Economics for idiots

[Gym Beglin]

Not wanting to turn things political but doesn't this, from ConservativeHome yesterday sum up the situation better with regards to the battle to cut the debt:

 

"Our government added £120 billion to the national debt last year. It'll add another £120 billion this year and another £120 billion next. In what parallel universe does that add up to deficit reduction or fiscal responsibility?"

 

On the railway investment building things puts money in people's pockets, they then put money in other people's pockets, you also get them of unemployment benefits. It's pretty much economics 1.01 that you cannot aggressively cut your way out of a recession, isn't it?

 

I don't think it's about economics. It's about an ideology of how they want the country to be, and that is less government services and major functions done privately.

 

Yeah, I'm not sure how you cut your way out of a recession either, but we certainly can't keep borrowing money, not least when our credit rating is shot to bits.

 

The Government needs to stimulate production in this country, but it's too much like hard work. Brazil, India and China are racing ahead but then again they can get away with paying staff fuck all to work in that system.

 

We're in desperate need of new ideas, a new age of industrial revolution. IMHO anyway.

[Lee909]

I've got ninety thousand pounds in my pyjamas, I've got forty thousand french francs in my fridge. I've got lost of lovely lire,

Now the Deutschemark's getting dearer,

And my dollar bills would buy the Brooklyn Bridge.

There is nothing quite as wonderful as money, There is nothing quite as beautiful as cash.

Some people say it's folly,

But I'd rather have the lolly,

With money you can ma-ake a splash.

[AngryOfTuebrook]

Not wanting to turn things political but doesn't this, from ConservativeHome yesterday sum up the situation better with regards to the battle to cut the debt:

 

"Our government added £120 billion to the national debt last year. It'll add another £120 billion this year and another £120 billion next. In what parallel universe does that add up to deficit reduction or fiscal responsibility?"

 

On the railway investment building things puts money in people's pockets, they then put money in other people's pockets, you also get them of unemployment benefits. It's pretty much economics 1.01 that you cannot aggressively cut your way out of a recession, isn't it?

 

I don't think it's about economics. It's about an ideology of how they want the country to be, and that is less government services and major functions done privately.

Whatever SD's equivalent of the Bat Signal is, I think it's just gone on.

[VladimirIlyich]

The question is,'who is going to be brave enough to prize the money back out of the pockets of the rich?'

 

The money hasn't disappeared its just gone into the pockets of a privileged few.

[cochyn]

Agree there Vlad. Aren't the ECB trying to do that with the Cypriots by taxing those with over 100K Euro by up to 40% on their savings? The fuckers will just keep moving it around offshore accounts though. They should bleed the Greek shipping industry while they're at it.

[Strontium]

Not wanting to turn things political but doesn't this, from ConservativeHome yesterday sum up the situation better with regards to the battle to cut the debt:

 

"Our government added £120 billion to the national debt last year. It'll add another £120 billion this year and another £120 billion next. In what parallel universe does that add up to deficit reduction or fiscal responsibility?"

 

 

Well, using those figures, then assuming that GDP grows during those years, £120bn added to the debt every year would actually constitute a reduction in the deficit in percentage terms...

 

On the railway investment building things puts money in people's pockets, they then put money in other people's pockets, you also get them of unemployment benefits. It's pretty much economics 1.01 that you cannot aggressively cut your way out of a recession, isn't it?

 

 

Okay, it's a little more complex than that.

 

Firstly, not all spending is equally useful. Capital spending (infrastructure) is "good" spending, especially in a downturn. Government has increased capital spending in recent budgets because it cut this too fast in the first place.

 

Secondly, in an ideal situation you want to be borrowing at the bottom of the economic cycle in order to stimulate the economy, and repaying that debt at the top of the cycle. Unfortunately successive chancellors in this country for the last three decades have been borrowing at all stages of the cycle, which isn't sustainable. And given that our economic growth was built on increased levels of personal debt (fuelled, in large part, by rocketing house prices), our economy was especially vulnerable when the bubble burst. Even after clawing in extra revenue via increased taxes, I would argue that this left us with little alternative but to cut spending, although it's increasingly obvious that capital investment should have been left well alone.

 

I don't think it's about economics. It's about an ideology of how they want the country to be, and that is less government services and major functions done privately.

 

 

There is good privatisation and bad privatisation. And good privatisation can definitely improve you economically.

[AngryOfTuebrook]

There is good privatisation and bad privatisation. And good privatisation can definitely improve you economically.

As long as the "you" in question is a director, executive or shareholder of one of the dodgy companies that keep getting all the contracts!

 

The basic model for "privatisation" of public services is that it's underwritten and/or subsidised by the taxpayers. In other words, any profits are privatised, all risks remain with us mugs. I've never come across any "good privatisations" of public services.

