91Èȱ¬

What is the training course?

Some kind of 're-education' programme for dicident journalists?

Watch out for the 'relaxation' sessions in those rooms with flashing lights.

You may come out with a whole new perspective on things!!!

Be especially wary if the course is stacked high with 'Sky' journalists.

which bit of greece spending spree was 'caused' by hedge funds? its an easy decision for the eu to make about an industry they don't have. i bet they all have their money in one?

Paul~

First off---Hope you are "enjoying" your time this week @ the training course...And, second...Thanks, for keeping us inform on the 24 May 2010 regarding the budget and its "public finances" situation...

(d)

Paul - really like this blog.

Enjoy your training - could be the last for a while if the 91Èȱ¬ gets hammered :-)

What's your course on? Some kind of namby-pamby liberal rubbish? Or work related? Why don't you buy a book then read it on the tube home whilst reviewing your defined +contribution+ pension like the rest of us. Or is yours defined +benifit+? Seriously - what can it be on? You don't need economics training.

No hard feelings - as I say your blog is great - but the 91Èȱ¬ has got to cut - big time. I reckon I could slash about 400 hours of total tripe a day so if you need help drop me a mail.

ps mod - let this through!

Well ! Here we all are in the lull before the storm.

Nothing has really changed apart from the government. It's a bit of an anti-climax now. Nothing to get too riled about.

Apart from we now see inflation rising. With most incomes virtually frozen we are stagnating while the cost of living is inflating.

The worst of both worlds as our incomes become more squeezed and that's before the emergency budget.

We have certainly been warned about what's ahead but why worry until it happens. There'll be more than enough to think about when it eventually becomes a reality.

have a nice break, Paul, PS my spotify has gone down...any suggestions?

I urge everyone to re-read Paul's blog entitled 'Euro bailout. Now banking risk morphs into geo-political risk'.

This really explains the key point that the crisis has not been resolved merely transformed & postponed.

So how is it going to pan out?

Now we know Europe alonside the UK & the US is prepared to debase its currency isn't inflation more likely than deflation?

If there is serious inflation you can bet that real wage rates will decline which adds to the pressure that comes from the fiscal tightening (cuts/tax rises).

Is growth going to recover, or will the fiscal tightening/declining wage rates mean recession (or stagflation) beckons?

And when will institutions stop buying US governmnet debt &/or demand a higher rate of interest?

Inflation, recession, higher interest rates, government default, banks going bust (state can't bail them out again) & people on the streets.

Is this the near future?

We are missing you, Paul.

In the meantime, Idle Scrawl junkies can find substitute satisfaction over at the London Review of Books:

I guess we could be looking at a rise in inflation in order to lighten the deficit burden. But if the Bank of England will need wiggle room on interest rates in order to exercise some control over inflation, does this mean that rates will start going up in anticipation of future inflation? (I'm only just starting to take an interest in macroeconomics, so please excuse me if this is a misguided question.)

#1

Has the 91Èȱ¬ got no sense of humour!

All I did was suggest Paul's course may be some kind of 91Èȱ¬ compulsory 're-education' programme for dissident journalist's, whom refuse to tow the body politic line..

I further suggested that the programme may be largely staffed by the 'stepford wives' of journalism whom largely frequent a certain huge Multi media organisation not unknown to indulge in a bit of in-appropriate partisan media politics e.g. as seen during one of the leaders debates.

Whats wrong with that?


Unless it is true of course!!!

We will be watching the content of your reports after this 'course' very carefully Paul!!!

Watch out for those synchronised flashing lights and funny tasting coffee.

I would hate to think that I wasted most of my lunch time writting the following so please forgive the repeat post below, but I would be interested in views on it from those more informed than me.


RPI 5.3% , CPI 3.7% expected to drop back to close to the target by the end of the year Hmmmmmmm.

Not entirely unrelated to the interesting debate previously on minimum wage either...

Capitalism goes full circle and becomes communism with most of the population only able to afford survival rations comprising Netto own brand Turkey twislers, oven chips, plus a crate of larger and a cheap broad band connection, whether they be a qualified car mechanic or on benefits with 6 kids..

It leaves an ever seperated elite whom by virtue of existing wealth and leverage rise above the tax trap threshold and into the realms of offshore accounts, posh cars and fancy foreign holidays... sounds a bit like communism really... human nature will out!!!

The middle ground (people like me) aka hard working families and small business which underpins everything in terms of national stability get murdered.

I am finding it very hard to believe inflation will die back as they hope (and pray) it will.

I just dont buy the Mervs 'overcapacity' argument calming it down this time around. Those benefits will be outweighed by commodity price rises. We now import coal to Newcastle (well Teesside anyway), everything we make and sell and eat and burn comes with a hefty imported raw materials component.

Even if the pound stays flat from here on in, I still cant see commodities going down in price outwith our influence.

It must therefore be an absolute knife edge between inflation and interest rates with so many 'hard working families and small business' endebted and only just managing to survive by virtue of 0.5% interest rates underpinning tracker mortgages.

If inflation stays high and wages low (as implied) defaults will start to creep up as pressure builds in the system over time. I would rather default on my debts than force my kids to live of turkey twislers and oven chips...Even worse if interest rates have to go up, even a fraction, that dynamic would rocket.

I can only make 'macro' assessments as I am not a professional economist but it just does not stack up.

It appears hard working families and small business are being deliberately coaxed into accepting a very reduced standard of living over time, cleverly managed such that it occurs too slowly for outright rebellion to occur.. hence the guarded 'hopefulness' about inflation dropping back later this year. Expect that prediction to be revised to 'mid next year' and so on...

Like the experiment with the frog who will not move from a pan of water brought staedily to the boil until he dies, as oppose to the frog chucked straight in there, who leaps out immediately.

laboratory frogs are we!

But what is the answer? I am all for a strategy of 'buying time' at the moment but only if the time bought is used to figure out how to turn the gas off under the pan that is staedily warming people like me up.

Outside of fringe groups like NEF and individuals on here, I just done see any evidence that is happening, which is really scary!!

