The Deficit Myth! Cameron When are you Going to Apologise?
Discussion
Art0ir said:
I think that guy votes Labour.Notice that he uses 2008 a lot. Why?
Oh yeah, it was just before the economy went to s
t because of Winky's policies.Some other guff by this alleged economist, though googling his names comes up pretty empty:
http://www.huffingtonpost.co.uk/ramesh-patel/georg...
http://www.huffingtonpost.co.uk/ramesh-patel/david...
http://www.huffingtonpost.co.uk/ramesh-patel/georg...
http://www.huffingtonpost.co.uk/ramesh-patel/david...
He isn't entirely wrong. For their first term Labour, who had pledged to stick to the Conservatives tax and spending policies, did actually reduce our debts. What he forgets to mention is that post 2001 they started borrowing money and increasing spending, despite the fact the economy was still strong. When things turned bad they went back to their roots and threw public money at the problem, and at the end of Labour's last full year in power, 2009, it was nearly 45% of GDP, up from 36% the year before.
Cameron may well be gloomy on the economy though, because he's completely failed to address the problem and since he has come in debt was 52% at the end of 2010 (ok, half a year, not too much he could do) 60% at the end of 2011 (had a full year now) and is forecast to be nearly 67% at the end of this year. He doesn't even appear to be cutting the rate of growth very dramatically.
Personally I think confidence based on the pronouncement of politicians is a much over rated determinant of economic performance - it can bounce the currency or the stock market around for a day or two, but it doesn't solve fundamental problems like a massive public debt or inflation.
Cameron may well be gloomy on the economy though, because he's completely failed to address the problem and since he has come in debt was 52% at the end of 2010 (ok, half a year, not too much he could do) 60% at the end of 2011 (had a full year now) and is forecast to be nearly 67% at the end of this year. He doesn't even appear to be cutting the rate of growth very dramatically.
Personally I think confidence based on the pronouncement of politicians is a much over rated determinant of economic performance - it can bounce the currency or the stock market around for a day or two, but it doesn't solve fundamental problems like a massive public debt or inflation.
Guam said:
Thats funny, the Huffpost are attacking Cameron for the same issues they excuse Obama for in the US <different scale though>.
I tend to concur with some of their sentimemt. Cameron and Osborne are failing to deal with these issues and should be roundly criticised.
The possibility of another Labour term is chilling giving their recent history, the fact that the current mob seem incapable of running a pissup in a brewery is terrifying.
Damned if we do damned if we dont
Plus they are all lying scum
Labour RECENT history !!!??? I would say history full stop.I tend to concur with some of their sentimemt. Cameron and Osborne are failing to deal with these issues and should be roundly criticised.
The possibility of another Labour term is chilling giving their recent history, the fact that the current mob seem incapable of running a pissup in a brewery is terrifying.
Damned if we do damned if we dont
Plus they are all lying scum
otherwise good post
What matters is not the debt figure when they left office, though this has risen sharply in their last year in ofice, but the structural deficit they left behind.
This has been recently estimated at around 5% of GDP in 2009/10. So even if they economy returned to 'normal' growth without action to reduce spending or increase taxation the deficit would still be at that level.
This has been recently estimated at around 5% of GDP in 2009/10. So even if they economy returned to 'normal' growth without action to reduce spending or increase taxation the deficit would still be at that level.
Guam said:
Thats funny, the Huffpost are attacking Cameron for the same issues they excuse Obama for in the US <different scale though>.
I tend to concur with some of their sentimemt. Cameron and Osborne are failing to deal with these issues and should be roundly criticised.
The possibility of another Labour term is chilling giving their recent history, the fact that the current mob seem incapable of running a pissup in a brewery is terrifying.
Damned if we do damned if we dont
Plus they are all lying scum
That last bit...you should have started your post with that.I tend to concur with some of their sentimemt. Cameron and Osborne are failing to deal with these issues and should be roundly criticised.
The possibility of another Labour term is chilling giving their recent history, the fact that the current mob seem incapable of running a pissup in a brewery is terrifying.