[Stu Monty]

Well, using those figures, then assuming that GDP grows during those years, £120bn added to the debt every year would actually constitute a reduction in the deficit in percentage terms...

 

Why would you assume that? Given that four of the last five periods on record showed GDP shrinking? You're getting very weak growth at best.

 

You may argue there's little alternative to cuts. I'd point out that tax evasion in the UK has been calculated to be anywhere up to £120bn. Around the same figure as the deficit.

 

If only the same amount of effort was being put into targets at HMRC as they are at DWP.

[KopOut]

Public debt is one thing, and governments obviously only have limited ways to raise capital. Private debt on the other hand, is the real problem underlying everything, because we have a global fractional reserve banking system, which creates the money supply out of thin air so people who are ignorant about these things can have all their STUFF, regardless of the real cost.

 

The whole planet has to learn to live within its means, and the very nature of fractional reserve banking, means that someone's money, is someone elses debt.

 

Theres no easy solution.

[KopOut]

although these guys reckon there is . . . . . from the Positive Money website

 

[Strontium]

As long as the "you" in question is a director, executive or shareholder of one of the dodgy companies that keep getting all the contracts!

 

The basic model for "privatisation" of public services is that it's underwritten and/or subsidised by the taxpayers. In other words, any profits are privatised, all risks remain with us mugs. I've never come across any "good privatisations" of public services.

 

 

I think telecoms was a good privatisation. We have excellent choice now as consumers and some of the best telecoms in the world. Privatisation can work if you are able to get competition into the system.

 

In Germany something like a third of hospitals are privately run, although the state will fund your stay in any of them. Again, it functions well because of competition.

 

At the other end of the scale, there have been some pretty disastrous privatisations. Transport sticks out for me.

 

Why would you assume that? Given that four of the last five periods on record showed GDP shrinking? You're getting very weak growth at best.

 

 

I was just using it as a hypothetical. If your deficit stays the same and your economy grows, it's falling in percentage terms.

 

You may argue there's little alternative to cuts. I'd point out that tax evasion in the UK has been calculated to be anywhere up to £120bn. Around the same figure as the deficit.

 

If only the same amount of effort was being put into targets at HMRC as they are at DWP.

 

 

HMRC thinks the true cost of evasion and avoidance is £35bn. Obviously someone is wrong. Whatever the sum, getting it is the difficult part. You'll be a rich man if you can figure a way of doing that.

 

although these guys reckon there is . . . . . from the Positive Money website

 

 

 

Remember, there are no simple solutions, just simple people.

[Stu Monty]

The idea that they want to get it but can't is quaint.

 

It would first require the will.

 

You know, for a man whose trust fund was built on avoidance to want to stop it. Unlikely I reckon.

[Strontium]

I think they want to get some of it. I think they could and should get more. Some is unobtainable.

 

And of course, a mansion tax and land tax should be introduced too.

[Stu Monty]

What makes you think they only want to get some of it and not all of it? And by "them" are we talking the coalition or the tories?

[Red Phoenix]

Good thread. Economics has always been a weak point of mine but have learnt a bit in the last few years, will add some links later if I remember.

 

In the mean time though, if you really want to learn and have patience, go to youtube and start watching The Money Masters. I never saw things in the same way after watching that.

 

Actually while I'm here, a recent link I found :

 

The Wall Street Ponzi Scheme called Fractional Reserve Banking | Global Research

 

This helps explain a lot of the corruption too :

 

Leaks reveal secrets of the rich who hide cash offshore | UK news | The Guardian

[AngryOfTuebrook]

Here's a bit of a catch-up with six people who (supposedly) predicted the 2007/08 global fuck-ups, giving their views on the current threats to watch.

 

http://intheblack.com/articles/2015/07/07/6-economists-who-predicted-the-global-financial-crisis-and-why-we-should-listen-to-them-from-now-on

 

 Lessons Nouriel Roubini preaches to this day include the perils of a lack of market discipline, internal mismanagement and conflicts of interest within financial institutions.

 

 Ann Pettifor, in her most recent book Just Money: How Society Can Break the Despotic Power of Finance, calls for greater public understanding of finance so the monetary system can be managed for the public good. She notes that society seized back control of the monetary system from the wealthy elite after the 1929 crash.

 

 Steve Keen opposes debt-dependent economics and over-investment in speculative assets such as property or shares. Commenting in BRW magazine, he argued: “This is how bubbles grow and burst and ignoring debt in this way is one of the great fallacies of modern economics.”

 

Since the Global Financial Crisis, Dean Baker has warned against the incompetence of financial policymakers. In his 2010 book, False Profits: Recovering from the Bubble Economy, he states that the US needs to “rein in a financial sector that has grown out of control”.