I do feel sorry for this incoming government. What difficult job they have, not of their own making.

Am I close anyone? I really am interested in stress testing my 'uneducated' economic assessments with those of you who post here whom clearly live this stuff / make a living from it.

Am I anywhere close? If not why not?

Grateful for any response.

Just come across Ann Pettifor's blog, Debtonation.

She has an intriguing post about the neutering of Vince Cable, and David Law's city stooge background:

"While most economists recognise that the source of the government debt is the past profligacy of large segments of the private sector, and in particular the financial sector.. yesterday's Dem-Con coalition statement argued to the contrary. Government debt, according to our new political masters, is the result of 'Labour's financial crisis' – with the City of London blanked out."



Is our esteemed 91Èȱ¬ being economical with the truth?

Hawkeye - the private sector pays all the tax. Yes the one-off bank bailout cost a bomb, this year national debt repayments are £30.8 billion. The budget deficit was £162 billion per year as of March 2010. We were already in debt before the bank bailout so not all of the £30 billion is down to this.

Even if we say all our repayments are due to the bank bailout (which would be grossly incorrect), that leaves £130 billion, the lion's share, which is down to government overspend.

Regarding that article:

He updated his Wikipeadia article to remove the VP reference - big deal. The media are mental about banking.

David Laws was Vice President - anyone who knows investment bank grades would know this should be: was a Vice President - which is a low grade grunt. Maybe in charge of about 5 people.

"It was the most dishonorable and deceitful sleight of hand in modern British politics, I would contend. And sadly, both Labour and too many of the British public bought into this framing of the debate."
...
"What is at stake is nothing less than Britain’s democracy, and the peoples’ right to control over the nation’s finances."

I really think this article is bordering on incoherent. Labour totally messed up. Ann Pettifor quotes Martin Wolf of the FT but doesn't link to the article and I couldn't find it. Here is an article by Martin Wolf saying Brown did make several misjudgments (but he is balanced):

[Unsuitable/Broken URL removed by Moderator]

How can the "most deceitful sleight of hand" be the way the Tories ran their campaign? They tried to speak about the debt but Brown lied saying there would be no cuts, thereby stifling the debate. How is the "peoples’ right to control over the nation’s finances" now at stake? The government we elected are bound by 25 years of PFI commitments, all off-balance sheet as part of Labour's house of cards.

I've never heard of Pettifor before but if this is her usual output I'll avoid her like the plague. That picture of bankers as rampant daemons is also a little silly.

The 91Èȱ¬ isn't economical with the truth - it's economical with intelligent analysis which is required to conceive the root causes of this mess.

Paul,

It appears that my mortgage provider has let me borrow what I thought was money but it turns out that it never existed and the bank never had it at all. Do you think this is a deception and a criminal matter?

"NOTHING TO GET TOO RILED ABOUT" (#5)

The Conservative candidate won in Newbury, with a substantially increased majority, in direct competition with LibDems. The last minute Tory flyer read: "THE CONSERVATIVES MUST WIN HERE TO STOP ANOTHER FIVE YEARS OF GORDON BROWN" I see no way that this can be read as fact.

I have informed various authorities, who should be concerned in some way (parliamentary stds, electoral comm, local returning officer) and been given the political run around. As distillation of all 'advice' is 'go to the police, if you are hard enough'.

I am riled - care to join me?

'HOLDING GOVERNMENT TO ACCOUNT' (while living within the lie) (#10)

Paxo mentioned the war - then just moved on. It's just a game.

The Tories FAILED TO HOLD LABOUR TO ACCOUNT as The Grand Old IDS. marched all but a few (the whip-phobics) into the AYE lobby. IDS is now in the Cabinet.

What do 2 and 2 make? Too many NEETS - too much crime. When will conscription be re-introduced?

Oh - it's all going awfully well.

#15

Y'know it could just be all part of some cunning labour think tank thirty year plan orchestrated by Tony Blair on behalf of North korea.

First you abandon your principles and hitch yourself to the banking sector to get power and let them run amock until the system is totally screwed beyond all repair (no brainer that one).

Then you make sure you appoint an unelectable leader of the labour party (ont take any chances by actually asking the party if it is agood idea or not)to ensure you dont have to clear up your own mess.

Wait for the god awful mess to happen while quietly totally re-inventing yourself so you appear all new and shiny when things get really ugly. Continually point out that it all went horribly wrong because Labour did not win the election.

If you are really clever you can get both opposition parties to be in government so that there is nobody else to turn to when the time is right for you to pounce.

Win the next election by a huge majority on an ultra left agenda on a tide of working and middle class utter desperation..


Six months into power have all the opposition arrested for 'grooming' whistle blowers in the civil service (they have already tested this one out in a trial run to get the bugs out of the technique).

Invite Tony Blair back to be leader of the labour party without anyone electing him (also road tested that one..works fine).

Finaly roll out the red carpet to your paymasters in Pyongyang and launch trident to take out all opposition to North korea.


Easy when you know how Barry!

Dear all, my training course involves fake blood, bandages and GPS and if I tell you any more about it one of the instructors will have to kill me. Sorry I am not around for now and I take all the points raised about 91Èȱ¬ spending. Rest assured I am staying in a hostel that would make a good location shoot for Foyle's War (we have foxes but we also have rats). All the best to regular contribs to Idle Scrawl and also my Twittering chums if you are feeling detoxed. Back on Monday. Keep posting. Paul

FOREVER WITHIN THE LIE (#13)

Even the 'Coalition of Salvation' is within the lie. See #14 for another.

While Westminster and/or the EU control(s) our lives, we will live within a lie. And soon it will be a global lie.

CLOSE - BUT WE ARE IN NO DANGER OF TONY RETURNING (#16)

Even the WORLD stage is now too cramped for that ego.

#12 Ben

I'm glad you agree that "Labour messed up", but I'm not clear what your position is in relation to the causes of the current crisis.

