One for the Bankers/Economists
Discussion
So, I was listening to the radio last week and some fella came on to announce that he and his mates had the answer to the credit crunch. Now I'm no economist but what he said seemed to make some sense (in a way that was unfettered by econo-crap and political spin). The PM is telling us that the country needs to spend its way out of the 'recession'. He reduces VAT by 2.5% (whoop-de-doo!) which actually costs the nations shop keepers more than the 2.5% being saved anyhoo. No affect on the economy there then.
I cannot confirm the exact figures but this chaps point was that instead of giving the ailing banks bail-out money the same amount is divided equally amongst all income tax payers (not means tested). This, he calculated, would land £15,000 in the pocket of each and every tax payer, thus increasing the spending power of each of those lucky enough to be in work. By extension some of the money would go back to the banks (the ones being properly run that is!), some would be spent on reducing or erasing personal debt, some on moving house, some on holidays, some on goods, etc etc etc.
I can see the reasons why HM Govt wouldn't give very large sums to Joe public but from a common sense point of view this seems to work.
Why wouldn't it work? The sums are not large enough to be life changing (for very long), debt would be reduced, spending would start and the failing banks could bu**er off and fail leaving the properly managed banks to keep on as they were.
I cannot confirm the exact figures but this chaps point was that instead of giving the ailing banks bail-out money the same amount is divided equally amongst all income tax payers (not means tested). This, he calculated, would land £15,000 in the pocket of each and every tax payer, thus increasing the spending power of each of those lucky enough to be in work. By extension some of the money would go back to the banks (the ones being properly run that is!), some would be spent on reducing or erasing personal debt, some on moving house, some on holidays, some on goods, etc etc etc.
I can see the reasons why HM Govt wouldn't give very large sums to Joe public but from a common sense point of view this seems to work.
Why wouldn't it work? The sums are not large enough to be life changing (for very long), debt would be reduced, spending would start and the failing banks could bu**er off and fail leaving the properly managed banks to keep on as they were.
If the banks fail then all credit ends. What this means basically is that for Joe Blogs who bought his weekly shopping on credit card then paid it off in 56days time would suddenly have to pay cash for everything - or go without.
With companies to actually make any stock you'd have to have cash upfront to buy the raw materials as you no longer have an overdraft. So there would be zero credit terms - which is sometimes used with slow payers but very rarely.
The economy would really tank.
With companies to actually make any stock you'd have to have cash upfront to buy the raw materials as you no longer have an overdraft. So there would be zero credit terms - which is sometimes used with slow payers but very rarely.
The economy would really tank.
shirt said:
because most won't spend it, as with the yanks with their tax rebates last year.
So the money stays in the banks? What the govt have actually done already. I suspect that people being people will spend rather than save. Interest rates are too low at the moment and not all banks are giving mortgagees the benefit.shirt said:
because most won't spend it, as with the yanks with their tax rebates last year.
Didnt this also happen in Japan? The Jap Govt gave out Govt credits to everyone - but it was like Manopoly money you had to spend it you couldnt bank it. The problem was people even saved these....Japan's lost decades still hasnt really recovered. I wonder if that could happen globally? So 2030+ still hardly much difference!!
I guess there comes a point where you nationalise EVERY business - communism - then you have full employment let that settle for some time get the long term non workers actually doing something. Everybody earns the same. Then as time goes by derestrict the regulations to allow private companies to start up again/privatise companies...
Johnniem said:
Can't see that really. If we all had money to spend would we not spend it? Whether it was on holidays, debt reduction or sweets? Anyway, I suspect a small inflationary move would be welcomed by HM Govt. However, I understand that they are currenly offering 0% on tax overpayments!!
Unless that has changed in the last couple of weeks, thats definately not true. Interesting if it has changed though.Johnniem said:
shirt said:
because most won't spend it, as with the yanks with their tax rebates last year.
So the money stays in the banks? What the govt have actually done already. I suspect that people being people will spend rather than save. Interest rates are too low at the moment and not all banks are giving mortgagees the benefit.I'm not a fan of any government spending, but I can see this as the least of evils. It doesn't distort the market as much, it is relatively easily to administer, and above all it doesn't politicise the banks, which is the biggest problem I see with the current arrangement.
It would be instant inflation, and not by any small amount. If you say the average income tax payer is on 30,000 then 15,000 out of no where is 50% inflation. No less than we will get anyway when all this cash is released.
It would be instant inflation, and not by any small amount. If you say the average income tax payer is on 30,000 then 15,000 out of no where is 50% inflation. No less than we will get anyway when all this cash is released.