Damned if we do damned if we dont
Plus they are all lying scum
Policy and spending early in a new administration's term is largely 'baked in' to follow the pattern set by the preceding government.
Austerity may have an element of theatre, but is justified in order to tackle the level of PS spending, but we should never let muppets like this forget that bond markets could and would have reacted very differently to UK debt, had steps not been taken. France will, IMHO soon be an example of this.
Finally though, I agree with the position that Cameron and Osborne have mishandled the UK economy. Post banking crisis, the amount of capital available to SMEs has plummeted - as 'our' banks (the global corporations that Joe public thinks were British banks) that 'we bailled out' withdrew credit on a widespread, arbirary basis - and as a result the system has stalled.
The effects are everywhere and IMHo are severe. Stock inventory levels decreased, contractors shackled by cash flow restraints can only bid for smaller projects, investment - buildings, plant, machinery - has plummeted. None of this will repair quickly without a return to business lending and none of this bodes well for the UK. Fine, the plc sector is largely immune to this, but it is not isolated from the success or failure of SME UK.
Austerity may have an element of theatre, but is justified in order to tackle the level of PS spending, but we should never let muppets like this forget that bond markets could and would have reacted very differently to UK debt, had steps not been taken. France will, IMHO soon be an example of this.
Finally though, I agree with the position that Cameron and Osborne have mishandled the UK economy. Post banking crisis, the amount of capital available to SMEs has plummeted - as 'our' banks (the global corporations that Joe public thinks were British banks) that 'we bailled out' withdrew credit on a widespread, arbirary basis - and as a result the system has stalled.
The effects are everywhere and IMHo are severe. Stock inventory levels decreased, contractors shackled by cash flow restraints can only bid for smaller projects, investment - buildings, plant, machinery - has plummeted. None of this will repair quickly without a return to business lending and none of this bodes well for the UK. Fine, the plc sector is largely immune to this, but it is not isolated from the success or failure of SME UK.
crazy about cars said:
Sometimes the lesson had to be learnt the hard way. The cuts are hard but people are starting to learn and adapt a more lean business strategy.
No, what they'll do is wait until the Tories have sorted the economy out, see the signs of growth and decide they want the government to give them nice things, then vote Labour back in. Labour will screw the economy, get voted out, the Tories will come in and make hugely unpopular decisions in order to sort the ecoonomy out...<repeats>
Johnnytheboy said:
No, what they'll do is wait until the Tories have sorted the economy out, see the signs of growth and decide they want the government to give them nice things, then vote Labour back in. Labour will screw the economy, get voted out, the Tories will come in and make hugely unpopular decisions in order to sort the ecoonomy out...
<repeats>
<repeats>
I agree that the lack of SME lending has caused a big part of the slump, but I'm not sure it can or even should be "resolved" by making credit more readily available. The reliance on readily available borrowing was a structural fault on both in the consumer and business sectors. Some level of credit availability is efficient, and always made businesses vulnerable to a credit squeeze, or even a sharp rise in interest rates.
The problem built up over decades, but was really exacerbated in the last 10 years or so by the interest rate being held falsely low due to constantly fiddling with price indices to hide inflation, and this made borrowing to fund immediate expansion seem completely rational. As it made borrowing to buy Audi A8s and 100" TVs seem completely rational to consumers.
I was selling cars for a while in 2005/6 and had several offers of loans to fund expansion - I knew of a couple of other dealers whose entire stock basically belonged to the bank. Which was very efficient if you made money and paid them back. However if you kept building flashier offices and started buying fun cars that you would sit around for months, as a couple of places I knew of did, then you have probably now gone bust, as those places have.
I'm quite sure the same applied to other SME businesses, and I'm equally sure a few good ones will go to the wall due to the sudden and drastic nature of the credit contraction. However such is the way of the world, and what will emerge will hopefully be more robust and shock proof businesses that are not so dependent on bank lending.
The problem built up over decades, but was really exacerbated in the last 10 years or so by the interest rate being held falsely low due to constantly fiddling with price indices to hide inflation, and this made borrowing to fund immediate expansion seem completely rational. As it made borrowing to buy Audi A8s and 100" TVs seem completely rational to consumers.