 

Raghuram Rajan fears long-term low interest rates and unorthodox programs to stimulate economies, such as quantitative easing, may lead to more turmoil in financial markets.  “My sense is that monetary policy can only do so much and beyond a certain point if you try to use monetary policy it does more damage than good,” he told Time magazine in August 2014.

 

Claims of a US recovery in recent years are largely an “illusion”, Peter Schiff says, created by the effects of zero per cent interest rates, quantitative easing and deficit spending. These policies have primarily benefited rich owners of stocks and real estate at the expense of creating good-paying jobs and purchasing power for the average Joe.

[AngryOfTuebrook]

So, it looks like not a great deal has really been learned and we're all still fucked.

[Strontium]

I always take claims about accurate predictions of doom and gloom with a hefty pinch of salt unless the person in question has put their money where their mouth is and is now stinking rich, which is what you become if you can accurately predict where markets are going to go.

 

Isn't Peter Schiff one of those goldbugs? (checks) Yes, he is. He's such a crank that he actually has put his money where his mouth is. He is an economic adviser to maverick American libertarian and perennial Republican presidential nomination seeker Ron Paul, also a great believer in the mythical power of precious metals. The pair of them have lost a small fortune in recent years because they invest heavily in mining companies, and the price of gold and silver has tanked.

[AngryOfTuebrook]

I always take claims about accurate predictions of doom and gloom with a hefty pinch of salt unless the person in question has put their money where their mouth is and is now stinking rich, which is what you become if you can accurately predict where markets are going to go.

 

Isn't Peter Schiff one of those goldbugs? (checks) Yes, he is. He's such a crank that he actually has put his money where his mouth is. He is an economic adviser to maverick American libertarian and perennial Republican presidential nomination seeker Ron Paul, also a great believer in the mythical power of precious metals. The pair of them have lost a small fortune in recent years because they invest heavily in mining companies, and the price of gold and silver has tanked.

It's always sensible to take such claims with a reasonable (not necessarily hefty) pinch of salt.  I wouldn't necessarily dismiss the credentials of anyone who isn't a gazillionaire.  There are humans who don't see the accumulation of ever-vaster piles of cash as the be-all and end-all.  If, for example, you were a respected professor or economic analyst, you would (presumably) be more than comfortable with your earnings; your job satisfaction (and self-worth) could well derive from using your knowledge to alert people to bad times ahead, rather than using it to exploit the situation in order to acquire shit you don't need.

 

(As an aside, a quick blimp at Schiff's Wikipedia entry suggests that his views of gold as a long-term safe investment are not particularly wacky.  https://en.wikipedia.org/wiki/Peter_Schiff#Gold_and_silver )

 

The test of the claims for these six people is the fact that the link names things that they published a year or more before the crash.  If we had the time and inclination, we could read those things to see whether or not they did predict it.

[Jairzinho]

It's always sensible to take such claims with a reasonable (not necessarily hefty) pinch of salt.  I wouldn't necessarily dismiss the credentials of anyone who isn't a gazillionaire.  There are humans who don't see the accumulation of ever-vaster piles of cash as the be-all and end-all.  If, for example, you were a respected professor or economic analyst, you would (presumably) be more than comfortable with your earnings; your job satisfaction (and self-worth) could well derive from using your knowledge to alert people to bad times ahead, rather than using it to exploit the situation in order to acquire shit you don't need.

 

(As an aside, a quick blimp at Schiff's Wikipedia entry suggests that his views of gold as a long-term safe investment are not particularly wacky.  https://en.wikipedia.org/wiki/Peter_Schiff#Gold_and_silver )

 

The test of the claims for these six people is the fact that the link names things that they published a year or more before the crash.  If we had the time and inclination, we could read those things to see whether or not they did predict it.

 

An unbelievable claim.

[Kevin D]

I am economic for idiots.

 

Once EU Economic professors et al get involved, I don't really follow what is being argued.

[Jairzinho]

I am economic for idiots.

 

Once EU Economic professors et al get involved, I don't really follow what is being argued.

 

That is deliberate on their part.

[Spy Bee]

More debt exists in the world than money, so the continuation of the current system is dependent upon perpetual growth, which is clearly bonkers. So basically the system is fucked.

 

I get this a lot better than I did back in 2007 when I predicted the global recession.

[Kevin D]

That is deliberate on their part.

Well, after the Chicago boys detonating your economy and getting Nobel prizes, you're biased as fuck.

[Jairzinho]

Well, after the Chicago boys detonating your economy and getting Nobel prizes, you're biased as fuck.

 

We were just the Guinea Pig. You should also be biased as fuck.