Johnniem said:
So, I was listening to the radio last week and some fella came on to announce that he and his mates had the answer to the credit crunch. Now I'm no economist but what he said seemed to make some sense (in a way that was unfettered by econo-crap and political spin). The PM is telling us that the country needs to spend its way out of the 'recession'. He reduces VAT by 2.5% (whoop-de-doo!) which actually costs the nations shop keepers more than the 2.5% being saved anyhoo. No affect on the economy there then.
I cannot confirm the exact figures but this chaps point was that instead of giving the ailing banks bail-out money the same amount is divided equally amongst all income tax payers (not means tested). This, he calculated, would land £15,000 in the pocket of each and every tax payer, thus increasing the spending power of each of those lucky enough to be in work. By extension some of the money would go back to the banks (the ones being properly run that is!), some would be spent on reducing or erasing personal debt, some on moving house, some on holidays, some on goods, etc etc etc.
I can see the reasons why HM Govt wouldn't give very large sums to Joe public but from a common sense point of view this seems to work.
Why wouldn't it work? The sums are not large enough to be life changing (for very long), debt would be reduced, spending would start and the failing banks could bu**er off and fail leaving the properly managed banks to keep on as they were.
The VAT cut will bring some benefit over time as it does boost household spending power. The problem is the government had to borrow the money to fund it, and 12.5 billion could have been in more creative ways to boost the economy.I cannot confirm the exact figures but this chaps point was that instead of giving the ailing banks bail-out money the same amount is divided equally amongst all income tax payers (not means tested). This, he calculated, would land £15,000 in the pocket of each and every tax payer, thus increasing the spending power of each of those lucky enough to be in work. By extension some of the money would go back to the banks (the ones being properly run that is!), some would be spent on reducing or erasing personal debt, some on moving house, some on holidays, some on goods, etc etc etc.
I can see the reasons why HM Govt wouldn't give very large sums to Joe public but from a common sense point of view this seems to work.
Why wouldn't it work? The sums are not large enough to be life changing (for very long), debt would be reduced, spending would start and the failing banks could bu**er off and fail leaving the properly managed banks to keep on as they were.
It's very similar to the debt cut idea. Get the banks to right off x% of all mortgages thereby reducing monthly payments and bringing most mortgages back below 90% LTV. Consumers can spend again and banks have better looking loan books. The idea is the money will be written off anyway via reposessions.
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The VAT cut will bring some benefit over time as it does boost household spending power. The problem is the government had to borrow the money to fund it, and 12.5 billion could have been in more creative ways to boost the economy.
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It hasnt worked. Why not just reduce income tax that way everyone gets the benefit rather than those who choose to buy items which attract VAT.
Frankly food shopping has ~0% VAT
Fuel - everyone is cutting back on driving and per tank it makes no difference.
Big ticket items yes they work but who'd buying...not many according to the high street sales.
As I said it will bring some benefit/stop things being worse than they might have been. That doesn't mean I am for or against it. i was stating the economic reasoning behind it, that it does boost household spending power, simple economics. Once again the problems are its finaniced with debt, the money could have been better spent (such as a NI cut suggested above but government won't do as its there fav stealth tax) and its cumlative. We have only had 3 billion of its benefit when a more instant boost was needed.
To be honest i agree with the view forming that so much has been thrown at this problem, its time to give it some time! Its way to early to say X or Y hasn't worked, think of the economy as a super tanker, you turn the wheel and it takes a while for things to happen.
To be honest i agree with the view forming that so much has been thrown at this problem, its time to give it some time! Its way to early to say X or Y hasn't worked, think of the economy as a super tanker, you turn the wheel and it takes a while for things to happen.
Edited by revrange on Friday 13th February 18:13
Welshbeef said:
Its called a Balance sheet recession/depression. This is where individuals & companies just pay off debt - there is no investment in anything other than debt clearance. Now to get out of that... Japan still hasnt managed to 20+ years trying.
I dont get this, if you are paying off debt then the balance must be reducing and your ability to pay gets better over time with growth hopefully and possibly some inflation. Unless the debt burden is that great that its too hard to put a dent in it. How big were Japans debts?Gunny Sergeant D said:
Welshbeef said:
Its called a Balance sheet recession/depression. This is where individuals & companies just pay off debt - there is no investment in anything other than debt clearance. Now to get out of that... Japan still hasnt managed to 20+ years trying.
I dont get this, if you are paying off debt then the balance must be reducing and your ability to pay gets better over time with growth hopefully and possibly some inflation. Unless the debt burden is that great that its too hard to put a dent in it. How big were Japans debts?In Japan the issue was huge property boom was immense - then the burst and year after year of deflation. That is one reason so many young Japanese bought nice flash cars as houses were losing money year on year so better off renting
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