Hard to explain how bad economic crisis is, says Cable
Discussion
Is it just me but if house prices collapse then we really will see how bad the economy is.
Sorry if this is a repost.
http://www.bbc.co.uk/news/uk-politics-13480971
Sorry if this is a repost.
http://www.bbc.co.uk/news/uk-politics-13480971
Yes. Many, many people have the impression of being rich due to house price rises. If the house price average falls from where it is (£167,000) to roughly the historical average of three times average salary (about £80,000) there is going to be some serious s
t going down. Although at the minute what's more likely is that inflation will force wages up a lot to equalise it, rather than house prices falling.
And inflation is getting to be quite a big problem. 4.5%, although anecdotally many items are inflating much quicker than that, and we're getting to the edge of it being a big issue.
The only thing that can be done to fix it is raising interest rates. And that will cause a house price collapse. It's coming...
t going down. Although at the minute what's more likely is that inflation will force wages up a lot to equalise it, rather than house prices falling.And inflation is getting to be quite a big problem. 4.5%, although anecdotally many items are inflating much quicker than that, and we're getting to the edge of it being a big issue.
The only thing that can be done to fix it is raising interest rates. And that will cause a house price collapse. It's coming...
Bing o said:
So yet again, he blames the bankers and not Winky? I still fail to see why Winky is not being hounded out of the country by pitchfork wielding masses?
13years of previous government = 13years of subliminal TV messages perhaps?I know I've been strangely reluctant to use my pitchfork of late.
Rubbish.
It's easy to explain.
Instead of trillions think in ten thousands
So the state's 1 trillion debt and 4.8 trillion total liability become 10000 and 48000 respectively.
Now think of these as being a debt held by Mr & Mrs UK.
Bank : Your credit card has 10000 pounds on it and you seem to expecting bills of about 48000 pounds, What are you doing about it?
Mr and Mrs UK : Nothing.
Bank : You seem to be spending 7000 pounds a year on your credit card but only pay off 5500 pounds a year. What are you doing about this?
Mr and Mrs UK : You can't expect us to cut back!
Bank : You must.
Mr and Mrs UK : Ok, This year we'll do something about it.
Bank : What's your plan?
Mr and Mrs UK : We can't possibly be expected to budget properly so we'll spend 6800 this year, 6600 the next, 6400 the year after that and then 6200 for ever after.
Bank : So your plan to stop going 1500 deeper into debt every year is to go 1300 further into debt this year, 1100 the next, 900 the year after and then 700 pounds a year for ever? Are you serious?
Mr and Mrs UK : Yes?
Bank : so how will you ever get out of debt? When will you ever stop going deeper into debt?
Mr and Mrs UK : ----silence----
Bank : Is this debt secured on anything at all?
Mr and Mrs UK : ----silence----
Bank : Hello?
That about sums it up.
It's easy to explain.
Instead of trillions think in ten thousands
So the state's 1 trillion debt and 4.8 trillion total liability become 10000 and 48000 respectively.
Now think of these as being a debt held by Mr & Mrs UK.
Bank : Your credit card has 10000 pounds on it and you seem to expecting bills of about 48000 pounds, What are you doing about it?
Mr and Mrs UK : Nothing.
Bank : You seem to be spending 7000 pounds a year on your credit card but only pay off 5500 pounds a year. What are you doing about this?
Mr and Mrs UK : You can't expect us to cut back!
Bank : You must.
Mr and Mrs UK : Ok, This year we'll do something about it.
Bank : What's your plan?
Mr and Mrs UK : We can't possibly be expected to budget properly so we'll spend 6800 this year, 6600 the next, 6400 the year after that and then 6200 for ever after.
Bank : So your plan to stop going 1500 deeper into debt every year is to go 1300 further into debt this year, 1100 the next, 900 the year after and then 700 pounds a year for ever? Are you serious?
Mr and Mrs UK : Yes?
Bank : so how will you ever get out of debt? When will you ever stop going deeper into debt?
Mr and Mrs UK : ----silence----
Bank : Is this debt secured on anything at all?
Mr and Mrs UK : ----silence----
Bank : Hello?
That about sums it up.
It certainly seems hard enough to explain to all the special interest groups that bubble up and whinge whenever any cut in public spending is proposed.
As is my understanding, we're spending something daft like 13% more than we're earning as a state. And we're spending 20% of that on interest payments on debt.
The deficit cutting measures so far proposed will do something to address this, but don't even begin to reduce the debt that the last shower grew by running this deficit.
I'm a glorified gardener and I can grasp this - what's so hard about it?
As is my understanding, we're spending something daft like 13% more than we're earning as a state. And we're spending 20% of that on interest payments on debt.
The deficit cutting measures so far proposed will do something to address this, but don't even begin to reduce the debt that the last shower grew by running this deficit.
