Paul Krugman

[turbobloke]

Sway said:

Fittster said:

turbobloke said:

No doubt Greek politicians have the same porcine trough DNA as ours, but what about a significant cross-section of the population running a shadow economy equivalent to one-third of GDP over thirty years while maintaining a position on tax evasion equivalent to 15% GDP when the deficit is about 15% GDP?

So if increasing the tax income of the government to reduce the defict is a good idea, we should raise taxes in the UK?

Don't wish to answer for TB, but his response was to the Greek representative on Newsnight protesting at 'innocent' Greeks being tarnished. I read TB's post as pointing out they aren't exactly innocent, and deserve to be tarnished...

Fair comment. I was addressing those who do, and while recognising that this isn't one or two, it's not everybody.

In response to Fittster, yes we could raise more tax by e.g. reducing the rate of corporation tax and/or reduce the rate of CGT both of which on past experience are likely to increase tax revenues.

In other words, raise more taxes by lowering tax.

[crankedup]

Marf said:

crankedup said:

So exactly what is the answer

Stimulate demand - Slash income taxes, increase personal allowance to £30k, increase VAT to 30%.

Would be a good start.

Wouldn't argue the first two points but can't see how raising VAT to 30% will stimulate growth and jobs. I do see that putting more disposable cash into peoples pockets is a good thing but then this needs encouragement to be spent here in the U.K. on U.K. products for maximum benefit. I still would like to see MOD land offered to developers with payment for the land made upon sales percentages. Mentioned this before but it didn't attract a round of applause then, any change now I wonder.

[Marf]

crankedup said:

Marf said:

crankedup said:

So exactly what is the answer

Stimulate demand - Slash income taxes, increase personal allowance to £30k, increase VAT to 30%.

Would be a good start.

Wouldn't argue the first two points but can't see how raising VAT to 30% will stimulate growth and jobs. I do see that putting more disposable cash into peoples pockets is a good thing but then this needs encouragement to be spent here in the U.K. on U.K. products for maximum benefit. I still would like to see MOD land offered to developers with payment for the land made upon sales percentages. Mentioned this before but it didn't attract a round of applause then, any change now I wonder.

My suggestion of increasing VAT was merely to move the tax burden onto purchases rather than income in an effort to offset some of the revenue lost in the short term from the increase in personal allowance.

I'd have a huge chunk more disposable to spend if the allowance was hiked that high, and wouldnt begrudge that increase in VAT as I'd still have more cash in my bank after expenses.

[12gauge]

crankedup said:

So exactly what is the answer, clearly the austerity program is not working for the PIGS or the U.K. Agree the State cannot be enlarged either. Pension funds cannot be used for long term infrastructure investment.
Any goldmines around that have not been exploited.

Wholesale Monetary reform is the only answer. Fiscal responses like stimulus vs austerity both have exactly the same problem. One increases the debt, the other reduces GDP.

[12gauge]

IroningMan said:

The people of Greece knew darned well they were stealing from the Germans all along - they just believed it was their right to do so.

Stealing?

What they did is no different to Northern Rock et al literally forcing liar loans/self cert on borrowers, having their staff even encourage borrowers to lie about their income to gain bigger mortgages. Thats illegal, and yet nothing has been done about it, no mortgage brokers are behind bars.

They knew damn well the greeks could never pay it back. The Germans lenders are as complicit in the fraud as the Greek borrowers. If you lend to someone you know cant pay you back, more fool you.

[baz1985]

The US no longer possesses the fabled AAA rating. If ratings were of absolute genuine significance, the rating agencies would no longer exist. The principle rating agencies with circa $6 billion revenue will never be sanctioned a diktat on the world’s biggest economies.

[Caulkhead]

crankedup said:

Caulkhead said:

crankedup said:

So exactly what is the answer, clearly the austerity program is not working for the PIGS or the U.K.

Why isn't it working for the UK? We can borrow at historically low rates and have a triple A credit rating despite our huge deficit because the markets trust our austerity plan. Growth is certainly too slow, but that's highly preferential over 5% instead of 2% borrowing and growth will be hard to find irrespective until the uncertainties of the eurozone collapse go away.