I was selling cars for a while in 2005/6 and had several offers of loans to fund expansion - I knew of a couple of other dealers whose entire stock basically belonged to the bank. Which was very efficient if you made money and paid them back. However if you kept building flashier offices and started buying fun cars that you would sit around for months, as a couple of places I knew of did, then you have probably now gone bust, as those places have.
I'm quite sure the same applied to other SME businesses, and I'm equally sure a few good ones will go to the wall due to the sudden and drastic nature of the credit contraction. However such is the way of the world, and what will emerge will hopefully be more robust and shock proof businesses that are not so dependent on bank lending.
Johnnytheboy said:
No, what they'll do is wait until the Tories have sorted the economy out, see the signs of growth and decide they want the government to give them nice things, then vote Labour back in. Labour will screw the economy, get voted out, the Tories will come in and make hugely unpopular decisions in order to sort the ecoonomy out...
<repeats>
You think the Tories will sort out the economy? <repeats>
Silly, silly, naive, deluded person!
Johnnytheboy said:
crazy about cars said:
Sometimes the lesson had to be learnt the hard way. The cuts are hard but people are starting to learn and adapt a more lean business strategy.
No, what they'll do is wait until the Tories have sorted the economy out, see the signs of growth and decide they want the government to give them nice things, then vote Labour back in. Labour will screw the economy, get voted out, the Tories will come in and make hugely unpopular decisions in order to sort the ecoonomy out...<repeats>
AJS- said:
I agree that the lack of SME lending has caused a big part of the slump, but I'm not sure it can or even should be "resolved" by making credit more readily available. The reliance on readily available borrowing was a structural fault on both in the consumer and business sectors. Some level of credit availability is efficient, and always made businesses vulnerable to a credit squeeze, or even a sharp rise in interest rates.
From the 'starw poll' of SME businesses I've spoken to over the last four years - and many have been surprisingly frank - and also from a very senior regional business manager for a 'big bank' the story is nearly always the same:- Business and bank establish an overdraft facility crica 1990's
- facility is rolled over every year
- somewhere post 2000 a 'puppet' bank manager (answerable only to nameless, faceless head office or 'the computer') replaced the old, discretionary, thinking, executive brank business manager
- new manager keeps rolling overdraft facility - ususually tweaking up because the bank is 'pushing credit' - but is now far more interested in milking the customer for extras; pensions, insurance, forex etc.
- late 2008/early 2009 hell rains down on manager from HQ - he is told to arbitrarily cut the bank's risk/lending on overdrafts
t that most businesses I've spoken to in this situation says it takes their in-house accounts team more time to manage than running the debtor book directly themsleves.Now you can say all of the above was 'wrong' but the fact is that in most business sectors in most geographic areas, this was the reality. To somehow think we can have an effective creditless recovery when margins are tight and taxes high is fantasy. It will not happen.
My take on this is that until or unless SME lending repairs - and FWIW I do not beleive it will - the recovery will be anaemic at best.
Art0ir said:
It is a very misleading piece based on carefully selected statistics.Primarily the author has failed to understand that there are 2 parts to a budget surplus/deficit:
1. Fiscal surplus/deficit - the surplus or shortfall caused by the economic cycle. For example, Corporation Tax receipts lags behind the movements in the economy. When times are good companies make profits and pay taxes on them but when times are bad companies make losses and don't pay any tax but in addition they can store tax losses to offset against future tax payments. This causes a timing difference between the economy and tax receipts and a deficit arising from things like this is a fiscal deficit.
2. Structural surplus/deficit - the surplus or shortfall after excluding the fiscal surplus/deficit i.e. the underlying performance. In simple terms a structural deficit is the stuff you can never afford.
In 2008 the economy was at the peak of an economic cycle so there would have been a substantial fiscal surplus. The fact that we were actually had a budget deficit means that there had to have been an even more substantial structual deficit.
In 1997 the economy was growing but was nowhere near the peak of the economic cycle. It is entirely possible that the budget deficit was the net of a structural surplus and fiscal deficit (I don't have the figures to hand to show if it was or wasn't).
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