I'm a glorified gardener and I can grasp this - what's so hard about it?
Fittster said:
So hound out Winky but not CMD how is increasing the public debt?
If I've understood you "who is" rather than "how is" then I'd point out that he was left no choice. The previous government allowed this country to become addicted to banking taxes and borrowing. The banking taxes have fallen in a big way, but we still have a state which is set up to be all things to all men. Unless he keeps borrowing we risk a crash like nothing you can imagine, but at least the current mob are reducing borrowing at a sensible pace.To my mind, no matter where you look for blame, all roads still lead to winky.
Good post cymtricks. That covers pretty much all the bases.
I think it's hard for Cable to explain as he doesn't really understand it himself. He just inherited from Gordon Brown the dubious honour of being the economics go to guy for the left wing press, and so he feels he has to say something.
Look at this quote:
Gordon Brown
The UK probably hasn't been a "price setter" in commodity markets for 100 years, if ever.
My bet is that he pulled this from some Economics Master's thesis he found on google half an hour before the interview, and thought it would make him sound really clever.
Unfortunately to a large chunk of the electorate, it does.
I think it's hard for Cable to explain as he doesn't really understand it himself. He just inherited from Gordon Brown the dubious honour of being the economics go to guy for the left wing press, and so he feels he has to say something.
Look at this quote:
Vincent Cable said:
He added: "Britain is no longer one of the world's price setters. We take our prices from international commodity markets driven by China and India.
Am I missing something, or is that just a completely unrelated truism that has no relevance whatsoever to either the banking crisis of 2008 or the ongoing government debt problems, and it's impact on the general UK economy?The UK probably hasn't been a "price setter" in commodity markets for 100 years, if ever.
My bet is that he pulled this from some Economics Master's thesis he found on google half an hour before the interview, and thought it would make him sound really clever.
Unfortunately to a large chunk of the electorate, it does.
These sound bites from Cable are in my mind just the start of an attempt by the "Coalition" to make people understand just what a god awful mess the Labour party made of this country...they will obviously try and make the Labour party unelectable. The Labour PR machine made sure the electorate blamed the bankers when the reality is that the regulators (who almost to a man still have their jobs) and were appointed by Brown were equally to blame. If the crime rate goes up in this country it is instantly seen as a failure by the police (i.e. the regulator) to control it.......why is the banking system different ?
Politicians of both sides have been extremely economical with the truth because they had no choice in the first instance....I suspect we'll be hearing an awful lot more about exactly what went on over the next couple of years.
Politicians of both sides have been extremely economical with the truth because they had no choice in the first instance....I suspect we'll be hearing an awful lot more about exactly what went on over the next couple of years.
cymtriks said:
Rubbish.
It's easy to explain.
Instead of trillions think in ten thousands
So the state's 1 trillion debt and 4.8 trillion total liability become 10000 and 48000 respectively.
Now think of these as being a debt held by Mr & Mrs UK.
Bank : Your credit card has 10000 pounds on it and you seem to expecting bills of about 48000 pounds, What are you doing about it?
Mr and Mrs UK : Nothing.
Bank : You seem to be spending 7000 pounds a year on your credit card but only pay off 5500 pounds a year. What are you doing about this?
Mr and Mrs UK : You can't expect us to cut back!
Bank : You must.
Mr and Mrs UK : Ok, This year we'll do something about it.
Bank : What's your plan?
Mr and Mrs UK : We can't possibly be expected to budget properly so we'll spend 6800 this year, 6600 the next, 6400 the year after that and then 6200 for ever after.
Bank : So your plan to stop going 1500 deeper into debt every year is to go 1300 further into debt this year, 1100 the next, 900 the year after and then 700 pounds a year for ever? Are you serious?
Mr and Mrs UK : Yes?
Bank : so how will you ever get out of debt? When will you ever stop going deeper into debt?
Mr and Mrs UK : ----silence----
Bank : Is this debt secured on anything at all?
Mr and Mrs UK : ----silence----
Bank : Hello?
That about sums it up.
You forgot the part where Mr and Mrs UK tell their Bank Manager 'But some of our neighbours have plenty of money, can't you take some of theirs and give it to us?'.It's easy to explain.
Instead of trillions think in ten thousands
So the state's 1 trillion debt and 4.8 trillion total liability become 10000 and 48000 respectively.
Now think of these as being a debt held by Mr & Mrs UK.
Bank : Your credit card has 10000 pounds on it and you seem to expecting bills of about 48000 pounds, What are you doing about it?
Mr and Mrs UK : Nothing.
Bank : You seem to be spending 7000 pounds a year on your credit card but only pay off 5500 pounds a year. What are you doing about this?
Mr and Mrs UK : You can't expect us to cut back!
Bank : You must.
Mr and Mrs UK : Ok, This year we'll do something about it.