The main premise of the argument put by Ann Pettifor is as follows:

"Could it be that Vince Cable is unacceptable to the City? That he was likely to threaten the oligarchical role of the British banking community, and their grip on the UK Treasury?"

Therefore the position put forward by Ann, and shared by many others (on this side of the Atlantic: NEF, Vince Cable, Andrew Haldane, Peter Warburton, and on the US side: Janet Tavakoli, Nassim Taleb, Max Keiser, James Galbraith, William K Black to name but a few) is that the financial sector has grown out of control and is pillaging the real economy. If you haven't come across Simon Johnson yet, I suggest you check out his latest book - 13 Bankers:



The key question is whether the UK has gone the way of the US in creating a revolving door between key Gvt / Treasury positions and powerful lobbyists for the financial sector (does it ever cross your mind why Tony Blair receives a whopping salary from JP Morgan?).

Yes, Labour messed up, but more importantly in terms of it's cosy relationship with the finance sector both in enabling rapid de-regulation (a.la. Iceland), and facilitating off-balance sheet shenanigans (a.la. Greece). Both resulting in a plundering of the state to fund private wealth concentration.

All emphasis in this week's news is about Labour's public sector spending spree. Surely this is just about softening us up for Ireland style austerity measures whilst cunningly diverting attention away from any meaningful discussion on reigning in the banking sector's stranglehold on the country and the Gvt.

If the oligarchs can condition us to think that the problem all along has been big Government and it's dubious excesses, then they get to win in two ways. Firstly, they divert attention from themselves and also conveniently create an even better climate for their lecherous conduct.

#jericoa

inflation has nothing to do with increasing prices, increasing prices are a symptom (not the only one) of inflation.

Inflation is a measure of the money supply, increase the amount of money in circulation without a commensurate increase in the amount (value) of goods will cause an increase in the price of those goods.

New money must be created in line with stuff being created to keep the system stable (otherwise the price (value) of the new stuff would fall inline with the increase in quantity of the new stuff less the destruction rate of the old stuff)

The BOE is the only official body that can create or destroy real money in the UK, they regulate the supply of new money by lowering interest rates to stimulate demand or raising interest rates to stifle demand. (this is demand in the banking system, not retail demand)

The BOE uses CPI as an indicator as to which way to move rates.

#17 Paul Mason

Your course is acclimatisation training for the new era at the beeb, foxholes and rats will be a common theme. Real blood and bandages will be a daily event.
(I like the way you have to wait in the mod queue like everyone else, very english)

Shouldn't you be in bed by now, tomorrow will be a busy day and the will be questions (and questionnaires) at the end.

#21

''inflation has nothing to do with increasing prices, increasing prices are a symptom (not the only one) of inflation.''

Call me old fashioned but if something is a symptom of something else it can hardly be said to 'have nothing to do with it' ?

Like a true Yorkshireman I call a spanner a spanner, inflation = prices going up and I am gonna stick with that thank you very much.

keep your fancy econo talk to yourself lad.

( for the avoidance of doubt the above is meant to be humerous banter not insulting...thanks for the feedback Rob.:).

This should make the next few days rather interesting!

‘Market chaos warning after German ban on shorting’

Jericoa

good man. Every forum chat I've ever seen on inflation gets some economist saying what he said, word for word.

If he's an economist he should do the decent thing and start using BA after his name, not BSc, as part of the downgrade of economics from science to art.

Hawkeye

oh good another one who thinks it's all some big conspiracy, where bankers and politician's all meet up in a big room. It's never conspiracy, always incompetence. Politician's don't like the City and don't know how to regulate it, but know that they get loads of tax from it. Right now we need all the tax we can get, from anywhere. If we cut off the flow of cash from the City it would be like 28 days later.

Yeah I know Blair works for JPM. Again, get off your fantasy and look at it as it seems. JPM like Blair because of his rep in America due to the war. `So they hired him. What didn't happen was they didn't meet up before hand and agree to have a war to boost military spending (a meeting at which Bush, Blair and yes Hussain who is alive and well and also bought stocks in Lockheed). Not got time to read your link now but will check it out.

Yes, there's gonna be Ireland style cuts. Banks went over the top but they were a reflection of public "wealth". Northern rock gave out cash like mad which boosted house prices, then Brits went off on holiday with equity out of their "earnings". This went on for years whilst we all slapped each other on the back and closed our factories. Now we all have big tellies and a massive bill. The Northern Rock payout took public money to pay it off, but it was simply filling the black hole that was growing, unseen by most (Taleb excepted - any me btw!!!) for years. To suggest that it's just gone to bankers is wrong. Britains must stand up and take a share of the blame, and start paying for it now.

I'm a saver and I'm really annoyed about my decade of savings being eroded by inflation and deprecation of our currency to erode the debt. So bring on the austerity and more tax. As one of the few working in Britain I'll pay for it, as I usually do.

Please let's grow up and stop this blame the bankers / conspiracy / it's not my fault it's the bad man stuff.

Morning Ben,

I'm in no way trying to say that either we the public or the Government are not complicit in this mess.

In one form or other we have all either speculated on our economy ourselves (e.g. pushing house prices up and taking out huge loans), or endorsed the speculation of others on our behalf (e.g. private pensions).

However, the current crisis (indeed according to Reinert & Rogoff - all banking crises) are precipitated by de-regulatin of the financial sector. The reason that regulations have been put in place over time (from usury laws, to fractional reserve banking limits, to separation of retail & investment banking) is that without some form of controls the system is open to abuse. This could be by Gvt, the public, or those in banking itself.

Do you actually understand how banking works and why there have been repeated attempts to tightly regulate it in the past?

Just changing the Government (blaming the past one) and implementing austerity doesn't tackle the systemic flaw.

A study of the current crisis in terms of who has benefitted and who is getting abused would be worth a thousand of your hollow "let's grow up" comments.

Just "follow the money":

/blogs/newsnight/paulmason/2010/05/euro_bailout_now_banking_risk.html

#21

Actually privately created credit monies outweighs real money levels in the region of ten to one for most major currencies:



The BoE is not in control of the money supply. Banks can create and destroy far more money in circulation than the BoE. Policy makers can give little nudges here and there, but the real balance of power (certainly since the 1970s) rests with the financial sector.