Agreed the triple A rating and low interest rates, but the current reduction is just a drop in the ocean of debt and the rate of reduction implies at least another decade before we are seeing the light. I cannot see how this can be sustained with increasing unemployment, SME having almost zero access to business loans and the increase in benefits which is bound to happen when we invite half of the PIGS population over. I cannot see an end to the Euro crisis before the end of the decade and the fall out from PIGS (lesser extent Ireland) will be a major downer for any growth hopes for us for years to come.
Not sure how much more the BOE will provide QE.
Would I be far off by suggesting that Labour will be in power next time around and they will introduce the major infrastructure building in the hope of stimulating growth. Seems to me that half of the 'experts' favour current Government action whilst the other half favour a stimulus program for growth, I refer to Economics commentators. Perhaps the answer is somewhere inbetween?

If labour get in and start borrowing for major infrastructure work, our credibility will disappear and we'll immediately be asked for 5% instead of 2%. This will stop the infrastructure idea dead.

No-one likes it, but the truth is we've got to hurt now to be ahead in a couple of years time. If you think petrol and food are expensive now, add triple the mortgage rate into your household accounts if we don't stick rigidly to austerity and see how the spreadsheet looks then. Not nice at all.

[12gauge]

Caulkhead said:

If labour get in and start borrowing for major infrastructure work, our credibility will disappear and we'll immediately be asked for 5% instead of 2%. This will stop the infrastructure idea dead.

No-one likes it, but the truth is we've got to hurt now to be ahead in a couple of years time. If you think petrol and food are expensive now, add triple the mortgage rate into your household accounts if we don't stick rigidly to austerity and see how the spreadsheet looks then. Not nice at all.

Well, we're not Greece, we dont have to borrow at 5% or even 17%.

Most likely they'll QE to infinity and we'll pay 0.5% interest, but only on pounds worth pennies.

Wonder how Chancellor Balls will react when the NHS cant afford to buy in drugs or put fuel in its ambulances due to the pound being worthless.

Actually, Let me guess, 'its Thatchers fault'

[crankedup]

Caulkhead said:

crankedup said:

Caulkhead said:

crankedup said:

So exactly what is the answer, clearly the austerity program is not working for the PIGS or the U.K.

Why isn't it working for the UK? We can borrow at historically low rates and have a triple A credit rating despite our huge deficit because the markets trust our austerity plan. Growth is certainly too slow, but that's highly preferential over 5% instead of 2% borrowing and growth will be hard to find irrespective until the uncertainties of the eurozone collapse go away.

Agreed the triple A rating and low interest rates, but the current reduction is just a drop in the ocean of debt and the rate of reduction implies at least another decade before we are seeing the light. I cannot see how this can be sustained with increasing unemployment, SME having almost zero access to business loans and the increase in benefits which is bound to happen when we invite half of the PIGS population over. I cannot see an end to the Euro crisis before the end of the decade and the fall out from PIGS (lesser extent Ireland) will be a major downer for any growth hopes for us for years to come.
Not sure how much more the BOE will provide QE.
Would I be far off by suggesting that Labour will be in power next time around and they will introduce the major infrastructure building in the hope of stimulating growth. Seems to me that half of the 'experts' favour current Government action whilst the other half favour a stimulus program for growth, I refer to Economics commentators. Perhaps the answer is somewhere inbetween?

If labour get in and start borrowing for major infrastructure work, our credibility will disappear and we'll immediately be asked for 5% instead of 2%. This will stop the infrastructure idea dead.

No-one likes it, but the truth is we've got to hurt now to be ahead in a couple of years time. If you think petrol and food are expensive now, add triple the mortgage rate into your household accounts if we don't stick rigidly to austerity and see how the spreadsheet looks then. Not nice at all.

Having listened intently to 'experts' on telly and radio, read various newspapers about the subject I'm not about to argue the toss. But with half of the 'experts' on one side and half on the other its almost impossible to be able to judge outcomes. Well if the experts can't agree it has said it all I guess. Our saving grace is devaluation and a society that is, compared to many others, fairly compliant. But unless we can achieve some sort of growth how the heck are people going to find employment and start paying taxes. Its a nightmare in a bubble.

[johnfm]

crankedup said:

JagLover said:

crankedup said:

So exactly what is the answer, clearly the austerity program is not working for the PIGS or the U.K. Agree the State cannot be enlarged either. Pension funds cannot be used for long term infrastructure investment.
Any goldmines around that have not been exploited.