Bank : What's your plan?
Mr and Mrs UK : We can't possibly be expected to budget properly so we'll spend 6800 this year, 6600 the next, 6400 the year after that and then 6200 for ever after.
Bank : So your plan to stop going 1500 deeper into debt every year is to go 1300 further into debt this year, 1100 the next, 900 the year after and then 700 pounds a year for ever? Are you serious?
Mr and Mrs UK : Yes?
Bank : so how will you ever get out of debt? When will you ever stop going deeper into debt?
Mr and Mrs UK : ----silence----
Bank : Is this debt secured on anything at all?
Mr and Mrs UK : ----silence----
Bank : Hello?
That about sums it up.
_Al_ said:
Fittster said:
So hound out Winky but not CMD how is increasing the public debt?
If I've understood you "who is" rather than "how is" then I'd point out that he was left no choice. The previous government allowed this country to become addicted to banking taxes and borrowing. The banking taxes have fallen in a big way, but we still have a state which is set up to be all things to all men. Unless he keeps borrowing we risk a crash like nothing you can imagine, but at least the current mob are reducing borrowing at a sensible pace.To my mind, no matter where you look for blame, all roads still lead to winky.
John Redwood blog (don't think he's going to be in the cabinet anytime soon):
"Most of the debate about the UK deficit reduction programme is about whether the government is doing too much too quickly. There is another side that rarely gets examined – is it doing enough and is the programme going well?
Before critics get to work alleging falsely I want to see cuts in schools and hospitals, let me confirm I do not. There are, however, other areas and budgets, starting with the state owned banks and going through the large EU expenditures, moving on to the pace of sorting out the administrative overhead where there is some scope to cut the deficit more quickly.
Let us today look at the strategy so far. The government in June 2010 said it planned to borrow an extra £451 billion over the five years to 2015. This entailed substantial reductions in the rate of increase in the state debt, from the very high levels reached in 2009-10. The aim is to get rid of the structural deficit by 2015, leaving a relatively small running deficit in that year.
Eight months later, in the March 2011 budget, the government decided it could afford to borrow £485 billion over the five years. It decided to increase spending over the period compared to July 2010 plans, and had to allow for a small revenue loss owing to a downgrade of the growth forecast for 2011. The amount the state plans to borrow in five years is more than the total UK state debt in 2004. The growth forecast was lowered from 2.3% to 1.7% for 2011, and from 2.8% to 2.5% for 2012.
As controlling the debt and deficit is crucial to our economic future, something all commentators and political parties agree, we need to ask how robust is the current plan? Is the March 2011 budget the last when we should expect an overrun or increase in the planned borrowing, or could the same happen in any future budget?
Let us take the growth forecasts first of all. The plan assumes growth will accelerate to a lively 2.9% in 2013, a further 2.9% in 2014 and 2.8% in 2015. This could happen. If the banks by then are mended and capable of lending more money on mortgage and to businesses, that would help. If the world economy is growing well, that will provide a good background. The government’s welfare reforms should be kicking in with their contribution.
If, however, the world economy faltered, or if the banks were still unable to finance a robust recovery, there could be a disappointment. Every 1% of growth less means a revenue loss of around £6 billion each year. If 2013 saw 1.9% growth instead of 2.9% growth, for example, the government would need to borrow an extra £18 billion over the period to reflect the three years of lower revenue from the lost growth. There would also be some consequential increases in public spending, as there would be fewer jobs.
We need also to ask if the pubic spending figures will be delivered as currently planned. Normally as a government gets closer to an election it wants to increase public spending. Lobbyists intensify their efforts to persuade politicians to give them more money for their causes in a more fevered atmosphere. We have seen the government giving some ground on spending related issues already when it faces criticism. It seems likely that the government will increase spending somewhat compared to plan as we get nearer to 2015. Some of the cuts pencilled in for 2013 may not materialise.
I think it unlikely the final outturn for total government borrowing over the five years will be as low as the forecast £485 billion. Looking at the figures I think other actions need to be taken to allow for some increases in spending on core programmes, and to allow for any disappointment in the global growth rate which could adversely affect UK growth. The government is right to warn that it must cut the deficit to keep the confidence of the markets and keep interest rates low by Greek or Irish standards. That is why delivering the strategy is important, and why we need to ensure something like the forecast numbers is delivered"
http://www.johnredwoodsdiary.com/
CMD hasn't even questioned the size of the state, the only argument that is being put forward for it's reduction is due to the state's finances.
RYH64E said:
You forgot the part where Mr and Mrs UK tell their Bank Manager 'But some of our neighbours have plenty of money, can't you take some of theirs and give it to us?'.
Or the pub sec union argument: "If you don't lend us money, we won't be able to spend it buying things from all our friends, then everyone will have less money".
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