This comment was removed because the moderators found it broke the house rules. Explain.

#25 Ben,

"Right now we need all the tax we can get, from anywhere. If we cut off the flow of cash from the City it would be like 28 days later."

Is this hyperbole or factually based?

ONS figures state that financial services only contribute 12% to our nations direct tax take, whereas manufacturing contributes 59%:

/blogs/thereporters/stephanieflanders/2009/07/is_double-dipping_the_new_green_shoots.html

IT'S A MAN'S (BIGGER FASTER) WORLD

In the spirit of "That's nuthin' - we were so poor we lived in 'ole in't road" I would like to propose the severe dominance of THE MALE PRINCIPLE as mankind's FUNDAMENTAL problem.

Look around: mothering is carp, women are sex objects, children are miniMammonites, bigger/larger/more is better, competitive violence (including psychological) is fun.

Against that lot, inflation/rising prices, is a minor irritant.

Well Paul, I hope you enjoy your week away even if it is "work". I notice that your supplemental post yesterday had to go through the moderation process just as if you were a "normal" user.

@27 Hawkeye "Actually privately created credit monies outweighs real money levels in the region of ten to one for most major currencies:.."

I'm not sure your factor of 10 is correct. I looked at the graphs in the Wiki article, and I think you misinterpreted currency, ie circulating cash, as the only "real" money. Whereas central bank created bank deposits are also "real", (if any money at all is real). In an article earlier this year, Stephanie F said that the BOE expected banks to multiply QE created money by a factor of about three as credit created to enable proper functioning of the real economy.

In fact, it is very difficult to measure the money supply, as it's also affected by the rate of spending. Eg more before Christmas, hence temporary inflation, but less after, hence January Sales and temporary deflation.

PS For an alternative look at economics, read the hilarious Teryy Pratchett fantasy novel "Making Money". It's very thought provoking, and at least partly true. It reads even better if you are familiar with his work of course. Pratchett is far better than pills as an antidote to depression!

Is Merkel showing true political leadership, or does she need her head examining:



Discuss.

Which ever side of the fence you sit, batten down the hatches and get ready for a bumpy ride. There's going to be a 21st Century beggar-thy-neighbour unleashed soon.

@25 Ben " ...as part of the downgrade of economics from science to art."

Economics has never been a science, at best it's a combination of history and psychology, backed up by approximate mathematical models and statistics. At worst, it's self-serving political ideology. Economics is never neutral - choices must always be made - to the advantage of one part of society and the disadvantage of another - but be careful of collateral damage to your own side if you get things wrong.

It's difficult to get economics right, but it's very easy to get it wrong by assuming the world is how you would like it to be, rather than how it is. This was Churchill's mistake in his disastrous budget of 1925, the consequences of which have never left us.

Hawkeye

taking half of that 12% out of the equation at a time when our deficit is 12% of GDP would be +very+ tough. Manufacturing contributes more. Great, as it should be. We can't afford to snub even 1% now. Thatcher never cut spending.

Looks like my other comment has gone. Broke house rules! Guess someone complained as the mod thought it was ok. Oh well.

Sasha:

after the crash I remember hearing some economist on radio 4 talking about how economic principles could be applied to football management to make the league more efficient. At the time I thought: this is the last time I'll hear some arrogant academic applying generic textbook fantasy to a situation he knows nothing about! Economics was running rampant. Books all over the place about how the world can be explained in terms of economics. Pride comes before a fall.

ps yes football is heading for a big crash and it's a mess, that's not my point.

pps yeah we need economics too, but just like banking let's make it simpler and get on with industry.

Three thoughts of mine in progress:-

1. Merkel is upping the ante in many areas, not just short selling - dire warnings for the euro and the EU - pushing for Federalised rules for participants and punishable deficit cut-offs ; Europe is centralising seriously
2. European Banks' liquid assets pools must be being hammered by the sovereign debt debacle with knock-on effects
3. Why dont I believe the line that spare capacity will bear down on uk inflation in the medium term

Its got to be the Brecon Beacons, I reckon.

Ben,

Let's look at this holistically, by assesing the sector contribution to Gvt coffers as a proportion of total asset base used to generate that tax take. Think of the following as a form of macro-economic Return on Capital Employed (ROCE).

Firstly, the tax income:

Manufacturing GDP: 17% Tax contribution: 59%
Finance & business services GDP: 26% Tax contribution: 12%

This means that the Finance & services sector is the largest contributor to our GDP figures, but is woefully under contributing to the nation's tax revenues. Manufacturing is proportionately paying 6 times the amount and therefore far more efficient at lining the Gvt purse that Fin & Serv.

Now if that weren't enough to unsettle you, then compare the asset base used by each sector to generate the tax income. I'm anticipating that the Manufacturing sector will mainly state tangible (fixed) assets on it's balance sheet (factories, plant, machinery etc.), and I'm taking a punt here that this will amount to say about 1-1.5 x GDP in assets (UK's total wealth is about 3-4 times GDP, and assuming manufacturing has a slightly higher share of that than their GDP contribution would state so let's call it about one third).

Whereas the Financial sector has 5 times GDP on it's balance sheets, i.e. more than the nation's total wealth (source: Andrew Haldane's Banking on the State).

Now, remember one person's assets is another's liabilities. So, Manufacturing creates 59% of our nation's direct tax take by employing about one third of our wealth. If any of these businesses go bust, then at least we still have some physical assets that have the capability of generating future income.

Whereas Financial serives generate only 12% of tax by employing nearly one and half times our nation's wealth. Oh, and those "assets" held by the banks, most of it is not tangible and has little or no "replacement value", it is paper claims on future earnings.

I don't really count that as good value for money, do you?

#35 Shireblogger

Interesting, glad I am not the only one who does not believe Merv's overcapacity argument. Do you think it will be outstripped by imported inflation as the far east recovers / creates its own internal markets or some other mechanism?