Firstly there is no alternative to austerity and it is 'working' to the extent that credibility has maintained even if actual progress in reducing the deficit is small.

Secondly to generate growth we do not need more non-jobs or welfare spending, but supply side reform.

The only additional state spending I would support at this time is infrastructure investment.

Edited by JagLover on Thursday 31st May 13:19

Agreed, but where do we find the money for the infrastructure program.

We borrow it. In fact we already do. Sadly it is being 'spent' rather than 'invested'.

I don't think international markets would have any issue with the UK if the money being borrowed was invested in fracking industries, tech R&D in pharma and hi end engineering, improved infrastructure etc etc etc. They would have a problem borrowing £180bio a year to spend on oversized civil service, public service, benefits etc - things that have low or no 'return'.

[mat777]

So far they've given this fking loon 5 minutes of airtime to brainwash the sheeple viewing C4 news tonight saying we need to keep spending, and that slashing your way out of recession never works. Does he genuinely live in cloud fking cuckoo land?

[JagLover]

johnfm said:

crankedup said:

JagLover said:

crankedup said:

So exactly what is the answer, clearly the austerity program is not working for the PIGS or the U.K. Agree the State cannot be enlarged either. Pension funds cannot be used for long term infrastructure investment.
Any goldmines around that have not been exploited.

Firstly there is no alternative to austerity and it is 'working' to the extent that credibility has maintained even if actual progress in reducing the deficit is small.

Secondly to generate growth we do not need more non-jobs or welfare spending, but supply side reform.

The only additional state spending I would support at this time is infrastructure investment.

Edited by JagLover on Thursday 31st May 13:19

Agreed, but where do we find the money for the infrastructure program.

We borrow it. In fact we already do. Sadly it is being 'spent' rather than 'invested'.

I don't think international markets would have any issue with the UK if the money being borrowed was invested in fracking industries, tech R&D in pharma and hi end engineering, improved infrastructure etc etc etc. They would have a problem borrowing £180bio a year to spend on oversized civil service, public service, benefits etc - things that have low or no 'return'.

Exactly

The contribution of infrastructure spending to economic growth is far larger than other state spending as you both get the short term boost of the spending but are left with a productive asset for the economy.

Someone mentioned Labour borrowing to fund infrastructure but that is certainly not how they operated in government, where spending on infrastructure useful to the economy was low. They borrowed to 'invest' but somehow that 'investment' was expanding the client state.

[crankedup]

johnfm said:

crankedup said:

JagLover said:

crankedup said:

So exactly what is the answer, clearly the austerity program is not working for the PIGS or the U.K. Agree the State cannot be enlarged either. Pension funds cannot be used for long term infrastructure investment.
Any goldmines around that have not been exploited.

Firstly there is no alternative to austerity and it is 'working' to the extent that credibility has maintained even if actual progress in reducing the deficit is small.

Secondly to generate growth we do not need more non-jobs or welfare spending, but supply side reform.

The only additional state spending I would support at this time is infrastructure investment.

Edited by JagLover on Thursday 31st May 13:19

Agreed, but where do we find the money for the infrastructure program.

We borrow it. In fact we already do. Sadly it is being 'spent' rather than 'invested'.

I don't think international markets would have any issue with the UK if the money being borrowed was invested in fracking industries, tech R&D in pharma and hi end engineering, improved infrastructure etc etc etc. They would have a problem borrowing £180bio a year to spend on oversized civil service, public service, benefits etc - things that have low or no 'return'.

Agreed, I dearly wish to see investment into those industries mentioned. But the money men are hanging onto what they have unfortunately. Its the magic roundabout syndrome.

[hornet]

crankedup said:

Having listened intently to 'experts' on telly and radio, read various newspapers about the subject I'm not about to argue the toss. But with half of the 'experts' on one side and half on the other its almost impossible to be able to judge outcomes. Well if the experts can't agree it has said it all I guess. Our saving grace is devaluation and a society that is, compared to many others, fairly compliant. But unless we can achieve some sort of growth how the heck are people going to find employment and start paying taxes. Its a nightmare in a bubble.

