are significant problems but they just keep on being brushed under the carpet. But this is what you get form a mainly unelected body who feel they are above reproach.
The only way the EU and Euro would function is if there were a United States of Europe, but I would not hold my breath for that to be happening any time soon. For as I said earlier it would take a war to bring it about or it would bring about a war.....
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#195. Richard Dingle
May I reiterate my support for the Euro and the need for the UK to join ASAP (I will not repeat the arguments yet again - save to say they remain solid and valid.)
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As Richard raised the issue of culture, I would like to expand that a little by illuminating a major change in US multinational culture.
In the UK we have what was a rather unique multinational culture. Since the 1960's our multinational companies have been truly multinational in that whilst based here they have owned little of no sense of duty to the UK economy. Hence their UK operations had no priority and could be closed etc. to suit the greater corporate need. This was not the same for US multinationals. For the majority of them, the home base was sacrosanct. Overseas subsidiaries could be closed or starved of investment to meet the domestic need. This held true from the 60's to the mid 90's. Now, we are seeing the US multinationals adopting a more UK style model. I just wonder what the true economic effects of this change has been upon the US economy?
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IMF Executive Board Concludes 2010 Article IV Consultation with the United Kingdom
Public Information Notice (PIN) No. 10/147
November 9, 2010
It broadly says that UK government and IMF policy are inline, there are some useful numbers in it that will bear future comparison.
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200 fdd
You dont know many multinationals do you. The HQ, or home base is usually protected as the head of the beast. Labour is, whatever is said is not seen as terribly important so satellites develope. However loyality to satellites is to say the least, thin. The set up is driven by accounting. The satellites think they are self determining and have some independence because this illusion encourages involvement by the satellite staff, good for morale, good for the 'work hard and jam tomorrow story'. Nothing could be further from the truth, if HQ says kneel they kneel. If HQ says shut then they shut. If two similar satellites exist in the same corp then they are invited to cut one anothers throats.
I wont name names because it will inevitably be referred to mods. Thats the limitation of public blogs. it would also be a very long list which in added to pretty much everyday.
Multinationaism generally is driven by economy of scale, exploitation of the cheapest labour, and takeovers to allow culls of staff to pad the bottom line. Governments encourage this with grants and relocation help and bid against one another to get this supposed golden goose. The wholoe thing is very Victorian.
The US is bigger but is facing the same problems. It still is a continent with far more resources than the UK. Food, timber, and materials are cheaper than here. Housing is often cheaper, despite the bubble. There are still truely huge areas with few people.
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#202 Buzz
Once again you are talking out of your backside. The majority of my work has been with multinationals. I can assure you that I do know what I am talking about.
Your little rant appears ill-informed.
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Bankers.stockholders,and retailers are out of touch with reality.U.S. Boomers are retiring with a lot less income,they were the ones driving consumerism in the U.S.,they can't drive it anymore.demand will never go up the same way.Gen X is smaller,hasn't had a pay raise,a lot have one income earner and don't have access to loans.(how to know well just look at how many stay at home moms and dads their are)The rest of the World isn't going to be able to wait for U.S. consumer growth to return,it probably won't.Stockholders are short sighted many don't even manage their own stocks or even know they have votes in the Company as Common stock holders except banks and more companies becoming private equities.Retailers and Suppliers have pushed for ever lesser prices with outsourcing to increase profits for what less than 5%,while moving the wages to a foreign lands where the shipping of raw materials and finished products costs creates wage slaves to poor to purchase goods.Unless U.S. workers get wage increase and we change what the hours are for full time employment are in this country to offset increases in productivity than I don't see much change coming.What's funny is Walmart the multinational that started this mess by example wouldn't be turning a profit in the U.S. if it weren't for food stamps.Banks needed bailout from taxpayers.And stockholders still are pushing for wage slave profits and more firings instead of long term but slow growth and stability.And fighting any changes to Trade for the U.S. with other countries still thinking unemployed people and people on Welfare are somehow going to go shopping with credit cards they don't have.The middle class like myself are just making it and are not going to into debt for Banks and multinationals.especially since the government has made no guarantees that Oil,Food,and natural Gas won't increase but they do because these companies are trying to charge the Federal and State Governments more for the people who are receiving Food stamps,heating credits,and housing vouchers,which will end up increasing prices,debts and taxes on the middle class.The Federal reserve has to act quick because of the GOP coming in soon,especially in the State governments who are threatening to drop government programs like Medicaid,housing,Food stamps,etc.. which they can't afford which BTW are optional.many GOP states will try to opt out soon.The worst isn't even over yet.Many states are also talking about forming their own state run Banks which will deposit taxes into State Central Banks instead.Many things are going to change soon.
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203 fdd
You do not appear to have observed much then do you.
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