The Eurozone is playing a very dangerous game of brinkmanship at the moment. They should remember that the markets have no ego..unlike the Eurozone elite. I just hope somewhere they have a'Plan B' in a locked drawer with top secret stamped on it which allows for a phased and sensibly managed withdrawal of certain countries from the Eurozone. If they dont that truely would be the mother of all irresponsible ego driven oversights verging on criminal negligence. The phrase 'white collar crime against humanity' comes to mind again.

Wouldent it be nice to apply the same rigour to individuals in the financial world whom have caused much suffereing as we do for individuals in other fields of inflicting misery upon others for personal gain in some form with no tangible value exchange in return.


#36 hawkeye

Really interesting (albeit somewhat frightening)figures in there hawkeye which makes a lot of sense. I hope the Government can see that too in terms of the cuts to come.

It is often a tempting easy hit for them to rip out capital projects first, they can find the 6 billion cuts from Cross Rail alone for example at the stroke of a pen rather than from the back offices of whitehall.

I have long been of the view that the best course of action is to try to swing the economic oil tanker back around to a manufacturing and infrastructures base in the medium term, to rip out everything except that which is contributing to a new sustainable infrastructure for the UK.

I cant remember the exact figure but something like 56p in every public pound spent on new infrastructure gets recycled back to the treasury via the tax system. Not to mention the jobs it creates and (in the case of green infrastructure) the viable tangible future assest of REAL worth it will create for our children and our childrens children.

I was pleased that NEF breached the subject of much shorter working weeks for everyone but i think they overcooked it at 21 hour weeks.

What they should have said is that first you build a sustainable green infrastructure then, with that energy and material security (largely) in place you can relax a bit at that point and gradually shift to everyone working less (possibly for longer e.g. until 70) but winding down in terms of days per week worked over time. There would be no need to struggle to pay gas bills or put petrol in the car once a broadly sustainable infrastructure is created thus freeing up ahuge ammount of that which forces into comodity price slavery.

We have the technology to free ourselves from that

We have to get over this idea and quick that we can sustain ourselves by selling non tangible stuff to the rest of the worlds while importing most of the ever decreasing tangible stuff.

It is a very simple and compelling argument and a positive vision the nation could get behind to sustain us through the difficult years of change to come.

It is forever a source of frustration to me that nobody with the power to grasp this opportunity even seem to realise that it exists. Either that or they are not allowed to offer it as atangible policy platform by their body corporate and media paymasters.

It is just such a dreadful unecesarry criminal waste of a generation or more.

Hawkeye - is someone intercepting my posts, changing them into a polemic argument for an unrestricted financial sector, then passing them on to you? I'm not for the current system. It sucks thanks in large part to Labour!

Current levels of leveraging suck. It's ridiculous. But Gordon liked the money to be "working". No to all that boring stuff like gold reserves and pension pots. Let's get it out there. Whilst we are at it let's leverage the government books too, using PFI. Let's keep interest rates low and exclude house prices from the rate we use to track inflation even though there's clearly a problem.

Anyone with half a brain could see this crash a mile off. I'm in London. In 2006 everyone I knew, whether office clerk or teacher, who got on the housing ladder before it went nuts, was on their way to becoming a half millionaire. Such wealth creation only happens off the back of major technological advances. What happened between 1997 and 2008? Not much that I'm aware of. John Prescott got a blackberry - a major step yes but not enough.

Our whole society is overleveraged. Mortgages used to be 3 times salary. Now they are 5+ for my generation. The transfer of wealth is on savers to property owners as the BoE tries to save house prices no matter what the cost, by not raising interest rates. I can't wait when they put them up! Of course we can't blame individuals, but we do blame banks for increasing leverage. Why? Because it's a nice simple out that doesn't involve anyone we know being at fault.

I had a funny sense of deja vu when reading your tax details - are we assuming that only work that generates tax counts? And not GDP contribution which feeds back into the REAL economy? Sounds like Gordon Brown in the debates - if it doesn't pass through HM Revenue it's not part of the economy. And not part of his all encompassing socialist experiment which has totally failed. Let's reduce spending. Let job creators do their stuff and relegate government staff to the minimum possible.

My original points:

* the deficit is not totally down to the banks and we need to sort that out before we can sort out the debt, by definition, and the deficit will require we stop all of Labour's socialist dreamland. As you say they messed up. Fixing the deficit will hurt a lot and will require more realistic spending from our fellow citizens.

* I totally disagree with Pettifor's article

I'm genuinely interested in what your saying and value it! But please don't reply as though I said the banks are great and we should give them more, not less regulation.

spotify back on....blisssss

Ben,

Sounds like we are violently agreeing with each other on the overall symptoms: especially the point that "Our whole society is overleveraged"!

However, there is a very subtle difference of opinion though on how we got there and how we tackle it.

My post at #26 attempts to explain that "Just changing the Government (blaming the past one) and implementing austerity doesn't tackle the systemic flaw."

My proposition is that the overleveraged society was facilitated by de-regulation of the banking sector. This was the tool by which we got in to this mess, and we can't move forward without addressing the systemic flaw; the financial sector creates the conditions under which individuals, corporations and Governments get themselves in to excessive levels of debt. Only proper regulation can save us from ourselves (and potentially, from those who can profit whilst others suffer)!

Incidentally, the whole private sector versus Gvt as a better means of wealth creation is a diversion. Follow the little thread of discussions from a few week's back (#17,#9,#1):

/blogs/newsnight/paulmason/2010/04/economy_debate_now_guys_show_u.html

I guess it all depends on whether you still believe in the fairytale of economics or are slowly coming round to seeing it all as fraudonomics.

Ok - read a bit of that fraudonomics link but just got bored with the style that thinks I cannot focus on facts and have to have it spun around a story. Also sick of all the swearing. The guy seems to be getting towards criticizing fiat currencies based on a wing and a prayer. I dislike fiat currencies - I want my "on demand pay the bearer ...". However we do need some means of exchange and if all currencies were to collapse it would be so bad one cannot contemplate it. So I wont! :-)

It's gonna be hard but can be done. I'm someone who believes in education, healthcare etc. I just think socialism is doomed to fail. As it always has.