Are we perhaps at the point where we need to think of a new indicator and consign "growth" to the dustbin? Not talking about a happiness index or any of that nonsense, but it's clear that even if we can return to growth, it'll only be temporary, as we'll ultimately run out of resources, at which point our current troubles will look like a minor inconvenience. No idea what the answer is, but perhaps it's time to at least start thinking about what comes next?

[12gauge]

crankedup said:

Having listened intently to 'experts' on telly and radio, read various newspapers about the subject I'm not about to argue the toss. But with half of the 'experts' on one side and half on the other its almost impossible to be able to judge outcomes. Well if the experts can't agree it has said it all I guess. Our saving grace is devaluation and a society that is, compared to many others, fairly compliant. But unless we can achieve some sort of growth how the heck are people going to find employment and start paying taxes. Its a nightmare in a bubble.

You are right to doubt the 'experts'...as they say...The only function of economic forecasting is to make astrology look respectable.
But look at the 'experts' track records. Not only did Krugman NOT see the credit crunch coming, he was one of those who advocated creating the conditions to foist this bubble upon us. He, Greenspan, Bernanke should be taken out back and flogged, not treated as some kind of oracle.

The only reason's Krugman is where he is, making the money he makes is 1) Because he is a good liar/actor and shifty b@stard, (check out his recent below the belt tactics debating Steve Keen) so tends to do well in debates, and 2) because he says exactly what the politicians want to hear and tell the electorate - you can spend limitless amounts without consequence. This is obviously a very alluring message for duplicitous populists like Balls.

[johnfm]

crankedup said:

Agreed, I dearly wish to see investment into those industries mentioned. But the money men are hanging onto what they have unfortunately. Its the magic roundabout syndrome.

I don't think the money men have anything to do with it.

Government are not grasping nettles. They continue down a 'green' agenda, pushing wind farm projects - ignoring the obvious infrastructure needs:

Fracking - give the north of England a HUGE boost by promoting fracking in the north. It may even stimulate the manufacturing and oil/gas service sectors in addition to Aberdeen/offshore North Sea work.
Gas storage faciliites - the UK has very little gas storage capacity for LNG IIRC.
clean gas or nuclear power generation (especially the latter. Invest in the R&D people so we don't need to buy the technology/experience from France etc)
3rd runway or new airport in Thames estuary
Tech centres of excellence in computer science, medicine, pharma: we have very very bright people going to a few of the best universities in the world. Then the students go to the US or into finance etc. Maybe even more joined up tinking to link corporates and universities.

But I think they/we know all this. They just lack the ability to weather the storm when promoting investments which aren't direct payments on welfare - as the govt investment would involve partnership with the private sector and the left woul all cry 'capitalism' and 'jobs for mates' etc etc.

[AJS-]

There is also government's utterly disastrous record at investing in and promoting industries, to the extent that it almost guarantees the chosen industries (and who chooses, how and why?) will fail, while other ones pop up totally unplanned.

Balance the books first, then cut taxes and regulations and let people get on with it.

[johnfm]

AJS- said:

There is also government's utterly disastrous record at investing in and promoting industries, to the extent that it almost guarantees the chosen industries (and who chooses, how and why?) will fail, while other ones pop up totally unplanned.

Balance the books first, then cut taxes and regulations and let people get on with it.

The 'investment' really needs to take the form of 'getting out of the way' via tax incentives to industries/sectors that they want to promote.

If you give a 10 year tax break to fracking companies or LNG storage companies etc, private companies will invest.

[AJS-]

johnfm said:

The 'investment' really needs to take the form of 'getting out of the way' via tax incentives to industries/sectors that they want to promote.

If you give a 10 year tax break to fracking companies or LNG storage companies etc, private companies will invest.

People will invest if they can get the return they're seeking on their investment.

What's so special about fracking as opposed to any other way of making money? Why not just cut general taxes?

[Zod]

I really don't see where people think UK growth is supposed to come from when our largest trading partner, the Eurozone, is in meltdown. All we can do is manage our economy as prudently as we can to keep our borrowings and the costs of them down. It's not even as if spending is being cut. It's actually increasing.

The Krugman/Balls/Brown idea that borrowing and spending the money on building infrastructure will bring growth is patent nonsense. Over-borrow and the cost of borrowing will increase very quickly putting an end to the grandiose plans to build infrastructure and create employment.