The financial system can be fixed. As you say it's a ponzi scheme built by successive governments. The only way it will change is if the public get off their ass and *think*. Then they will see it doesn't add up. Every generation has to fight for their freedoms, and economic freedom is critical. If we don't try we get the politician's and the society we deserve. Gotta go - XFactor is on ;-)

@38 Ben

You seem like a good bloke to me, but I think you are blinkered by political prejudice and lack of knowledge of history.

Firstly, anyone who uses the word "socialist" about New Labour understands neither socialism (in any of its 570 varieties) nor New Labour. I would say that the policies of both Edward Heath's and Harold Macmillan's governments were as socialist as those of the Blair Brown government.

In some ways, New Labour rolled back the frontiers of "socialism" more than the previous Tory government would have dared, especially in the field of higher education funding. At best, they tossed the poorest a few more crumbs from the table. In most ways, they just continued with the policies of the previous government, especially as regards PFI, which they opposed in opposition, and financial deregulation.

One weakness of most Conservative governments since WWI is that they have favoured finance over manufacturing. The victory of Banking and the City was enshrined in Churchill's budget of 1925. This took Britain into the Great Depression 4 years early and caused the General Strike of 1926.

There's a bit about it here:



The above analysis is a bit superficial. There's much more in Keynes' "Essays in Persuasion" and in particular one section: "The economic consequences of Mr Churchill". Keynes did feel that Churchill had been mislead by banks and the treasury. As we have seen recently, bankers frequently don't understand, or care about, the macroeconomic consequences of their actions.

The Wilson-Callaghan government in the seventies is much maligned for many reasons, some more justified than others, but it is the last government of the UK which, by its actions as opposed to words, had any real strategy or priority to encourage manufacturing. Tory governments, like the Blair/Brown government, have tended to be voluntary prisoners of the City.

@41 Even under the gold standard we had fiat currency. The banking system enables several people to spend the same money at the same time. Stopping it overnight would devastate the economy.

The TRUE worth of a currency should not be gold, or any other useless commodity, but the productive capacity of the economy it represents.

As I've argued many times before, I'd rather base a currency on manure than on gold: at least manure has a genune economic function:



On an isolated island, iron would be valuable, and so would manure, but gold would not help feed or clothe anyone!

When do the helicoptors arrive?....you know...the ones that will start chucking loads of Mervyn's funny money out of them!!!

Just reading these various posts as is my habit and wondering as follows;

''ok there is a good general consensus of free thinkers on here and has been for some time, the direction of debate is as clear as it ever gets within the limits of language, the consensus on the direction of travel humankind is currently embarked on is clear, the signs are consistent, results repeatable, outcomes broadly predictable''

'' I find it reassuring to at least know that I am not, aparently, a lone complete paranoid conspiracy theorist, but for goodness sake we have all been saying the same stuff, albeit dressed in whichever topical economic clothes happen to be fashionable on the day ever since the crisis began.''

''It would be really nice if there could be some form of mainstream media acceptance of this consensus to raise awareness, to promote it based on its intellectual credibility alone. Because the level of awareness is stuck the debate is stuck in analysis mode when it should be well into tangible solutions mode by now, we are just going round and round in elaborate analytical circles, fascinating as those may be they are past theior sell by date''


''I guess as an engineer who works to tight programmes to achieve specific outcomes i am accustomed to recognise when it is time to stop analysing and start designing, sure, as part of the design process you have to dip back into analysis mode every now and again but it is, non the less, a very different but equally methodical thought process required''


'' so the analysis is done for me, for the most part anyway, if it were an engineering problem the next step would be to communicate the broad outcomes of the analysis to the design team along with the desired outcome as the next step. The creative design process involves morphing the results of the anlysis until it looks as close to the desired outcome as you can reasonably get within your available materials and time constraints''.

''it is unusual for me to come so far down the analytical path without starting to engage with what the desired outcome is''

'' i suddenly realise that I dont know what the desired outcome is, we never debate it, consequently i have absolutely no idea how to design a process map to get there''

''As some clever greek bloke once said... if you dont know which direction you are sailing in, no wind is favourable''.

''The landscape upon which we live our lives has changed by our own hand, the old ideologies once strived for no longer resonate as a guiding direction''


''What is the consensus of what the desired outcome may be''?


Just thinking out load..as usual.

#37 Jericoa

The argument appears to be that there is latent capacity and unemployed workers waiting in the wings to gobble up inflationary pressure once growth picks up.But, what if that capacity is in fact permanently lost. Where is their evidence?It has an old-fashioned feel to it as an argument. We didnt have a manufacturing based economy which simply shut a few production lines which can start back up. We had a service/City and government-demand led economy. That model is now in for permanent change or influenced by irrational pricing tendencies ( bonuses,departmental spending on things that have no productive end use).Spending cuts are now ahead. But, the market in commodities, oil etc. and business inputs responds to global pricing. We have a balance of trade deficit relying on net imports.Taxes and interest rates will go up. Personally, I dont see a collapse/major downward pressure in business costs. I see companies who have survived protecting margins by holding or increasing prices.Some now enjoy a more monopolistic position than they did previously and will offer their staff pay increases with inflation now eroding salaries.Exports have not exploded on a weak pound, but exporters have protected their margins. Even if we have a continuing credit famine I see that environment as inflationary. The cost of money unrelated to bank rate is expensive and will get more so. So, I agree with your comment but there is something else which doesnt impress me on this. In a way the extraordinary monetary boost via low interest rates ( not QE)is compensating borrowing spenders and punishing savers.

Just dont get the argument nor do I see the BoE offering much evidence.Seems a risky one to rely on if their brief is to keep it at 2%.

Good people: following Jericoa's example, a few thoughts of my own before I disappear for a few weeks (an OU assignment deadline looms).

1) Be careful about using the word "think" when you really mean "believe". The two are not remotely the same.

2) If you use a word like "socialist" or "capitalist" ask yourself whether other people will understand that word in the same sense that you do. Such words can either describe a commonly understood system, or be a pejorative to label something you personally dislike. In the latter case it's just a "Humpty Dumpty" word - read reknowned jurist Lord Atkin's famous opinion in the link below; trust me - it may change your life (it did mine):



3) It is not necessarily "socialism v captalism". Major CH Douglas' ideas on "Economic democracy" described a different type of free market system.



If anyone hasn't read it, might I once more urge you to look at the informative and entertaining book by J K Galbraith: "A Short History Of Financial Euphoria". Yes it's an economics book, but it made me laugh out loud more than once. I estimate it should take no more than 8 hours, possibly less. It provides a template for understanding all all the boom and bust crises of the last few hundred years.

Actually, I would go as far as to say that if you can't be bothered to read it, you have no business debating economic matters at all, unless you have read considerably more elsewhere. It will give you a vision of the big picture.

Toodlepip all! :-)

To Sasha:

Thanks for the book suggestions, I've read a few Pratchett and Galbraith books in the past so I will seek out the recommendations. Good luck with the assignment.

To Jericoa:

The vision you paint of a more practical and egalitarian society will come true. It will not be labelled communism / socialism or even post-capitalism, for as Sasha says those terms will eventually become recognised for the obfuscation they wreaked. The frustration for many that can see where we should be going is that it will take time, and maybe a few big hurdles along the way before we right the ship. Unfortunately it's human nature to continually bang our heads against a brick wall before finally deciding to try another route to climb round it.

To Ben:

Yes, economic freedom is what we should aspire towards. However, the general trend has been away from "liberty" in the true sense of the word:



We shall not be free as individuals until we are free of the shackles of debt that grow tighter round our necks:

/blogs/newsnight/paulmason/2010/05/euro_bailout_now_banking_risk.html

#42 (Sasha Clarkson)

"....One weakness of most Conservative governments since WWI is that they have favoured finance over manufacturing...."

Exactly the Tories biggest problem, they are still basically in thrall to * the bankers.

* the thrall of?, in thrall to? who knows?

#42 (Sasha Clarkson)

Churchill is an enigma to my generation; he did so many dumb and bad things over a long life, but modern history only wants a single-line judgement, so he is one of the men of the century.
Perhaps he was best at simple decisions/issues (win or die) 'we will never surrender'.
Is there a fair biography of him somewhere?

#47 Sasha Clarkson



To understand why there is a difference between the wages labourers get paid & the total value produced, he only had to read the first volume of Marx's Capital.

The social credit system could likely be the first stage of communism - before the elimination of money.

But to achieve this requires the end of private ownership of the means of production.
Why would those who own the means of production consent to paying the full value of what is produced & get no profit?

To be for social credit is to be for the common ownership of the means of production.

Just to say thanks collectively for the various feedback above, they are cherished as ever for the genuine concern and unleveraged intelligence which clearly supports them.

Rather pushed for time today on my lunch hour, I did not intend to put any subconscious brake on any of the analytical debate that goes on here by the way, just sharing where I am at the moment.

I suspect Hawkeye is right in that we will move by force of nature towards that 'new society' anyway. The concern is the process, when mother nature has to get involved and exercise her force to redress an inbalance in the natural world she tends to roll up her sleeves and get stuck right in there with no concern for the uniquely intense capacity we humans have to suffer by cause of our 'awareness', that same awareness that gives us the capacity to avoid it.

Sasha - for me communists control the whole economy, socialists control most of it! And with government spending at 60% of GDP the last lot were a good way down the line. Fair point - not a technical definition - more a pejorative term.

Agree we can never go back from fiat money, but the current expansion of credit is insane. Also if we used manure there would be horses everywhere. At least gold cannot be manufactured.

Whilst everyone is recommending books - Hayek - Road to Serfdom. Will consider your suggestion.

Let's not stereotype the Tories as banker lovers. Labour loved finance. As I said Brown has a big part to play in the crisis with his "light touch" regulation that forced the States to regulate less.

Also I'm amazed you think Labour had a strategy on manufacturing. The sector fell more under them than under Thatcher. Again Labour talk the talk but deliver the opposite. Just like inequality. All politician's have good intentions. Nobody wants to see kids go hungry, the difference is in trusting citizens to deliver versus centralising control, which quickly becomes a gravy train.

There seems to be a trend in conversations on this forum. Here are some simple steps to annoy ;-)
1. take any economic point
2. castigate old Tory policy from 30 years ago
3. say what Labour said they would do (but not what they did do)
4. castigate the new government for what you say they will do (but not what they say they will do)

For the left wing it's always academic - the real world is an inconvenience.

All I know is I'm put off from starting a business because of all the rights workers have - increased paternity, redundancy payments, employment law, tax law etc. I feel sorry for all the BA staff crossing the picket line who will ultimately loose their jobs. Still - it's "their right".

Ben,

Study our country properly, and you will soon see that we are indeed a mixed economy; one of privatised profits, and socialised risks (i.e. losses).

Successive gvts since the 1970s have been asset stripping the country's communal wealth. For instance the military continually sells off land and housing whilst also contracting out more and more "non core" services. These are not the actions of a socialist / communist government, but Hayek-esque free market fundamentalism. I suggest you check out PBS' Commanding Heights and also Adam Curtis' Mayfair Set.

The giant leap of real economic growth by the West (from 1945 to 1970) came about under a social democratic climate. Whereas the appearance of growth since the 1970s has been through trickery (and debt) to mask underlying problems of wealth fundamentals (and the exposition of Hayek/ Friedman and the Austrian prescription).

Even this ideology is being contorted as what has been happening recently is that debt is just being used to delude ourselves into living well beyond our means. The real truth is that our "wages" and living standards are just ridiculously high and unsustainable.

This a natural economic fact caused by diminishing returns to complexity in our developed society.

Globalisation, technology and good old oil has made it very easy for other countries to do the same things in the way we do them. They can undercut us because their wages (i.e. standards of living) are much lower than ours.

Whilst they are sold on the vision of aspiring towards our standards as we too are being promised the vision of further global economic growth, unfortunately the real story is one of resource limitations. In such a finite world the only truly rational economic outcome is one of genuine factor price equalisation. Alas, not by bring up the poor to our standards, but by ours reducing substantially.

The writing was on the wall more than 30 years ago, but we chose the path of economic / financial gerrymandering. In striving to maintain a larger share of a bloated pie that can barely grow any more, we can create a temporary appearance of "business as usual", by extending exploitation of low wages from abroad and ever increases levels of debt (i.e. borrowing from the future).

If we can't grow in the future then there is going to be a lot of very disaffected people in the world.

The intellectual warfare between Adam Smith, Marxism, Keynes, the Austrians etc. is a diversion and is more about political power plays than economic realities. If you truly wish to understand how wealth is created then you need to read Soddy:

"Soddy's deeper understanding of the physical realities of production and economic processes shattered virtually all the theories of economists from Adam Smith and Karl Marx to John Maynard Keynes. Soddy used the example of the steam engine and what makes a railroad train go. 'In one sense or another the credit for the achievement may be claimed by the so-called engine-driver, the guard, the signalman, the manager, the capitalist, or the shareholder – or, again, by the scientific pioneers who discovered the nature of fire, by the inventors who harnessed it, by Labor, which built the railway and the train. The fact remains that all of them by their united efforts could not drive the train. The real engine-driver is the coal. So, in the present state of science, the answer to the question how men live, or how anything lives..., is with few and unimportant exceptions, BY SUNSHINE.' "



To quote Ruskin "There is no wealth, but life"

Apologies to all for the long post at #54.

Michael Hudson has a similar perspective:

"Living in the short run is the financial sector's time frame­ while distracting the attention of indebted populations from calculations that Wall Street understands quite well: the debts cannot be paid in the end.

But they can be paid in the short run, with promises to pay someday as if any economies ever have been able to grow by imposing austerity! It is all junk economics, of course. But it buys time for the bankers to pay themselves yet more bonuses this year. By the time the financial system collapses, they presumably will have put their money into hard assets.

Bank lobbyists know that the financial game is over. They are playing for the short run. The financial sector's aim is to take as much bailout money as it can and run, with large enough annual bonuses to lord it over the rest of society after the Clean Slate finally arrives. "



P.S. Ben - check out Hudson's "New Road to serfdom", predicting the house market crash in 2006:

17# Hi Paul
I presume someone at the 91Èȱ¬ has taken the long view and they are preparing you before the period of social unrest.
Hope it's not preparation for a part in Big Brother.
Enjoy at least the weather is good.

#54 Hawkeye_Pierce

"Soddy's deeper understanding of the physical realities of production and economic processes shattered virtually all the theories of economists from Adam Smith and Karl Marx to John Maynard Keynes."

Indeed the physical realities are crucial & I'm with you in stressing the importance of energy.
The days of cheap energy seem to be be history.
This will have dramatic consequences.

But these physical realities make it even more important to understand the social relationships of production, i.e. the political economy & the various theories that attempt to explain political economy.

Marx did indeed neglect the supply side in Capital.
But that wasn't the objective of the book.
He was trying to understand how capitalism worked.

The central point being that under capitalism (which includes social democracy) the profit motive drives everything.
This make capital accumulation the imperative, no matter what the ecological consequences.

So to deal with the ecological crisis, to deal with the energy crisis (which will get worse), humanity has to take control of the productive forces.
Collective, direct democracy not profits & so-called representaive democracy.

It really is crucial to human existence.

Hawkeye - ok thanks for the Hudson ref - will read that this weekend.

Agree completely on unrealistic living standards and the sustainability of them, and masking it through debt.

Also yes our state are drip by drab pawning off the family silver to underwrite our annual real deficit.

All this is very clear to me and has been for five years. Hence I refused to buy a house!

divinrouge - also agree about cheap energy. This will make life most interesting. I wonder if I'll be able to run a laptop most of the day in future??

One other force to throw into the mix. Technology is changing, and faster. Technology has always put pressure on the lowest level of society, through the industrial revolution as machines replaced manual labour, to the present day. I can only see this ramping up a lot more. Robotics will erode manual jobs all over the world. The well-educated will earn big bucks creating and maintaining such systems, but unemployment will increase a lot.

Nobody likes the current financial system but again I'd say this is part of the mix, and I think in the medium term other changes, like energy price increases and technology changes will make this current mess seem trivial.

Again though I'd say the selling off of land etc and finance being bailed out is not a conspiracy. It's a bunch of people reacting cleverly to a poorly thought out system whilst in the wider context our greedy western masses (every single one of us) elect in those who promise to give them the most resources.

Again the above is all compatible with me deriding Labour's record. They blew up a huge bubble of public and private debt, by letting their principles lead their policy, irrespective of the fact that they didn't have the money. They have raised people's expectations way beyond pre-1997 by creating a society in which people think they have a right to holiday abroad or buy a coffee every day. They didn't do this so they could inflate their own property prices as part of some big scheme, they did it for one of two reasons:

1. they thought they were doing the right thing because they were dumb
2. they gave people what they wanted and thought "I won't be around when it all falls down"

Unless the public apply some intelligence and call out their politician's on the above then they must live as serfs (and some would say they deserve to).

I think we agree on lots of points but our conclusions are different. You seem to emphasize some kind of financial conspiracy (yet acknowledge all our living standards are unsupportable regardless of this), and I say the public need to wake up and accept lower living standards, be less materialistic and accept some responsibility for always voting for more spending. Perhaps I'm allowing my judgement to infer an incorrect emphasis? That's just people I guess...

Again thanks for the Hudson link!
If people could not see the last decade was a bubble how can they "take control of productive forces"? Only a child could think this situation is sustainable yet still the majority will, after the emergency budget, moan about cuts. And the cuts have little to do with bankers as it's the deficit, not the debt, that the cuts are initially aimed at.